MyGovCost News & Blog

Tesla Motors Inc. is paying back its government loan of $465 million in full, and nine years early. This is being billed as “a huge boost for the Obama administration and clean energy firms.” Actually it isn’t.

It is customary to pay back loans in full, so that is hardly a news item, and early repayment, though laudable, is not a clean-energy breakthrough. “I hope we did you proud,” said Tesla CEO Elon Musk, who certainly did himself proud by plunking down $17 million for a 20,248-square-foot Bel-Air mansion with a gym, seven bedrooms, 10 bathrooms, tennis court, motor court and a swimming pool. His company makes the Model S, a luxury vehicle selling for $70,000, more than most Americans can afford. Britain’s “Top Gear” found the Tesla car “an astonishing technical achievement” but lamented that “it’s a shame that in the real world it doesn’t seem to work.” The car ran far less between charges than Elon Musk claimed. So even with the loan payoff Tesla hardly represents a breakthrough for the masses, the environment, or the Obama administration.

The real news on the clean-energy front is the number of stimulus recipients who have gone bankrupt. In 2009 Flabeg Solar U.S. Corp. got $10 million in stimulus funds and another $9 million in job creation money. By April 2013 Flabeg had shut down its plant, laid off workers and will likely seek Chapter 11 bankruptcy protection from workers suing over severance pay. Flabeg is hardly alone.

Solyndra got $535 million in federal loan guarantees but went bankrupt in 2011. Stimulus recipients Evergreen Solar and SpectraWatt, both in the alternative energy business, also went bankrupt. And of course, Fisker Automotive Inc, is heading south despite $529 in federal loans to produce luxury cars built in Finland and selling for nearly $100,000. Tesla did better and paid back its loan but on balance the $800 billion American Reinvestment and Recovery Act, also known as the stimulus, remains more of a bust than a boost.

Did you know that the top-level bureaucrats who are doing the most to increase the negative impact of federal government spending cuts to the American people are in line to get big bonuses this year?

Lindsay Wise of the McClatchy News Service reports:

An elite group of federal employees is set to receive cash bonuses despite this year’s automatic budget cuts, according to a report that a Senate subcommittee issued Friday.

The report revealed that members of the government’s highly paid Senior Executive Service _ who make up less than 1 percent of the federal workforce _ had received more than $340 million in bonuses from 2008 through 2011. The bonuses came on top of annual salaries that ranged from $119,000 to $179,000.

Doing some back of the envelope math, the Senior Executive Service’s bonus program for high-level federal bureaucrats pays out approximately $113 million in bonuses each year. With 2.15 million civilian employees on its regular payroll, the one percent (21,500) that are employed as part of the Senior Executive Service have been collecting bonuses of roughly $5,271 per high-level federal bureaucrat per year.

Now consider the context in which they are collecting that bonus this year. Since the federal budget sequester took effect at the end of March 2013, we’ve observed federal government bureaucrats in the Senior Executive Service pretty much doing everything they can to make ordinary Americans pay the price for reducing federal spending by such a small percentage (the sequester budget cuts total $85 billion, or 2.2% out of projected federal spending total of $3,803 billion for the current year.) Here, faced with having to trim their spending, top-level bureaucrats at various federal government agencies have:

• Threatened to keep meat from reaching U.S. supermarkets by furloughing low-level federal food safety inspectors.
• Threatened to create flight delays by furloughing low-level air traffic controllers.
• Threatened to jam up airport security lines by furloughing low-level TSA agents.
• Threatened to cut the pay of low-level janitors at the U.S. Capitol.
• Threatened to hand out pink slips to teachers.

Now, what all of these things have in common is that each is aimed at hurting large numbers of the American public. What they also have in common is that not a single dollar of a federal government’s Senior Executive Service’s bonus program for would appear to have been considered to be included in these budget cuts.

Here’s an easy solution for this situation. By eliminating the $113 million in bonuses to be paid out to the 21,500 member Senior Executive Service of the U.S. federal government this year, the federal government can recover 1.3% of the total of $85 billion that would otherwise have been cut elsewhere as part of the budget sequester, such as the spending that these same individuals were intending to cut for the express purpose of increasing the amount of inconvience in the lives of 313 million Americans.

Unless the top 1% of federal bureaucrats have a good reason why they would refuse to minimize the impact of such a minor federal government spending cut to ordinary Americans.

“Look, s— happens.”

That was California governor Jerry Brown, a former candidate for President of the United States, responding to reports of faulty bolts and rods on the new span of the Bay Bridge linking Oakland and San Francisco. The governor didn’t get into why, exactly, all that happened, but it’s worth a look.

In 1989 the powerful Loma Prieta earthquake wrecked the original double-deck span, but less than two months later the bridge reopened. Caltrans, the massive state government agency, wanted to retrofit the span at a cost of $230 million, which even then shaped up as a decent deal. But then Caltrans bosses saw an opportunity to make more work for themselves and proposed a spanking new span for $1 billion. As Mary Theroux noted, the tab is now $6.4 billion “with no end in sight.” All that runaway spending, however, has not prevented safety concerns such as bolts and rods that could well break during an earthquake. How could all that happen?

As the Sacramento Bee noted, members of a review panel created by the state’s Legislative Analyst had “financial and professional ties to the California Department of Transportation and Bay Bridge contractors.” And that panel was formed after a Bee investigation revealed conflicts of interest in a Caltrans review panel that pronounced the bridge’s foundations to be sound. State senator Mark DeSaulnier, chairman of the Transportation and Housing Committee, told the Bee “There’s no sense in paying 100 grand to have someone summarily approve everything Caltrans has done. We need an independent review.” He is right, but there’s more to the story.

Jerry Brown, raised in San Francisco and a former mayor of Oakland, doubtless sees the new bridge as part of his legacy. It’s actually a monument to the way government operates. A retrofit the original span would have been more prudent course but government usually prefers the more expensive and complicated course. Waste is inherent in the system and when safety concerns surface, politicians shrug and say “look, s— happens.”

On May 17 outgoing IRS boss Steven Miller – president Obama fired him but he was going to resign anyway – testified to the House Ways and Means Committee about his agency’s campaign to target conservative groups seeking non-profit status. Mr. Miller contended that he did not mislead Congress or the American people. He listened to cases of the IRS asking applicants what kind of books they read, people they might know, and even the contents of their prayers. He heard about a businesswoman who, after applying for tax-exempt status for a local tea party chapter, suddenly found herself facing Labor Department inspectors, four inquiries from the FBI, and a foray by the ATF.

Mr. Miller failed to explain how this type of harassment had happened and did not name those responsible. He did reveal that a week earlier the Internal Revenue Service actually planted the question that ignited the whole controversy. Mr. Miller rejected the term “targeting” as “pejorative” but did tell lawmakers “We provided horrible customer service here.” That was the biggest whopper of his evasive and self-serving testimony.

The IRS is not a business. It is a tax enforcement agency of the federal government. Its “service” is doubtless as horrible as Mr. Miller conceded, but it is not “customer” service. Customers operate on a voluntary basis, and choose to patronize one business instead of another. When treated horribly by the IRS, no American worker can seek more courteous and professional treatment at, say, Betty and Don’s Tax Agency down the street. So when it comes to taxes, Americans are more like captives.

According to Mr. Miller, the “superb” IRS manager who headed the division providing the “horrible customer service” was not punished. In fact, she was promoted. Sarah Hall Ingram is now responsible for the IRS division working with Obamacare. More horrible treatment cannot be long delayed.

On this Sunday, May 19, 2013, the U.S. federal government will metaphorically max out its credit card. Jeffrey Sparshott of the Wall Street Journal‘s Real Time Economics blog reports:

The U.S. government will bump up against the federal debt limit this weekend, though a series of emergency steps will allow it to continue paying all of the nation’s bills until at least early September, Treasury Secretary Jacob Lew said Friday.

“Nevertheless, Congress should act sooner rather than later to protect America’s good credit and avoid the potentially catastrophic consequences of failing to act until it is too late,” Mr. Lew said in a letter to House and Senate leaders.

Lawmakers in January agreed to suspend the debt ceiling until May 18, allowing the White House and Congress negotiate new spending and tax plans. But the sides haven’t made a deal, so on May 19 the debt limit will be restored to its previous level, plus the amount of borrowing that occurred while the limit was suspended.

That means that the Treasury will be up against the limit on Sunday.

Fortunately, the U.S. Treasury can use what it calls “extraordinary measures” to hold total public debt outstanding of the federal government to “just” $16.7 trillion, or about $138,560 per American household.

Those extraordinary measures involve things like a more careful management of the nation’s finances, which thanks to the recent surge of revenue for the federal government, could be sufficient to carry the nation through the end of the federal government’s current fiscal year at the end of September 2013.

That surge of revenue largely consists of three factors:

1. Increased payroll tax collections, where all Americans who earn wages or salaries saw their taxes to pay Social Security increase by up to 2% of their paychecks on January 1, 2013.
2. Increased revenue from Fannie Mae and Freddie Mac, both of which were taken over by the federal government in the aftermath of the first housing bubble collapse, who have benefited from the emergence and inflation of a new housing bubble in the U.S. in the second half of 2012.
3. Increased tax collections for dividends and capital gains in 2012, much of which wasn’t paid until income taxes for that year became due on April 15, 2013. Here, following the re-election of President Obama, the fear having tax rates on dividends potentially triple as part of the pending “fiscal cliff” crisis at the end of 2012 drove many public companies to accelerate the timing of when they would pay out their dividends to help protect their shareholders from being exposed to the higher tax rates that would take effect after December 31, 2012. They did this by raiding a large portion of the funds they were setting aside to pay dividends in 2013, which they then paid out before the end of 2012 instead.

Only one of these three factors is likely to be sustained indefinitely, as there’s no telling how long the new housing bubble might last and the dramatic surge of capital gains and dividend tax collections seen at the end of 2012 is clearly the result of a one-time event. The chart below shows the impact of these changes in the Congressional Budget Office’s most recent projection for the next 10 years of the federal government’s budget deficits as a percentage of the nation’s GDP:

For now however, it means the federal government will run its lowest deficit in years, even though the national debt will still grow by hundreds of billions this year, as the U.S. is still far from a healthy fiscal situation in that its ability to withstand another major economic shock has not been restored.

The federal government is obfuscating about Benghazi and deploying the IRS against groups less than worshipful of government. As if that were not enough, the Justice Department is seizing the phone records of Associated Press reporters, which the AP calls a “massive and unprecedented intrusion” on press freedom. Ben Wizner of the ACLU called it “an unacceptable abuse of power.” True, but it’s more than that.

The Justice Department grabbed telephone records of journalists who worked on an article about the way authorities uncovered a plot to blow up a jetliner. Attorney General Eric Holder, claimed the AP investigation put the American people at risk, but as The Economist noted, terrorism advisor John Brennan said “there was never any danger to the American people” because AP revealed the plot. And the government’s interest in journalists’ phone records, “will make such inconsistencies harder to probe.” That could well be, and the campaign is also a confession that the federal government does a poor job of tracking down leaks from government agencies. This case, though of great concern, is not the only abuse of the press emanating from the federal government.

The Washington Post objects to “the White House’s bullying tactics, which treat all dissent — even inconvenient facts! — as treachery.” When Bob Woodward of Watergate fame reported that the White House had in fact authored the sequester, White House economic adviser Gene Sperling blasted Woodward in a half-hour tirade followed by an email warning “I think you will regret staking out that claim.” Woodward saw it as a veiled threat and the Post came out swinging.

“This is monstrously stupid of the White House displaying what we have seen repeatedly: The administration cannot defend its positions on the merits, so it attacks critics. It also suggests a level of desperation rarely seen from the arrogant Obama White House.” The president risks “going from halo-crowned messiah to nasty bully in the eyes of at least some in the media and, more important, in the view of the country.” Further, said the Washington Post, “it is impossible for Obama to achieve Reagan-like status, but he just might become the left’s Nixon if he keeps this up.”

Has the U.S. government become too vast for the President to be accountable for the misconduct of its bureaucrats?

Believe it or not, that’s the argument being advanced by President Obama’s former campaign manager David Axelrod for the
purpose of defending the President in the abuse of power scandals now engulfing his administration.

Politico reports on the political risk for the proponents of the kind of big government that President Obama champions in using this argument now to claim that the very politically-driven President bears absolutely no responsibility for the politically-driven misconduct of the government’s bureaucrats on his watch:

The uproars over alleged politicization of the IRS and far-reaching attempts to monitor journalists and their sources have not been linked directly to Obama. But it does not strain credulity to suggest that Obama’s well-known intolerance for leaks, and his regular condemnations of conservative dark-money groups, could have filtered down to subordinates.

The narrative is ideological. For five years, this president has been making the case that a growing and activist government has good intentions and can carry these intentions out with competence. Conservatives have warned that government is dangerous, and even good intentions get bungled in the execution. In different ways, the IRS uproar, the Justice Department leak investigations, the Benghazi tragedy and the misleading attempts to explain it, and the growing problems with implementation of health care reform all bolster the conservative worldview.

Hot Air’s Allahpundit tries to wrap his mind around the logic of Axelrod’s argument:

What’s significant about Axelrod’s defense of O is that he’s pointing to the size of government as a structural reason for why scandal might proliferate, which is downright Reaganesque as a critique of the federal leviathan. The bigger the government gets, the less accountability there’ll be. That’s conservatism 101.

The perverse twist is that he’s using that logic to exculpate Obama. Try to get your mind around that. A guy who helped O win two presidential elections by arguing that government needs to do more, especially for health insurance (which will soon be partly under the jurisdiction of the IRS, natch), is now trying to absolve Obama of responsibility for his underlings’ malfeasance by suggesting that … no one can really control a government this big. Obama’s off the hook, thanks to his dogged efforts to make the country even more ungovernable than it already is.

A government that is too vast is a government that cannot last.

The Independent Institute’s Robert Higgs has some pretty detailed thoughts on the problems that are inherent in having a government that’s too big for its own good....

The Internal Revenue Service has been targeting conservative groups but the powerful federal agency was not content with abuse of groups with “tea party” and “patriot” in their names. As the Wall Street Journal noted, the IRS was acting in a highly inclusive manner, giving extra scrutiny to groups seeking to “make America a better place to live” and even groups concerned about government spending.

The IRS knew about this in 2011, a year before IRS boss Douglas Shulman denied that any such targeting was going on. So he compounded the abuse and harassment with lies. The IRS was reportedly “apologetic” about the campaign but blamed it on low-level employees, claimed it was not politically motivated, and denied that anyone outside the IRS was involved in development of the criteria for harassment. That is a telling sign. Citizens should never believe anything until it is officially denied.

Legislators have called on president Obama to make it clear that the situation is unacceptable and issue a formal apology. That is unlikely because the IRS campaign conforms with federal policies to marginalize and malign those at odds with intrusive government. For example, a recent report from the U.S. Military Academy’s Combatting Terrorism Center includes groups that believe the federal government intrudes on individuals’ civil and constitutional rights, and even groups that support civil activism, individual freedoms, and self-government. That sounds a lot like the groups the IRS has been targeting and lying about, compounding their campaign with a half-baked attempt at an apology.

Deploying the IRS as a political weapon is a dangerous abuse of power. That past presidents have done likewise is no justification for the conduct of the Obama administration. If anything, the current IRS campaign confirms that the federal government is too big and intrusive, prone to deception, and essentially unreformable.

For ten years the U.S. Central Intelligence Agency has been dropping off bags of money for Afghan president Hamid Karzai, who is grateful for the monthly cash deliveries. The revelation sparked a protest from Rep. Jason Chaffetz of Utah, who told the New York Times “I thought we were trying to clean up waste, fraud and abuse in Afghanistan. We have no credibility on this issue when we’re complicit ourselves. I’m sure it was more than a few hundred dollars.”

It was actually tens of millions of dollars and “used to pay off warlords, lawmakers and others whose support the Afghan leader depends upon.” The record of this “leader”suggests the money is not well spent.

Hamid Karzai is “one of the most unreliable allies we’ve ever had,” notes Bob Woodward of the Washington Post, author of Obama’s Wars. “Karzai is a diagnosed manic depressive, somebody who has mood swings. Sometimes it’s controlled, sometimes it’s not. If you just look at what he has said in public and on the record, you know, one moment he’s totally embracing us, the next moment he’s denouncing the United States.”

Karzai does not command loyalty and has been unable to prevent insider attacks by Afghan government forces against American troops. Two years ago Col. Ahmed Gul killed eight U.S. airmen and one civilian adviser. Last year Afghan soldiers and police officers killed 62 NATO soldiers and the Taliban now threatens a surge in such insider attacks. More U.S. dollars to Hamid Karzai will not prevent such attacks and only contribute to waste, fraud and abuse in Afghanistan.

The CIA, meanwhile, came across rather well in the film Zero Dark Thirty, tracking down terrorist impresario Osama bin Laden. If other CIA heroism remains unexposed, so doubtless do other fiascoes like Hamid Karzai’s monthly payment plan, funded by embattled U.S. taxpayers.

There’s a long-standing joke among politicians, which kind of goes along the following line:

“You had better not threaten my power, or else I’ll set the IRS on you!”

Even President Obama has told a version of this joke:

Unfortunately, the people and managers who staff the bureaucracy of the Internal Revenue Service (IRS), who are not known for having a good sense of humor in the first place, appear to have taken the President’s words from 2009 as their license to act against the President’s political opposition. Tax professor Paul Caron writes:

After months of denying that the IRS has been targeting tea party groups for special scrutiny, Lois Lerner, Director of the IRS’s Exempt Organizations Division, admitted that the IRS had been giving additional scrutiny to applications for tax-exempt status from goups with the “Tea Party” or “patriot” in their title. She denied there was any political motivation and blamed the practice on a low-level employee in Cincinnati.

Apparently, this particular “low-level” employee of the IRS based in Cincinnati would seem to have a very long reach, as dozens of non-profit “Tea Party” and “patriot” groups in at least 18 states were either denied tax-exempt status or compelled to answer what have been described as “intrusive and blatantly unconstitutional questions” in their bid for tax-exempt status.

If the IRS’ explanation for its politically-oriented corruption rings false to you, you’re not alone. At the very least, IRS managers and directors at a number of different locations across the nation would have needed to coordinate such an effort targeting these non-profit groups’ applications for tax-exempt status, as a real “low-level” employee would not have the authority to do so on their own. Remember, the form-loving IRS is nothing if not bureaucratic!

And then, it gets even worse. In what the Washington Post describes as a “public relations disaster“, the IRS, in trying to minimize the impact of the scandal, threw gasoline on them instead as:

• They admitted they were not good at math.
• They failed to indicate whether any disciplinary action had been or will be taken against the IRS bureaucrats who executed the politically-biased harassment of Tea Party and patriot organizations.
• They revealed that they never intended to make the IRS’ wrongdoing known the public.
• They bailed out of the press conference citing “repetitive questions”, which one well-respected long-time tax journalist indicated were repetitive because the IRS spokesperson was failing to provide adequate answers to them.

Try pulling that last one at your next IRS tax audit!

Rick Hasen of the Election Law blog frames the IRS’ scandal of politically-based selective enforcement:

This is not one of the best days for the IRS. Conservatives are absolutely right to call for a congressional investigation of this one, even if it turns out to be an isolated problem.

For liberals who think this is no big deal, imagine if during the Bush Administration the IRS targeted political groups that were “progressive” for special scrutiny.

We should recognize the issue of politically-biased selective enforcement is one that is not isolated to the IRS. The same kind of politicization of a federal government agency has also effectively provided pardons to the politically-connected and powerful bankers and finance people who are responsible for having created the housing market collapse and economic crisis in the first place, as the U.S. Department of Justice under President Obama has declined to pursue any prosecution of wrongdoing for their political patrons.

Should we mention that these same politicians and bureaucrats have progressively run up the national debt for the sake of bailing their cronies out?

After all, the whole reason that so many of these Tea Party and patriot grass-roots organizations came into existence was to oppose this kind of extreme fiscal irresponsibility and corruption in the nation’s government. Is it really any wonder that the empire would strike back? Or that their stormtroopers would work for the IRS?