The World War II generation has reason to associate the U.S. Department of State with treason in the form of Stalinist spy Alger Hiss. Baby Boomers and beyond have come to associate State Department briefings with “Saturday Night Live” in the form of spokesperson Marie Harf, who shows a keen sense for the absurd. Now people of all ages can associate the State Department with plain old-fashioned government waste.
As Kellan Howell of the Washington Times explains, since 2007 the U.S. State Department has spent more than $36.5 million “to survey citizens in foreign countries on a wide range of topics, including general public opinion polling on how their own governments—many of them U.S. allies—are performing.” The topics include a survey of medical insurance in Spain, an elite survey in Russian and a survey on “Public Attitudes Toward Domestic and International Affairs in Austria.”
As Howell reports, of the $36.5 million more than $34 million “was paid to unnamed contractors according to the contracts compiled from USASpending.gov.” Such spending “nearly doubled” on the watch of Secretary of State and former First Lady Hillary Clinton. In fiscal year 2012 alone “the state department spent over $7.5 million alone on international polls.” Howell also notes that on Clinton’s watch, “the polling contracts became less transparent. Many of the projects were simply described with one word, ‘survey,’ and were billed to ‘miscellaneous’ foreign contractors.” Those intrigued by this record may want to review the recent book Clinton Cash.
Meanwhile, complaints now arise that a congressional investigation of Secretary Clinton’s handling of Benghazi is a waste of money. Actually, such investigations are a legitimate function of Congress and often prove useful. On the other hand, for the U.S. Department of State to spend more than $36.5 million on useless foreign surveys is indeed a waste of taxpayer dollars.
Everyone knows that monopolies in business are bad. Writing at CBS News, economist Mark Thoma explained why they’re so bad for consumers:
When firms have such power, they charge prices that are higher than can be justified based upon the costs of production, prices that are higher than they would be if the market was more competitive. With higher prices, consumers will demand less quantity, and hence the quantity produced and consumed will be lower than it would be under a more competitive market structure.
The bottom line is that when companies have a monopoly, prices are too high and production is too low. There’s an inefficient allocation of resources.
In addition, the tactics used to establish monopoly power, such as driving competitors out of business or thwarting potential entrants, can also cause considerable harm to households who own the businesses that are forced to close their doors.
For instance, a firm with deep pockets can set prices below costs and absorb losses until competitors can no longer survive. Then, once the competition is eliminated, the surviving firm can raise prices high enough to more than cover the losses it took while establishing its now-dominant market position (under antitrust regulation, such tactics are prohibited).
Americans hate monopolies. So much so that the antitrust laws and regulations that Thoma cites are specifically designed to keep businesses from being able to abuse the kind of power they might otherwise obtain.
But there are monopolies in the United States. Monopolies that the U.S. government backs with its own power against the interests of regular Americans.
The best example of that is the U.S. Postal Service, which has a government-granted monopoly over the delivery of first class mail in the United States, which comes complete with all the downsides that Thoma identifies for U.S. consumers and businesses: prices that are too high and production that is too low.
That’s a big reason why both American consumers and businesses began turning away from the U.S. Postal Service as soon as less expensive alternatives to its monopoly have become available. In response, the U.S. Postal Service, backed by the U.S. government, has repeatedly doubled down on its monopoly power over the years, jacking up its prices and cutting back its service.
And each time it does, more Americans come to hate it and turn away from it. So much so that at this point of time, even with its monopoly power, it can’t even break even. RStreet‘s Kevin Kosar explains:
The U.S. Postal Service lost nearly $5 billion this past year, according to its just-released year-end financial results. As in recent years, the agency did not make the legally required $5.7 billion payment to its Retiree Health Benefits Fund. The agency is $15 billion in debt and legally prohibited from borrowing additional funds. The unfunded portion of its retiree-health-benefits obligation is $54 billion.
Revenues increased slightly but mail volume slid by 1.4 billion pieces from last year to 154 billion. The agency has $6.6 billion of cash on hand, which is better than in recent years and means USPS is in no immediate danger of having to shut off the lights due to lack of cash. The agency’s financial results benefited from a temporary emergency price increase and a lower-than-expected employee compensation charge.
All told, the results confirm what’s been obvious for some time: the USPS faces not just a financial crisis, but an existential one. The agency’s business model was predicating on the assumption that granting it a monopoly over first-class mail delivery would enable it to reap high margins that would subsidize the agency’s service nationwide. Thanks to electronic bill-paying services, among other factors, first-class mail volume has plunged. Worse still, total mail volume is down more than 25 percent since 2007.
To be fair, the cost of the benefits for the U.S. Postal Service’s retirees represents a pretty big chunk of money, that if it didn’t pay, would make its financial performance seem better – just like the city of Chicago and its chronic underfunding of public employee benefits.
But just like Chicago, the hole that the U.S. Postal Service is in is so deep that skipping out on its legal obligations to fully fund its employee benefits programs would not be enough to put it in the black. Kosar comments:
Economist Michael Schuyler has shown that if you remove this cost, USPS nevertheless lost $10 billion over the past seven years, and the situation would have been worse still were it not for the temporary emergency-rate increase, which forces mailers to pay the government monopoly more. These same proponents of the status quo tacitly admit the USPS’ existential problem when they advocate for it to enter new lines of business, like banking.
Because an organization that:
is one that some U.S. politicians believe that Americans will trust with the management of their own money, if only it could become a bank too.
But that’s the way they think in Washington D.C. What could possibly go wrong?...
In 2011, New York Times columnist Paul Krugman wrote:
People think of debt’s role in the economy as if it were the same as what debt means for an individual: there’s a lot of money you have to pay to someone else. But that’s all wrong; the debt we create is basically money we owe to ourselves, and the burden it imposes does not involve a real transfer of resources.
That’s not to say that high debt can’t cause problems—it certainly can. But these are problems of distribution and incentives, not the burden of debt as is commonly understood. And as Dean says, talking about leaving a burden to our children is especially nonsensical; what we are leaving behind is promises that some of our children will pay money to other children, which is a very different kettle of fish.
As of the end of the U.S. government’s fiscal year on September 30, 2015, here’s Political Calculations’ estimate of the size of the U.S. national debt and the percentage share of it that is owed to its major groups of creditors.
The U.S. national debt had been “frozen” at $18.152 trillion after hitting the nation’s statutory debt ceiling on February 24, 2015, which was later suspended on November 3, 2015 which allowed it to immediately increase by $339 billion. The estimate of $18.444 trillion above for September 30, 2015 assumes that the U.S. national debt would have otherwise grown at a steady rate during the period in which it was frozen.
In looking at the chart, the one thing that we see right off is that 33%, or one third, of the U.S. national debt is actually owed to foreign entities. And if not for the U.S. Federal Reserve’s quantitative easing programs in recent years, in which it grew to become the largest single creditor to the U.S. government, it’s quite possible that the share owned by foreign interests would nearly be 50%.
But that’s not the biggest problem of having such a large national debt. Arnold Kling identifies the real problem in having a nation’s debt grow to be too large – even if all its lenders and spenders are found within the nation’s population, starting with a simple example:
There are two types of people in our economy: Lenders and Spenders. Sammy Spender and Lois Lender each grow two bushels of corn per year. However, Sammy wants to eat three bushels this year. There are three ways that this can happen.
Private loan: In a purely private transaction, Sammy borrows one bushel of corn from Lois this year and pays her back one bushel of corn next year.
One-time redistribution: The government redistributes corn by taxing one bushel of corn away from Lois and giving it to Sammy.
Government borrowing: The government borrows one bushel of corn from Lois this year and gives it to Sammy. It then pays Lois back out of taxes next year.
In each case, Sammy can consume three bushels of corn this year—the two he produces, plus the additional bushel from Lois. Conversely, Lois consumes one bushel of corn this year—the two she produces, minus the bushel that Sammy gets.
Next year (year two) is where the three cases differ. With the private loan, when Sammy pays Lois back next year, she is the one who will have three bushels of corn and he will be the one with only one bushel.
In the one-time redistribution case, assuming no further redistribution, then next year Sammy and Lois will revert to consuming what they produce—two bushels of corn each.
Every year, the debt creates more and more political division and antagonism.
With government borrowing, the outcome is decided in year two. Suppose that the government pays back the debt at that time. It owes Lois one bushel of corn. If it obtains that bushel of corn by taxing Sammy, then the result is the same as the private loan. If it obtains the bushel of corn by taxing Lois, then the result is the same as the one-time redistribution. If the government gets half of its tax revenues from each, then Lois will have 2.5 bushels of corn to eat (two bushels she produces plus one bushel repayment, minus 0.5 bushels of tax). Sammy will have 1.5 bushels to eat (two bushels he produces minus 0.5 bushels of tax).
In the first year, when the government borrows the money, nobody is unhappy. Sammy gets to eat an extra bushel of corn, and Lois willingly defers consuming one bushel of corn with the expectation of getting it back next year.
However, this sets the political system up for conflict and strife in year two, when the burden of paying the debt has to be apportioned. As we have seen, it could be divided any number of ways. However, consider this: Lois is expecting three bushels of corn, based on what she produces and her expectation of having her loan repaid. Meanwhile, Sammy is expecting two bushels of corn, based on what he produces. There are only four bushels of corn available, and there will be a political battle over who gets disappointed the most.
It gets worse.
In fact, in year two, the government will not want to resolve the issue of distributing the cost of the debt. Paying off the debt requires incurring political cost. The easiest thing to do is instead to roll over the debt. Moreover, Sammy is used to eating three bushels of corn, and the government does not want to have him face austerity. So it goes to Larry and Lena Lender for a loan of two bushels of corn. The government pays back Lois with one bushel and gives the other bushel to Sammy. It goes into year three with a debt of two bushels of corn.
As you can see, the political incentive for the government is to go deeper and deeper in debt. This in turn raises the stakes in the political conflict over who will bear the burden of tax increases and spending reductions. Every year, the debt creates more and more political division and antagonism....
The burden of the debt is that we create an ever-deeper conflict of interest between Lenders and Spenders. Yes, if you think of Lenders and Spenders collectively, you can say that “we owe the debt to ourselves.” But that is a dangerously vacuous way of looking at it. Large government debt is a recipe for a bitter political stew.
And that’s how the outsized growth of the U.S. national debt since 2008 became the defining domestic political conflict of our time.
As we observed in “Financial Crisis and Leviathan,” in its first 14 months the Consumer Financial Protection Bureau, a new federal agency, did little besides expanding an already bloated and wasteful government. The CFPB duplicates the work of existing regulators and worsens a crisis government played a major role in causing through programs such as the Carter-Era Community Reinvestment Act. Unfortunately, the damage does not stop there.
As the New York Times observes, the CFPB has been taking aim at the arbitration process, a longstanding way to resolve disputes outside of the court system. A new rule by the CFPB “which would prevent financial services companies from including class-action bans in consumer contracts, could in effect kill arbitration altogether.” Trouble is, as the Times notes, the CFPB is “empowered to issue rules without legislative approval, making them more difficult to defeat. Furthermore, unlike the Securities and Exchange Commission, which is overseen by a bipartisan commission, the consumer agency has a single head, appointed by the president.”
As Mother Jones explains, a recent television commercial, aired during a presidential debate, “paints the CFPB as a Kremlin-like bureaucratic nightmare,” with prime mover Elizabeth Warren “as the Stalinesque figure” on a red banner alongside CFPB boss Richard Cordray. Given the top-down autocratic structure of the CFPB, and the lack of legislative oversight, the Soviet imagery is not much of a stretch.
The CFPB is institutionalized statist superstition, a dominant non-ethos in Washington. In this superstition, government should always expand wasteful programs and agencies, regardless of performance. And even in times of recession, government should create new federal agencies. As the CFPB confirms, those are easy to start but as Milton Friedman observed, practically impossible to eliminate, regardless of performance.
The police are much in the news of late and some activists contend the cops are too severe when dealing with minorities. On the other hand, as Brad Brannan writes in the Sacramento Bee, the California Highway Patrol might be too lenient when they deal with privileged members of the ruling class.
On November 2, Superior Court Judge Matthew Gary at the wheel of his 2014 Toyota Tundra, struck cyclist Margaret Bengs, 66, a Sacramento Bee columnist and former speechwriter for Gov. George Deukmejian. Bengs died two days later. The Nov. 4 CHP press release said Gary was wearing his seatbelt and driving less than 35 mph. The cyclist Bengs “failed to clear the traffic lane by lane” and “was not wearing a helmet.”
How did the CHP know Gary was wearing his seatbelt and driving less than 35 mph? Apparently they just took his word for it, before any formal investigation of the accident. Bengs’ helmet arrived at the hospital with the rest of her clothes, so the charge that she was not wearing a helmet is strange. A helmet can easily get knocked off in a collision with a vehicle weighing nearly 5,000 pounds.
The CHP press release says the cyclist “was struck by the front of the Toyota Tundra” but does not indicate whether Gary, the driver, struck Bengs from behind. If he was going less than 35 mph, it should not have been difficult for Gary to see a cyclist in broad daylight and stop his vehicle before impact. Was the judge perhaps negligent? Who had the right of way?
The CHP did not identify Gary as a judge and Gary wasn’t talking to reporters. CHP spokeswoman Jenna Berry told Brannan she could not say where Gary’s truck hit the bike, or where the bike was at the time of impact. An investigation was still pending but Berry told the reporter “Everything indicates that she may have responsibility for the accident.” So it looks like the results are already in and the victim is to blame for her own death. The CHP may give Judge Gary the benefit of the doubt, but the appointee of Gov. Arnold Schwarzenegger does not exactly get good reviews for his performance on the bench.
It really is a toss up these days as to which is the most criminally corrupt federal government agency. Is it the Internal Revenue Service, the Environmental Protection Agency or the Department of Veterans Affairs?
In the horse race of malfeasance, the VA edged into a slight lead last week, as two of its regional directors asserted their fifth amendment rights against self incrimination in Congressional testimony last week. Heath Druzin of Stars and Stripes describes the scene:
“Upon advice of counsel, I respectfully exercise my Fifth Amendment right and decline to answer that question,” Philadelphia VA Regional Office Director Diana Rubens said repeatedly under tough questioning from House Committee on Veterans Affairs Chairman Jeff Miller, R-Fla.
Miller’s flair for the dramatic was evident in the placement for witnesses: Rubens and St. Paul VA Regional Director Kimberly Graves, both accused by the VA Office of Inspector General of serious malfeasance, were seated next to the regional directors they are said to have pushed out of their jobs for financial gain. The actions spurred a criminal complaint the IG referred to the Department of Justice, and the VA has recommended both directors be punished.
Rubens and Graves sat grimly through the questioning and the testimony of LA VA Regional Director Robert McKenrick and Baltimore VA Regional Director Antione Waller, who said they had been pressured into leaving the posts that Rubens and Graves filled.
Benjamin Krause of Disabled Veterans assembled a video of Rubens’ and Graves’ testimony, in which he gradually sped up their speech each time they plead the fifth amendment (so no, that’s not a video glitch):
Stars and Stripes describes the financial windfall both received, but perhaps more disturbingly, reveals that both are still on the job.
Between them, Rubens and Graves also received roughly $400,000 in moving expense reimbursement as part of a VA program to entice candidates into hard-to-fill jobs, despite apparently seeking the positions. That bill earned the ire of lawmakers and rank-and-file VA employees alike, and the VA suspended the program in the face of the report.
Former VA Under Secretary for Benefits Allison Hickey, who was in charge of 20,000 employees, was also implicated in the scheme and originally subpoenaed but resigned under pressure before the hearing. The committee then withdrew her subpoena.
Despite the accusations against them, Rubens and Graves are all still on the job. In a lengthy email obtained by Stars and Stripes, dated Wednesday, Rubens highlights what she says are improvements in customer service at the Philadelphia and Wilmington (Del.) Regional Office.
On that last note, in other VA corrupt conduct news, USA Today‘s Donovan Slack and Bill Theobald report on who some of the most notable recipients of $142 million in “performance” bonuses that the scandal-plagued government department were:
WASHINGTON – The Department of Veterans Affairs doled out more than $142 million in bonuses to executives and employees for performance in 2014 even as scandals over veterans’ health care and other issues racked the agency.
Among the recipients were claims processors in a Philadelphia benefits office that investigators dubbed the worst in the country last year. They received $300 to $900 each.
Given Philadelphia VA Regional Office Director Diana Rubens‘s alleged ethical improprieties, we suspect that the standards she uses to measure the “improvements” in customer service she promised at her regional office would not likely be shared by many veterans among her Philadelphia-area “customers”.
That would be yet another reason to plead the fifth.
The California Coastal Commission (CCC) is an unelected body that overrides the elected governments of coastal counties and cities on issues of land use and property rights. As we recently noted, the powerful CCC is moving into animal management, trying to leverage SeaWorld into killing off its orca shows. As Dan Walters of the Sacramento Bee observes, this is hardly the CCC’s only power surge.
San Diego County is attempting to establish a landfill in Gregory Canyon. The inland project is not in CCC jurisdiction but that does not disturb the unelected commissioners. They claim that since the landfill could affect the San Luis Rey River, which flows to the sea, the CCC should play a role in the permitting process. If the CCC can pull this off, Walters says, “its authority could expand to almost the entire state.” Since everything west of the Sierra flows into the sea, “the expansion of a ski resort 7,000 feet high in the mountains could theoretically affect the flow and quality of water in the coastal zone, so its opponents could ask the Coastal Commission to intervene under its jurisdictional theory in the Gregory Canyon case.”
Known for zealotry and Mafia-style corruption – commissioner Mark Nathanson served five years for bribery – the CCC shows how government progressively becomes more intrusive, more expensive, and less responsive to the people. A responsible, accountable government would eliminate the Coastal Commission at the first opportunity. The voters, taxpayers and duly elected governments of coastal counties and cities are entirely capable of overseeing land-use and environmental concerns. The city of San Diego and San Diego County are fully capable of dealing with SeaWorld expansion and the Gregory Canyon landfill.
California governor Jerry Brown casts himself as a visionary leader in climate change and likes to demonize the oil and gas industry. When it comes to his own property and his own interests, the governor sings a different tune. As Ellen Knickmeyer of the Associated Press noted, according to state records, “Gov. Jerry Brown last year directed state oil and gas regulators to research, map and report back on any mining and oil drilling history and ‘potential for future oil and gas activity’ at the Brown family’s private land in Northern California.” Note that Brown did not hire an independent engineering firm to map out this potential oil and gas activity, like other property owners. Instead he deployed state personnel for that task, which state law forbids.
Brown’s office claimed he received no special treatment, sought only geologic history, and requested only public records, all dubious claims. Republicans are calling for an investigation but the Los Angeles Times already has a sense of the problem: “It’s inappropriate for the governor to call the head of an agency for help with personal business, especially someone he had just installed in the job nine days before. It also was wrong for his aides to follow up with the agency to ensure that there would be a map and other specific information. State employees are paid to do state business, not take care of the governor’s personal matters.” That is true but understates the matter.
Here we have a governor’s son, to the manner born, who traded on his father’s name. A failed senatorial and presidential candidate, the two-time governor has come to believe that state employees are his personal staff to deploy as he sees fit, at taxpayer expense. Worse, state officials themselves seem to be on board with this abuse of power. Nobody in state government blew the whistle and it took diligent reporters to uncover the story. In California you don’t have to dig very deep to bring up a gusher of ruling-class rot.
But according to Dave Walker, the former comptroller general of the U.S. government’s General Accounting Office, the total liabilities of the U.S. federal government add up to $65 trillion, which works out to be about 360% of the nation’s GDP. Bradford Richardson of The Hill reports on the problem:
“If you end up adding to that $18.5 trillion the unfunded civilian and military pensions and retiree healthcare, the additional underfunding for Social Security, the additional underfunding for Medicare, various commitments and contingencies that the federal government has, the real number is about $65 trillion rather than $18 trillion, and it’s growing automatically absent reforms,” Walker told host John Catsimatidis on “The Cats Roundtable” on New York’s AM-970 in an interview airing Sunday.
The former comptroller general, who is in charge of ensuring federal spending is fiscally responsible, said a burgeoning national debt hampers the ability of government to carry out both domestic and foreign policy initiatives.
“If you don’t keep your economy strong, and that means to be able to generate more jobs and opportunities, you’re not going to be strong internationally with regard to foreign policy, you’re not going to be able to invest what you need to invest in national defense and homeland security, and ultimately you’re not going to be able to provide the kind of social safety net that we need in this country,” he said.
He said Americans have “lost touch with reality” when it comes to spending.
Replace the word “Americans” with “politicians and bureacrats” in that last sentence and Walker will have completely defined the problem.
Now that former House Speaker John Boehner’s deal with President Obama to suspend the nation’s debt ceiling until March 2017 is law, the U.S. Treasury Department is ending the shell game that it was playing with the nation’s accounts and trust funds to keep the government running as if it were business as usual.
For the U.S. national debt, that means that a very sudden $339 billion upward adjustment. Pete Kasperowicz of the Washington Examiner reports:
The U.S. national debt jumped $339 billion on Monday, the same day President Obama signed into law legislation suspending the debt ceiling.
That legislation allowed the government to borrow as much as it wants above the $18.1 trillion debt ceiling that had been in place.
The website that reports the exact tally of the debt said the U.S. government owed $18.153 trillion last Friday, and said that number surged to $18.492 on Monday.
With the nation’s statutury debt limit suspended until March 2017, U.S. politicians and bureaucrats will effectively have no credit limit until that time – if there’s money they want to authorize themselves to spend, they can spend it without constraint, ignoring the actual debt ceiling that is actually written into the law.
Somehow, we don’t think that any major credit card company would ever offer such a generous credit program to regular Americans.
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