Tilting at Windmills

July/ August 2013 Launch pad follies … Roger and Rupert … How to refuel your private jet

By Charles Peters

It should be noted that there is reason for the people in Cincinnati to be confused. In the late 1950s, as I believe MSNBC’s Lawrence O’Donnell was the first to point out, the IRS adopted a regulation interpreting the law governing the tax-exempt status of 501(c)(4)s. Instead of requiring that an organization be “exclusively” involved in social welfare, as the law had done, it now required that the organization be only “primarily” involved in such activities. And “primarily” is not as easy a standard to apply as “exclusively.”

As the Times story points out, the bureaucrats in Cincinnati charged with carrying out this murky mandate—and processing roughly 70,000 applications for tax exemption each year—were performing a task considered “unglamorous” and avoided by other IRS employees. The Times quotes a former lawyer in the IRS’s Washington office saying, “Nobody wants to be a determination agent. It’s a job that just about everybody would be anxious to get out of.” This means that this difficult task was likely to have been left to those not astute enough to avoid it, while the people who were needed to advise them were back in Washington.

The situation that arose was rife with the potential for misunderstanding—the kind of misunderstanding that seems to explain the delay by the Cincinnati office in carrying out Lois Lerner’s 2011 order to stop using the Tea Party test. What I find most maddening about all this is that it is so predictable. You don’t have to study bureaucracy for long to become aware of certain probabilities. When a job is shunned by the clever, it’s likely to be left to the less clever. When the headquarters is in Washington and offices are in the field, miscommunication and misunderstanding are not only possible, but probable, with a resulting tendency to blame the fellows in the other place for anything that goes wrong.

The blame game

Who should be accountable in this case? More than any other official, Douglas Shulman, who was appointed by George W. Bush and was the head of the IRS during the entire period in question, should have been responsible for avoiding these predictable problems. And those of his subordinates who came up with the outrageous questions, like the ones about religious belief and practices, should be held accountable too.

But accountability should not end with Shulman and a few IRS employees. The White House, Congress, and the media all need to be accountable for preventing the predictable. What they have usually done instead is to act only after a predictable problem has led to a scandal or disaster. Barack Obama says that Robert Gates told him shortly after he took office that “someone, somewhere in the government was screwing up every day.” Yet despite that warning, Obama has too often seen his job not as preventing problems but as fixing them only after they have become obvious to the public.
Members of Congress have long neglected the prevention side of their responsibility, too, instead focusing on trying to impress voters and get reelected by conducting investigations with the potential to make headlines. Similarly, members of the media, most of whose eyes glaze at the mere mention of the word “bureaucracy,” view reporting on scandals, disasters, and the political horse race as the best way to maintain and expand their audiences. Even the political scientists who are supposed to teach us about government focus primarily on policy and the electoral process, and not on how Washington really works.

Scylla and Charybdis

Obama deserves blame for his disinterest in fixing problems before they become scandals, but in a couple of cases, he may deserve a pass. If he had fired the Bush-appointed commissioner, Shulman, can you imagine the headlines that would have resulted? “Obama tampers with IRS.” “Obama politicizing the IRS.”

The Post’s Ruth Marcus makes a similar “damned if you do, damned if you don’t” point about the Justice Department’s investigation of the AP. Suppose the White House, having decided the investigation had gone too far in getting phone records for roughly 100 journalists, had tried to rein in the investigation. It would have been a political disaster. “The political people need to stay away from meddling or appearing to meddle in criminal probes,” Marcus wrote.

Ironically, she also points out that the administration began the investigation because it would have been accused of a cover-up if it hadn’t investigated the leak.

Telltale words

If there are people at the IRS who need to be fired, as I’m sure there are, I pray that the smart ones who are just trying to do a good job are left alone. I’m especially concerned about those whose sole mistake
was originally grouping the Tea Party applicants for a careful look. Can you think of two words that suggest a greater propensity for political activity than Tea Party? For those who contend that the left wasn’t similarly targeted, can you think of any words used by liberal organizations with similar import and frequency?

Yikes

Speaking of national security concerns, there’s a lot going on that seems more suited to the front page than some of the “scandals” the press has been featuring lately. Both the Times and the Post buried this story on an inside page: seventeen Air Force officers who launch nuclear missiles have been stripped of their duties because of what one of their commanders described as “rot in the crew.” The Air Force’s disciplinary action did not become known until the AP discovered an email from Lieutenant Colonel Jay Folds that, in addition to making the rot comment, said, “We are, in fact, in a crisis right now.”

The seventeen are part of a group of 150 officers in the launching unit in North Dakota. Precisely what they did to get themselves in hot water is not clear from the email, but Bruce G. Blair, a former missile launch officer, offered this explanation to Michael Gordon of the Times: “The missile crews know that there is no career future for them in their field. And that has led to low morale, some loss of discipline, and sloppier performance, including the intentional violation of nuclear rules.”

As I read the email, I remembered a movie from three decades ago called War Games. In it, Matthew Broderick plays a teenager who, fooling around with his computer, almost caused a nuclear launch that would have brought about World War III. Oops, we just took out Shanghai.

That’s forty-seven subsidiaries per regulator

Seventy regulators from the Office of the Comptroller for the Currency and forty examiners from the Federal Reserve are stationed inside JPMorgan Chase. They have been blamed for not catching on sooner to the fact that the bank was hiding losses from the London Whale’s trading operation. Clearly, they deserve some of the blame. According to Danielle Douglas of the Post, one OCC regulator admitted that he didn’t realize what was going on until the Journal first reported the scandal. But I began to sympathize with the regulators when I discovered, from another article in the Journal, that JPMorgan Chase has 5,132 subsidiaries—more than half of which are overseas.

Devoid of feeling for your fellow humans? Worry not

Charles Peters is the founding editor of the Washington Monthly and the author of a new book on Lyndon B. Johnson published by Times Books.

Comments

  • David Merkowitz on July 29, 2013 10:34 PM:

    Re: The July/August Tilting at Windmills
    Charles Peters praises Time's Michael Grunwald for questioning why nonprofit organizations need to be tax exempt. I haven't read Grunwald's piece (who does read Time anymore?), but maybe other reporters don't raise that question because the answers are so patently obvious.

    The main reason most nonprofits seek tax exemption is to achieve formal recognition as a charitable organization under Section 501(c)(3) of the Internal Revenue Code, which in turn makes donations deductible on contributors' income tax returns. In probably all states, it also exempts the organizations from paying sales taxes on their purchases and property taxes on land and buildings they might own. Whatever your view of the value of nonprofits--be they Harvard University, the Metropolitan Opera, the local Boys and Girls Club, or the Little Sisters of the Poor--many of them live or die on their ability to solicit tax-deductible charitable contributions.

    Another reason we should want charitable organizations to file for tax exemption: It's the only way we (via the IRS) can determine whether they are indeed operating as nonprofits, and fulfilling their charitable mission, rather than sheltering profit-making activities from federal, state, and local taxation. Under the IRS Code, charities' unrelated business income is subject to taxation.

    Certainly, a number of nonprofits, including the NFL and some universities, hospitals, and other charities, pay outrageous salaries to their top officials and spend a lot of money on activities not directly related to their main purpose. Curbing those kinds of abuses should be a worthy goal for members of Congress and federal and state regulators, but it's one that pays few political dividends and is not easily achieved.