Devil in the Details

HERITAGE HYPOCRISY I

It's no secret that the Heritage Foundation is conservative, but there's
a significant distinction between advocating an ideology and actively assisting
a candidate for political office. Doing the former is common among tax-exempt
nonprofit groups like Heritage and its liberal counterparts; doing the
latter is illegal.

Heritage's support of Bob Dole's presidential campaign dangles right
on the edge of illegality. In exchange for Dole's signature on a fundraising
letter, Heritage gave the candidate one-time use of its mailing list for
his own fundraising purposes.

The Internal Revenue Service prohibits tax-exempt organizations from
attempting to influence the outcome of an election. Giving something of
value, like a mailing list, to a political candidate would certainly violate
this regulation. John von Kannon, a Heritage spokesman, argues that it
was a fair trade, and thereby legitimate. "We have determined that
the value of his signature is equal to the value of the list," he
says. Heritage's list rents on the open market for $26,643.33. It would
be an astonishing coincidence if Dole's signature is worth precisely that
amount.

As a nonprofit, Heritage also cannot endorse a candidate. Dole is of
course free to endorse whomever he chooses, but the letter, envelope, and
enclosed "Reform Facts" brochure (see opposite page) suggest
more than one-way support. Dole's name appears above Heritage's on the
envelope and at the top of Heritage's stationery.

The letter reads like a Dole for President ad, mentioning Heritage only
incidentally. Dole requests that the reader fill out a survey (with questions
like "Which Cabinet Departments would you reduce or cut entirely?")
and mail it, along with a donation, to him at the Heritage Foundation-it's
not all that clear for whom the donation is intended. Heritage's implied
endorsement of Dole couldn't be much stronger.

While Heritage is subject to IRS regulations, Dole has to worry about
Federal Election Commission laws. A spokes man for the FEC said that Dole
and Heritage would have to definitively prove that the signature's value
is equal to or greater than the value of the list. If it weren't, then
Heritage would be giving Dole an in-kind donation. Since corporations cannot
give anything of value to candidates (and the candidate cannot accept it),
both Heritage and Dole would be in trouble with the FEC.

Even if the IRS and FEC determine that the signature-for-list trade
does not violate these laws, there's still the matter of how much Dole
can spend on his own campaign-since he received federal matching funds,
he is limited to $50,000 of his own money. According to both Heritage and
Dole, the list was fair compensation for the signature, so Dole essentially
put the payment towards his campaign. If he doesn't declare it as a personal
contribution and spends more than the limit in other funds, he would be
in violation of yet another FEC regulation.

Evidently, Dole's tough-on-crime stance doesn't extend to nonprofits
who flout the IRS, or to campaigns that find loopholes in FEC laws.



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HERITAGE HYPOCRISY II

In the letter discussed above, Dole takes a second out of his campaign
pitch to mention that: "The Heritage Foundation actually lives by
the free market system they advocate. Heritage accepts no government funds
and relies on voluntary gifts to support their work."

As we pointed out above, Heritage is tax-exempt, one of the biggest
forms of government subsidy available.

HERITAGE HIGH-BALLING

In its ongoing efforts to turn Americans against social programs like
Medicare, the Heritage Foundation has resorted to phony arithmetic. A June
18 press release from the think tank warns in bold capital letters: "Average
Household Faces $14,000 Tax Bill To Keep Medicare Afloat." The press
release, and corresponding study by Stuart M. Butler, detail the rising
costs of Medicare and the resulting tax burden.

Butler's analysis claims that over the next nine years (1997-2005),
every household in the country will end up paying $14,000 to cover additional
costs for the Medicare program. Butler reasons that the hospital insurance
portion, Part A, will require $400 billion in increased funding, and Part
B, which covers doctor visits and other services, will cost $1.2 trillion.
Since about 30 percent of that is paid by beneficiaries, the taxpayer share
will come to $950 billion. The Medicare program will therefore require
a total of $1.35 trillion over the next nine years, which he divides into
a $14,000-per household share. Butler calls his results, "grim reading."
They are, but not in the way he meant it.

Richard Kogan of the Center on Budget and Policy Priorities analyzed
Butler's calculations for The American Prospect. He discovered that
Butler fails arithmetic. Using data from the Congressional Budget Office,
Kogan figured the increased costs for Part A to be $331.6 billion, $68.4
billion less than Butler's estimate. But the real dishonesty is in the
Part B costs. Butler uses the total Part B costs and adds them to the increase
in Part A costs, resulting in an incredibly misleading number. The additional
Part B costs come to $273.4 billion, as op posed to Heritage's $950 billion.

The real increase in Medi care costs (Part A + Part B) totals $605 billion,
not $1.35 trillion. In a single year like 1996, this would mean an additional
$195 in taxes per typical household. Over nine years, the additional cost
per household would equal $1,752, not Butler's $14,000. Inflation will,
of course, cause incomes (and with them, taxes) to rise, but the percentage
of a household's income that goes to cover additional Medicare costs will
stay constant.

Butler's ultimate point, that the Medicare program needs adjustment,
is not particularly controversial. Indeed, a straightforward analysis of
the problem might prove helpful, but the Heritage Foundation's attempts
to promote its agenda through deceptive accounting is just dishonest.

HERITAGE HYPERBOLE

In the July 8, 1996 edition of Heritage's online feature "The Right
Numbers," the conservative foundation notes that the AmeriCorps national
service program costs $26,654 per participant. This figure, which is indeed
accurate, was widely cited by congressional Republicans when they tried
to kill the program last fall. But what AmeriCorps's GOP critics and the
Heritage Foundation neglect to add is that taxpayers don't actually pay
that amount.

Thanks to private donations and corporate sponsors, the average cost
to the taxpayer is about $19,000. In some states, the cost is even lower-the
Massachusetts program costs just $10,500 per participant. But even these
figures are misleading considering that AmeriCorps volunteers perform needed
maintenance and repairs that the government would otherwise have to pay
someone else to do-most likely at a higher cost-or go without.

AmeriCorps cuts costs, encourages public-private cooperation, and teaches
young people the value of discipline and hard work. Remind us again why
the Republicans want to do away with it?

-Robyn Gearey, Jonathan Cohn

Heritage responds in The American Prospect November-December Issue

CONSISTENCY DEFICIT

Give the Concord Coalition credit. When Bob Dole released an economic
plan audaciously promising both a balanced budget and a 15 percent across-the-board
tax cut, the Coalition-a vocal advocate for balanced budgets-took out a
one-page ad in the New York Times critical of the proposed tax cuts.
Even Warren Rudman, a close friend of Dole's who is one of the Coalition's
founders, signed it.

Alas one will not find such consistency at some other groups who claim
to worry about the deficit. Take Citizens for a Sound Economy, a grassroots
organization that has been a relentless critic of Clinton's budgets. "The
President's budget supposedly balances by 2002, but it fails to state,
in detail, which discretionary programs would have their spending growth
restrained," a CSE paper from June reported. "By avoiding an
explicit description of changes to programs, the President manages to avoid
tough decisions, while putting on the appearance of balancing the budget.
This is a classic example of Washington politicians trying to pull the
wool over the public eye."

So what does CSE have to say about the Dole plan, whose supply-side
fudges and backloads make Clinton's look like grammar school fibs? They
like it, says Leila Bate, CSE's director of tax and budget policy. "He
did as much as he could to appease both the supply-siders and the deficit
hawks. He is trying to stay on track to a balanced budget by 2002. . .
. Growth should be the goal."

- J.S.C.



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