K Marx The Spot

Catch-29

The Internal Revenue Code is full of odd provisions, but none is odder in practice that Section 29, the Credit for producing fuel from a nonconventional source. While it has noble beginnings—attempts in the late 1970s to create a market for synthetic fuels—its primary use for the last decade has been to allow clever corporations to spray liquids on coal and claim—abracadabra—that a new fuel, worthy of a generous tax credit, has someone been created. It is hardly a secret that Section 29 credits are subsidizing thoroughly useless activities, to the tune of bill\ions of dollars per year. (We wrote about this subject in 2004.)

One of the few wholly good things about high oil prices was that they would eliminate, by statute, the subsidy that these tax credits create. But not anymore, thanks to stalwart conservatives Rick Santorum and Orrin Hatch. These two intrepid watchdogs against government waste were instrumental in sneaking language into the 2005 Tax Relief Act that pretended that the subsidy was still needed. As a Time magazine report notes, the fake energy industry has some dear friends in Washington.

[A] select group of investors and companies will walk away with billions of dollars in tax subsidies, not from oil but from the marketing of a dubious concoction of synthetic fuel produced from coal and dependent on government tax credits tied to the price of oil.

From 2003 through 2005, TIME estimates, the synfuel industry raked in $9 billion in tax credits. That means the lucky few collectively cut their tax bills by that amount, which would be enough to cover a year's worth of federal taxes for 20 million Americans who make less than $20,000 a year and pay income taxes. How important is the tax credit to synfuel producers? In its latest annual report, Headwaters Inc., a Utah-based purveyor of synfuel processes and substances, says flatly, "Headwaters does not believe that production of synthetic fuel will be profitable absent the tax credits."...

The coal can look and burn like regular coal. The IRS rule for transforming coal into synfuel—and getting the tax credit—requires only that the substance be chemically altered in some way. The alchemy that satisfies the IRS is a simple process: some plants spray newly mined coal with diesel fuel, pine-tar resin, limestone, acid or other substances—a practice that industry critics call "spray and pray." Other operators mix coal-mining waste with chemicals, coat it with latex and blend it with untreated coal to form briquettes....

Today about 55 such plants around the U.S. process 125 million tons of coal or, in many cases, coal waste from an earlier mining era. For owners and operators, the whole point isn't creating a profitable new energy resource for the U.S.; it's about collecting the tax subsidy. Progress Energy Inc. of Raleigh, N.C., which owns electric utilities that serve portions of the Carolinas and Florida, reported in a filing with the Securities and Exchange Commission that in 2002-04 its synfuel-production losses added up to $400 million. No problem: the company claimed $852 million in tax credits, magically transforming a money-losing operation into a money-making business with $452 million in profits—courtesy of the American taxpayer. And that's not all. Like other synfuel producers, Progress Energy can't immediately use all the tax credits it mines because of tax-law limitations. As of Dec. 31, 2004, it was sitting on $745 million in deferred credits that it can write off against future earnings for years to come. And Progress Energy is not alone. Plants run by DTE Energy Co. of Detroit generated $1.2 billion in tax credits during the same years....

Asked again by TIME to identify the author [of the amendment], the Senate Finance aide later wrote in an e-mail, "the provision originated as an amendment from Sen. [Rick] Santorum [a Pennsylvania Republican]. Sen. [Gordon] Smith [an Oregon Republican] had a similar amendment co-sponsored by several other Senators, Republicans and Democrats. Chairman Grassley accepted the Santorum amendment ... It's routine for him to accept non-controversial provisions that way rather than have the committee vote on each amendment ... So now the Santorum amendment is in the bill." When contacted by TIME, Santorum's staff had no comment.

The bill is now part of Congress's budget-reconciliation process. But there is no synfuel amendment in the House bill, meaning that it cannot become law unless the House conferees agree to the Senate provision. Bill Thomas, the California Republican who heads the House Ways and Means Committee, by some accounts is not in favor of the synfuel provision, but whether he will actively oppose it remains to be seen. There are already major differences between the House and Senate reconciliation bills on much larger issues like Medicare, so the odds are that synfuel may slip through again.

Another Senate supporter of the credit is Orrin Hatch of Utah, the ranking Republican on the Finance Committee. An aide said Hatch believes the new provision in the Senate bill "helps make the current credit work better." Utah-based Headwaters Inc., one of the synfuel industry's most active companies, licenses its technology as well as sells materials to synfuel producers. "If the tax credits under Section 29 of the Internal Revenue Code are repealed or adversely modified," the company said in its latest annual report, "Headwaters Energy Services' profitability will be severely affected."

Cabinet Level

I always thought that the reason that the Bush administration put the Coast Guard under the Department of Homeland Security was to ensure that its concerns would be the concerns of an administration at least ready to pay lip service to the notion of, well, security of the homeland. Apparently lip service means less than it used to.

The Coast Guard warned in December that the proposed takeover of some U.S. port operations by a state-owned company in the United Arab Emirates raised "intelligence gaps" that made it difficult to assess the deal's possible threat to national security.

Its cautions, however, didn't trigger a 45-day investigation into the transaction, which would have been required if a Cabinet-level agency had raised such concerns. The Coast Guard is a division of the Department of Homeland Security.

The Senate Homeland Security Committee released the unclassified Coast Guard document Monday. It came one day after the Bush administration accepted an invitation from Dubai Ports World to pursue a new inquiry into the national security implications of its deal to acquire terminals at six major U.S. ports when it purchases a British firm, Peninsular & Oriental Steam Navigation Co.

On one hand, I should not be surprised, because President Bush is a former CEO of a public company—and if the last few years have told observers anything, it is that CEOs would rather delegate, duck, and deny responsibility for any decision that one might think they ought to have made themselves.

On the other hand, this debacle has provided at least three instances of pure, unmitigated irony. First, the president who has yet to veto a single measure passed by Congress threatened to veto any action by Congress to block the transaction.

Second, the selfsame Republicans who claimed that "9/11 changed everything" now claim that globalization must go ahead as planned, regardless of ties to terrorists or longstanding hatred of our key ally in the Middle East.

Finally, the nominal conservatives in the Bush administration are trying to grease the skids of commerce so a state-owned company can take over a private firm. Who knew we had such proponents of nationalized industry?

Tour de Pants

My intellect say that Bush and his minions do such a horrible job running the government because they are both convinced that government is good at helping the citizenry and philosophically opposed to improving how it helps the citizenry.

My nastier impulses say that they are just plain incompetent at managing anything remotely complex.

In support of the second idea, here is prima facie evidence that Bush cannot do two things at once (and kids, you should be able to try this at home).

Scotland on Sunday has obtained remarkable details of one of the most memorably bizarre episodes of the Bush presidency: the day he crashed into a Scottish police constable while cycling in the grounds of Gleneagles Hotel....

The official police incident report states: "[The unit] was requested to cover the road junction on the Auchterarder to Braco Road as the President of the USA, George Bush, was cycling through." The report goes on: "[At] about 1800 hours the President approached the junction at speed on the bicycle. The road was damp at the time. As the President passed the junction at speed he raised his left arm from the handlebars to wave to the police officers present while shouting 'thanks, you guys, for coming'.

"As he did this he lost control of the cycle, falling to the ground, causing both himself and his bicycle to strike [the officer] on the lower legs. [The officer] fell to the ground, striking his head. The President continued along the ground for approximately five metres, causing himself a number of abrasions. The officers... then assisted both injured parties."...

Details of precisely how the crash unfolded have until now been kept under wraps for fear of embarrassing both Bush and the injured constable. But the new disclosures are certain to raise eyebrows on Washington's Capitol Hill....

In Scotland, an accident such as the one at Gleneagles could have led to police action. Earlier this year, Strathclyde Police issued three fixed penalty notices to errant cyclists as part of a crack-down on rogue riders. Legal experts also suggested lesser mortals could have ended up with a fixed penalty fine, prosecution, or at least a good ticking-off from officers.

Worst. Bicyclist. Ever.

A Page from the Nixon Playbook

One of the hallmarks of the Nixon administration was its penchant for auditing the tax returns of its political enemies. Apparently, Republicans in Washington liked the idea so much that they are slightly modifying it, auditing instead the non-profit status of grouyps that cause them trouble.

The Internal Revenue Service recently audited the books of a Texas nonprofit group that was critical of campaign spending by former House majority leader Tom DeLay (R-Tex.) after receiving a request for the audit from one of DeLay's political allies in the House.

The lawmaker, House Ways and Means Committee member Sam Johnson (R-Tex.), was in turn responding to a complaint about the group, Texans for Public Justice, from Barnaby W. Zall, a Washington lawyer close to DeLay and his fundraising apparatus, according to IRS documents....

The IRS sent two auditors last year to comb the 2003 books of Texans for Public Justice and an affiliated foundation that collected donations for the organization. No tax violations were found, according to a letter the IRS sent the group.

But the circumstances behind the effort—which were uncovered by the group's director and founder, Craig L. McDonald, using the Freedom of Information Act—prompted him to allege that the audit was an abuse of the IRS's mandate. He said there was no evidence of wrongdoing in the complaints.

"This audit was political retaliation by Tom DeLay's cronies to intimidate us for blowing the whistle on DeLay's abuses," McDonald said. "Enlisting the IRS to intimidate critics is a dirty trick reminiscent of Richard Nixon. . . . It is not a crime to report a crime, as we did with DeLay."...

Steven T. Miller, the senior IRS official in charge of tax-exempt organizations, said that though he could not address how Johnson's request was handled, referrals related to improper political activity generally must be judged reasonable by two career employees before an audit can proceed.

I should remind our dozens of readers that charitable organizations that are exempt from taxation under Internal Revenue Code section 501(c)(3) can indeed have ideological axes to grind, but they must generally be charitable, educational, or scientific endeavors. Surely by now even the political appointees at the IRS are a bit embarrassed at their fairly blatant political targeting of Texans for Public Justice. Perhaps they might even be in the mood for some actual auditing of soi-disant charitable groups that have absolutely no educational or charitable merit whatsoever. I humbly offer these fine establishments for the perusal of anyone at the tax-exempt/governmental entities division eager for uncovering some actual skullduggery.

Guns Don't Kill People

But idiots with guns do kill people. And, fortunately for Harry Whittington, getting shot at close range with a shotgun landed him only in intensive care, not the morgue.

And now that Whittington is out of intensive care and presumably out of immediate danger, Americans should ask whether Dick Cheney ought to be in any position of responsibility, since he failed one of the basic tests that millions of hunter pass every year—that of not maiming one's companions.

It is certainly good that the press is asking the sorts of questions that ought to be asked here—Was Dick Cheney impaired when he shot his friend? Was he questioned by the local sheriff? If not, why not? It is certainly amusing to consider that Dick Cheney and Aaron Burr are the only vice presidents to shoot someone while in office (and Burr did his deed against someone expecting to be a target). But what is not being asked are questions about the deeper problems of the Bush-Cheney regime. Why did Bush and Cheney push so hard for war in 2001? And why did the American press go so meekly along?

Oh, the Humanity!

The second unintentionally funny story from the Boston Globe on Thursday dealt with the underreported but ever so real plight of the poor souls who have built huge houses and find themselves at a loss to furnish them. No, really.

It happens all the time. A couple buys an estate-size home with multiple rooms and lavish amenities. Two-story fireplaces. Palatial entryways with formal staircases. Soaring coffered ceilings. Arched floor-to-ceiling windows....

Decorating a big house is a challenge being faced by an increasing number of homeowners, given the proliferation of suburban residences of the sort variously referred to as "McMansions," "starter castles," or "new construction," to use the more discreet phrasing of the real estate world.

Whether they are 5,000-square-foot faux Tudors in suburban developments or 10,000-square-foot showplaces on rural cul-de-sacs befitting the pages of Architectural Digest, supersize homes come with a host of supersized decorating concerns.

Such as: How do you muffle the echo in a massive two-story foyer? Where do you get knickknacks to fill up a gazillion built-in shelves, let alone furniture that doesn't seem Lilliputian beneath a 20-foot ceiling? What do you hang on the walls when your living room runs the length of a bowling alley? Not to mention: How do you pay for all this stuff after you've broken the bank on the house?

Oh the humanity! This is the worst housing dilemma in human history!

Our dozens of readers will have to click the link to read about the new manse in Concord that is so big that even the dog has its own room, complete with shower and radiant heating in the floor. No, really.

Reading about this, in what passes for the liberal media, almost makes one yearn for a nasty real estate crash.

Think Before You Act

The first of two unintentionally funny articles from Thursday's Boston Globe was this one about the town manager of Stoughton, Massachusetts. It seems that he decided to show his solidarity with an iconoclastic Danish newspaper, and is only catching flak for it.

[I]n a small act of solidarity with Denmark and of support for free speech, Mark Stankiewicz bought two Danish flags on Monday and raised one of the red-and-white banners outside the Town Hall that morning, flying it on the pole beneath the US flag.

The symbolic gesture was short-lived, as Stankiewicz lowered the flag the next afternoon after a local veteran complained that it was improper to fly the flags of two countries on one pole. He declined to release the name of the veteran.

But many people in town saw the foreign flag display as insensitive and inflammatory. Several town employees told Stankiewicz they did not agree with his decision and worried the flag could provoke violence against Town Hall in light of the attacks against Danish and other European embassies throughout the Middle East.

Now what could have impelled Stankiewicz to do something to get him in hot water with two groups at once?

Stankiewicz said he had closely followed reports of the Islamic protests. But it was a op-ed column written by Jeff Jacoby in Sunday's Boston Globe, headlined "We Are All Danes Now," that persuaded him to show his support publicly.

That explains it! A word to any other town officials thinking of making big political statements: if Jeff Jacoby writes something, particularly with overblown rhetoric and passion, you should remember foremost that it is still Jeff Jacoby writing it. And therefore the politics behind it are solitary, poor, nasty, and brutish.

The Greatest Deliberative Body in the World

Welcome to legislating, Republican-style.

Senate Majority Leader Bill Frist and House Speaker Dennis Hastert engineered a backroom legislative maneuver to protect pharmaceutical companies from lawsuits, say witnesses to the pre-Christmas power play.

The language was tucked into a Defense Department appropriations bill at the last minute without the approval of members of a House-Senate conference committee, say several witnesses, including a top Republican staff member....

The legislation, called the Public Readiness and Emergency Preparedness Act, allows the secretary of Health and Human Services to declare a public health emergency, which then provides immunity for companies that develop vaccines and other "countermeasures."

Beyond the issue of vaccine liability protection, some say going around the longstanding practice of bipartisan House-Senate conference committees' working out compromises on legislation is a dangerous power grab by Republican congressional leaders that subverts democracy.

"It is a travesty of the legislative process," said Thomas Mann, senior fellow at the Brookings Institution, a Washington think tank.

"It vests enormous power in the hands of congressional leaders and private interests, minimizes transparency and denies legitimate opportunities for all interested parties, in Congress and outside, to weigh in on important policy questions."

And it is not just highfalutin scholars at think tanks who are upset about this sort of shenanigan. At least one of the critics is a member of the Dear Leaders' own party.

At issue is what happened Dec. 18 as Congress scrambled to finish its business and head home for the Christmas holiday.

That day, a conference committee made up of 38 senators and House members met several times to work out differences on the 2006 Defense Department appropriations bill.

Rep. David Obey, D-Wis., the ranking minority House member on the conference committee, said he asked Sen. Ted Stevens, R-Alaska, the conference chairman, whether the vaccine liability language was in the massive bill or would be placed in it.

Obey and four others at the meeting said Stevens told him no. Committee members signed off on the bill and the conference broke up.

A spokeswoman for Stevens, Courtney Boone, said last week that the vaccine liability language was in the bill when conferees approved it. Stevens was not made available for comment.

During a January interview, Frist agreed. Asked about the claim that the vaccine language was inserted after the conference members signed off on the bill, he replied: "To my knowledge, that is incorrect. It was my understanding, you'd have to sort of confirm, that the vaccine liability which had been signed off by leaders of the conference, signed off by the leadership in the United States Senate, signed off by the leadership of the House, it was my understanding throughout that that was part of that conference report."

But Keith Kennedy, who works for Sen. Thad Cochran, R-Miss., as staff director for the Senate Appropriations Committee, said at a seminar for reporters last month that the language was inserted by Frist and Hastert, R-Ill., after the conference committee ended its work.

"There should be no dispute. That was an absolute travesty," Kennedy said at a videotaped Washington, D.C., forum sponsored by the Center on Congress at Indiana University.

"It was added after the conference had concluded. It was added at the specific direction of the speaker of the House and the majority leader of the Senate. The conferees did not vote on it. It's a true travesty of the process."

There are several disturbing things about this whole mess. First, the clear implication of this report is that the House and Senate are relying far, far too much on conference committees to do the actual work of crafting legislation. (Both chambers have to accept the report of the conference committee, but those approvals are virtually automatic nowadays.)

Second, the leaders of the Republicans in the House and Senate have shown themselves to be not all that unlike their man in the White House—thoroughly unconcerned with the niceties of small-d democratic behaviors.

Third, the Republican modus operandi in the House and Senate has been, for several years now, to pass important bills in a flurry of frantic votes, amendments, and conference committees. Rare is the important bill that is read—nay, could be read by the time that the chamber votes on it. And why bother reading it if the conference committee, never mind the House speaker and the Senate majority leader, are going to ruin whatever good work managed to get done?

Fourth, it is clear that someone in the Senate needs to do what Howard Metzenbaum used to do in the 1980s for the Democrats—refuse to go along in the Senate until the Republicans start playing by the rules. Metzenbaum would not have relied on someone's say-so that a provision was not in the bill: his staff would have ensured that Senate business got held up, vacation or no vacation, until they could check.

Now I Get It

Now I understand with Ariel Sharon was so eager to start his own, more moderate party and leave Likud, after so many years of being so involved with Likud and its conservative party. It is because Benjamin Netanyahu, the present leader of Likud—and, by extension, his followers—does not mind being seen as either knavish or insane.

While stumping in Netanya on Sunday, Likud Chairman MK Benjamin Netanyahu compared Hamas' victory in Palestinian parliamentary elections last week to the rise of the Nazis in Germany in the 1930s.

"A few days ago, a new foe arose," Netanyahu said at a campaign stop at the Park Hotel. "When Hitler rose to power, it was said that ruling would moderate him, and it was also said in regard to the Ayatollah's regime and the Taliban. There are urgent warning signs that [scream] out a lust for murder and destruction."

"The Likud will not continue transferring territory, [we] need to stop giving them money—neither ours nor the world's—and [we] must prevent them from establishing an army any which way possible," Netanyahu said, adding that the Likud will derail Hamas' continuing ascent.

Yes, conciliatory actions towards those entities long sworn to your destruction never work: please ignore the pesky fact that Israel and Egypt have been at peace for almost 30 years.

And it is now official: Likud's leader has essentially decided that it is not enough that fanatics in Hamas want to destroy Israel, but that the converse must be true.

The Television Market Gets One Right

Our dozens of readers surely know that we have an instinctive distrust of the wisdom of the marketplace for making decent decisions. But sometimes even the market gets something dead right.

In September 2004, the Public Broadcasting Service (PBS), after heavy lobbying from its Republican overseers at the Corporation for Public Broadcasting, began feeding a new show called the "Wall Street Journal Editorial Report" to its member stations. Why Americans needed their tax dollars spent on a new right-wing commentary show at 10:30 p.m. Eastern time was not an issue. But the corporation for Public Broadcasting satraps were sure that Americans needed were the politics of "Firing Line" with a bigger budget and better production values.

The Wall Street Journal, as Brad DeLong astutely points out when events warrant, is really two newspapers in one—a thorough and mainly evenhanded news section with a heavy emphasis on news about business, and a thoroughly slipshod and underhanded editorial page with a heavy emphasis on conservative talking points.

And the "Wall Street Journal Editorial Report" had little to do with the news section of the paper and a lot to do with its editorial staff. (Ironically, many PBS stations would have welcomed a straightforward business news show to replace the post-Louis Rukeyser version of "Wall Street Week.")

After 15 short months, alas, the conservative Republican overseers were licking their wounds, having been a little too overt and partisan in their overt partisanship, and the Journal Editorial Board took its business private.

And in January 2006, the "Wall Street Journal Editorial Report" made its triumphant return to television, on a network that would favor its politics and reward it with a time slot that reflected its importance to the American public. Yes, the show now appears on Fox News at the stellar hour of 11:00 p.m. on Saturdays (Eastern time) and 6:00 a.m. on Sundays. Gentle readers, The Tony Danza Show gets better time slots than that: those time slots shout pity, not respect.