As we noted in 2013, it is possible for an EPA “policy advisor” such as John Beale to falsify his employment record, claim that he actually works for the CIA, and maintain this ruse for 20 years while bagging fat bonuses but performing no actual work of any value. The EPA’s secret agent man cost taxpayers approximately $1 million, but as Daily Caller writer Ethan Barton shows, Beale’s caper was hardly the only secrecy going on at the powerful federal agency.
Two EPA committees “secretly control how billions of dollars are spent” and from the EPA’s annual $1 billion Superfund program “the agency has accumulated nearly $6.8 billion in more than 1,300 slush fund-like accounts since 1990.” The EPA’s National Risk-Based Priority Panel and the Superfund Special Accounts Senior Management Committee “meet behind closed doors twice annually” and “all reports to and from the groups, as well as the minutes of their meetings and all other details, are kept behind closed doors.” The EPA has collected $6.3 billion in approximately 1,308 special accounts from lawsuits and settlements but it is “nearly impossible to determine where the estimated $3.3 billion spent so far went, or who will get the remaining $3.5 billion (after adding interest).” Reporters with the Daily Caller News Foundation were able to secure some documents but they were marked “privileged” and “could only be reviewed under EPA supervision.” That does not exactly amount to accountability.
Taxpayers may recall that last August EPA contractors released three million gallons of contaminated wastewater into the Animas River. This unleashed 880,000 pounds of lead, arsenic and other toxic materials for dozens of miles through southwest Colorado and northern New Mexico. The EPA’s alleged vigilance also did nothing to prevent the Flint water crisis but despite both disasters EPA boss Gina McCarthy kept her job. And as recent congressional hearings revealed, little has changed since the days of John Beale.
The EPA suspended a sex offender in 2006 but did not fire him until he violated probation in 2014. The sex offender’s termination was overturned and the EPA paid him $55,000 to resign. This is a federal agency, as an inspector general testified in the Beale case, with “an absence of even basic internal controls” and unaccountable to the people.
As we noted in 2013, an immigration bill pending in Congress included a hidden multimillion-dollar slush fund for left-wing nonprofits that would provide almost $300 million over three years and grow over time. A primary beneficiary of the slush fund was the National Council of La Raza, whose former senior policy analyst Cecilia Munoz played a role in drafting the legislation and became a director of domestic policy for the Obama administration. Now journalist Richard Pollock shows how federal largesse is paying off for the Raza-ists.
According to Rep. Sean Duffy, Department of Justice Officials skimmed three percent from mortgage-related bank settlements to create a slush fund of $500 million that could be steered toward activist groups the administration favors. Since the money was intended for actual victims of the mortgage crisis, Duffy told reporters, the diversion to a slush fund meant that these victims had been harmed a second time. A major beneficiary was the National Council of La Raza, which according to Pollock’s report boasts assets of $55 million and whose CEO Janet Murguia bags an annual salary of $417,000, more than the annual salary of the President of the United States. La Raza mouthpiece Lisa Navarrete told the Daily Caller News Foundation that La Raza would pocket 10 percent of a Bank of America settlement—at least $1 million—and $500,000 of a Citigroup settlement.
MEChA, the Chicano Student Movement of Aztlan, was to get $50,000 from the Bank of America settlement. MEChA is a gazpacho of Marxism, irredentism and racism, dedicated to the recovery of Aztlan, a place with origins in 60s left-wing mythology, not the history of the Aztecs. At some MEChA meetings members chant “Entre la raza todo, fuera de la raza, nada,” meaning “Everything within the race, nothing outside the race.” Despite what “progressive” apologists say, the raza is not the human race. Taxpayers should also keep that reality in mind with the National Council of La Raza. Neither group is a model of diversity and inclusion and a ballpark figure for what they should “pocket” from the federal government is zero.
According to Social Security’s Trustees, in 2034, all Americans who receive retirement benefits from Social Security will have their pension payments slashed by 21%.
But before that happens 18 years from now, U.S. truckers will test drive even larger retirement benefit cuts from their pensions if the U.S. Treasury department has its way, as Mike Shedlock describes:
407,000 private sector workers are about to lose most of their pensions.
I first wrote about this on April 21, in One of Nation’s Largest Pension Funds (Truckers) Will Reduce Benefits or Go Broke by 2025.
The Central States Pension Fund, which handles the retirement benefits for current and former Teamster union truck drivers across various states applied for reductions under that law.
Currently the plan pays out $3.46 in pension benefits for every $1 it receives from employers. That’s a drain of $2 billion annually.
The plan filed for 60% cuts in pensions. The Treasury Department has the final say. The verdict came in today: “cuts not deep enough”.
Consequently, the director of the Central States Pension Fund, Thomas Nyhan, has gone on record to confirm that unless the U.S. government bails out the fund, the pension benefits for current and future retirees from the Teamsters labor union will be cut to “virtually nothing” when the fund runs out of money in less than 10 years time.
What is happening in this case is significant because whatever action is ultimately taken with respect to the failing Teamster-mismanaged pension fund will also set the likely path that will be followed by countless local and state governments for handling their unsustainably generous pension benefits for government employees. How the situation is managed will also impact the Social Security program, which is on a similar path where it will no longer be able to sustain the generous payments it is making today to its beneficiaries.
Retirement experts are watching Central States as a pivotal test case, the first to seek cuts for current retirees under the Multiemployer Pension Reform Act of 2014. Some say the move signals a turn toward making the problems of America’s festering pension systems into a personal crisis for individual pensioners.
David Certner, legislative counsel for AARP, warns that it threatens to create “a blueprint for companies and (pension) plans to do something similar.”
One estimate puts the funding shortage for all multiemployer pension plans at $140 billion, including up to $50 billion at the most critically short plans. The same painful reality confronts many state and local pension plans that collectively are $1 trillion short of covering what they will owe in pensions.
Sooner or later, things that cannot continue will stop. The question that must now be resolved is to what extent will regular Americans who have had absolutely no part in the mismanagement of the pensions of Teamsters and government employees will be burdened to bail them out.
That’s a real question today because according to CNN, that’s exactly what three of the U.S. government’s largest lenders did in the first quarter of 2016:
China, Russia and Brazil sold off U.S. Treasury bonds as they tried to soften the blow of the global economic slowdown. They each sold off at least $1 billion in U.S. Treasury bonds in March.
In all, central banks sold a net $17 billion. Sales had hit a record $57 billion in January.
So far this year, the global bank debt dump has reached $123 billion.
It’s the fastest pace for a U.S. debt selloff by global central banks since at least 1978, according to Treasury Department data published Monday afternoon.
The article goes on to explain their motive for selling off such large quantities of their U.S. Treasury holdings:
Judging by the selloff, policymakers across the globe were hitting the panic button often and early in the year as oil prices fell, concerns about China’s economy rose and stock markets were very volatile.
In response, countries may be selling Treasuries to prop up their currencies, some of which lost lots of value against the dollar last year. By selling U.S. debt, central banks can get hard cash to buy up their local currency and prevent it from losing too much value.
The U.S. government gets one major benefit from having the world in financial turmoil—the same panic that prompted foreign central banks to sell their U.S. Treasury holdings to prop up their currencies also prompted large numbers of U.S.-based individuals and institutions to buy more U.S. Treasuries, which pushed down their yields, which means that the U.S. government can borrow more money at lower interest rates to sustain its spending, as the following chart from Bloomberg illustrates. Note the more-than-20% sustained decline beginning in January 2016:
Because the U.S. government realizes this kind of benefit, it has a very strong incentive to continue to promote instability elsewhere in the world so long as it continues to sustain its deficit spending at elevated levels, as illustrated by the following chart from the Committee for a Responsible Federal Budget from January 2016.
As John Tozzi and Michelle Cortez of Bloomberg report on the stem cell front, “press releases, popular media, and even some journal articles routinely inflate expectations for future therapies based on early findings that probably will never turn into cures.” Now the International Society for Stem Cell Research, representing more than 4,100 researchers, wants to tone down the hype. The number of approved stem cell treatments is “pretty darn small,” and claims about cures, researchers say, “must be accurate, circumspect and restrained.”
That is good advice, but it comes a little late for California researchers, patients and taxpayers alike.
As we noted, California’s $3 billion Stem Cell Research and Cures Act, Proposition 71, promised life-saving cures and therapies for a host of afflictions, including heart disease, diabetes, Alzheimer’s and Parkinson’s. Celebrity promoters included Christopher Reeve, Michael J. Fox and Arnold Schwarzenegger. In 2004 voters approved the measure, which created the California Institute for Regenerative Medicine. CIRM drew down the money and spent lavishly, but ten years later in 2014 not a single cure or therapy had reached the clinic, and none was likely to do so. By late 2015, according to David Jensen of the California Stem Cell Report, CIRM had produced no cures but sought to spend $620 million on clinical work and translational research, including $50 million for “educational programs” and another $50 million for “infrastructure.” CIRM plans a number of “translating” centers, at $15 million a pop, “to negotiate federal rules and regulations, and win ultimate approval of a therapy.”
In practice, this state agency has always functioned as the California Institute for the Redistribution of Money. Heavily insulated from legislative oversight, CIRM awarded huge salaries and provided a soft landing spot for over-the-hill politicians. CIRM bosses are certain to don the white coat of medical science and seek more money from the people. Taxpayers might keep in mind their actual record: $3 billion spent without any of the promised cures or therapies.
When counting the cost of government, taxpayers should pay close attention to OPEB, the “Other Post-Employment Benefits” of government employees aside from their pensions but including their health care costs. Now taxpayers have a calculating tool, State Retiree Health Plan Spending: An examination of funding trends and plan provisions, a new report from the Pew Charitable Trusts. As the report notes, only 28 percent of large U.S. employers offer retiree health benefits, but “49 states continue to include these benefits as a key part of state compensation programs.” The retiree health benefits, in turn, “account for the majority of states’ OPEB obligations” and many states have implemented policy changes to address “looming OPEB obligations.”
In 2013, the combined OPEB liability was $627 billion, and the report finds much of this liability concentrated in 13 states: Alaska, California, Connecticut, Georgia, Illinois, Maine, Michigan, North Carolina, New Jersey, New York, Ohio, Pennsylvania and Texas. In 2013 these 13 states represented about half of the U.S. population but “accounted for 81 percent of the total OPEB liabilities for all 50 states.” To meet these obligations requires ARC or “annual required contributions.”
According to the Pew Report, California will have to spend an annual $6.6 billion, to cover in full the current unfunded liabilities of $80.3 billion. As Dan Walters of the Sacramento Bee notes, that would be more than three times the $2 billion a year California currently spends, and that number, according to Gov. Brown’s budget, is up more than 80 percent in the last decade. Walters also recalls that, until recently, California was one of just 18 states that have “set aside nothing to cover those future obligations.”
When they use the Pew report to run the numbers for their state, taxpayers should keep in mind that these “looming” obligations are aside from government pension costs. For an assessment of government pension obligations, now more than $4 trillion nationwide, see California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis, by Lawrence J. McQuillan.
How has the national debt burden per typical U.S. household changed during the last 8 years?
To answer that question, it might help to know what a typical U.S. household is. For our purposes, a typical American household is one that earns the median household income, which means that 50% of U.S. households earn more than that amount and 50% earn less.
The national debt burden then can be calculated as the ratio of the entire national debt per household to the median household income.
Political Calculations did that math for each year from 1967 through 2015, and graphed the results:
Through the end of Fiscal Year 2015, back on 30 September 2015, we estimate that the ratio of the United States’ total public debt outstanding to the nation’s median household income is approximately 263%. While down slightly from its peak of 267% in 2014, that figure is up considerably from the 170% of median household income that was recorded at the end of Fiscal Year 2008.
Rising from 170% of the median household income to 263% of median household income means that the U.S. national debt per household went up nearly by the amount of the annual income earned by a typical American household in the years from 2008 through 2015.
How many American households do you suppose could actually afford to take on that additional amount of debt?
As the story goes, somebody opened a restaurant with politicians and bureaucrats as waiters but it failed because they kept serving the food under the table. In the real world, likewise, politicians and bureaucrats strive to keep things out of sight from taxpayers. As Taryn Luna writes in the Sacramento Bee, one way they do that is through “ex parte communication,” private communications between state agencies, boards and commissions, and those they purport to oversee.
In the interest of public transparency, such secret communications are banned, but lawmakers have carved out exceptions. Officials of the Public Utilities Commission, Coastal Commission, Board of Equalization, the Public Employee Relations Board and the California Air Resources Board, among others, “are allowed to communicate with groups behind closed doors and in private emails.” State legislators who don’t rule on specific regulatory cases “also can discuss their business privately.” Ex parte communications, however, are hardly the limits of government secrecy.
Luna’s veteran colleague Dan Walters observes that every year thousands of bills wind up in “suspense files” because they would create government expense. Though sometimes valid, the process allows legislators “to decide in secret which bills will be allowed to proceed and which will not, for reasons known only to themselves.” Walters contends this secrecy should stop, and notes that a pending ballot measure would require “sneaky trailer bills” to be in print 72 hours before votes. That would still leave politicians with ample opportunity for mischief.
In 2012 voters faced four ballot measures on taxes and spending. The Senate Governance and Finance Committee held hearings on these measures, and the California Channel gave taxpayers statewide a chance to gain insights from the testimony. Unfortunately, senate President pro Tem Darrell Steinberg blocked citizens’ access by killing the live broadcast, and followed by making this claim: “I pride myself on being open and transparent.”
Steinberg’s action to block the live broadcast prompted objections from the media, but journalists and editorial writers quickly forgot about it. Steinberg is now running for mayor of Sacramento, and the Sacramento Bee endorses him as the “clear choice” for the office.
As we observed in “Financial Crisis and Leviathan,” a deep recession, widespread unemployment, and fathomless debt were the prevailing conditions when the Obama administration created the federal Consumer Financial Protection Bureau in 2011. The CFPB was based on the premise that consumers were unable to look out for themselves without help from the federal government. CFPB defender Paul Krugman captured this sentiment when he wrote, “Don’t say that educated and informed consumers can take care of themselves,” and “even well-educated adults can have a hard time understanding the risks and payoffs associated with financial deals.”
As the New York Times reports, the CFPB now proposes a rule that would allow customers to bring class-action lawsuits against financial firms. Opponents of the rule told the Times it would lead to an upsurge in litigation and spell the end of arbitration, which businesses tend to favor. The U.S. Chamber of Commerce said in a statement that “The proposed rule is a wolf in sheep’s clothing,” and that “the agency designed to protect consumers is proposing a rule that will end up hurting them.” If so, it wouldn’t be the first time, and taxpayers might note the irony. Those well-educated and informed consumers supposedly too dim to protect themselves from financial fraud are now fully qualified to launch complex legal actions and competent to assess the risks and payoffs.
Taxpayers might also recall that the CFPB was created with no hint that government policy, regulation, or failure could have played any role in the financial crisis. CFPB backers also avoided mention of the Community Reinvestment Act, despite considerable evidence that the 1977 Carter-era law, with its promotion of lax lending standards, was a key part of the problem. The CFPB thus confirms the federal government’s zeal for expansion at any time, at any cost, and without any regard for need or performance. No new federal agency, however useless, is ever temporary. And as the CFPB class-action caper suggests, such agencies tend to become more troublesome and wasteful, not less.
If you said “the government”, or “the people”, you’re wrong. In reviewing the series of bailouts of Greece from 2010 through 2015, a recent study by the European School of Management and Technology (ESMT), a business school based in Berlin, found that nearly all of the money that was spent by the European Central Bank, the International Monetary Fund, and the European Commission (together called the “Troika“) to bail out the Greek government as it repeatedly defaulted on its national debt obligations in 2010, 2012 and again in 2015, went to the big European banks that had loaned it money. Via Global Research, Greek news outlet Ekathemerini reports:
Some 95 percent of the 220 billion euros disbursed to Greece since the start of the financial crisis as loans from the bailout mechanism has been directed toward saving the European banks. That means about 210 billion euros was eventually channeled to the eurozone credit sector while just 5 percent ended up in state coffers, according to a study by the European School of Management and Technology (ESMT) in Berlin.
“Europe and the International Monetary Fund have in previous years mainly saved the banks and other private creditors,” concluded the report, published yesterday in German newspaper Handelsblatt. ESMT director Jorg Rocholl told the financial newspaper that “the bailout packages mainly saved the European banks.”...
The economists who took part in the study have analyzed each loan separately to established where the money ended up, and concluded that just 9.7 billion euros – less than 5 percent – actually found its way into the Greek budget for the benefit of citizens.
“This is something that everyone suspected, but few people actually knew. That has now been confirmed by the study: For six years Europe has tried in vain to put an end to the crisis in Greece through loans, and keeps demanding ever harder measures and reforms. The cause of the failure obviously lies less on the side of the Greek government and more on the planning of the bailout programs,” the German daily concluded.
There’s an old saying about debt that was immortalized by billionaire oil baron J. Paul Getty: “If you owe the bank $100, that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”
That saying has just been proven true with the identification of the primary beneficiaries of the Troika’s multiple Greek government bailouts.
The reason it is important to recognize this today is because, once again, Greece is approaching fiscal and economic ruin. The Wall Street Journal describes why all of the previous actions that Greece has taken on the behalf of its lenders have failed:
Back in May 2010, a heavy austerity program in Greece was inevitable. The country had lost control of its finances. No lender was willing to finance the status quo. Greece’s primary budget deficit, which excludes interest, was over 10% of its gross domestic product.
Over the next five years, Greek governments enacted spending cuts and tax increases worth a total of 32.3% of GDP, a scale of austerity far beyond that seen in any other European country during the financial-crisis era. The budget recorded a small primary surplus of 0.7% of GDP in 2015, an improvement of nearly 11 percentage points since the dawn of the crisis.
But two-thirds of the fiscal effort was needed just to offset the impact of Greece’s collapsing economy, which crippled tax revenues. The IMF said in 2013 that creditors had underestimated how hard the radical austerity plan would hit the economy. As GDP shriveled, Greece’s debt burden rose, keeping the country from regaining solvency.
What is important to recognize here is that one of the actions that the Troika demanded from Greece – sharp increases in the nation’s top income tax and value added tax rates – is primarily responsible for most of the nation’s collapsing GDP. The Troika’s “solution” has ensured that Greece’s debt problems can never, ever be truly resolved.
At this point, only one member of the Troika, the International Monetary Fund (IMF), recognizes that the main beneficiaries of the Greek government bailout are the ones in most need of sharing the pain. The Financial Times reports on a leaked letter sent by IMF head Christine Lagarde to Europe’s finance ministers, which the FT‘s Peter Spiegel describes as being the equivalent of the IMF putting “the gun on the table” in demanding that European banks finally accept losses on their failed loans. Here’s the section of Lagarde’s letter that drives home that reality (emphasis ours).
I understand the urgency of the situation in the case of Greece and Europe as a whole, and our common objective is to quickly agree on a way forward. This requires compromises from all sides, and we have contributed our part by focusing conditionality on what we see as the absolute minimum, leaving important structural reforms to a later stage. However, for us to support Greece with a new IMF arrangement, it is essential that the financing and debt relief from Greece’s European partners are based on fiscal targets that are realistic because they are supported by credible measures to reach them. We insist on such assurances in all our programs, and we cannot deviate from this basic principle in the case of Greece.
The IMF’s Lagarde is telling the biggest beneficiaries of all the Greek government bailouts that her organization will not participate in another bailout unless they write off significant portions of the bad loans they made, and thereby reduce Greece’s debt burden. Not just because they are just as responsible for the existence of those bad loans, but also because of their bad decisions in ensuring that Greece could never regain its solvency.
Or rather, because they have been made whole by the Troika’s bailouts while Greece has been left in ruins.
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