In an Uncertain World (30 page)

Over a period of three days, the Senate Finance Committee had IRS employees testifying in hoods and people hidden behind partitions speaking into voice distortion machines for protection against possible retribution. We didn't even know who these people were. Those on the committee who were truly interested in fixing what was wrong with the IRS—as opposed to demonizing it—had no way to bring balance to the hearings.

We couldn't respond to the horror stories even if we had wanted to. A federal law forbids any release of private taxpayer information, unless the taxpayer waives his right to sue for violation of privacy. Such waivers ought to have been a condition of this sort of testimony before the Senate Finance Committee, but neither the committee nor the media required that of witnesses. As a result, the public had no way of knowing whether people who claimed to have been so abused were telling the truth.

In a more reasonable perspective, the IRS was a largely effective tax collection agency with some very real failings. One problem was that it had too much of a law enforcement mind-set and not enough of a customer-service mentality. But many people simply refused to acknowledge that law enforcement was necessary for our system of voluntary compliance to work. Some critics, such as Senator Charles Grassley (R-IA) and Representative Rob Portman (R-OH) were sincerely concerned with making the IRS more taxpayer-friendly. But throughout the hearings, others tried to turn a few abusive episodes into a misleading impression about the IRS as a whole. No one cared that 205 million returns were processed every year without any known dishonesty or corruption. Once the idea took root that the IRS was an out-of-control agency gratuitously abusing taxpayers, reason and proportion could not be brought to the issue. Republicans, Democrats, and the media piled on, without any serious focus on the larger picture.

I soon realized we had no way to effectively respond to allegations, let alone restore balance, in the midst of a political firestorm. David Dreyer told me that no one would listen to anything I said on the subject unless the first words out of my mouth were “There are problems at the IRS, and we're committed to reform.” But this wasn't like Clinton and the balanced budget or Bill Lynch refusing to criticize Jesse Jackson at that dinner in New York. Even with that admission, which I made constantly, no one was interested in a balanced view of the IRS. I could have hired a marching band, and no one would have paid any attention.

The problem is that when one person is abused—and some people really were—a government official who tries to paint a more complete picture simply won't be heard. When a taxpayer gets up and tells a story about IRS agents acting like thugs, it wipes out everything else. Saying that the overwhelming preponderance of the 102,000 employees at the IRS are conscientiously applying a code of incredible complexity, and that some error, even some wrongdoing, is inevitable, gets absolutely no traction. The most courageous U.S. senator couldn't bring balance to such a discussion with the whole process lined up against him in this way. He would simply be overwhelmed by a bad process on its way to creating flawed legislation.

What I never understood in any of these firestorms is why some enterprising reporter didn't pursue the other side of the story out of self-interest. Someone attempting to be the voice of reason in a lopsided debate would seem well positioned to get onto the front page or appear prominently on television. Eventually a few journalists did write more objective articles about the IRS. But for the most part, the coverage seemed utterly one-sided, with at best an offsetting paragraph or two buried deeply in articles with sensational headlines.

In private, I did try to make the point about the inevitability of error. At one meeting with Senator Roth, he said that the IRS should have “zero tolerance” for mistakes. I'd say, “Bill, I don't know of a single day of my life with zero errors. There are a hundred thousand people at the IRS—how are you going to do that? I'll bet even you make mistakes sometimes.” Roth laughed and said, “It's true we all make mistakes.” But he didn't alter his course.

With these hearings and the surrounding media coverage, IRS reform legislation became veto-proof. When I got back from China and met with Erskine and a few others in the chief of staff's office, everyone there agreed that vetoing the GOP bill made no sense. But with the Democratic leadership in Congress signaling support for a law that was sure to pass and no threat of a presidential veto, we had little with which to negotiate. However, the Treasury team decided to persist. I steeped myself in the technical details and functioned almost as a senior staff person in working with congressional members and staff to try to improve the bill. Despite our lack of leverage, we were able to make a significant contribution to the legislation in the end, due in large part to the credibility that our prior work on reforming the IRS gave us with those legislators who took the problem seriously. In particular, after the political uproar had died down, I was able to work with the two House members most involved with this bill—Republican Rob Portman and Democrat Ben Cardin of Maryland—in a refreshingly non-political way on the key issues. The other congressman I remember most vividly from that episode was Democratic Representative Steny Hoyer, who supported us on principle at a time when few others were willing to do that.

We were also aided by the President's political deftness. After the House passed a bill in October, Senate Republicans gave the President an opening by not rushing the legislation through before the end of the fall congressional session. Their thinking may have been to keep the issue alive into 1998, closer to the midterm election. But holding the bill over to a new session defused some of the political energy behind IRS bashing. Moreover, President Clinton seized upon the delay to co-opt the issue, saying the bill must not “languish” in the Senate, and calling on the Republicans in his State of the Union address to “pass the bipartisan package as your first order of business.” That took some nerve and helped reduce the political heat.

The bill President Clinton signed in July 1998 still had serious flaws—especially the provisions that deterred or impeded enforcement. Since I left office, a cascade of news reports have appeared about the problems created by the reform legislation. People who had supported the bill at the time were now “shocked” to discover that enforcement was suffering seriously. Such a consequence may have been unintended, but it was entirely foreseeable. The very news organizations that had failed to bring balance to the debate in the first place were now complaining about the resulting problems, without acknowledging their own central role. One example was an editorial in
The Washington Post
that accused members of Congress of having “assaulted and weakened” the IRS—which was true—but neglected to mention how the
Post
itself and other news organizations had contributed to the process.

When the IRS battle wound down—and after Mexico, the debt limit crisis, and the battle over the budget—we thought that perhaps Treasury might enjoy a spell of relative normality. But that was not to be. Within a few weeks, we began to engage with a global financial crisis that turned out to be much bigger, longer lasting, more complex, and more threatening to the American economy than anything any of us had expected to encounter during our time in office.