Wonkbook: Five questions on the IRS mess

May 14, 2013

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(Photo by Andrew Harrer/Bloomberg)
(Photo by Andrew Harrer/Bloomberg)

A few questions on the IRS scandal.

1) The core issue here is that the IRS was using the term "tea party" and its associated language as a flag for organizations that might be more political than the 501(c)4 designation permitted. As Juliet Eilperin writes, this kind of category-based approach to choosing which applications require more scrutiny is typical for the IRS. It's even used in individual tax returns. The question was whether, when it came to the 501(c)4 groups, the only kind of political activity being rigorously screened was conservative political activity. Was tea party language the only red flag? Or did other kinds of politicized language set off alarm bells, too? If so, what was that language?

2) Was the Cincinnati office the only one that used the tea-party test or was it more widely applied? The fact that some tea party groups received scrutiny from Washington-based IRS employees doesn't answer that question. We should expect tea party groups to get scrutiny when they apply for non-political 501(c)4 designation. The question is whether their applications were flagged through a politically discriminatory test that existed in other agencies, too.

3) Did the IRS higher-ups act appropriately? Right now, much of the reporting indicates that IRS higher-ups shut this down pretty much as soon as they heard about it. Their sin, if there was one, was that they didn't disclose that anything had gone awry when asked whether the IRS was targeting conservative groups. But they may also have thought that this wasn't targeting conservative groups -- it was simply a reasonable, but ultimately unwise, way of filtering politicized applications for appropriate scrutiny. The IG report should tell us more on this score.

4) In which direction does our outrage point? Do we think the tea party groups really are primarily non-political social welfare organizations and they should've received 501(c)4 designation more smoothly? Or do we think that they're clearly political organizations and their applications should've been closely scrutinized and maybe even rejected  -- but so too should the applications from a host of other politicized groups on the left and the right?

5) Do we want a personnel outcome, a political outcome, or a policy outcome? Is the right endgame simply that some IRS employees get fired? That the Obama administration gets embarrassed? Or is that Congress tightens the language governing who does and doesn't qualify for 501(c)4 status so that the IRS doesn't have so much discretion -- and career employees don't resort to these confused tactics -- when reviewing applications? Note that if we go the legislative route, we could either widen the 501(c)4 designation, making it clear that political groups qualify, or we could narrow it, making it clear that they don't.

The answers to these questions would go a long way in clarifying whether we have a real scandal or simply a bad filtering process on our hands, and what we should do about it.

Wonkbook's Number of the Day: 1/3. That's the share of all House committees that are now "investigating some aspect of the Obama administration," according to Jake Sherman and Lauren French in Politico.

Wonkblog's Graphs of the Day: The IRS explained in two flowcharts.

Wonkbook's Top 5 Stories: 1) The IRS gets dragged before Congress; 2) guest worker program next in immigration; 3) cuts coming to uncompensated care; 4) Minn. set to legalize same-sex marriage; and 5) extreme poverty in America.

1) Top story: Enter the politics of scandal

Scandal politics sweep Capitol Hill. "Just days after news broke that the IRS targeted conservative nonprofits, Speaker John Boehner’s House committees will morph into mock courtrooms where the White House will be the defendant in what amounts to a number of high-stakes political trials. The most recent scandal to grip the Obama administration came Monday evening, when The Associated Press disclosed that the Justice Department sought its reporters’ phone records — including those of correspondents who sit in the Capitol...All together, roughly one-third of House committees are engaged in investigating some aspect of the Obama administration." Jake Sherman and Lauren French in Politico.

@dandrezner: Jon Stewart on the IRS response to inappropriate inquiries: "I didn't realize apologies were sufficient in IRS-related issues."

Why the White House should be particularly afraid of scandals right now. "Political scientist Brendan Nyhan has researched the conditions in which scandals are most likely to take hold of the public imagination. “New scandals are likely to emerge when the president is unpopular among opposition party identifiers. Obama’s approval ratings are quite low among Republicans (10-18% in recent Gallup surveys), which creates pressure on GOP leaders to pursue scandal allegations as well as audience demand for scandal coverage.”" Ezra Klein in The Washington Post.

Updates on the IRS scandal

Rep. Camp to hold hearing on Friday. "Chairman Dave Camp (R-Mich.) announced that the committee will hear testimony on Friday from acting IRS Commissioner Steve Miller and J. Russell George, the agency’s inspector general." Jake Sherman and Lauren French in Politico.

Obama speaks out on IRS scandal. "President Obama on Monday morning called the Internal Revenue Service’s admitted targeting of conservative groups “outrageous” and said he “will not tolerate it.” “This is pretty straightforward,” Obama said at a news conference. “If in fact IRS personnel engaged in the kind of practices that have been reported on and were intentionally targeting conservative groups, then that’s outrageous, and there’s no place for it. And they have to be held fully accountable, because the IRS as an independent agency requires absolute integrity.”" Aaron Blake in The Washington Post.

@justinwolfers: If only the Senate actually confirmed appointments, then there may actually be an IRS Commissioner for them to hold accountable.

The IRS commissioner has known about this since last year. "Acting IRS Commissioner Steven Miller was told in May 2012 that the IRS was targeting conservative groups for extra review, the agency confirmed to POLITICO. The tax-exempt and government entities office informed Miller, then the deputy commissioner for services and enforcement, about the “improperly identified” applications on May 3, 2012, the agency said." Lauren French in Politico.

@mattyglesias: As punishment, they should make these IRS guys move to Cincinnati.

...And officials in Washington knew what was going on. "Internal Revenue Service officials in Washington and at least two other offices were involved with investigating conservative groups seeking tax-exempt status, making clear that the effort reached well beyond the branch in Cincinnati that was initially blamed, according to documents obtained by The Washington Post...“For the IRS to say it was some low-level group in Cincinnati is simply false,” said Cleta Mitchell, a partner in the law firm Foley & Lardner." Juliet Eilperin and Zachary A. Goldfarb in The Washington Post.

Read: The 2012 annual report from the IRS tax-exempt divisionJeff Simon in The Washington Post.

Why was the IRS even targeting the Tea Party in the first place? "As more revelations surface about how the Internal Revenue Service singled out conservative political groups for special scrutiny when they petitioned for tax-exempt status, it’s worth asking why the IRS chose to lump all of these organizations in the same category...The thought by the IRS is the right one: Group like things so they all get judged by the same standard.  Of course, when you start singling out individual groups based on their names or their stated missions, you veer from the right idea into the wrong one." Juliet Eilperin in The Washington Post.

@thegarance: AP snoop/IRS stories r sorts of things that undermine trust in govt for moves like electronic med records/gun checks. Radiating consequences

Lois Lerner, the face of the scandal. "Lois G. Lerner and her subordinates do some of the most sensitive work at the Internal Revenue Service. They oversee politically active nonprofit groups — whose politicking often tiptoes to the edge of what a nonprofit is legally allowed to do...In interviews Monday, even Lerner’s critics said she had done her job without showing a political bent." David A. Fahrenthold in The Washington Post.

Conservative media had this story last year. "[O]ver a year before Obama learned about the story, and the national media began asking him about it, several conservative sites were raising questions about why the IRS had been contacting a number of tea party-affiliated groups with similar demands for information." Michael Calderone in The Huffington Post.

@nickconfessore: Problem: The IRS standard for whether a c4 has done too much impermissible political activity is, basically, "We'll decide."

GERSON: Political corruption at the IRS. "Suppose that the Environmental Protection Agency were to admit offhandedly that the fluoridation of water had only modest communist mind-control effects. Or the United Nations were to concede it had been running fleets of black helicopters over U.S. cities, but only in the course of conducting extensive goodwill tours. The Internal Revenue Service has managed a similar confirmation." Michael Gerson in The Washington Post.

DRUM: IRS shoots self in foot, reloads. "What's really unfortunate about all this is that it will probably put an end to any scrutiny of 501(c)4 groups, and that's a shame. The IRS should be scrutinizing them, and it should be doing it on an ongoing basis. More than likely, though, Congress will step in to neuter them completely on this score, and the current Wild West character of 501(c)4 fundraising will continue unabated." Kevin Drum in Mother Jones.

WILL: In IRS scandal, echoes of Watergate. "Jay Carney, whose unenviable job is not to explain but to explain away what his employers say, calls the IRS’s behavior “inappropriate.” No, using the salad fork for the entree is inappropriate. Using the Internal Revenue Service for political purposes is a criminal offense. It remains to be discovered whether the chief executive is guilty of more than an amazingly convenient failure to superintend the excesses of some executive-branch employees beyond the Allegheny Mountains." George F. Will in The Washington Post.

MACGILLIS: The IRS' error. "Yes, the IRS employees in Cincinnati, looking for shortcuts to process the wave of applications, used conservative-themed catchwords to filter for groups that were perhaps too election-focused to merit 501(c)(4) status. But there is a plausible explanation for this: Most of the campaign-minded applications they were getting were conservative!...The biggest problem with the Cincinnati office’s extra scrutiny of the groups was not that it was not justified, or not even that it would lead to predictable wails of manufactured outrage once it came out." Alec MacGillis in The New Republic.

BROOKS: The next scapegoat. "Is this a tale of hard intelligence being distorted for political advantage? Maybe. Did Victoria Nuland scrub the talking points to serve Clinton or President Obama? That charge is completely unsupported by the evidence. She was caught in a brutal interagency turf war, and she defended her department. The accusations against her are bogus." David Brooks in The New York Times.

Music recommendations interlude: The 5 best R.E.M. songs from their "IRS" years.

Top op-eds

BLINDER: The 'Partial Faith and Dubious Credit' Act. "The position of the U.S. Treasury has always been that the United States government makes good on all of its obligations—no exceptions. What if we traded in Alexander Hamilton's tried-and-true principle for a new one in which Congress can decide which creditors to pay and which to stiff?" Alan S. Blinder in The Wall Street Journal.

PONNURU: Liberals, caricature, and flextime. "A simple question puts the objections in perspective: If our society hadn’t inherited government restrictions on flextime, would we impose them now? That is, if the law already allowed companies to offer flextime instead of higher pay, in return for overtime, would Congress vote to take that option away? Would most people want it to? It seems pretty clear that the answer to all these questions is no." Ramesh Ponnuru in Bloomberg.

STERN AND KLEIN: Common Core is worth embracing. "For most states—which have lacked demanding standards for years—the Common Core represents a remarkable advance in rigor and academic content. Since the standards call for a coherent, grade-by-grade curriculum, those states that have signed on to the Common Core are now having a serious discussion about the specific subject matter that must be taught in the classroom. This is a discussion that's been neglected for almost half a century." Sol Stern and Joel Klein in The Wall Street Journal.

BARTLETT: The place for Keynes. "I think Milton Friedman was right that in a sense we are all Keynesians and not Keynesians at the same time. What I think he meant is that no one advocates Keynesian stimulus at all times, but that there are times, like now, when it is desperately needed. At other times we may need to be monetarists, institutionalists or whatever. We should avoid dogmatic attachment to any particular school of economic thought and use proper analysis to figure out the nature of our economic problem at that particular moment and the proper policy to deal with it." Bruce Bartlett in The New York Times.

KRAUSS: We will need to actively remove CO2 from atmosphere. Not just cut emissions. "[I]n addition to undertaking dramatic global efforts to reduce present and future COemissions, we need a strategy for addressing the carbon already up there. Recently, a broad group of geologists, planetary scientists, climatologists, social scientists, and physicists convened at the Origins Project at Arizona State University, which I direct, to explore such strategies." Lawrence Krauss in Slate.

MILBANK: The second-term blues set in. "Outrage is appropriate, but Obama’s response did him little good because it failed to get him out in front of the scandal. Rather than taking quick action — firing those involved or opening an investigation with more teeth than the inspector general’s — he has left himself at the mercy of events, and will be called to respond as details dribble out...[I]f Obama wishes to avoid the endless scandals that plague many second-term presidents, he needs to say more sooner." Dana Milbank in The Washington Post.

Advanced mathematics interlude: A mathematician may have just proved that every odd integer greater than 5 is the sum of 3 primes. (This is an important problem in math known as "Goldbach's weak conjecture." And it is a freshly released finding.)

2) Guest-worker plan next up on immigration reform docket

Gang of 8 looks to defend guest-worker plan. "The Senate Gang of Eight has largely controlled the Senate Judiciary Committee’s immigration markup, and the group’s next step: shielding a painstakingly negotiated agreement for a new guest worker program. This week, the gang will have to fend off amendments from both the right and left to fiddle with the program, either to appease businesses or insert stronger protections for labor. Much as they did with border security measures last week, the four members of the gang on the Judiciary Committee, who brokered the immigration deal will aim to band together and defeat changes that could prove fatal to the overall bill." Seung Min Kim in Politico.

Study: The U.S. stops about half of all border crossings from Mexico. "[H]ere comes a new report from the Council of Foreign Relations asking the key question: “How effective is enforcement?” The authors — Bryan Roberts, Edward Alden and John Whitley — come to a few big conclusions...“Based on the best currently available evidence,” the report says, “the apprehension rate along the southwest land border between the ports of entry is likely in the range of 40 to 55 percent.”" Brad Plumer in The Washington Post.

Should we suspend deportations? "With an estimated 1,100 illegal immigrants per day being deported from the United States, the advocates said Obama has a moral obligation to stop breaking up families when lawmakers are considering legislation that would allow most of the nation’s 11 million undocumented immigrants to apply for legal status." David Nakamura in The Washington Post.

Asian-Americans concerned by changes to family visa policies. "As part of the Senate's sweeping reform package, some family visas would be scaled back while others would be eliminated altogether — changes that have dismayed advocates for Asian immigrants, who benefit disproportionately from those programs. Attempting to alleviate those worries, Sen. Charles Schumer (D-N.Y.), one of the eight co-authors of the Senate bill, held a conference call Friday with Asian American leaders, while Rep. Xavier Becerra (D-Calif.), one of the eight lawmakers crafting a separate House bill, told another Asian American group that he is making family unity a top priority of those talks." Mike Lillis in The Hill.

Historical interlude: Internet, it's not just you. The Suffragette movement was obsessed with cats, too.

3) Cuts coming to uncompensated care

Health officials detail payment cuts plan. "The Obama administration on Monday published a plan for cuts in payments for hospitals that treat many uninsured patients and said states that decline to expand their Medicaid programs under the 2010 health law won't get preferential treatment. The federal government currently sends about $11 billion a year to states to help cover the costs of uncompensated care. The health law called for cuts in those payments, assuming that most Americans would have insurance coverage after the law took effect." Louise Radnofsky in The Wall Street Journal.

Utah gets nod for dual exchange. "The federal government has approved Utah to become the first state to have a dual-model health insurance exchange in which the state and the federal government divide responsibilities. The plan allows Utah to continue to run its existing health insurance marketplace for small businesses, a system that lets employees pick health care plans in an online exchange. The federal government will run the state’s individual exchange. The two marketplaces will operate independently of each other." The Associated Press.

What happens if you don't pay Obamacare's tax penalty? "Even if the Internal Revenue Service did find that an individual lacked health coverage, they would still need to look at whether he or she qualified for one of the nine exemptions from the individual mandate. These include clauses that allow Americans with religious objections, incarcerated individuals and those who cannot find an affordable plan to not carry health coverage without penalty." Sarah Kliff in The Washington Post.

Big grocers have big problems with Obamacare's calorie labels. "A while back, I spoke with Brendon Cull, who handles government affairs for the Krogers chain, for a story that never quite got finished. The case he made to me was that grocery stores aren’t fast food restaurants, even those that have small sit-down areas where consumers can purchase and eat prepared food. Cull said if forced to comply, Krogers would need to spend $20 million to come into compliance with the new regulations. And it’s not just about buying poster board and listing calorie counts. It’s about figuring out how many calories each item has to begin with." Sarah Kliff in The Washington Post.

Explainer: What you need to know about the Gosnell caseSarah Kliff in The Washington Post.

Unrestricted Plan B sales put on hold. "A federal appeals court on Monday agreed to temporarily put on hold the unrestricted sale of the Plan B emergency contraceptive to all ages while it considers a government appeal of a lower court ruling...The government sought a delay at the Second U.S. Circuit Court of Appeals in New York, which said it will consider the request by May 28." Jennifer Corbett Dooren in The Wall Street Journal.

Cartographical interlude: A Tumblr blog of just awesome transit maps

4) Minnesota set to legalize same-sex marriage

Minn. clears way for same-sex marriage. "Gay couples will be permitted to wed in Minnesota starting in August, making it the 12th state to permit same-sex marriage and the first in the Midwest to take such a step outside of a court ruling. The State Senate, controlled by Democrats, voted 37 to 30 on Monday to allow same-sex marriages, after approval by the State House last week. Gov. Mark Dayton, also a Democrat, had urged lawmakers to pass the measure and said he would sign the bill on Tuesday afternoon." Monica Davey in The New York Times.

Majority in favor of same-sex marriage has solidified, Gallup says. "Fifty-three percent of Americans say the law should recognize same-sex marriages, the third consecutive reading of 50% or above in Gallup polling over the past year. The 53% in favor ties the high to this point, also measured last November and in May 2011." Jeffrey M. Jones in Gallup.

Learn something new every day interlude: "Lieutenant Colonel William Henry Rankin (1920 — 2009) was the only known person to survive a fall from the top of a cumulonimbus thunderstorm cloud."

5) What does extreme American poverty look like?

Retail sales rise on cheap gas. "Retail sales rose 0.1% last month, the government said Monday, as shoppers shrugged off a lackluster labor market, higher payroll taxes and unseasonably cold weather in parts of the country. The April figure, which follows a revised 0.5% decline in March, suggests consumers ushered in the second quarter on solid footing, spending less on essentials such as food and gas, and more on discretionary items such as electronics and sports gear." Brenda Cronin and Suzanne Kapner in The Wall Street Journal.

Millions of Americans live in extreme poverty. How do they get by? "Using data from the Survey of Income and Program Participation (SIPP), a Census program that tracks samples of tens of thousands of households across 2.5 to 4 years, Edin and Shaefer estimate that in 2011, 1.65 million U.S. households fell below the $2 a day per person threshold in a given month. Those households included 3.55 million children, and accounted for 4.3 percent of all non-elderly households with children." Dylan Matthews in The Washington Post

Credit-rating agencies poised to avoid overhaul. "Three years after Congress told federal regulators to consider changing the way credit-rating agencies are paid, the industry appears poised to dodge a major overhaul...[T]he way these firms are compensated has come under scrutiny, with critics arguing that the agencies have a conflict of interest because they’re paid for their analysis by the very banks and corporations whose products they’re rating." Dina ElBoghdady in The Washington Post.

U.S.-E.U. trade talks face some issues. "Supporters of a U.S.-European free-trade deal have begun damping expectations about its immediate benefits amid a series of emerging disputes that could complicate the creation of the world’s largest trade zone...But in recent weeks, fresh disagreements have surfaced over issues such as the regulation of financial services and the openness of U.S. state governments to foreign businesses and contractors. Those add to a healthy list of legacy disputes involving agriculture, European prohibitions on genetically modified food and French insistence it be allowed to maintain quotas on non-French media." Howard Schneider in The Washington Post.

Reading material interlude: The best sentences Wonkblog read today.

Wonkblog Roundup

What the Bloomberg scandal reveals about how the media actually makes its moneyNeil Irwin.

Should we eat more insects? The U.N. thinks soBrad Plumer.

How the Great Gatsby could afford his great partiesEzra Klein.

Big grocers have big problems with Obamacare’s calorie labelsSarah Kliff.

Millions of Americans live in extreme poverty. Here’s how they get byDylan Matthews.

Readers ask, we answer! What happens if you don’t pay Obamacare’s tax penaltySarah Kliff.

Three reasons the White House should be particularly afraid of scandals right nowEzra Klein.

The Gosnell case: Here’s what you need to knowSarah Kliff.

Why are birthrates falling around the world? TelevisionBrad Plumer.

Study: The U.S. stops about half of illegal border crossings from MexicoBrad Plumer.

Et Cetera

Senate Dems: Nuclear option on filibuster reform back on the tableAlexander Bolton in The Hill.

Only you can prevent forest fires. But only the sequester can make the federal government less ready to fight themZack Colman in The Hill.

Debate: Can diversity survive without affirmative action? The New York Times.

Obama: the problem is "hyper-partisanship." David Nakamura in The Washington Post.

Got tips, additions, or comments? E-mail me.

Wonkbook is produced with help from Michelle Williams.

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