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Newsletter | Revolving Door Project Newsletter | January 11, 2023

Government Spending and its Discontents

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Government Spending and its Discontents

Austerity dogged agency budgets again, despite Democratic majority.

This edition of the Revolving Door Project newsletter was originally published on our Substack. View and subscribe here.

We spent October highlighting the perpetual underfunding of most federal departments and agencies, and urging Congress and the Biden administration to use December’s omnibus bill to finally provide them with the money and resources they need.

Sadly, while appropriations did increase for FY2023, budgets consistently fell short of what agencies requested. The most jarring example may be the Department of Housing and Development (HUD), whose budget is a whopping $16 billion shy of the requested $77.8 billion. Biden recently announced his goal to cut homelessness by 25 percent in the next two years, but it’s hard to see how even this meager goal will be achieved without a fully funded HUD.

In addition to HUD, hardly any non-defense agencies received the full appropriations they requested. Despite Biden’s intention to lead the “most pro-union administration in American history,” the budgets for the National Labor Relations Board and Occupational Safety and Health Administration were $20 million and $69 million below their respective requests. While Lina Khan is trying to lead an aggressive Federal Trade Commission, the agency’s appropriations are short $60 million. The Food and Drug Administration’s budget was nearly $1.75 billion below its $8.3 billion request. The list goes on and on. Notably, these funding decisions come on the heels of a defense budget that is $45 billion more than the Pentagon’s request. Budgetary choices highlight the government’s priorities, and it’s clear that the military-industrial complex remains Congress’s favorite child.

This was the last set of spending bills negotiated with a Democratic majority in Congress before two years of divided government, and they knew this at the time that they passed the spending bill for 2023 in late December. Yet priorities like funding the Environmental Protection Agency—which will face staunch Republican opposition in the next two funding cycles—were sacrificed with seemingly little fuss. The EPA requested a $11.881 billion budget, and received only $10.135 billion. Fifteen years ago (after two terms of George W. Bush, an oilman, as president!), the EPA’s budget was $7.725 billion, which is equivalent to $11.362 billion in 2022 dollars. How is the Biden administration supposed to lead on environmental protection with a chronically underfunded, understaffed, overwhelmed Environmental Protection Agency?

The Environmental Integrity Project recently put out a report analyzing the past twenty years of enforcement by the EPA, and its findings are grim. The agency has lost more than 25 percent of its total enforcement staff since 2016. In 2022, the EPA concluded the lowest number of civil judicial cases in 22 years, referred the lowest number of civil cases to the Justice Department in 22 years, and opened the second-lowest number of criminal cases in 22 years. 

Under Bush from 2005 to 2008, the EPA conducted an average of 334 criminal investigations a year. Under Biden in 2021, it conducted only 123 criminal investigations, and in 2022, only 117. Similarly, under Bush the EPA resolved an average of 4,385 administrative cases a year, and referred 295 cases to the Justice Department. In 2022, the EPA resolved only 1,584 cases, and referred only 88. The unchecked decline of environmental enforcement is a devastating indictment of Congressional Democrats’ dedication to public and environmental health, and the Biden administration’s stated commitment to increased environmental stewardship and corporate accountability. 

The Revolving Door

In other news, an apple fell rather far from the tree last week. Rep. Brad Sherman (D-Calif.), a consistent crypto skeptic who called the industry a “garden of snakes” last month, lost his policy advisor Robert Robilliard to the Crypto Council for Innovation, where Robilliard is now Director of Government Affairs. Robilliard previously spent three years with Rep. Sherman’s office on the Subcommittee on Investor Protection, Entrepreneurship, and Capital Markets, which focuses on markets and investor protection, including crypto. 

This is a quintessential revolving door story, complete with the classic revolver title “Director of Government Affairs.” But the timing of Robilliard’s departure (and from a crypto-skeptic office) comes as some surprise. Leaving the government to lobby on behalf of a rapidly collapsing and newly disgraced industry seems not only unethical but, frankly, risky. Key members of the Crypto Council for Innovation include Coinbase, which was just fined $50 million by the New York State Department of Financial Services for violating anti-money-laundering laws, and Gemini, which has been unable to meet earn customer withdrawal requests since November. But hey, they must be able to meet his requests for compensation (presumably paid in actual money). 

Taxing Nonsense

House Republicans used their first vote (or 16th vote, if you count every time they tried to elect a Speaker) to pass legislation that would claw back 90 percent of the increased funding for the Internal Revenue Service (IRS) included in the Inflation Reduction Act. It’s all for show, since the bill will get quashed in the Senate. But it is a useful show, if you’re looking for a fresh example of conservatives disguising catering to the ultra-rich and corporations with populist fear-mongering about the government being out to get you, and further proof that the deficit only matters to the GOP insofar as they can cudgel Democrats with it. 

The CBO’s first score of this new Congress estimated that the GOP IRS bill would increase the deficit by $114 billion over the next decade. With that kind of money, you could fund the Department of Energy, the Department of Agriculture, the Environmental Protection Agency, Food and Drug Administration, Securities and Exchange Commission, Federal Trade Commission, Commodity Futures Trading Commission, Federal Energy Regulatory Commission, National Labor Relations Board, Bureau of Land Management and Department of Indian Affairs for a year, and still have billions left over. Or else you could let wealthy and corporate tax evaders pocket it. 

To be clear, the IRS does deserve the distrust of low-income taxpayers. Historically, its grossly inadequate funding has led the agency to target the poor—specifically earned income tax credit recipients—because they’re among the easiest people to audit. Recently released data for 2022 shows this trend continuing, with the lowest wage-earners in the country audited at five and half times the rate of everyone else. During FY 2022, the odds of a millionaire being audited was just 1.1 percent

So the reinvigorated IRS has a lot to prove. Treasury Secretary Yellen has directed the IRS to “focus on high-end noncompliance,” and indicated that the IRS’s additional resources “shall not be used to increase the share of small business or households below the $400,000 threshold that are audited relative to historical levels.” Both Biden and Yellen should help the IRS communicate instances of overdue enforcement of the law against rich tax evaders to the public, combating GOP misinformation through good storytelling about persuasive data. 

Republicans have pledged intense scrutiny of the IRS this Congress, and though they’re certainly not intending their investigations to be constructive, the outcome of that scrutiny isn’t necessarily bad. It is important that the IRS prove to the public that it is reversing past trends of disproportionately auditing low wage-earners, and actually focusing enforcement on white collar tax evasion. If the IRS can strengthen public confidence by proving that its new resources are going to good use, that would be a silver lining in this hostile environment indeed. 

Thanks to KJ Boyle for his contributions to this edition.

Want more? Check out some of the pieces that we have published or contributed research or thoughts to in the last week:

Revolving Door Project Condemns TVA Decision To Expand Fossil Fuels, Urges EPA and White House To Be More Aggressive

Larry Summers Advised A Possible Crypto Fraudster. Is Anyone Going To Ask Him About It?

Stock Market Index Funds Can Beat Crypto: On Cryptocurrency Investing and Building Black Wealth

The Power to Green the Public Energy Portfolio

112 Organizations Call For White House To Fully Review TVA Decision On Fossil Gas Expansion

The Biden Administration could halt TVA’s gas plans. A petition is asking for just that.

Scoop: Larry Summers gives up advisory role at crypto firm DCG amid criticism

Bowman, Warren Push Biden to Protect Renters From Corporate Price Gouging

Dozens in Congress beat stock market in 2022 despite downturn on Wall Street: analysis

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More articles by Hannah Story Brown More articles by KJ Boyle

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