The Oversight Options Available to the House Ways & Means Committee

This piece was originally published on January 16, 2019. This version reflects updates and additions made on July 17, 2020.

Shortly after taking office, Richard Neal, the chair of the House Committee on Ways and Means and the one Democrat with the power to obtain Trump’s tax returns, announced his intention to slow-walk the process of requesting the President’s returns. As we wrote at the American Prospect in January, Neal should have requested Trump’s tax returns right away and after that easy part of the committee’s job was over, proceeded to more complex oversight. (alas, Neal has not yet taken our advice)

This oversight should be undertaken with the goal of not only educating the public about problems but also starting a conversation within civil society and among potential future presidents about ways new laws and better executive branch appointees can begin to fix what ails us as a society.

Given Neal’s difficulty taking the initiative, we have decided to provide his Committee with a proposed draft agenda. We hope that Neal takes note, reverses course and charges ahead on oversight.

Recommendations are organized by subcommittee, except for those related to oversight of the coronavirus pandemic response which have been placed in their own category. Please note that this list is not complete and will continue to grow as we learn more about the administration’s incompetence and corruption as well as new examples of corporate misbehavior.

Think we’ve missed something? Email us at oversight@cepr.net to let us know!

1. Oversight of the Pandemic Response

• Accessing unemployment insurance is a nightmare: The CARES Act’s $600 per week boost to unemployment insurance was boosted as its hallmark accomplishment (meant to outweigh generous stimulus to corporations). But, months after this crisis began, many are still struggling to access these benefits through broken state-level unemployment systems. In some cases, applying has become a full-time job. Richard Neal has said that he expects elevated unemployment benefits to be extended, but it’s clear that delivery systems are breaking down. What can be done to ensure that people get the money that they need in a timely manner?
• Surprise medical bills set to proliferate amidst pandemic: An estimated 5 million people have lost their health insurance this spring. Studies show that the uninsured are particularly vulnerable to surprise medical billing. That is only likely to be exacerbated as the coronavirus – the treatment of which can often require extended hospital stays and help from a variety of specialists – continues to spread throughout the U.S. As lawmakers prepare for a new round of stimulus, they must seek to understand the extent of the surprise billing problem and come up with a fix. (Richard Neal was responsible for killing a legislative solution last winter, but hopefully changing circumstances will have forced him to reconsider his opposition). 
• Centers for Medicare and Medicaid Services (CMS) unprepared and unresponsive: Approximately 40% of those who have lost their lives to COVID-19 lived in nursing homes. It is true the virus hits older people disproportionately harder, but it would be a mistake to consider these fatalities an inevitability. This disaster stems from too-lax regulation of working conditions and care standards in nursing homes across the country. Rather than raising these standards over the past several years, Trump’s CMS has sought to lower them. Meanwhile, it has drastically reduced enforcement actions against those violating the too-low standards. This laid the groundwork for disaster. And once the crisis had struck, CMS still failed to rise to the occasion. The Centers took months to begin releasing data on COVID-19 cases in nursing homes and the data that it did eventually release was riddled with errors.
• Top health officials more focused on feud than public health crisis: Secretary of Health and Human Services (HHS) Alex Azar and Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma are embroiled in a very public, long-running feud that is likely to have influenced their agencies’ ability to respond to the unfolding crisis. Rather than focusing on the problems at hand, Azar and Verma regularly spend their energy trying to undermine the other by placing opposition research and, sometimes, actively interfering with the operations of the others’ agency. How have these squabbles impacted the coronavirus response (and other aspects of public health policy)? Ways and Means should also look more closely at some of the consequential information that has surfaced as a result of this infighting – like the fact that Verma used public funds to pay outside consultants (many of whom were friends and allies) millions to improve her public image. The fact that Verma and Azar are willing to dish true, worrisome facts about each other makes seeking their testimony (and dirt) even more likely to pay substantive dividends.
• Major delays and roadblocks getting stimulus funds to vulnerable people: The CARES Act was passed in March but, as of July, many Americans are still struggling to access their stimulus funds or to get the right amount. As some lawmakers discuss the possibility of further stimulus payments, it is important that they examine what has gone wrong in the current program. How could the delivery process be hastened? And what could they do to remove unfair roadblocks and fees? Thanks, in part, to a bill that Richard Neal himself pushed last year, many Americans may be tricked into paying for 2019 tax filing, even if they qualify for the free service. In other words, they will pay to access their stimulus money. 

2. Tax Policy

While most Americans like the hardworking and under-resourced IRS, elected Republican animosity towards the agency has led to deep budget cuts and a shrinking staff. Unsurprisingly, this has left the tax authority struggling to perform its job. In the last seven years the IRS’ audit rate has fallen 42 percent and, as a result, the US government is missing out on billions of dollars in revenue each year.

The fall off in audits has not affected all Americans evenly; audit rates have fallen much faster for high earners than for the country’s lowest earners who qualify for the Earned Income Tax Credit (EITC), despite the fact that pursuing these low-income individuals is a revenue-losing endeavour. This raises serious concerns about the IRS’s willingness and ability to pursue high-income taxpayers, concerns that are only deepened by the proliferation of ultra-wealthy individuals in the corridors of power. With that in mind, here is our list of suggestions:

• Lack of Resources at the IRS: By all accounts, the IRS does not have the resources to effectively carry out its duties. What is the Trump Administration doing to change that? What amount should be budgeted for the next fiscal year? Acting Commissioner David Kautter asked Congress for more money to implement the GOP tax bill but defended further budget and personnel cuts for FY 2019.

• Private Equity-Friendly Interpretations: Under the watch of new IRS Commissioner, Charles Rettig, the agency has already made at least one corporate giveaway to a powerful special interest. The IRS recently released guidelines that interpreted language in the 2017 Trump tax cut to include certain public-private partnerships, among the group of firms that qualify for an exemption from new tax rules that raise the cost of debt.  Many private equity firms are heavily invested in such partnerships. This move was unusual in that the IRS guidelines seemingly lifted suggestions from a White House policy document, and, among the greatest beneficiaries is Blackstone, a firm with deep ties to Jared Kushner.
• Corporate Tax Avoidance/Evasion: It is no secret that many corporations pay taxes at a rate far below the official corporate tax rate through the exploitation of tax loopholes and foreign subsidiaries. While at least some of these practices are legal, albeit reprehensible, there is reason to suspect that others may run afoul of the law. Facebook, for example, is in an ongoing case with the IRS for potentially undervaluing assets that were being transferred to Ireland to lower its tax burden. Major multinational corporations engaged in these tax avoidance and evasion schemes should be put under the microscope and made to answer for tactics that cost the US government an estimated $70 billion per year (some estimates state that it could be as high as $111 billion). Additionally, since corporations are not required to publicly disclose information about where they make their money or what taxes they pay, Congressional oversight constitutes a unique opportunity to make that likely infuriating information available to the public and spur a debate on legislative and executive branch solutions.
• Potential Politicization Under Kautter: While serving as Acting Commissioner of the IRS (a role that demands independent interpretation of existing tax law), Kautter simultaneously served as the assistant Treasury Secretary for Tax Policy (a role that is charged with sketching out a vision for how tax law should be). The sixteen most recent interim IRS directors had been career people. What occurred during this period of politicization of the IRS is an important subject for independent oversight.

• Renaissance Technologies: The hedge fund that major Trump and GOP campaign donor Robert Mercer ran until recently (and in which Mercer presumably remains heavily invested), Renaissance Technologies, owes at least $7 billion in back taxes. They have appealed the IRS’s decision. Can the agency be trusted not to bend to political pressures from the President’s benefactor? Has this case already been settled on terms favorable to Renaissance Technologies? Settlements are not automatically made public. The fact that Mercer has drastically reduced his political giving could suggest that he no longer feels the need to buy favors having achieved a favorable settlement. We believe that Renaissance Technologies’ tax return should be the second one requested by the committee, after that of Trump himself. Indeed, we believe that it should become a new norm that massive political donors to a president expect to have their tax returns reviewed in order to ensure that the administration is not foregoing revenue the country is owed in order to reward its donors.

• What Were They Doing at Treasury? As Republicans pushed their new tax legislation late in 2017, Secretary of the Treasury Steven Mnuchin threw the weight of the Treasury Department behind their case. He claimed that tax policy experts there were busy running analyses of the new law’s effects and that the bill would pay for itself through increased growth. It turns out he was lying. The Ways and Means Committee should press Mnuchin on his dishonesty and find out why Treasury Department staff were not directed to try to understand the effect of the new legislation.
• Ivanka and Opportunity Zones: It appears that President Trump and his daughter, Ivanka, both advocated for tax breaks that could have a direct impact on the first daughter, and her husband’s, real estate holdings.  The new program offers tax breaks on investments in designated “Opportunity Zones,” in an effort to invite investment into downtrodden areas. Ivanka and her husband Jared Kushner, have large real estate holdings in several Opportunity Zones and could benefit directly from the new program. Even if they decide not to claim the tax savings, they will likely benefit from rising property prices.

• Designation of Opportunity Zones: Housing rights advocates have raised concerns that the new tax credit program will fail to achieve its stated purpose of revitalizing distressed communities. As one example, several already prime investment zones have been designated as Opportunity Zones thanks to certain loopholes in the designation criteria. Of broader concern, recipients of the tax credits face no conditions that subsidized investments benefit local residents. That’s why many suggest that the Opportunity Zone program subsidizes gentrification and aggravates the wealth divide, rather than serve its intended purpose of helping to revitalize low-income communities.  Congressional oversight of the lack of safeguards in place to make sure investment benefits local community members is long overdue.
• Steve Wynn and Opportunity Zones: Former RNC finance chairman Steve Wynn met with Mnuchin and his team about a proposal that could reduce his personal tax burden months after he was forced to sell his stake in his casino empire amid sexual misconduct accusations. The Wall Street Journal’s Richard Rubin and Alexandra Berzon report: “Mr. Wynn met with senior Treasury officials on June 4 to discuss ‘opportunity zones,’ a break that was part of the 2017 Republican tax overhaul…Mr. Wynn … attended the meeting in the Treasury building with Daniel Kowalski, a counselor to [Mnuchin] who was helping write opportunity-zone regulations. Mr. Mnuchin stopped by the meeting to greet Mr. Wynn, according to a copy of the secretary’s calendar that the department periodically releases.”

3. Health

According to an NBC exit poll from the 2018 midterm election, health care is Americans’ primary policy concern. Health care costs in the US continue to rise and many Americans are struggling to keep up. These costs remain higher in the United States than in any other developed country. The underlying reasons are multifaceted and cannot be solved unilaterally. However, there is significant evidence that foul play and neglect is contributing to the cost crisis.

• Price Fixing: Many people wonder why pharmaceutical prices in the United States are so high. One explanation? Cheating. Pharmaceutical companies have conspired to keep generic drug prices high by whatever means necessary. This has included collusion to divide up customers and set prices. At times, it has also meant restricting the supply of common generics to inflate their value. These tactics cost American consumers and the Medicare program at least $1 billion. Subcommittee members should use their authority to dig deeper and uncover the true extent of pharmaceutical companies’ criminal practices. While the committee overall has held two hearings, neither has included any discussion of this most blatant form of cheating. Additionally, neither hearing included either pharmaceutical company executives who raise prices greedily and regardless of human consequences or the Trump Administration executives who empower those executives.

• Patent Monopolies: Similarly, the subcommittee should revisit pharmaceutical companies’ patent monopolies. While it is true that research can be expensive, there are many reasons to doubt that their research costs are as exorbitant as pharmaceutical companies claim. Better understanding these questions could help lawmakers to adjust the length and terms of patent monopolies to reflect reality and might also help to build a case for an alternative approach to drug innovation and manufacturing.

• Pharmacy Benefits Managers: Under fire for rising drug prices, pharmaceutical companies engaged in a public relations campaign to shift blame onto pharmacy benefits managers (PBMs). While some of this pressure was potentially unwarranted — PBMs capture a relatively small portion of total profits from drug sales — investigation into their practices revealed cause for concern as it related to these entities’ dealings with state Medicare programs. This data demonstrates that PBMs charged different states’ Medicare programs vastly different prices for the same drugs, often well above the rate that they charged pharmacies.

4. Social Security

• Underinvestment and Service Problems: Like the IRS, the Social Security Administration (SSA) has been forced to reduce staff and close offices due to mean spirited budget cuts in recent years. The Subcommittee should learn more about the impacts these budget cuts have had on the provision of SSA’s essential services. Such oversight would fit with our recommendation that oversight work be used to reflect the legitimate concerns of rural and small-town America.

• Politicization of Administrative Law Judges: Last year the Trump administration moved Administrative Law Judges (ALJ) from the competitive hiring process to the excepted service, “giving agency heads much broader discretion in the judges’ qualifications and appointment.”  While seemingly a technical change of little interest, the decision opens up ALJs, the majority of whom work in SSA, to politicization. This increases the chances that partisanship infects SSA and affects its ability to carry out its mandate. House Democrats on the Oversight and Government Reform Committee unsuccessfully tried to convince Republicans to open an investigation last year. House Oversight, Ways & Means, or the two in tandem, ought to investigate this topic now.

• Pursuing the Undocumented? The SSA recently announced that it will begin examining its records and notifying employers when reported employee information does not match. Advocates are concerned that this is a new method to identify and target undocumented workers. Similar programs under past administrations have been halted because they hurt workers and employers alike, regardless of immigration status. Why is SSA making this change now and what is there to suggest that it will be not suffer from the same problems as in the past?

5. Human Resources

Inside the government and out, workers’ rights are under attack. Whether it be government employees forced to work without pay or the fate of Sears employees’ pensions, there is cause for concern.

• Nomination to the PBGC: The Trump administration’s nominee for Director of the Pension Benefit Guaranty Corporation (PBGC), Gordon Hartogensis, is a relatively unknown figure who happens to be the brother-in-law of Senator Mitch McConnell and Transportation Secretary Elaine Chao. He has no experience in the field, leading many to puzzle over the administration’s choice. Since there is no reason to suspect that Senate Republicans will exert serious inquiry into his qualifications, Ways & Means is the best bet for oversight by concerned elected officials with subpoena power.

• Mnuchin, Sears, and the PBGC: As the Treasury Secretary, Steven Mnuchin sits on the board of the PBGC, which was tasked with making decisions regarding Sears’ pension plans now that the company has declared bankruptcy. Given Mnuchin’s close ties to Sears and to its head, Eddie Lampert, it would be a clear conflict of interest for him to have any influence over this process. Mnuchin promised to recuse himself from Sears matters during his confirmation hearings. However, it is not clear if Mnuchin honored that assurance when the PBGC decided in February to take over Sears pension plan in what one Sears attorney called a “phenomenal” settlement. The Trump Administration’s pattern on recusals is not encouraging.

• Shutdown Work Without Pay: During the government shutdown hundreds of thousands of federal employees were forced to work without pay, despite a 2013 ruling that forcing them to do so violates the Fair Labor Standards Act (FLSA). It is true that some workers are essential to the day-to-day functioning of this country, although this does not excuse their lack of pay or use as political pawns. The Trump administration, however, stretched the “essential” classification to a breaking point. For example, while most federal parks workers were furloughed, the clock tower in the Old Post Office building, home to a Trump hotel, remained open and staffed.
• Ongoing Effects from the Shutdown: Although the government shutdown has faded from the public conversation shockingly quickly, the country has not yet escaped its ongoing implications. The government’s closure for thirty-five days created a backlog in training and hiring that will take many months, even years to rectify. Furthermore, it seems likely that the federal government will struggle to find and retain top talent after this debacle. It is important that lawmakers not allow this issue to fade into the background. They must work to understand the shutdown’s ongoing consequences across the government and the economy as a whole.

• Federal Unions: Last year, the Trump administration released three Executive Orders that would have weakened federal workers’ rights by easing restrictions on firing workers, setting time limits on collective bargaining negotiations, narrowing the scope of issues on which employees could bargain collectively, and erecting barriers to workers’ union participation. While a judge struck down the orders late last summer, members of the American Federation of Government Employees (AFGE) have reported that the administration has been attempting to include all of these provisions in new union contracts.
• Secret Service Shortfalls: The security demands for Trump’s family have stretched the Secret Service thin and forced many officers to work without pay after they have hit their overtime cap. The Anti-Deficiency Act prohibits government agencies from spending funds that have not been appropriated by Congress. The problem for Secret Service members is that they cannot stop protecting the President. As a result, even when they hit their maximum pay allowance, they are required to keep working for free. Although it is a grey area, this likely leaves the Executive Branch in violation of the law.  More needs to be understood about the extent of this problem (which predates the Trump administration) and ways to fix it.

6. Trade policy

Despite Trump’s assertions that “trade wars are good, and easy to win,” recent analyses suggest that tariffs cost the US economy billions of dollars last year. While corporations may be bearing some share of those increased costs, many have said that they are passing them onto consumers. With this clear evidence that tariffs are hurting the American economy and its consumers, why is the administration still charging ahead? One answer may be that some of its members stand to gain.

• The Boeing Suit: In the spring of 2017, aircraft maker Boeing brought a case against its Canadian counterpart Bombardier, claiming that the company was unfairly subsidized by the Canadian government. In October, the Commerce Department announced that it would levy a 219.63 percent tariff against Bombardier, pending necessary approval by the US International Trade Commission (ITC). While the ITC rejected the tariffs, the circumstances surrounding their imposition still deserve further inspection. That summer Secretary of Commerce Wilbur Ross, who has the power to levy tariffs, took a meeting with Boeing’s CEO. Ross’ wife also holds a $2 million stake in the company. Did these conflicts of interest factor into his decision?

• Auto Industry Tariffs: Although Secretary of Commerce Wilbur Ross has seemingly formally divested from his portfolio (after numerous delays and a great deal of dishonesty) he transferred many of his assets to a family trust, failing to eliminate conflict of interest concerns. One of those assets is a significant stake in the autoparts industry. In his capacity as Commerce Secretary he was charged with studying the potential impacts of tariffs in that sector. Given how much he would have to gain from eliminating Chinese competition, does anyone really believe that he reached that decision objectively?

• Steel Sell-Off: Early last year, President Trump announced tariffs on steel and aluminum. Investors reacted by selling off shares in steel-dependent industries. One investor, billionaire and former Trump adviser Carl Icahn was seemingly lucky, having liquidated a third of his position in Manitowoc, a crane construction firm, in the preceding days. Was this luck or did he have access to knowledge not available to the general public?
• China Trade War: Following President Trump’s decision to increase his tariffs on Chinese goods in August, he received a phone call from Sheldon Adelson. Adelson, who donated $25 million to a Trump super pac in 2016, sought to register his displeasure with the President’s trade policy. It hardly seems a coincidence that Adelson’s casino company, Las Vegas Sands Corp., derives just over 60 percent of its revenue from within China. The President should conduct trade policy based on the nation’s best interest, rather than on his or her donor’s business interests. The committee should investigate how Trump donors, such as Adelson, have been able to exert improper influence over trade policy.

7. Miscellaneous Oversight

• Missing Financial Disclosures: The Office of Government Ethics (OGE) has yet to certify and make public the 2017 financial disclosures for Secretary of the Treasury Steven Mnuchin. Why is the process taking so long? What irregularities are preventing ethics officials from certifying Secretary Mnuchin’s disclosures? Meanwhile, OGE made Secretary of Commerce Wilbur Ross’ 2018 disclosures public in February 2019 but refused to certify the statements after determining that Ross had lied about divesting his stock in BankUnited. Both of these cases are highly unusual and represent a serious cause for concern, especially considering the numerous questions regarding conflicts of interest that already surround both officials.