Fixing a Rigged Game

“In fact, the best thing we could do on taxes for all Americans is to simplify the individual tax code. This will be a tough job, but members of both parties have expressed an interest in doing this, and I am prepared to join them.” — Barack Obama

The game is rigged against the regular guy in America today. And it's rigged in favor of big business, the politically connected, and the wealthy.

If Republicans and conservatives want to reform themselves, they need to begin with this fact. Admit it. Understand it. Declare it. Decry it. And start fixing it.

Here's the evidence the game is rigged:

Corporate profits soared to a record $1.73 trillion annualized rate in the first quarter of 2013, more than triple what they were in 2001, according to data from the Bureau of Economic Analysis.

Banks made a record $40.1 billion in profits in the first quarter, 16 percent higher than a year before, according to FDIC data. The big banks have grown much faster than the economy. Last year, Bloomberg News found that the five largest banks held assets equal to 56 percent of the economy, up from 43 percent in 2006, before the fiscal crisis the big banks caused -- and before the taxpayers bailed them out.

And how's the regular guy doing?

New business formation continues to fall to record lows. In 1980, nearly half of all firms were less than five years old. The latest data from the Kaufmann Foundation puts that number at about one-third.

And the working man isn't faring better. Unemployment, while improving, is still high. Maybe worse is the collapse of median household income -- down more than 7 percent since 2008, and it is not noticeably climbing.

Meanwhile, federal spending hit a record 26.9 percent of GDP in 2010. While it dropped a bit to 24.8 percent in 2012, that is still higher than any year between World War II and 2009 and 18 percent higher than the average year from the previous five decades.

So it's no surprise that seven of the 10 richest counties in the United States are in the Washington, D.C., area. Revolving-door lobbyists and government contractors are living the high life in McLean, Georgetown, and Great Falls.

Jeff Jacoby reports in the Boston Globe that Washington booms – thanks to other people’s money:

“In the months since President Obama signed the order to cut federal outlays by $85 billion, the Washington Post reported last week, the region has added 40,000 jobs. “Income-tax receipts have surged in Virginia, beating expectations. Few government contractors have laid off workers.” There is no sign of the economic hellfire and brimstone foretold by Fuller, who says it’s a “surprise” to him that Washington’s economy is still booming. “We’ve done better than I expected,” he confessed.

The real surprise is that anyone is still surprised by the affluence of the Washington area.

According to the most recent census data, seven of the nation’s 10 wealthiest counties surround Washington — including the only three counties in the United States with median incomes above $100,000: Loudoun, Fairfax, and Arlington, all in Northern Virginia. In 2010, there were six Washington-area counties in the Top 10; in 2007, there were five. The Great Recession may have left great swaths of America reeling, but it didn’t stop Washington from surging even higher in the income rankings.

If the worst recession in decades couldn’t tarnish Washington’s opulence, sequestration — a political budget maneuver designed to achieve merely a tiny reduction in the growth of federal spending over the next decade — isn’t likely to either.

Coverage of the D.C. area’s high-flying economy sometimes sounds like an episode of “Lifestyles of the Rich and Famous.” In a front-page article last weekend — “What Sequester? Washington Booms as a New Gilded Age Takes Root” — The Wall Street Journal described the extraordinary wealth of Washington’s “moneyed brain trust,” beneficiaries of a generation’s worth of soaring government budgets and immense political aggrandizement. Examples of extravagance are everywhere, from the flourishing Aston Martin dealership selling sports cars at $120,000 and up to the Georgetown hotel that charges $22 for a martini.

Washington hasn’t grown so rich because it is home to industries that produce wealth through commerce or manufacturing or invention. Unlike Silicon Valley or Manhattan or Houston or Hollywood, Washington’s primary activity isn’t the creation of goods and services that have intrinsic value in themselves, and that raise the national standard of living. Government doesn’t generate new income — it redistributes income that others have already generated. Through taxes, spending, and regulation, the federal establishment now dominates more of the private economy than ever, directly confiscating trillions of dollars earned in the private economy, and indirectly controlling the fate of tens of trillions more.

“Power is the great aphrodisiac,” Henry Kissinger famously claimed. It is also a great conduit to other people’s money. When a single tweak in the tax code can make or break a business, when fortunes are being doled out through federal bailouts and contracts, when regulations can decide the future of industries and interest groups, it stands to reason that so many will spend so much to get a piece of what government controls.

“Most federal activity involves taking money from some people, giving it to others, and keeping a big chunk as a transaction fee,” says the Cato Institute’s David Boaz. At its broadest, that “transaction fee” is reflected in everything from overpaid federal employees to Washington’s gargantuan lobbying industry to the clustering of America’s wealthiest counties in suburban Washington.”

Take account of total compensation - wages plus benefits - and the disparity is even more striking. In 2008, total federal civilian compensation averaged $119,982 - more than twice the $59,908 in wages and benefits earned by the average private-sector employee. Chris Edwards, a scholar at the Cato Institute, has documented the steady widening of the gap: In 1960, federal workers averaged $1.24 for every $1 earned by a private employee. By 1980, the federal advantage was up to $1.51; in 2000 it was $1.66. Now it is $2 - and climbing. When ranked alongside 72 industries that span the US economy, federal employees take home the seventh-highest average compensation. Among the workers they out earn, Edwards shows, are those in such fields as computer systems design, chemical products, and legal services.

A full-page ad in The Wall Street Journal several years ago was the clearest evidence yet of the approaching showdown. “We are the Private Sector. And we’ve had enough,’’ the ad proclaimed. It announced the launch of The Free Enterprise Nation, which describes itself as the first national organization intended to represent the interests of the majority of Americans who work in the private economy. Its message was blunt: “The private sector provides pay and benefits for public-sector workers that we cannot afford to provide for ourselves .We need to change public policy

The game is rigged, and conservatives can point out that the chief game rigger is government. The tax code is convoluted, regulations are terrifying, big businesses that fail get bailed out while small entrepreneurs get crushed by bureaucracy.

If you're already doing well, or if you're well connected and can hire a former congressman, senator, or Cabinet secretary — you're OK. Otherwise, you're not.

Conservatives and Republicans would do well to admit this, and declare it a serious problem. Attacking Obama for "hating success" or being "anti-business" is not only factually flimsy, it is a political loser. Such attacks don't appeal to the folks who have been suffering in our current economy.

Driven by the insight that the game is rigged in favor of the wealthy and well-connected, Republicans can push a free-market populist response. Free-market populism is, for one thing, a moral stance, manifested through rhetoric and action.

Republicans have become more comfortable lately denouncing "crony capitalism" and even "corporate welfare." After blaming politicians who use public power to enrich private interests, Republicans also ought to shame some of the "capitalists" and their lobbyists who demand handouts and protective regulations.

Republicans ought to abolish corporate welfare, including subsidies for exports and green-energy projects. Break up the big banks. Get rid of corporate tax credits.

Politically, these policies checkmate Democrats because corporatism is at the heart of President Obama's economic agenda. Subsidies for Boeing, Chrysler and General Electric are the building blocks of Obama's "New Economic Patriotism." ObamaCare was built in collusion with drug makers and the hospital lobby.

If Republicans destroy the stale myth of Washington versus Wall Street — and make it clear it's really K Street, Wall Street and Pennsylvania Avenue versus Main Street — Democrats lose much of their rhetorical advantage.

Ending federally granted privilege is politically helpful because clear moral stances are winners. But voters often want something tangible and immediate from politicians. In the short term, dismantling corporatism helps mostly the minority of voters that are or want to be entrepreneurs.

Many conservative reformers advocate a package of policies to aid middle-class families. This is dangerous territory because the Left can always out-Santa Claus the Right. Any conservative "gifts" to the middle class should be consistent with the message that Big Government isn't their friend.

So, here's one: abolish the payroll tax — totally and permanently. It's a tax on employment. It's a tax on someone's first dollar. And it's specious to say that it funds Social Security and Medicare — both entitlements are funded on the margin by general revenues. So give up the charade and abolish a regressive federal tax.

As a pointed out in a previous blog: How Did We Get in this IRS Mess? A flat tax would be a good way to accomplish this.

“For example, let the flat rate be 20%, and let the deductions be $20,000 per adult and $7,000 per dependent. Under such a system, a family of four making $54,000 a year would owe no tax. A family of four making $74,000 a year would owe tax amounting to 0.20 × (74,000 − 54,000) = $4,000, as under a flat tax with deductions. But families of four earning less than $54,000 per year would owe a "negative" amount of tax (that is, it would receive money from the government). For example, if it earned $34,000 a year, it would receive a check for $4,000. The NIT is intended to replace not just the USA's income tax, but also many benefits low income American households receive, such as food stamps and Medicaid. The NIT is designed to avoid the welfare trap — effective high marginal tax rates arising from the rules reducing benefits as market income rises. An objection to the NIT is that it is welfare without a work requirement. Those who would owe negative tax would be receiving a form of welfare without having to make an effort to obtain employment. Another objection is that the NIT subsidizes industries employing low cost labor, but this objection can also be made against current systems of benefits for the working poor.”

Consider this. A family of four making $60,000 will pay $4,490 (7.5%) in payroll taxes ($3,720 for Social Security and $870 for Medicare). The employer will pay a similar 7.5% amount. (The maximum earnings for Social Security is $113,700 and there is no limit for Medicare)

Now let’s look at the same family of four with a flat tax rate of 20%. That family of four making $60,000 would pay 0.20 x ($60,000 -$54,000) = $1,200. But the same family will have saved $4,490 in payroll taxes. If the family’s income were $100,000 the tax amount would be $9,200 and the payroll tax savings would be $7,650 for a total tax of $1,550. For $200,000 it would be $29,200 -$9,949 for payroll taxes for a total tax of $19,251.

Keep in mind that these commutations also apply to small businesses that create two-thirds of the jobs in the United States.

(These figures have been calculated using the Payroll Tax Calculator for 2013 from the Tax Policy Center.)

You will no doubt ask: Isn’t this going to reduce the amount of money the federal government will collect? The answer is yes, but isn’t that the point. Reduce the money, reduce the power.

In a 2012 article in Forbes Magazine by Addison Wiggin: “Flat Tax Is Fantasy In U.S. But Works Fine Behind Old Iron Curtain” Wiggin writes:

“The first comprehensive proposal for a U.S. flat tax came in the 1985 book The Flat Tax, by economists Robert Ernest Hall and Alvin Rabushka.

“Today, the flat tax idea is perhaps even more politically remote, in the United States, than it was in 1985,” Mr. Lewis says. “However, the rest of the world caught on to the idea. Today there are at least 40 governments with flat tax-type systems, most of which made the switch in just the last decade.”

A sizeable number of these countries used to lie behind the Iron Curtain. Messrs. Hall and Rabushka served as consultants to many of those governments as they implemented a flat tax.

The flat tax a panacea? Hardly. Central bankers can still muck up the works; thus, many of these countries were swept up in the Panic of 2008.

But “we could take 2007 as a representative pre-crisis year,” Mr. Lewis suggests. “How did the flat tax countries do then?

“For 13 countries for which information was available from the IMF, the average GDP growth rate was 10.0%, ranging from 6.2% (Slovakia) to 23.1% (Ukraine).”

Lewis further studied 10 countries from which International Monetary Fund data are available, examining the flat tax’s impact on overall revenues. Revenues rose an average of 17.7%… and that’s after throwing out Estonia’s outlier increase of 81%. Only the Czech Republic saw revenue fall — by a minuscule 0.5%, as crisis encircled the globe in 2008.

How about revenue as a percentage of GDP, a favorite measure of policy wonks? That looks good too. On average, the ratio was virtually unchanged in those 10 countries, down 0.1%.

“Most of the seemingly impossible promises of the flat-taxers–higher growth, stable revenue/GDP ratio, rising government revenue–are, in fact, common and repeatable,” Mr. Lewis concludes.

Meanwhile, back in Washington, the politicians argue about how to prevent automatic tax increases and spending cuts totaling $607 billion, which would barely cut the deficit in half.”

Theo Caldwell writes in the Daily Caller: Fair Tax or Flat Tax:

“But for all the hullabaloo around the IRS of late, with some claiming complaints against the agency are overwrought, and others going so far as to question the motives, intelligence, and parentage of those of us who have called for its abolition, there has not emerged any kind of reasoned argument in favor of keeping the tax authority just the way it is.

What has come to the fore, however, is a healthy competition between two credible, if not complementary, alternatives to America’s current tax system. That is, should we move to a Fair Tax or a Flat Tax?

Simply put, would a consumption tax on goods and services (Fair Tax), or a single, small rate of tax on income (Flat Tax) be a better way to fund our government? The short answer is that either would be preferable to the Byzantine, corrupt tax system America has now

Folks are fond of saying you can’t replace something with nothing. This is, of course, complete rhubarb, and if the U.S. government could learn to replace something with nothing, it would go a long way toward solving its monumental debt and deficit problems. But in this case, we do need to pay for our public sector somehow, and since it would defeat the purpose to replace something with two things, it behooves us to consider which of these worthy ideas would work best.

First, the Fair Tax: There is legislative support for this approach, as the Fair Tax Act of 2013 works its way through Congress, sponsored by Rep. Rob Woodall of Georgia as H.R.25 in the House, and by Sen. Saxby Chambliss, also of Georgia, as S.122 in the Senate.

The gist of the plan is to phase out the IRS over three years, replacing income taxes with a sales tax on new goods and services, excluding necessities, of 23 percent. This figure is reached by combining the 15% income tax bracket with 7.65% employee payroll taxes, both of which would be eliminated. As to that last, fairtax.org stresses that its plan eliminates the payroll tax, and this is not an insignificant feature.

Many workers, particularly those with lower earnings, feel the bite of payroll taxes when they collect their paychecks, even if they do not end up with a federal income tax liability for the year. If we mean what we say about simplifying the tax code, then whatever system and rates we settle on ought to be straightforward and clear, and should account for whatever effect, if any, payroll and Social Security taxes will have on take-home wages.

A Flat Tax of, say, 10 percent should mean exactly that — not 10 percent, plus additional levies for retirees, unemployment, etc., that are not normally part of the income tax conversation.

If that can be accomplished, there is much to be said for the simplicity and transparency of a Flat Tax. Sen. Ted Cruz of Texas and The Heritage Foundation are among those calling for this approach. Americans spend billions of hours and hundreds of billions of dollars trying to comply with the country’s impossibly complex tax code. The opportunity cost to the productive economy is extraordinary.

Something that is often lost in income tax discussions is that these rates also apply to small businesses, which create two-thirds of the new jobs in America, and almost all of which file at individual rates. If a Flat Tax can eliminate the expensive and time-consuming task of tax preparation, not only for individuals but for job-creators as well, that would be a boon to America’s beleaguered employment market.

…

The primary question of whether to abolish the IRS having been answered in the affirmative by both sides, disagreement between Fair Tax and Flat Tax proponents is akin to the quarrels of the Yooks and the Zooks in Dr. Seuss’ Butter Battle Book (to whatever extent Seuss intended the tome as a moral relativist metaphor for the Cold War, it was misbegotten — but it actually works here). In that tale, both sides enjoy toast, but are at loggerheads as to whether it should be buttered on the top or the bottom. The applicable lesson here is, having agreed on the big issue, residual differences can be worked out over breakfast.

And so they should be, with the American people as arbiter (though if everyone’s coming to the breakfast, making a reservation seems sage). Politics being the art of the possible, if there is an appetite in the land for a Fair Tax, and political leadership able to make it happen, Flat Tax folks should sign on, perhaps keeping personal lists of I-told-you-so’s, in case the system falters. Likewise, if the Flat Tax finds a market and effective champions, Fair Taxers should offer support.

Whichever option prevails, let us seize this opportunity to reform America’s tax system and change the country for the better.”

This reflects the heart of conservative reform: Level the playing field by getting government out of the game. If we can’t learn from the recent scandals and abuses of federal power and overreach such as the IRS targeting the Tea Party, the DOJ taping in to reporter’s e-mail and phone records, gun-running to Mexico, and the NSA’s data mining we will be doomed as a free society. The only true remedy is to close the taxpayer’s checkbook.

The Myth of Quality from Government Services

“Almost all quality improvement comes via simplification of design, manufacturing layout, processes, and procedures.” — Tom Peters

On May 21, 2013 Secretary of Veterans Affairs Eric Shinseki issued a press release addressing the problems with the VA and setting metrics for improvement:

“VA and Veterans Service Organizations Announce Claims Initiative to Reduce Claims Backlog - Today, the Department of Veterans Affairs (VA), Disabled American Veterans (DAV), and The American Legion announced a new partnership to help reduce the compensation claims backlog for Veterans. The effort—the Fully Developed Claims (FDC) Community of Practice—is a key part of VA’s overall transformation plan to end the backlog in 2015 and process claims within 125 days at 98% accuracy. VA can process FDCs in half the time it takes for a traditionally filed claim.”

In a related report by Aaron Glantz of the Riverside Press-Enterprise:

“The Department of Veterans Affairs has systematically missed nearly all of its internal benchmarks for reducing a hulking backlog of benefits claims and has quietly backed away from repeated promises to give all veterans and family members speedier decisions by 2015.

Internal VA documents, obtained by the Center for Investigative Reporting, show the agency processed 260,000 fewer claims than it thought it would during the past year and a half – falling 130,000 short in fiscal 2012 and another 130,000 short of its goal between October and March.

The result: At a time when the number of veterans facing long waits was supposed to be going down, it instead went up.

On April 29, the VA began to qualify its promise, made repeatedly since 2009, that “all claims” would be processed within four months by 2015.

In a weekly performance report posted on its website, the agency excludes a host of benefits from the promise – including veterans’ burial subsidies, pensions sought by survivors and compensation claims from children of Vietnam veterans, who have birth defects caused by the defoliant Agent Orange.

In an emailed statement, the VA said its promise to eliminate the claims backlog was never meant to cover those types of benefits.

The agency also said it is “using all the tools in the toolbox” to expedite claims. It again repeated its mantra that the delays are “unacceptable.” It added that it fell nearly 17,000 claims short of its production goal for April.

But the VA did not address questions about the fundamental issue: Are the goals unrealistic, the execution flawed or both?

Instead, the agency cited yet another set of ambitious goals – an April vow to clear all 2-year-old claims by mid-June and an order, issued May 15 by VA Secretary Eric Shinseki, instructing all claims staff to work 20 hours of overtime a month through September, which the agency said would have “a measurable impact by the end of the fiscal year.”

The long delays and seemingly intractable nature of the claims backlog has led some lawmakers to look into radically overhauling the process.

…

Earlier this month, Rep. Bill Enyart, an Illinois Democrat and former adjutant general of the Illinois National Guard, introduced legislation to require the VA to begin providing partial compensation to all veterans with claims pending more than 125 days – even if their disabilities had not yet been verified. If a claim denial ultimately followed, veterans would have to pay back the money only if they were found to have consciously misled the agency.

Minnesota Democrat Al Franken has introduced a similar measure in the Senate.

“I’m tired of meeting veterans who come back from Iraq and Afghanistan, who can’t work because they are disabled and are worried about losing their home,” Enyart said. “They deserve better than that.”

According to USA Today the VA has seen its budget increase 41% since 2009 to $140 billion this year. Meanwhile, the pace of incoming disability claims has stayed ahead of VA's ability to process them:

“Concerned about nearly 600,000 veterans waiting months or years for disability checks, Obama administration officials Friday lifted the veil on a corner of the president's upcoming 2014 budget, promising a hike in VA discretionary spending.

The proposal would boost non-entitlement spending to $63.5 billion for 2014, a 4% increase over this year, said Department of Veterans Affairs Secretary Eric Shinseki and White House chief of staff Denis McDonough in a meeting with reporters at the Executive Office Building.

"We're bringing all the power of the government to bear ... to try to address the backlog," says McDonough, who added that Obama tracks the weekly numbers of pending cases. "We're involved in this ... on a daily basis, very aggressively to try to bring this (disability claims backlog) number down."

Shinseki in recent weeks has come under intense criticism for the backlog from a chorus ranging from comedian Jon Stewart to the House VA Committee chair, who called upon the department's Veterans Benefits Administration chief to resign because of it.

"I hear the criticism out there," Shinseki said Friday. "You make the tough decisions, and you deal with it."

McDonough seemed to reaffirm the White House's confidence in Shinseki, saying he is someone "the president relies on and leans on daily."

The VA has seen its budget increase 41% since 2009 to $140 billion this year. Meanwhile, the pace of incoming disability claims has stayed ahead of VA's ability to process them, and there are now nearly 900,000 pending claims from veterans, including about 600,000 waiting longer than four months.

McDonough stressed the administration's high priority on VA spending even as major reductions are considered elsewhere, citing news reports Friday that Obama would propose cutbacks in Social Security and Medicare.”

I also heard an audio clip from an interview with Shinseki today where he restated his goals for the VA and added that they were targeting a rating of 90% for customer service. When I heard this I almost drove the car off the road. I was flabbergasted by such a statement! This was just more big government BS. What about the 10%? I guess they are irrelevant. How about the 98% accuracy goal? Does this mean that 18,000 (2%) vets will have inaccurate medical and benefit records? They deserve much better than that.

In the late 1980s the civil engineering, land surveying, and environmental services I was a principle, part owner and vice-president of made an application to the committee overseeing the prestigious Malcolm Baldrige National Quality Award. This is a very difficult award to receive and the firm was fortunate to make the top 100 national list.

The Baldrige Criteria for Performance Excellence serve two main purposes: (1) to identify Baldrige Award recipients that will serve as role models for other organizations and (2) to help organizations assess their improvement efforts, diagnose their overall performance management system, and identify their strengths and opportunities for improvement. In addition, the Criteria help strengthen U.S. competitiveness by:

• Improving organizational performance practices, capabilities, and results
• Facilitating communication and sharing of information on best practices among U.S. organizations of all types
• Serving as a tool for understanding and managing performance and for guiding planning and opportunities for learning

The Baldrige Criteria for Performance Excellence provide organizations with an integrated approach to performance management that results in:

• Delivery of ever-improving value to customers and stakeholders, contributing to organizational sustainability
• Improved organizational effectiveness and capabilities
• Organizational and personal learning

During our award submittal process I had read an article about a Cadillac Dealership in Dallas, Texas that had received the award for excellence. During the award ceremony with the assembled dealership employees and their families when the Baldrige Committee representative he stated that he dealership had one of the highest customer service ratings in the nation at 98.5%. This brought a round of cheers and applause from the audience. The owner of the dealership stepped up to the podium to thank the committee and the employees Then he became very serious and stated he was not satisfied with 98.5%. He said there were 1.5% of his customers who were not satisfied with the performance of the dealership and he was very concerned with them and admonished his employees that he expected them to do better in the coming years. This was a serious and dedicated man to his customers.

One of my responsibilities during my 22 years as a manager and owner I was very involved in quality control and quality assurance. The three books that I kept above my desk were: In Search of Excellence by Tom Peters and Robert H. Waterman; The Peter Principle by Laurence J. Peter and Raymond Hull; and Out of Crisis by W. Edwards Deming. These three books could be considered my quality assurance and customer service bibles.

In Search of Excellence is considered the "Greatest Business Book of All Time" (Bloomsbury UK), and has long been a must-have for the boardroom, business school, and bedside table.

Based on a study of forty-three of America's best-run companies from a diverse array of business sectors, In Search of Excellence describes eight basic principles of management — action-stimulating, people-oriented, profit-maximizing practices — that made these organizations successful.

In Search of Excellence', co-authored with Bob Waterman, is Tom Peters first book and sold over 6 million copies. Its success surprised their colleagues at McKinsey, who had laughed at the idea that Peters and Waterman would keep the royalties, "should the book sell 50 000 copies".

Two decades later, In Search of Excellence is still one of the most readable management books. The eight characteristics of excellent companies, a bias for action, close to the customer, autonomy and entrepreneurship, productivity through people, hands-on values driven, stick to the knitting, simple form and lean staff, simultaneous loose-tight properties are all still relevant and still ignored today. It is written clearly, painting vivid pictures with anecdotes and examples from real companies.

Peters and Waterman found eight common themes which they argued were responsible for the success of the chosen corporations. The book devotes one chapter to each theme.

1. A bias for action, active decision making — getting on with it. Facilitate quick decision making & problem solving tends to avoid bureaucratic control
2. Close to the customer — learning from the people served by the business.
3. Autonomy and entrepreneurship — fostering innovation and nurturing champions.
4. Productivity through people — treating rank and file employees as a source of quality.
5. Hands-on, value-driven — management philosophy that guides everyday practice - management showing its commitment.
6. Stick to the knitting — stay with the business that you know.
7. Simple form, lean staff — some of the best companies have minimal HQ staff.
8. Simultaneous loose-tight properties — autonomy in shop-floor activities plus centralized values.

None of these themes are present in the government civil service. I know because I worked as a supervisor for the California Division of Highways (now Caltrans) for ten years prior to going into business for myself. The civil service is managed by bureaucrats who are far more concerned with advancement in their civil service rating (GS rating for the federal government) and maintaining their longevity until their lucrative retirement benefits. It is a punitive system of management where “don’t rock the boat” far outweighs “thinking out of the box” and taking responsibility. Employees are managed and governed by policy manuals and memorandums and are far removed from their upper management. Customer (taxpayer) service ranks last on the list of concerns — personal advancement tops the list.

The main theme of The Peter Principle is rising to the level of incompetency. Back in 1969, Lawrence J. Peter created a cultural phenomenon with his brilliant, outrageous, hilarious, and all-too-true treatise on business and life, The Peter Principle — and his words and theories are as true today as they were then. By posing — and answering — the eternal question, “Why do things always go wrong?” Peter explores the incompetence that runs so rampant through our society, our workplace, and our world in an outrageously funny yet honest and eye-opening manner

The Peter Principle is a proposition that states that the members of an organization where promotion is based on achievement, success, and merit, will eventually be promoted beyond their level of ability. The principle is commonly phrased, "Employees tend to rise to their level of incompetence." In more formal parlance, the effect could be stated as: employees tend to be given more authority until they cannot continue to work competently.

The principle holds that in a hierarchy, members are promoted so long as they work competently. Eventually they are promoted to a position at which they are no longer competent (their "level of incompetence"), and there they remain, being unable to earn further promotions. Peter's Corollary states that:

In time, every post tends to be occupied by an employee who is incompetent to carry out its duties"

Ads that "work is accomplished by those employees who have not yet reached their level of incompetence." "Managing upward" is the concept of a subordinate finding ways to subtly manipulate his or her superiors in order to prevent them from interfering with the subordinate's productive activity or to generally limit the damage done by the superiors' incompetence.

Another method is to refrain from promoting a worker until he or she shows the skills and work habits needed to succeed at the next higher job. Thus, a worker is not promoted to managing others if they do not already display management abilities.

The first corollary is that employees who are dedicated to their current jobs should not be promoted for their competence, but should instead be rewarded with, say, a pay rise, and remain in their current position; they should also not be promoted in response to their lack of competence at their current job.

The second corollary is that employees might be promoted only after being sufficiently trained to the new position. This places the burden of discovering individuals with poor managerial capabilities before (as opposed to after) they are promoted.

As a manger I saw this numerous times within the organization. We would have project engineers who were crackerjacks at their job. They were technical competent, if not superior, they loved their work, and were constantly striving for excellence in engineering. But when they were promoted to the level of project manager where they had to deal with subordinates and more importantly clients and contract issues many would fail and would ether resign or asked to leave. Their client service skills were weak, if not nil, due to the introverted nature of an engineer. They were more comfortable with the computer than the telephone of a face-to-face client meeting. This was unfair to a technically sound and dedicated employee. It would have been far better to reward his or her performance with monetary and educational perks.

This also applies to the civil service. Promotions come via civil service exams and longevity. If a GS 9 studies and keeps his or her nose clean they will eventually be promoted to GS 10 and so on and on until they reach their level of incompetence and sit there until retirement. If you doubt this just look at the current spate of hearings regarding the maleficence and criminal behavior of the IRS and Justice Department.

In the late 1980s I was introduced to the work of W. Edwards Deming through his book Out of Crisis. was an American statistician, professor, author, lecturer and consultant. He is perhaps best known for the "Plan-Do-Check-Act" cycle popularly named after him. In Japan, from 1950 onwards, he taught top management how to improve design (and thus service), product quality, testing, and sales (the last through global markets) through various methods, including the application of statistical methods.

Deming made a significant contribution to Japan's later reputation for innovative high-quality products and its economic power. He is regarded as having had more impact upon Japanese manufacturing and business than any other individual not of Japanese heritage. Despite being considered something of a hero in Japan, he was only just beginning to win widespread recognition in the U.S. at the time of his death. President Reagan awarded the National Medal of Technology to Deming in 1987. He received in 1988 the Distinguished Career in Science award from the National Academy of Sciences.

Deming's teachings and philosophy are best illustrated by examining the results they produced after they were adopted by Japanese industry, as the following example shows: Ford Motor Company was simultaneously manufacturing a car model with transmissions made in Japan and the United States. Soon after the car model was on the market, Ford customers were requesting the model with Japanese transmission over the US-made transmission, and they were willing to wait for the Japanese model. As both transmissions were made to the same specifications, Ford engineers could not understand the customer preference for the model with Japanese transmission. Finally, Ford engineers decided to take apart the two different transmissions. The American-made car parts were all within specified tolerance levels. On the other hand, the Japanese car parts were virtually identical to each other, and much closer to the nominal values for the parts – e.g., if a part was supposed to be one foot long, plus or minus 1/8 of an inch – then the Japanese parts were all within 1/16 of an inch. This made the Japanese cars run more smoothly and customers experienced fewer problems.

My cousin worked for Ford Motors at the Cleveland Engine plant for 25 years as a general foreman. In the late 1980s he told me, while on a visit to Cleveland, that his plant had a very high rejection rate of cast engine blocks. He claimed this was due to union work rules and the company’s lack of willingness to challenge the union for fear of work slow-downs or strikes. He told me that Japanese auto manufactures, even the non-union shops in the United States, were delivering cars of higher quality and dependability. The Japanese, adhering to principles espoused by Deming were even surpassing the Germans in quality.

Deming offered fourteen key principles to managers for transforming business effectiveness. The points were first presented in his book Out of the Crisis. Although Deming does not use the term in his book, it is credited with launching the Total Quality Management (TQM) movement.

1. Create constancy of purpose toward improvement of product and service, with the aim to become competitive, stay in business and to provide jobs.
2. Adopt the new philosophy. We are in a new economic age. Western management must awaken to the challenge, must learn their responsibilities, and take on leadership for change.
3. Cease dependence on inspection to achieve quality. Eliminate the need for massive inspection by building quality into the product in the first place.
4. End the practice of awarding business on the basis of a price tag. Instead, minimize total cost. Move towards a single supplier for any one item, on a long-term relationship of loyalty and trust.
5. Improve constantly and forever the system of production and service, to improve quality and productivity, and thus constantly decrease costs.
6. Institute training on the job.
7. Institute leadership. The aim of supervision should be to help people and machines and gadgets do a better job. Supervision of management is in need of overhaul, as well as supervision of production workers.
8. Drive out fear, so that everyone may work effectively for the company.
9. Break down barriers between departments. People in research, design, sales, and production must work as a team, in order to foresee problems of production and usage that may be encountered with the product or service.
10. Eliminate slogans, exhortations, and targets for the work force asking for zero defects and new levels of productivity. Such exhortations only create adversarial relationships, as the bulk of the causes of low quality and low productivity belong to the system and thus lie beyond the power of the work force.
11. a. Eliminate work standards (quotas) on the factory floor. Substitute with leadership. b. Eliminate management by objective. Eliminate management by numbers and numerical goals. Instead substitute with leadership.
12. a. Remove barriers that rob the hourly worker of his right to pride of workmanship. The responsibility of supervisors must be changed from sheer numbers to quality. b Remove barriers that rob people in management and in engineering of their right to pride of workmanship. This means, inter alia, abolishment of the annual or merit rating and of management by objectives.
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish the transformation. The transformation is everybody's job.

"Massive training is required to instill the courage to break with tradition. Every activity and every job is a part of the process."

Seven Deadly Diseases

The "Seven Deadly Diseases" include:

1. Lack of constancy of purpose
2. Emphasis on short-term profits
3. Evaluation by performance, merit rating, or annual review of performance
4. Mobility of management
5. Running a company on visible figures alone
6. Excessive medical costs
7. Excessive costs of warranty, fueled by lawyers who work for contingency fees

A Lesser Category of Obstacles" includes:

1. Neglecting long-range planning
2. Relying on technology to solve problems
3. Seeking examples to follow rather than developing solutions
4. Excuses, such as "our problems are different"
5. Obsolescence in school that management skill can be taught in classes
6. Reliance on quality control departments rather than management, supervisors, managers of purchasing, and production workers
7. Placing blame on workforces who are only responsible for 15% of mistakes where the system designed by management is responsible for 85% of the unintended consequences
8. Relying on quality inspection rather than improving product quality

Deming's advocacy of the Plan-Do-Check-Act cycle, his 14 Points and Seven Deadly Diseases have had tremendous influence outside manufacturing and have been applied in other arenas, such as in the relatively new field of sales process engineering.

It was Deming’s principles and theories that put the issues of quality assurance, quality control, and client service in to total context for me. In 2006 I wrote a series of three articles for American Surveyor magazine where I stated:

“In 2003 the Mercedes Benz motorcar company had dropped from No.1 to 26th place on the J.D. Powers and Associates, Inc.* rating of auto manufacturers in the category of quality. This was eight slots below the industry average, trailing Chrysler and Ford. In 1991 Mercedes ranked No. 1 in quality and customer satisfaction; by 2000 they had dropped to No. 6 and by 2003 to 26th. Some of the problems cited in the J.D. Powers reports were handling, braking, shocks and struts, electronic window controls, and inaccurate fuel gauges. How did this one-time industry nameplate fall on such hard times?

The problems cited in the survey arose from three models from the year 2000, including the midsize E-Class sedan, Mercedes' big money maker. In the 1990s Toyota and Nissan stormed the U.S. market with lower-priced luxury cars such as the Lexus and Infiniti. To compete, Mercedes' engineers had to overhaul their process of building cars. Instead of letting design determine the cost, engineers had to design cars to meet a target price. These German engineers, accustomed to designing for quality, weren't very good at this practice. Quality took a back seat. Fortunately for Mercedes this situation did not last long and the company regrouped and went back to its roots, designing for quality and value.

Several years ago the firm I work for received a call from a Mercedes engineer in Stuttgart, Germany requesting that we take elevations on a section of the Harbor Freeway in Los Angeles. They wanted elevations taken to 3 millimeters on a ten-foot-by-ten-foot grid along a very rough section of this heavily traveled roadway. The Mercedes engineers wanted to use this data to create a digital terrain model of the roadway so they could design their front-end suspension for California drivers, many of which had been complaining about the stability and durability of the suspension systems. We carried out this assignment using the Vangarde 505 remote sensing pavement survey system. Due to the density of the grid, heavy traffic conditions requiring working off hours and nights, and coordinating with Caltrans, this was a very costly survey. It was also quite a change in philosophy from designing for cost rather than quality and customer satisfaction.”

…

“Both TQM and ISO 9000 (and its deviants) are very complex programs requiring a great deal of management's time and training throughout the enterprise. I will refrain from referring to these programs as in my opinion they do not address the focus of my articles. They are valuable programs and for many large private and public sector contracts the qualifying firms must demonstrate either ISO 9000 or a TQM certification. Keep in mind that both of these programs require external and internal audits of a company's business and client service practices, and run the gamut from accounting systems to answering the phone. ISO 9000 covers the basics of what quality management systems are and also contains the core language of the ISO 9000 series of standards. ISO 9001 is intended for use in any organization that designs, develops, manufactures, installs and/or services any product or provides any form of service. It provides a number of requirements which an organization needs to fulfill if it is to achieve customer satisfaction through consistent products and services that meet customer expectations.

All of these quality assurance programs are rooted in the teachings of W. Edwards Deming. Deming is to quality as Peter Drucker is to management (Management by Objectives) and Tom Peters (In Search of Excellence) is to client service.

William Edwards Deming (1900-1993) was an American statistician, widely credited with improving production in the United States during World War II. He is perhaps best known for his work in Japan, where from 1950 onward he taught top management the principles of Statistical process control (SPC), a forerunner of TQM. During the post-war reconstruction of Japan General Douglas MacArthur invited Deming to assist in the rebuilding of Japanese industry. At that time products made in Japan were considered to be of very low quality. Some Japanese cottage industries had located in the village of Usa so they could claim the their products were made in the USA! This did not help very much. When Japanese cars began arriving in the United States in 1960, Detroit automakers sneered. But we all know the end of the story. It is the Japanese and Korean automakers that are now building their cars in the "real" USA, and they are known for quality.

Under Deming's stewardship Japan became renowned for producing innovative high quality products. Deming is regarded as having had more impact upon Japanese manufacturing and business than any other non-Japanese individual.

Deming taught that by adopting appropriate principles of management, organizations can increase quality and simultaneously reduce costs (by reducing waste, rework, staff attrition and litigation while increasing loyalty) The key is to practice continual improvement and think of manufacturing as a system, not as bits and pieces. In 1960, Deming became the first American to receive the Second Order of the Sacred Treasures from Prime Minister Nobusuke Kishi. An accompanying citation stated that the people of Japan attributed the rebirth and success of their industry to his work. Today the highest prize awarded by the Japanese Union of Scientists and Engineers (JUSE) for industrial achievement is the Deming prize. This is comparable to the Malcolm Baldrige National Quality Award, established by the U.S. Congress in 1987 to recognize quality and business achievements of U.S. organizations.”

(These articles are available in a PDF format by click on the appropriate part of the series; Part 1, Part 2, and Part 3.)

I have given lectures at seminars for both the private and public sector of quality assurance, quality control, and client service. After my retirement I was contracted to write the quality assurance, quality control, and client service manual for my previous firm. It was the first interactive, hyperlinked manual of its kind the firm had ever had.

Of course I had to tailor my presentations to address the needs and concerns of the private and public sectors. This was difficult as the public sector, as stated above, is quite different from the private. To the private sector profit and sustainability are paramount and to achieve these firms are dependent on the highest quality, superb client service and retaining he best employees while keeping costs as low as possible. This is a very delicate balancing act, but Deming’s principles are most applicable.

In the public sector we have a different culture and management style. There is no realization of profit in the public sector. Why should there be? They have a unlimited source of capitalization — it’s called taxpayer money. Cost control is not an issue as most agencies are not aware of their real costs of doing business as they do not take into account the costs of employee productivity. They staff by available budget and each year they request budget increases. If they do not use their entire budget in any fiscal reporting period they lose the funds. This encourages them to spend until all the money is gone. There is no reward for saving money.

They have a punitive management style based on policies and memorandums that issue from some unknown mastermind in another department, building or state. Cross communication is something to be avoided as it only creates potential conflict.

I present all of this as an argument to show how the VA with its 41% increase in budget is still doing a lousy job and not meeting its goals and metrics.

This condition is not exclusive to the VA, but to almost every federal and state agency in the nation, including the military. They obfuscate with government doublespeak to a pint where the Congress and taxpayer is bamboozled over and over again. A recent example is the collapse of a bridge on I-5 over the Skagit River in the state of Washington. It did not take lone for the governor of Washington, Jay Inslee (D), to call for more money from the people of Washington and the federal government to repair and replace the ailing and failing transportation infrastructure. The New York Times reports:

“Mr. Inslee said in an interview that a broader message of the collapse is that state financing for state transportation projects — now under consideration in a special session of the Legislature — can no longer wait, especially for the long-delayed Columbia River project.

“It shouldn’t take an oversize load to let us know we have an oversized problem,” he said.

Washington State faces a deadline this year to find money for the $3.2 billion project over the Columbia River, or risk losing up to $1.2 billion in federal financing. Oregon’s Legislature has approved $450 million, but Washington State’s $450 million share has been stalled. About $1 billion would come from tolls.

Building America’s Future, an advocacy group founded by Mayor Michael R. Bloomberg of New York and two former governors, Edward G. Rendell of Pennsylvania and Arnold Schwarzenegger of California, also issued a statement characterizing the bridge collapse as a “call to action.”

“Regardless of how this happened, the collapse of the Skagit River Bridge in Washington State is a timely reminder of our nation’s need to invest in critical infrastructure upgrades,” Mr. Rendell said. “Our nation’s bridges, roads and highways are deteriorating before our eyes.”

Over the years the federal and state governments have collected excise taxes from the sale of gasoline, diesel fuel, tires, auto and truck registrations, and tolls to pay for the nation’s roads. Where does the money go? In states like Washington and California a large percentage of those excise go to bloated state employee staffs within the departments of transportation along with pensions and health care benefits for retiring state employees. Washington, as California, is restricted from outsourcing much of its design and maintenance programs to the private sector. Until these government union controlled agencies take a different course our infrastructure will continue to age and fail. Of course we can always take the train.

A Bad Day for Lois Lerner

“In a time of universal deceit - telling the truth is a revolutionary act.” — George Orwell

Today was a bad day for Lois Lerner the director of the IRS’ Exempt Organizations Division as she was called to testify before Darrel Issa’s House Oversight and Government Reform Committee.

The Internal Revenue Service official at the center of the political targeting scandal invoked her constitutional right not to answer lawmakers’ questions on Wednesday, but defiantly asserted that she has done nothing wrong — prompting confusion about how exactly she was using her right not to incriminate herself.

House Oversight Committee Chairman Darrell Issa (R-Calif.) told Politico that Lois Lerner, who leads the IRS office that determines which organizations receive tax-exempt status, will be brought before his panel again.

Lerner was the first to publicly disclose earlier this month that the IRS gave extra scrutiny to conservative groups.

“I have not done anything wrong, I have not broken any laws, I have not violated any IRS rules or regulations and I have not provided false information to this or any other congressional committee,” Lerner told House Oversight and Government Reform Committee members. “While I would very much like to answer the committee’s questions today, I have been advised by my counsel to assert my constitutional right not to testify or answer questions related to the subject manner of this hearing.”

Lerner added that by asserting her right not to testify, “I know that some people will assume I have done something wrong. I have not. One of the basic functions of the Fifth Amendment is to protect innocent individuals, and that is the protection I am invoking today.”

Issa noted during the hearing that because Lerner had asserted her innocence in her opening statement, “I believe you have not asserted your rights but have effectively waived your rights” and took her refusal to answer as a refusal to testify.

An incensed Rep. Trey Gowdy (R-S.C.) spoke up that Lerner should testify, agreeing that she already waived her constitutional privilege.

“You don’t get to tell your side of the story and not be subjected to cross-examination. That’s not the way it works. She waived her right to Fifth Amendment privilege by issuing an opening statement, she ought to stand here and answer our questions,” Gowdy said, earning applause from the audience.

After a key agency IRS official today invoked her Fifth Amendment right not to incriminate herself during congressional testimony, Oversight and Government Reform Chairman Darrell Issa said he will review legal precedent in order to determine whether Lois Lerner, the director of Exempt Organizations at the IRS, could be held in contempt of Congress.

Although Lerner, who’s at the center of the controversy, refused to answer questions from members of the committee, she read a brief statement into the record declaring her innocence. Furthermore, at the request of Issa, Lerner authenticated a document containing her written answers for the inspector general’s investigation of the matter.

Those actions prompted members of the committee to question whether Lerner effectively waived her right to invoke the Fifth Amendment.

“She just testified. She just waived her Fifth Amendment right to privilege,” Rep. Trey Gowdy, R-S.C., a former federal prosecutor, said. “You don’t get to tell your side of the story and then not be subjected to cross-examination. That’s not the way it works.”

Although Issa dismissed Lerner, at the end of the hearing he announced that the committee would recess rather than adjourn while he determines whether Lerner should be recalled before the panel.

“Ms. Lerner may have waived her Fifth Amendment rights by addressing core issues in her opening statement and the authentication afterwards,” Issa, R-Calif., said as he brought the hearing to a close. “Although I excused Ms. Lerner subject to a recall, I am looking into the possibility of recalling her and insisting that she answer questions in light of a waiver.”

A Republican committee aide said the application of the Fifth Amendment has nothing to do with House or committee rules, but rather is a constitutional question. The aide said courts have interpreted that the Fifth must be asserted in the absolute, not partially.

“Congress is respective when witnesses assert the Fifth, but if it’s not asserted properly, you’re not refusing to testify based on constitutional protection,” the aide explained. “Because you don’t want to answer certain questions, there’s a potential contempt of Congress.”

Sources also believe Lerner’s decision to read a statement into the record while invoking the Fifth may have been unprecedented for congressional testimony.

Rep. Elijah Cummings, the top Democrat on the committee, said he does not personally believe Lerner waived her rights with her actions today, but he said the committee should look into the issue.

“This is not a courtroom,” Cummings, D-Md., said. “In a courtroom that might have been the case. It’s a legal question.”

Cummings added that Lerner was acting on advice of counsel, and he doubted her legal team would have permitted her to deliver a statement if it would jeopardize her right to invoke the Fifth.

One constitutional expert noted that generally people who claim the Fifth in hearings give no statement and it would be “unusual” to give a statement and still claim the Fifth.

“Most witnesses claiming the Fifth will not tempt fate by answering any questions,” said Michael Gerhardt, a University of North Carolina constitutional law professor who specializes in the relationship between Congress and the executive branch. “I suppose the witness might argue he or she is claiming the Fifth for limited purposes but then needs to have someone spell out the relevant scope.”

Evert legal expert I have heard on TV today stated the same thing. You cannot assert your Fifth Amendment Right to some things and not others. It pertains either to all or nothing. When she made her opening statement and proclaimed:

“I have not done anything wrong, I have not broken any laws, I have not violated any IRS rules or regulations and I have not provided false information to this or any other congressional committee.”

She opened herself to answering any and all questions pertaining to the three items she skated in that statement; “broken any laws”, “violated IRS rules”, and “provided false information.”

According to Politico:

“Lois Lerner might win the legal battle but she’s prolonging the political war.

Instead of simply taking the scorn of lawmakers for a day, repeatedly invoking the Fifth Amendment to avoid self-incrimination, and then moving on, she chose defiance.

And her bravado has prompted House Oversight and Government Reform Committee Chairman Darrell Issa (R-Calif.) to say she has waived her constitutional right to not comment.

Now, he plans to haul the director of the IRS’s tax-exempt department back to the committee for questioning.

“When I asked her questions from the very beginning, I did so she could assert her rights prior to any statement,” Issa told POLITICO. “She chose not to do so — so she waived.”

Lerner shocked the committee room in the opening moments of Wednesday’s hearing by delivering an opening statement denying any wrongdoing and professing pride in her

“I have not done anything wrong,” said Lerner, who triggered the IRS scandal on May 10 by acknowledging that the agency had singled out conservative groups applying for tax exemptions. “I have not broken any laws. I have not violated any IRS rules or regulations, and I have not provided false information to this or any other committee.”

Beyond that, she refused to answer the committee’s questions, immediately triggering a debate among panel members over whether she had just voided her Fifth Amendment rights.

At the very least, Lerner’s speech prolonged the process. She’s almost certain to be back on Issa’s turf when Congress returns in June from the Memorial Day recess. If she refuses to talk then, the committee could ultimately pursue a contempt charge.

Issa said late Wednesday that he’s consulting the House parliamentarian and outside counsel to determine how to proceed.

..

Paul Rothstein, a law professor at Georgetown University, disagreed saying she “has run a very grave risk of having waived her right to refuse to testify on the details of things she has already generally talked about.”

She “voluntarily talked about a lot of the same things then lawmakers wanted to ask her about” in her opening statement.

“In that situation, when you voluntarily open up the subject they want to inquire in to, and it’s all in the same proceeding, that does result in a court criminal case … that would be a waiver,” he said in an interview with POLITICO.

That was Rep. Trey Gowdy’s argument. The South Carolina Republican and former federal prosecutor wanted to keep Lerner on the stand during today’s hearing and was the first to argue that she waived her rights.

He said lawmakers should at least be able to ask her questions about assertions she made in her statement.”

When the hearing concluded six hours later, Issa announced that he might recall Lerner before the committee and review whether she waived her Fifth Amendment rights by giving an opening statement and answering questions about the document.

Accordingly, Issa said the hearing “stands in recess, not adjourned.”

Lerner’s attorney had informed the committee on Tuesday that she would invoke the Fifth Amendment, but committee aides said she was required to appear anyway.

Once Lerner left the committee room, lawmakers turned their attention primarily to Douglas Shulman, the Bush administration appointee who led the IRS during President Obama’s first term. He was joined at the witness table by J. Russell George, the Treasury inspector general for tax administration, and Treasury Deputy Secretary Neal Wolin.

Rep. Elijah E. Cummings (Md.), the ranking Democrat on the House panel, criticized Shulman for not correcting his March 2012 testimony after learning that IRS employees had indeed targeted conservative groups.

“It seems to me that you would come back even if it were a phone call or a letter,” Cummings said. “I mean, common sense.”

At various points Issa charged that George, who has been largely spared the grillings reserved for other officials in previous hearings, failed to keep Congress informed about his findings as his audit began last year.

Issa told Inspector General George that “we do not wait 10 months to find out that there’s a there there” and called the delay “the greatest failing of an otherwise well-regarded inspector general.”

But George reminded the committee that his office conducted an audit, not a formal investigation. He added that there are “established procedures for conducting an audit” to ensure fairness and noted that information given to Capitol Hill “sometimes is not retained on the Hill.”

Under questioning by Rep. Jim Jordan (R-Ohio), who chairs an oversight subcommittee that first probed allegations of IRS wrongdoing, Shulman said he did not discuss the IRS targeting of conservative groups with the White House during visits to the White House that Jordan said numbered more than 100 between 2010 and 2011.

“It would not have been appropriate to have a conversation with anyone at the White House about the subject of discriminating against conservative groups,” Shulman said.

When Shulman was asked about his 118 visits to the White House he claimed he did not recall all of those visits and later clarified that he had visited the White House complex — which includes the adjoining Eisenhower Executive Office Building and the New Executive Office Building located across the street — for “The Easter Egg Roll with my kids” and for various meetings regarding the IRS budget, the enforcement of tax laws, efforts to improve the federal finance aid process and meetings on the implementation of the 2010 health-care reform law.

So where is Issa’s Oversight and Government Reform Committee going now? No one seems to know. I have always maintained that Issa’s committee was too large and did not have the legal counsel that was available to the Watergate Committee — no Sam Dash. It appears as though the members of the committee each have an agenda they want to push with no clear mission. At times there seems to be more speech making than fact-finding. The real solution is for the House to appoint a select committee with subpoena power, crackerjack legal counsel, and adequate investigative resources.

In my view Lois Lerner is a key figure to the unraveling of the IRS scandal. She has a record that needs to be looked into and according to the Washington Post she has been feeding Congress nothing but lies and obfuscations. In fact the Post’s fact checkers have given her four Pinocchios for just about everything she has said:

“In the days since the Internal Revenue Service first disclosed that it had targeted conservative groups seeking tax-exempt status, new information has emerged from both the Treasury inspector general’s report and congressional testimony Friday that calls into question key statements made by Lois G. Lerner, the IRS’s director of the exempt organizations division.

The clumsy way the IRS disclosed the issue, as well as Lerner’s press briefing by phone, were seen at the time as a public relations disaster. But even so, it is worth reviewing three key statements made by Lerner and comparing them to the facts that have since emerged.

“But between 2010 and 2012, we started seeing a very big uptick in the number of 501(c)(4) applications we were receiving, and many of these organizations applying more than doubled, about 1500 in 2010 and over 3400 in 2012.”

Lerner made this comment while issuing a seemingly impromptu apology at an American Bar Association panel. (It was later learned that this was a planted question — more on that below.) In her telling, the tax-exempt branch was simply overwhelmed by applications, and so unfortunate shortcuts were taken.

But this claim of “more than doubled” appears to be a red herring. The targeting of groups began in early 2010, after the Supreme Court’s decision in Citizens United v. FEC was announced on Jan. 21. The ruling led to increased interest in a tax-exempt status known as 501(c)(4). Most charities apply under 501(c)(3), but under 501(c)(4), nonprofit groups that engage in “social welfare” can also perform a limited amount of election activity.

At first glance, the inspector general’s report appears to show that the number of 501(c)(4) applications actually went down that year, from 1,751 in 2009 to 1,735.

But it turns out that these are federal fiscal-year figures, meaning “2010” is actually Oct. 1, 2009 to Sept. 30, 2010, so the “2010” year includes more than three months before the Supreme Court decision was announced.

Astonishingly, despite Lerner’s public claim, an IRS spokeswoman was not able to provide the actual calendar year numbers. By allocating one-quarter of the fiscal year numbers to the prior year, we can get a very rough sense of the increase on a calendar-year basis. (Figures are rounded to avoid false precision; 2012 is not possible to calculate.)

• 2009: 1745
• 2010: 1865
• 2011: 2540

In other words, while there was an increase in 2010, it was relatively small. The real jump did not come until 2011, long after the targeting of conservative groups had been implemented. Also, it appears Lerner significantly understated the number of applications in 2010 (“1500”) in order to make her claim of “more than doubled.”

I think you guys were reading the paper as much as I was. So it was pretty much we started seeing information in the press that raised questions for us, and we went back and took a look.”

Here, Lerner suggests that she found out about this issue only when news reports appeared in February and March 2012 about tea party groups complaining that they were being targeted. But the IG timeline shows this claim to be false.

According the IG, Lerner had a briefing on the issue on June 29, 2011, in which she was told about the BOLO (“Be On the Look Out”) criteria that included words such as “tea party” or “patriots.” The report says she raised concerns about the wording and “instructed that the criteria be immediately revised.” She continued to be heavily involved in the issue in the months preceding the new reports, according to the timeline.

“I don’t believe anyone ever asked me that question before.”

This was Lerner’s excuse during the media call for why she had not publicly addressed the issue before.

But in congressional testimony Friday, outgoing acting director Steven T. Miller said he had talked with Lerner about arranging to make a statement at a May 10 conference sponsored by the American Bar Association, knowing that the IG report would soon be released.

Lerner then contacted a friend, Celia Roady, a tax attorney with the Washington firm Morgan Lewis, to get her to ask a question about the targeting, according to a statement by Roady on Friday. (Roady had previously denied this was a planted question when asked directly by participants at the meeting.)

So Lerner was dissembling when she suggested that a simple well-aimed question prompted the disclosure.

In fact, just two days before the ABA conference, Lerner appeared before Congress and was asked by Rep. Joseph Crowley (D-N.Y.) about the status of investigations into 501(c)(4) groups. She provided a bland answer about a questionnaire on the IRS Web site, failing to take the opportunity to disclose the results of the probe. Small wonder that Crowley is now calling for her to resign, saying that Lerner lied to him. “

Lerner has a history of going after conservative and Christian groups. In the 1990's, Lerner also served as chief of enforcement at the Federal Elections Commission.

Under her direction, the FEC undertook the largest enforcement action in its history — suing the Christian Coalition for violating campaign laws. The Christian Coalition won, but in one deposition, FEC lawyers asked a defendant if televangelist Pat Robertson prayed for him.

James Bopp, the Christian Coalition's lawyer, said he was "shocked and appalled" by that.

"Both political activity and religious activity are specifically protected by the First Amendment," he said.

When Bopp learned years later that Lerner had been promoted to an IRS position, he became concerned.

"She was in effect being promoted for what she had done at the Federal Election Commission and now was going to be expected to replicate that at the IRS and now we know that's exactly what happened," he said.

Lerner is represented by lawyer William W. Taylor, who is noted for winning a dismissal of all charges against former IMF director Dominique Strauss-Kahn in a high-profile sexual assault case.

Lerner said at Wednesday's hearing that she had done nothing wrong. Well that is to be seen. She is an out of control civil servant with a history of violations against the Constitution. All she needed was an administration that would encourage her. Perhaps Issa’s or any other committee will have to grant her some level of immunity for her to open up and tell the truth. She is a defiant woman who seems to believe she is beyond the law. If granted the umbrella of immunity and she lies or obfuscates the immunity will be lifted and she will then be the subject of a grand jury. It’s time for Issa to take off the gloves and treat go after her in the manner the Watergate Committee went after John Dean. She is a servant of the people, we are not her serfs.

In 2004 when the Abu Ghraib prisoner abuse scandal rocked the Pentagon and the nation the press and Congress were furious with the Bush administration and Donald Rumsfeld, the Secretary of Defense, in particular. Photos were published in the media on almost a daily basis while liberal and conservative commentators pushed the story.

Most of these offenses were committed by young, untrained and unsupervised National Guard soldiers of the 320th Military Police Battalion. After public outrage and investigations by the Army CID eleven of these soldiers were charged and suffered Courts Martials or non-judicial discipline. The commander of the prison, Brig. General Janis Karpinski was busted to Colonel. The prison terms ranged from 10 years to six months.

As distasteful and controversial as Abu Ghraib was it should be remembered that the abuses took place in a time of armed combat in a very dangerous war zone where the coalition troops were suffering 50 to 100 casualties per week. The military did take action and punished the perpetrators. Unlike the abuses at Abu Ghraib the IRS abuses were against American citizens exercising their First Amendment rights. It is unlikely any of the principles will be disciplined or fired. They will surf the Potomac from agency to agency seeking new positions under the protection of their union. All We, the people can do is to urge of representatives to be vigilant and tireless in their pursuit of the truth.

As an aside to this post Deadline Breaking News has reported that the Fox News Cable Channel has just scored its second-best week of the year while the liberal channel MSNBC hits a seven-year low:

“The scandals of the Obama administration seem to be hurting not just the White House but MSNBC as well, while Fox News Channel has just scored its second-best week of the year. After double-digit gains during last year’s presidential election, May 13-17 saw the progressive-aligned “Lean Forward” news network hit new lows as the IRS scandal erupted and revelations that the Justice Department secretly obtained AP records became public. With 350,000 viewers on average and 94,000 in the adults 25-54 demo, MSNBC had its least-watched and lowest-rated total-day results of the year last week. That was also the lowest total-day demo result the network has had since the week of June 26-July 2, 2006, when MSNBC pulled in just 83,000 viewers among adults 25-54, according to Nielsen data.”

Perhaps the American people are more interested in these scandals as the pundits would leave to you believe.