Pigford: The Unexamined Obama Administration Scandal

The Obama administration has again been protected from a troubling scandal by the mainstream media (MSM) using the tactic of omission to simply ignore the scandal, its reality and the negative blowback attendant to a disturbing story.  As sunlight began to illuminate the scandal’s inconvenient and troubling facts, charges of racism were used to temporarily silence those sounding the alarm.  Seemingly, the alarm-ringers’ only crime was having the temerity to respond to the abuses of Pigford with a politically incorrect point of view to those abuses.

The under-reported scandal referenced is generally identified as Pigford.  Pigford’s germination occurred in 1997 as a lawsuit (Pigford vs. Glickman) alleging that 91 African-American farmers were unfairly denied loans by the United States Department of Agriculture (USDA) due to racial discrimination which prevented the complainants from farming.  In 1999, the black farmers won their case.

Pigford has the distinction of being an out of control waste of taxpayer funds and/or a cynical attempt by the Obama administration to curry favor with certain minority groups  to which neither President Obama nor Attorney General Eric Holder can plead ignorance of involvement.  Both have had knowledge since the court ruled on the Pigford lawsuit; in 2008 then Senator Barack Obama supported and voted for the funding of the initial settlement.  Since then Eric Holder (and Obama) have been involved in overseeing and managing the Pigford ‘judgment fund’.

Yet can Pigford be fairly described as a scandal? 

Pigford began innocently enough as a lawsuit to redress a perceived wrong negatively affecting a group of 91…  But then the number climbed to 400…then 1,600…then… 

The number of black farmers has metastasized, nay exploded, and the aggrieved group now includes not only blacks, but Hispanics, Native Americans and females.  In fact over 90,000 people have filed claims seeking a payment under the terms of the original Pigford court ruling.  That decision, now referred to as Pigford #1, was anticipated to cost approximately $120 million including legal fees. 

Pigford #2 is the appellation used to identify an expanded payment regime that funds more African-American payments, Native Americans, Hispanics and females.  This regimen grew out of the fact that thousands of claimants missed the original Pigford #1 filing deadline of October 12, 1999.  Interestingly potential Native American claimants were estimated at 5,300 while ‘plaintiff’ lawyers pegged the exposure at an estimated 19,000 Native Americans.  The ‘judgment fund’ announced by Agricultural Secretary Thomas Vilsack and Eric Holder in 2010 was expanded from just over $120 million to $1.25 billion given the expectation of many more filers.

However, the explosion of claimants has caused payouts to reach $4.4 billion and has swelled legal fees to over $130 million.  More importantly the claim’s process created a rush to get a share of the monies allocated to the ‘judgment fund’ even if no real claim existed.  Essentially the process encouraged people to lie and spawned a cottage industry.  Claimants had only to file applications for a $50,000 payment by stating that they had ‘thought’ about applying for loans to become a farmer.  Proof of a claimant’s intent to farm also included a statement from that petitioner saying he or she had attempted to farm by planting a batch of tomatoes in his or her backyard and having that statement verified by a family member.   In essence the need to be a farmer at the time of the alleged discriminatory actions by the USDA was not a requirement to share in the financial redress.   

Fraud was endemic to the claims process -- for example every apartment… in a New York City building received a settlement of at least $50,000.  Further, some families received checks of $50,000 for each family member (see NYT’s fraud identification narrative of 4-26-13).  These payments were dispensed by the judgment fund’s monitor, whose management and control fell to the Executive Branch and Justice Department.  Due to the application ‘vetting process’ the payouts were criticized by both Representative Steve King (D-IA) and journalist Andrew Breitbart as payoffs to Obama’s/Democrats’ preferred groups to gain a favored political position with those entities. 

King and Breitbart had the courage to indelicately point out that some of payouts were ridiculous, fraudulent and highly politicized.  Both Congressman King and Breitbart were predictably charged with racism by many in the MSM; and only because The New York Times printed their recent investigatory story have some MSM members begrudgingly ceded the veracity of King’s and Breitbart’s concerns. 

The combination of the racial criticism, the MSM’s silence regarding Pigford, and the quarantine on additional Pigford narratives subsequent to the NY Times’ article have emphasized the media’s concern for the damage an ongoing discussion of Pigford could cause the president.  Potential stories may have included added evidence of rampant fraud and controversy:

• A review of the Shirley Sherrod incident/resignation that became an embarrassing chapter in the Obama administration and might have brought into question the fairness of the payout her family received from Pigford which was rumored to total in the millions.  Time magazine also reported that the Sherrods’ received compensation of approximately $330,000 for mental suffering after it was determined that Ms. Sherrod did not use racist tactics in dealing with white farmers, a charge that led to her resignation from the USDA.

• The NY Times’ article disclosing that in 16 ZIP codes in Alabama, Arkansas, Mississippi, and North Carolina the number of successful Pigford claims exceeded the total number of farms that existed in 1997.

• The possible resurrection of a contentious conversation on the redistribution of wealth by whatever means to correct previous wrongs for certain minorities a la the Van Jones reparations argument.

• The blatantly racially charged comments similar to those of Mr. Al Pires, a lead attorney for African-American Pigford farmers, who asserted the USDA was “the biggest racist the world has ever seen.”

Thus, Pigford is another scandal that has received little attention and even less discussion than many of the scandals currently receiving attention.  Nevertheless, this scandal is another example of an administration out of control.  This is perhaps because Americans elected a leader without a modicum of real world management experience -- a person who believes ideology trumps organizational discipline, who believes that political cronies are automatically qualified as leaders/managers, and who uses lies/dissembling as a tool to obscure factual information from the American people. 

In sum, the damage generated by the Pigford scandal, and all the others, continues to be muted by the MSM’s lack of interest in reporting the facts integral to each issue and their lack of desire to dig for more information.  But given the daunting mass of scandals existent, President Obama’s administration will be described in the future by objective historians as the most scandalous in history.  

The Fiscal Cliff Diversion

The US economy is already over the “fiscal cliff” and falling at an increasing rate.  Today’s economic questions should be focused on its rate of descent; will the rate increase or can it be arrested before the rocks below are reached.  After the election the economy has continued to implode, yet its downward plunge has been largely ignored by the mainstream media (MSM).  Apparently the MSM’s economic orthodoxy is now only centered on “fiscal cliff” narratives.  The MSM’s focus on the “cliff” gives Obama, their hero, economic “cover” since the “cliff” story is the economic story and not the terrible economic results occurring weekly and monthly.

Currently it is difficult to find economic data related to the past two months (or past three years) which is positive; whether it is meaningful growth in employment, an increase in the labor participation rate, a consistent uptick in GDP, a reduction in the workforce dropout rate, a reduction in government spending or a reduction in the deficit et. al.  

Many “fiscal cliff” narratives have incessantly talked about tax increases/decreases, spending, debt, deficits and the intransigence of the President or the Republicans (mainly Republicans) to compromise.  With compromise a deal to move the country forward on important economic issues can be attained.  Certainly future economic performance will be significantly affected by many of the outcomes related to the “cliff” negotiations.  Yet the narratives seldom mention the Obama administration’s past or current record on economic issues…a dismal report card that demonstrates no sustainable success on any level over the past four years. 

A sampling of statistical evidence that the Obama economy is already in a free-fall includes: 

Economic Statistics
Employment Statistics
	Jul	Aug	Sept	Oct	Nov
Tot. Unemployed (U3) (000)	12,794	12,544	12,088	12,258	12,029
Monthly Job Growth (000)	141	192	132	138	146
Unemployment rate-%	8.3	8.1	7.8	7.9	7.7
Discouraged workers (000)	1,037	844	802	813	979
Workforce dropouts (000)				360	540
Pop. Not in workforce (000)	88,340	88,921	88,710	88,341	88,883
Labor participation rate-%	63.7	63.5	63.6	63.8	63.6
all employment stats per BLS
National Debt	$16,351 trillion
Deficit 2009-2012	each year in excess of $1.1 trillion
GDP (2011, qtr I to 2012, qtr III)-%	1.3	4.1	2	1.3	2.7
Gov. spending as a % of GDP normally <20% of GDP…under Obama up to 25%
all other economic stats per BEA

The above statistics when added to the fact that over 23 million Americans are unemployed, underemployed or discouraged, a 14.4% rate; that 47 million Americans are utilizing food stamps; that the number of citizens below the poverty line is increasing at an increasing rate; and that the unemployment rate has declined to 7.7% because the workforce dropout rate has exceeded 900 thousand workers in the last two months can be described as both tragic and scandalous.  This is the kind of information the MSM has largely ignored or chosen to soft pedal after the election.    

Further, an explanation of government accounting practices such as baseline verses zero based budgeting has received little attention.  This silence leaves the average American believing that a cut in spending is a real reduction in outlays when it usually means only a decrease in the rate of growth in the spending.  Finally articles detailing the lack of a Federal budget and its consequences over the last four years have also disappeared from media coverage.    

Instead the MSM has touted Obama’s “fiscal cliff” position centered on $1.6 trillion in new taxes, $1.2 trillion in new spending, an added stimulus of at least $50 billion, taxing the already overtaxed evil rich, ignoring the realities of crushing debt, and dancing around nearly bankrupt entitlement programs.  In contrast the stingy Republicans want up to $3.0 trillion in guaranteed spending reductions, care taken to not gut the defense of the country, assured deficit and debt reduction, and modifications to entitlement programs to restrain their growth, cost and preserve their future…thereby insuring that the underprivileged are hurt (sarcasm intended).    

Yet maybe the most telling informational deficiency is the shortage of reporting on the economic stimulative effects of previous income tax and capital gain tax reductions.  Reductions that then resulted in growing tax revenues and appreciable increases in prosperity for the American people.  In fact MSM stories have tried to debunk the realities of the Coolidge, JFK, Reagan, Clinton and Bush 43 tax reductions that kick started past sagging economies.  The media’s reluctance to discuss tax cutting or the subsequent economic surges that followed their execution has largely removed these strategies from public debate.

The strategic use of tax policy to enhance economic activity and revenue growth began during the Coolidge administration.  President Coolidge and his Treasury Secretary, Andrew Mellon, passed three revenue acts, in 1924, 1926 and 1928 designed to spur economic growth and revenues after WWI.  Coolidge’s and Mellon’s rationales were that changes in marginal income tax rates would cause individuals (and companies) to change their behavior.  Taxpayers, they believed, would reduce taxable income by working less, reduce plans to expand businesses, restructure companies to avoid tax and even transfer some activities to the “underground economy” if taxes were high (and increasing) and exhibit the opposite behavior when taxes were reduced.  Studies of the effects of the three revenue acts demonstrated that revenue, economic activity and the share of taxes paid by the well-to-do soared.

Thirty-five years later President Kennedy presented the notion that marginal tax rate reductions would instigate increased economic activity in his 1963 State of the Union address (the act would be known as the Revenue Act of 1964).  He postulated a 20% across the board decrease in individual rates, modest declines in corporate rates and a minimum standard deduction to help a somewhat lackluster economy.  Kennedy’s objectives were to increase consumption, up personal income and increase capital investments. 

President Johnson signed the Revenue Act of 1964 into law in February of that year.  The legislation cut the top individual tax rate from 91% to 70%, lowered the corporate rate from 52% to 48%, and created a standard deduction of $300 + $100 exemption. The economic consequence of these actions was a reduction in the unemployment rate from 5.2% in 1964 to 3.8% in 1966, and material increases in both personal income and federal tax revenues in 1964 and 1965.

Less than twenty years later President Reagan inherited an economy in crisis; one characterized by very slow growth, high unemployment, very high interest rates, high inflation and low consumer confidence.  President Reagan introduced Americans to supply side economics (at times derisively named “trickle-down” economics).  Reagan’s tax concept simply stated mirrored the beliefs of Coolidge and Kennedy, i.e. people’s behavior would be affected by marginal tax policy.  Reagan also embraced many of the ideas fostered by Arthur Laffer, an economist, who developed a theory that posited the existence of an ideal marginal tax rate (using the Laffer curve) that balanced growth, revenues and economic stimulus for a point in time. Thus Reagan introduced a broad-based plan, the Economic Recovery Tax Act of 1981, aimed at concurrently promoting economic growth through tax reductions coupled with expensing property using depreciation, incentives to increase savings and incentives to help small businesses.  The tax changes were phased in over three years.   

The economic outcome was a dramatic turnaround over the next three years.  Capital gain tax revenues alone grew from $12.5 billion to $18.0 billion in 1983 and to an astonishing $80.0 billion by 1986.  In sum a moribund economic performance was transformed into one of vibrancy…featuring high growth, low unemployment, and low inflation and growing individual prosperity for a record number of Americans.  Revisionist critics (usually hardcore Keynesian economists) insist that the Reagan recovery’s historical record is misleading and point to Reagan’s deficit growth as a component of that truth…believing deficit spending created much of Reagan’s economic success.

The merit of using marginal tax rates and capital gain tax reductions as an economic analgesic have been tested more recently by both Presidents Clinton and Bush.  Clinton, after the Republican Revolution’s election victory, moved towards the political center and supported the Taxpayer Relief Act of 1997.  The act transformed the Clinton economy into a much stronger entity and produced much higher tax revenues by appreciably reducing capital gain taxes and by removing some of the negative effects of his earlier Omnibus Budget Reconciliation Act of 1993. 

Finally the much maligned (read evil) Bush tax cuts bear mention.  In 2001 G.W. Bush using the pretested logic and the successful experience of the presidents noted above passed the Economic Growth and Tax Relief Reconciliation Act of 2001.  This legislation’s purpose was to mitigate the recession inherited from Clinton and promote economic prosperity not seen since President Reagan.  Just as positive economic signs began to appear the World Trade Center disaster occurred.  Nevertheless once the tax reduction effects took hold over 50 consecutive months of strong economic activity were realized.  That activity abruptly ended due to the mortgage crisis and the following financial collapse.  

Given the above realities, a fair hearing on an alternative approach for an economic resurgence using marginal tax rate reductions deserves discussion.  But sadly the MSM will continue to emphasize only statistics that highlight the positives of the torpid Obama economy (as will Obama) and continue to anesthetize the public to the magnitude of this administration’s failed economic policies rather than report on or discuss a time tested tax strategy.  The truth is that the economy is already over the “fiscal cliff”.  Obama’s incompetence did the pushing and his “fiscal cliff” strategy will accelerate the economy to destruction on the fast approaching rocks below.