Washington, D.C. is known as a town of turn-over, with revolving doors typically being installed in late January every four years.  This past week was little different, except the high-level government official turnover rate came with a State of the Union address rather than an Inaugural Speech.

On the eve of President Bush's State of the Union address, Samuel Alito was sworn in as a Supreme Court Associate Justice, replacing retiring Justice Sandra Day O'Connor.  That same afternoon, Ben Bernanke was sworn in to replace retiring Federal Reserve Chairman Alan Greenspan.  And then, two days later, Republican Representative John Boehner (OH) was elected to fill the House Majority Leader role relinquished by Representative Tom DeLay (TX).

Recently John Berthoud, President of the National Taxpayers Union (NTU), spoke with CFIF Senior Vice President & Corporate Counsel Renee Giachino about the tax implications of the events mentioned above before they happened.  What follows are excerpts from the interview that aired on "Your Turn - Meeting Nonsense with Common Sense," which aired on WEBY 1330 AM, Northwest Florida's Talk Radio.

GIACHINO:  My next guest is John Berthoud, who serves as President of the National Taxpayers Union (NTU) and the National Taxpayers Union Foundation (NTUF), based outside of Washington, D.C. in Alexandria, VA.

NTU, founded in 1969, is the nation's largest grassroots taxpayer group with 350,000 members in all 50 states. NTUF was founded in 1977 and produces research on economics, tax policy, and government spending.

Dr. Berthoud serves on numerous Boards, including the Board of Directors of the World Taxpayers Association. For over a decade, he has been an adjunct lecturer at George Washington University, teaching graduate level courses on budgetary policy and politics. He is also a Contributing Editor to Human Events.

Please welcome to "Your Turn" Mr. John Berthoud.

BERTHOUD:  Thank you.  It is great to be with you.

GIACHINO:  Recently your organization sent me a fiscal snapshot of the House Majority Leader's Race.  Before we talk about the potential candidates to fill Mr. DeLay's position, can you explain to the listeners why it is that the Majority Leader of the House position is vacant?

BERTHOUD:  It is vacant because Tom DeLay has had various ethical questions swirl around him.  He was indicted in Texas.  There is a dispute, and I can't decide from the facts, there are a lot of gray areas in the campaign finance laws and there is some dispute about those areas.  And their indictment has been secured by a prosecutor down there and Mr. DeLay says it is politically motivated.  The prosecutor denies that and it is now in a court proceeding.  But because of that, the House Rules say you cannot hold a leadership position if you are under indictment.  So Mr. DeLay temporarily stepped aside.  And then in the last month, as the Jack Abramoff scandal has really exploded here in Washington, with Mr. Abramoff facing maybe 10-12 years in prison, his relationship with Mr. DeLay, and maybe more importantly his relationship with a lot of DeLay staffers, has come into sharp focus.  Mr. Scanlon, who has also pleaded guilty in the whole Abramoff mess, was a former staffer of Mr. DeLay.  Again, there is nothing that Mr. DeLay has done that will take him off to jail tomorrow, these are all allegations, but it is not allegation that he accepted quips from groups that Mr. Abramoff put money into and it is an established fact that Mr. Scanlon, a former staff member to Mr. DeLay, has now pleaded guilty and may be doing prison time.  And if for no other reason than the very, very bad appearance of close ties and close relationships with Mr. Abramoff, within a couple of days of Mr. Abramoff making his pleas in a court here in Washington and a separate court down in Florida, Mr. DeLay stepped aside.  There was really tremendous pressure in the caucus on him and this was really the straw that broke the camel's back.

Again, on both of these, nothing may ever come of the charges down in Texas and they may ultimately be dismissed, and there may be no legal charges against Mr. DeLay arising from Mr. Abramoff, but clearly on the Abramoff matter there is a close association which has caused a big cloud. In addition, a lot of Republicans already concerned about mid-term 2006 elections thought that this was just one more stone on their back that they did not want to carry.  So Mr. DeLay has permanently stepped aside as Majority Leader and hence the opening that we have.

GIACHINO:  Before we discuss the fiscal snapshots that your organization has prepared on the each of the candidates, I would like to discuss something that is a developing matter this afternoon and that is clearly related to the Abramoff matter.  There were some new developments today on the House side relating to lobbying issues.  Have you been following any of that today and if so can you address any of those with us?

BERTHOUD:  I have seen a little bit of that today.  I have not read the entire House proposal but have read just little snippets.  One of the things that they are going to do is disallow travel gifts -- either direct payments of gifts as Mr. Abramoff did - actually, that is not how he did it.  What he did was get on the board of organizations and then channeled the money through the policy groups.  Henceforth all such private payments for travel, it is my understanding, is now banned.  I don't think it is a big surprise.  I think there is also an added limitation on time - I think it is up to two years now, where a former member of Congress or former staffer can lobby.  This is an on-going issue - the sort of revolving door in Washington. 

You know I would just add, and I am sure that a lot of Republicans will make very clear that they still want to be doing a lot of travel, and NTU would be the first to say that yes there are often legitimate times when a member should take trips.  And if there are legitimate reasons, we think it is a very reasonable matter, since their constituents are now the ones paying for it, that the members have full disclosure and give a full accounting on their websites and on a central Congressional website of what the purpose is and what the costs are.  You and I and your listeners are paying for these trips and I certainly don't think it is too unreasonable that we find out or have readily accessible for constituents to easily find out what the money got spent for.  So I hope Congress will do a better job as part of this and make all foreign travel on the taxpayer dime and not allow it to be susceptible to lobbyists at all.  I hope they are going to ratchet up accountability so that all of us know exactly what they are doing and what they are spending our money on.

GIACHINO:  One of our faithful listeners refers to lobbyists as the fourth branch of government.  Hopefully now, following on the Abramoff matter, there will be more accountability.  But can you highlight for us from a tax-related perspective, what impact, if any, that lobbyists have on our tax system when there are literally hundreds of lobbyists and special interests running around Washington seeking tax breaks and exemptions?

BERTHOUD:  Certainly on the tax system it complicates it.  Tax lawyers and lobbyists are paid to get their clients special relief.  And the problem it causes is not in the form of broad, across the board, tax rate reductions - which is the smart way to cut taxes, but rather targeted tax relief.  And in turn what that has meant is an increasing complexity every single year that Republicans have been in charge of Congress.  We have heard lots of discussion about the need to reform the tax code and that the tax code is too complex, but every single year we have seen the tax code get more and more complex.  And, I like that term, the fourth branch of government -- the lobbyists, who come in and the members of Congress understand that these guys control a lot of money.  I have heard stories of how Abramoff both contributed and then got others to contribute and you can just see all the ways that he funneled money into the political process and into politicians - either through arranging trips, campaign contributions, or assistance to party organizations.  And all that money has an impact and tax breaks are bought and sold.  These tax lobbyists who can get the ear of a Member of Congress and U.S. Senator - all those gifts and contributions create access and their phone calls will be returned and listened to as opposed to somebody who is a mere constituent or taxpayer and who will not get the same kind of attention.  So this process has led to our tax code being such a horrible mess.

GIACHINO:  John, help me with my civics lesson.  Why should the average American, the average taxpayer, care who holds the majority leader position?

BERTHOUD:  Well, I think right now the three candidates - Roy Blunt from Missouri who has been the acting majority leader while Mr. DeLay has been in a sort of temporary status, John Boehner who is a Republican from Ohio and John Shadegg who is a Republican from Arizona.  And with these guys you see a commonality of beliefs, but I do think that the House of Representatives would be a very different body and the policies that it produces would be very different depending on who is elected.  I think Mr. Shadegg clearly is easily the most, at least on tax and fiscal issues, easily the most fiscally conservative.  He has won the Taxpayer Friend Award, which is our highest award and which we don't give out to a lot of members, almost every time, which is at least 90% of the time in his years of service.

Mr. Blunt has never won that award in all the years of his service.  What that tells me - and we are not endorsing Mr. Shadegg, but what that tells me is that 90% to 0% is a pretty wide gulf and it tells me that Mr. John Shadegg, as majority leader, still has to get 218 votes each time the House votes but the majority leader has the impact.  And especially given the spending excesses of the last several years, I think on a number of issues like taxes and spending who is House majority leader - whether its Blunt or Shadegg or someone else, you will have differences in policies.  I think again, based on the record, John Shadegg would produce a result of lower levels of spending and lower levels of taxation.  Again it is not going to be a one person monarchy but in that position he will have an added level of influence that will help shape the product of Congress.

GIACHINO:  For the listeners who are interested in learning more about this fiscal snapshot of the House majority leader race, the three candidates who we have been talking about, you can visit NTU's website at NTU.org.

How will the replacement be decided and do you know whether there is any timetable?

BERTHOUD:  Yes, I believe that it is going to be the first week of February.  The House Republican Conference will take a vote and all House Republicans will vote.  Although we may know sooner because each of these three are out actively working to line up votes and the early lead of most head counters is Mr. Blunt.  And I think there is a strong possibility that one of these candidates will lock up a majority or a great preponderance so this election may be decided before the votes are all counted. But that will depend on the political skills of the three contestants.  And Mr. Blunt is most closely associated with the Republican leadership of the last 4 or 5 years.  Mr. Shadegg has been when you watch him on television or when he gives interviews, he says his vision is to return to the goals and the visions of 1994 which is to shrink government and limit taxes.  That is a message which is music to our ears.  NTU has been very disappointed with the direction of Congress and the tax and fiscal decisions during the Bush presidency.

GIACHINO:  I understand that Representative Shadegg announced his candidacy saying:  "The party of Reagan exists not to expand government, but to protect the American people from government's excess." 

BERTHOUD:  I could not say that any better.

GIACHINO:  Okay John now I would like you to pull out your crystal ball.

BERTHOUD:  Okay Renee but I want to warn you that I was 0-4 in my football predictions this past weekend.  So I will just let the buyer beware on this.

GIACHINO:  Okay, I will not ask you about football then but I will ask you about tax issues which I think that you are supremely qualified to talk about.  What do you think we will hear about at the President's State of the Union Address at the end of the month when it comes to taxes?

BERTHOUD:  I would expect him first to talk about the continued need for spending restraint.  The President has been saying this for a number of years and what we would like to see him do is veto more bills and use more political capital.  So I am sure he will be saying that we need to restrain spending.  That will not be news.  The real news will be what is going to be the follow-through.  And I think what we have been talking about - the House majority leader's race, is going to be a big determinant of whether we get enough follow through on that issue.

Secondly, I think the President will talk about tax cuts and certainly making permanent all the tax relief which he has gotten through Congress.  That has certainly been a bright spot in his fiscal record.  He wants to make all of that permanent.  It is certainly incumbent upon the nation and it is the right policy and it is good economics.  I hope the President says that; I expect that he will.  And I hope that Congress can get that done.

And I hope thirdly, although this is hard to say because as you know the President pushed Social Security this year without a lot of success, I hope that he is not going to give up on that topic.  Both because of the opportunities of Social Security to create individual ownership as part of a package of getting the long-term fiscal problems of Social Security under control, and then more importantly, and the President has eluded to this, the biggest problem on a tax or budget issue that we all face in the coming decades is Medicare, which has tens of trillions of dollars in unfunded liabilities.  We fight over relatively small chunks of change in the federal budget every year, we have fights over Amtrak or dairy subsidies and as well we should, we would like to see spending for both of those areas cut and a lot of other nonsense.  But, really with tens of trillions of dollars of unfunded liabilities - promises that we have made for these programs that we have no dollars for, we face a ticking time bomb.  Despite it being a very difficult subject, I hope that it is not going to be one that the President will duck from.  I don't know that he will.  We will be very happy if he doesn't.

I will also give a quick plug for our website ntu.org, we make it an annual project of analyzing the President's State of the Union Address and we make a cost-analysis.  We usually have that up in about 18 hours.  So your listeners interested in finding the facts and finding the numbers can come to our website at ntu.org.  They might say that the President's speech sounds pretty good but they might want to know what it is going to cost them.  We hopefully will have those answers.

GIACHINO:  What I'd like to do is invite you to come back shortly after the State of the Union so that we can talk about your analysis of the State of the Union Address and also to discuss one of the other issues that we ran out of time to talk about and that is the impact, if any, that we will see in the U.S. economy on the January 31^st retirement of Alan Greenspan. 

John, thank you so much for joining us this afternoon.

BERTHOUD:  Renee, thank you.