Gore tried to fund Internet scheme with hidden taxes

Human Events, Jun 26, 1998 by Glassman, James

It looks as though Al Gore's pet projecthooking every classroom and library up to the Internet and using a hidden tax to pay for itis about to explode in his face. It will be a consequence richly deserved.

The real outrage is the way Gore and his supporters have gone about implementing what's called the "e-rate program"-by trying to hide the astronomical costs and charges from the public and by running the whole show through a complicated array of boards in a system recently declared illegal by the General Accounting Office.

I disclosed this hidden-tax setup in a column last December, and it has enraged some powerful politicians, including Rep. Billy Tauzin (R.-La.), who heads the telecommunications subcommittee, and Rep. John Dingell (D.-Mich.), the top Democrat on the Commerce Committee.

Tauzin: `Unlimited Tax On Unlimited Entitlement'

The Internet project was part of the big 1996 Telecom Act, but Tauzin said on the PBS program "TechnoPolitics" that the Federal Communications Commission (FCC) isn't interpreting the law as intended. Now, it "smells like an unlimited tax upon an unlimited entitlement."

Dingell told Time magazine that he thought the "era of kings in this country ended when we kicked out George III.sS Apparently not. The open-ended tax circumvents the legislative system-a reason that the Supreme Court may declare it unconstitutional.

Telephone companies, which have to collect what is now being dubbed the "Gore Tax," have been under intense pressure from the FCC not to disclose it as a line item on customers' bills.

But AT&T announced recently that it would include a statement in customers' bills this month to alert them that, starting in July, they will be hit with a charge of 5% of their interstate long-distance charges to "give schools and libraries access to advanced services like the Internet." Other phone companies are already disclosing the charges on bills, and constituents are complaining to members of Congress.

The More You Know, The Less You Like

As details of the fiasco become known, the supposed popularity of this program is coming into question. Hidden taxes are only one reason. Some others:

Cost: In just 75 days, schools and libraries have applied for $2 billion in federal money. It's a "rampant feeding frenzy," says Ron Watkins, president of Information Systems by Design, Inc., in Boston, which develops technology for schools. "It's like watching pigs in a trough.... Schools are getting deluged with ads and high-pressure salespeople telling them, `Just sign here and send it back to us. We'll take care of it, and the feds will pay.' But the schools have no idea what they're buying."

The FCC originally estimated that the erate program would cost $9 billion over four years. After plans were publicized and criticisms were raised, the FCC scaled back the first round of spending to $625 million. On June 12, the FCC set 1998 funding for the controversial scheme at $1.275 billion, down from $2.25 billion the agency first envisioned.

Hot Wiring: Internet access is only a tiny portion of e-rate spending-just 4% of the $2 billion that the schools have requested. Meanwhile, two-thirds of the funds will go for "intemal connections," including the costs of ripping up walls to install wiring, repairing carpets, painting and putting in new computers.

Scandals: Shenanigans are inevitable when Washington tries to administer the allocation of billions to 30,000 separate schools and libraries. For example, Penny Bender of the Nashville Tennessean newspaper, in Gore's home state, reported in April that a businessman who is a friend of the governor's won a contract "to beef up Internet service to Tennessee's schools, even though his bid was $23 million higher than a competitor." The state is seeking $49 million from the e-rate fund, but the losing bidder has filed a complaint with the FCC. You can be sure it's the first of many.

Salaries: Members of Congress are just now learning that Ira Fishman, a former White House aide who once raised campaign funds for Gore, is being paid $200,000 a year to head the schools and libraries Internet program.

What's the federal government doing in this business anyway? Local school boards know local needs best, and local taxes should meet those needs. A couple of years ago, Al Gore probably figured such logic wouldn't help him get elected President. But now, with the e-rate project in deep trouble, he may be having second thoughts. Heeding the Constitution could be a decent idea, after all.