It’s a list that none of us wanted to see, but thanks to the wasteful spending of the federal government, one that has been dutifully assembled by U.S. Senator James Lankford: Federal Fumbles: 100 Ways the Government Dropped the Ball, Vol. 2.
Like its predecessors, U.S. Senator Jeff Flake’s Wastebook (formerly produced by James Coburn) and former Senator William Proxmire’s Golden Fleece Awards, Federal Fumbles highlights some of the most extreme examples of wasteful spending done by federal government bureaucrats in the name of doing their jobs. And in some cases, doing the same jobs as other federal government bureaucrats!
Here’s a short list of 10 items from the full list of 100 that stood out from the rest.
There is however just no getting rid of the smell from wasteful spending.
The United States government has deployed central planning through schemes such as the Agricultural Marketing Agreement Act of 1937. Authorized by Congress during the New Deal, the Act set up cooperative boards and conscripted growers into reserve set-asides. As we noted, in recent years the government targeted raisins in California. In 2003, Fresno raisin growers Marvin and Laura Horne would have to give up more than 30 percent of their crop, receiving nothing in return. To the Hornes this looked like theft, so they grew, packaged and sold raisins apart from government planners. The U.S. Department of Agriculture responded with a fine of $695,000, so the Hornes duly appealed and the case reached the U.S. Supreme Court.
Last year, Chief Justice John Roberts ruled that “Raisins are private property, the fruit of the growers’ labor, not public things subject to the absolute control of the state,” adding “Any physical taking of them for public use must be accompanied by just compensation.”
The court ruled 5-4 in favor of the Hornes and the only justice who filed a dissenting opinion was Justice Sonia Sotomayor, who bills herself as a “wise Latina.” The Justice Department argued that the statute of limitations had run out but a new ruling by the U.S. Court of Federal Claims rejects that argument. Marvin and Laura Horne may continue their “takings” case in quest of the just compensation they deserve. The real issue is government intervention in agriculture.
“Central planning was thought to work very well in 1937,” observed the late U.S. Supreme Court Justice Antonin Scalia during arguments in the raisin case, “and Russia tried it for a long time.” Justice Elena Kagan slammed the whole USDA raisin program as “ridiculous,” and she is right about that. Nearly 80 years after the Agricultural Marketing Agreement Act of 1937, it is time to stop government colonization of the market.
President-elect Donald Trump finds “tremendous waste, fraud and abuse” in the federal government,” and proclaims “we’re going to get it.” That will be a tough task because, as one recent case confirms, waste, fraud and abuse are inherent in the system.
When he applied for a job with the EPA in 1989, John Beale claimed he had worked for former senator John Tunney of California. He didn’t, and nobody bothered to check. Beale said he served in Vietnam, where he contracted malaria and therefore needed a handicapped parking spot. He didn’t serve in Vietnam, and didn’t contract malaria. But nobody checked those claims either and Beale got his handicapped parking spot.
In 1994, Beale claimed he was a secret agent for the Central Intelligence Agency but the EPA failed to check out that claim. That enabled Beale to take more than two years off, with full pay, and kick back at his vacation home in Massachusetts. Beale pulled off his CIA ruse for nearly 20 years, flying first-class all the way.
Hearings turned up no evidence that “policy advisor” Beale did anything of value for the EPA. Even so, the agency eagerly ponied up “retention bonuses,” authorized by, among others, the EPA’s Robert Brenner, who co-owned a vacation home with Beale. The secret agent man continued drawing paychecks 19 months after his retirement dinner and bilked taxpayers for nearly $1 million. He had to pay it back, but still draws his generous federal retirement, so in a real sense he got away with it. Many others are doubtless doing likewise, and despite the bold rhetoric, the new administration will have a tough time tracking them down and trimming the size of government.
As the New York Times noted, “the one-time real estate mogul has largely avoided specifics about cuts he might make, and much of his agenda imagines changes that would require huge increases in federal spending: tripling the number of border patrol agents; supplying the military with more warships and fighter jets; increasing spending on infrastructure; undertaking new efforts to confront cyberterrorism; and aggressively working to remake trade policies.” Taxpayers and waste-watchers should not drop their guard.
Since the U.S. federal government’s fiscal year cycled over to FY2017 on October 1, 2016, the growth of U.S. government’s total public debt outstanding has accelerated. If that faster growth rate holds at the average pace through November 23, 2016, just before Thanksgiving, then the total public debt outstanding will exceed $20 trillion sometime around December 15, 2016.
Extending that projection out further, by the time that President Obama reaches the end of his tenure in office on January 20, 2017, the U.S. total public debt outstanding would be slightly under $20.16 trillion, which would mean that Obama’s fiscal policies would be responsible for having increased the size of the national debt by $9.5 trillion, nearly doubling its size since he was first sworn into office on January 20, 2009. Over the 8 years of his presidency, that represents the national debt of the U.S. growing by an average rate of nearly $1.2 trillion per year.
According to the Committee for a Responsible Federal Budget’s analysis, the various fiscal policy proposals that President-elect Donald Trump advanced during the 2016 election campaign would result in the U.S. national debt increasing by another $5.3 billion over the next 10 years, which would represent an average growth rate of $0.53 trillion per year.
The amazing thing is that projected increase is just 44 percent of the actual national debt growth rate realized under President Obama’s fiscal policies, which just goes to show how out of control federal spending has been during the past eight years.
The U.S. economy may be sluggish, but as we noted, bureaucracy is booming. University of California bosses cry out for more taxpayer cash even as they bulk up on “diversity” bureaucrats. Universities nationwide are now cranking out administrators to fill these useless posts, but diversity bloat is hardly confined to education.
For example, new Sacramento city manager Howard Chan will try to “increase diversity” at city hall, and fill the recently created position of “diversity manager.” That pledge came in response to an “audit” showing that city management does not reflect the ethnic proportions of the population at large. If representation is not proportionate, according to diversity dogma, discrimination is always a problem and the only remedy is hiring on the basis of race, ethnicity and gender. Such “reverse discrimination” is actually illegal under Proposition 209, which Californians passed on November 5, 1996, but city officials elevate political correctness over the rule of law.
The new mayor of Sacramento is former state Senate boss Darrell Steinberg, on whose watch three Senators were busted on corruption charges. The Senate has been a hive of nepotism. Sergeant-at-arms Gerardo Lopez was involved in a gun battle that left one person dead, but he duly remained on the state payroll. Lopez’s wife worked for Steinberg in his policy unit, and Lopez’s mother was a big wheel in the Senate’s human resources department. What a cozy world.
In the days leading up to the November 8, 2016 elections, RealClearPolicy featured a number major policy ideas from across the ideological spectrum in the U.S. on how to manage the fiscal policy of the federal government after President Obama’s tenure in office comes to an end on January 20, 2017. The Progressive Policy Institute‘s Paul Weinstein was one of those contributors, who approached the topic from the perspective of how a victorious Hillary Clinton could achieve her costly policy agenda without racking up billions more in national debt for a federal government that has racked up too much in the previous eight years.
Many of the same considerations would most certainly apply to the costly policy agenda proposed by the actual winner of 2016’s presidential election, Donald Trump. And because that’s the case, Weinstein’s suggestions for how to carve out the “fiscal space” needed to make Hillary Clinton’s policy proposals a reality could very well be employed by President-elect Trump to do the same for his proposals once his tenure in office begins.
So when you read the following excerpt, substitute “Donald Trump” for “Hillary Clinton” or the appropriate pronoun wherever you see them used, and substitute whichever of Donald Trump’s spending priorities are of roughly equal value to those proposed by Hillary Clinton in the discussion.
Mrs. Clinton has proposed about $1.4 trillion in new initiatives. Her platform contains a number of important initiatives including a $300 billion down payment to get our roads, railways, sewers, electrical grids, and airports back in working condition; $350 billion to make community college free and help reduce student-debt burdens; $300 billion to expand paid family leave; and $200 billion to increase early childhood education and childcare.
The current administration’s playbook has been to press for new spending in the context of existing fiscal parameters: limiting cuts to the smallest part of the budget pie (discretionary spending); not linking sweeping tax reform to higher revenues; and avoiding a discussion of how to make important entitlements, such as Social Security, Medicare, and Medicaid, sustainable and more progressive. If President Clinton follows suit, her sweeping progressing agenda will likely be marginalized—or, even worse, never materialize at all.
If, on the other hand, President Clinton ties her agenda to a plan to cut the deficit and reform the tax code, she might be able to win the funding she wants and America needs....
In prior bipartisan budget deals, Republicans have demanded at least $1 in spending cuts for every $1 in additional tax revenue. Assuming a similar construct, President Clinton would need to cut total spending by 2.5 percent to stabilize the debt as a share of GDP and pay for her new initiatives. To balance the budget and fund her priorities, she would need to cut total spending by 7 percent.
Where can the money be found for these spending cuts? There are certainly some programs in the discretionary budget (spending that requires Congress to act annually) that no longer serve a purpose. But the real savings is in entitlements (spending that is on auto-pilot). This means: doubling down on the cost-savings measures in Obamacare as well as adopting some Republican ideas, including malpractice reform; saving Social Security in a way that increases benefits for low-income families and ensures adequate retirement security for all; and going after agricultural subsidies that have long outlived their usefulness.
The prospects for tax reform certainly look like the most promising starting point for the new administration—a real opportunity to find revenues to finance important investments in people and infrastructure.
If there is such a thing as “low-hanging fruit” in Washington these days, corporate tax reform is the sweetest tasting option. Both Republicans and Democrats recognize that U.S. corporate tax rates are too high. And the current U.S. system—which imposes those high rates on the foreign income of U.S.-based multinationals while deferring taxes until firms reinvest their profits at home or distribute them to shareholders—simply isn’t working.
A corporate-tax reform package that could split the difference between the Obama administration’s budget and the proposal put forth by former Republican Ways and Means chair Dave Camp would be a win for Democrats and Republicans. That proposal includes a lower statutory rate, fixes for the out-of-date and poorly interpreted transfer pricing rules, deferral of taxes on income earned overseas, income stripping using intercompany debt, and movement towards a territorial system.
The Clinton administration would also be wise to revisit the tax-reform plan put forth by the bipartisan National Commission on Fiscal Responsibility and Reform (Simpson-Bowles). Known as the “Modified Zero Plan,” this plan captured the interest of Republicans and Democrats because of its ability to lower rates dramatically, simplify the tax code, enhance fairness and progressivity, and increase government revenues for deficit reduction. Highlights of the plan included: 1) eliminating or reforming the vast majority of the special preferences and tax expenditures in the tax code; 2) creating four super tax incentives: an enhanced Earned Income Tax Credit, a universal 401k/IRA; a new mortgage-tax incentive; and a charitable-giving tax credit; 3) lower marginal tax rates for all taxpayers; 4) reducing the number of tax rates to three; and 5) taxing capital gains and dividends at ordinary income rates.
The interesting thing about Weinstein’s suggestions is that much of the dynamic he describes between a Democrat President and a Republican Congress would also apply between a President Donald Trump and a more fiscally conservative Republican Congress because of Trump’s position as the most anti-establishment candidate of 2016, albeit with a different line up of issues. In electing Donald Trump as the U.S. President, American voters may very well have achieved the result of a divided government that can better restrain the growth of the national debt, even though the White House, Senate and House of Representatives would all nominally appear to be controlled by members the same political party.
That is because policy divisions within the Republican party between the more establishment members of the Congress and an anti-establishment Donald Trump White House could act as a brake on the kind of runaway growth of the national debt that characterized the first two years of the Obama administration, where no such political divisions existed between the White House and the Democrat party majorities that tightly controlled both houses of Congress and marched in lock step together when it came to the U.S. government’s fiscal policies during those gloomy days for fiscal restraint.
Still, even with those factional divisions within the Republican party, there may be some other unique opportunities to clear more fiscal space within the U.S. budget to support Donald Trump’s ambitious priorities than would ever have existed in a Hillary Clinton administration, and thus were not even considered by Paul Weinstein in his analysis as he assumed, like many, that Hillary Clinton was all-but-guaranteed to win the 2016 election.
More on those unexpected opportunities in the weeks ahead.
The Committee for a Responsible Federal Budget wrapped up its analysis of the 2016 fiscal year back on November 2. When they did, they produced the following chart showing what the future of the U.S. government’s budget deficits will be even if all of the winners of all of 2016’s elections for national office on November 8 do absolutely nothing about the U.S. government’s spending when they start their terms in January 2017:
The deficit remains over three and a half times as high as in 2007 (just over 2 percentage points higher as a percent of GDP) and is projected to grow over time. Under CBO’s current law baseline, annual deficits will return to trillion-dollar levels by 2024. Under a more pessimistic Alternative Fiscal Scenario in which policymakers fail to pay for new spending and extended tax cuts, trillion-dollar deficits return by 2021 and reach $1.5 trillion – a nominal-dollar record – by 2026.
Fig. 3: Trillion Dollars Deficits to Return by 2024 (Billions of Dollars)
Though deficits have declined in recent years, the good news has ended; the era of declining deficits is over. This year’s deficit has risen 34 percent from last year, and CBO expects trillion-dollar deficits to return by 2024. Meanwhile, debt will reach a new post-World War II era record of 76 percent of GDP at the end of 2016 and rise further to 86 percent of GDP by 2026.
If you do check out the report, be sure to see Figure 2, which shows how fast the national debt increased during all that period of “falling deficits” shown in the chart above!
Politicians pitched it as a magic carpet that would speed riders from Los Angeles to San Francisco in record time, with complete safety and total comfort. According to promoters California’s high-speed rail project, also known as the bullet train, would also clear up the state’s crowded highways and of course protect the environment and help stop global warming. Governor Jerry Brown saw the bullet train as part of his legacy but for taxpayers it shaped up as a boondoggle.
Few commuters were panting for an essentially 19th century form of transportation that was slower and more expensive than air travel. Commuters were also puzzled that the first stretch aimed to connect Bakersfield and Fresno. As in Blazing Saddles, one thing stood between the rail bosses and the land they needed: the rightful owners. And as we noted, the project also had costly tunnel vision. The rail bosses kept switching tracks, and politicians started talking about a “blended system” with local rail networks. To longtime observers, that doesn’t sound much like the original plan.
“All in all, therefore,” writes Dan Walters in the Sacramento Bee, “it’s likely that the bullet train as envisioned, linking San Francisco and Sacramento in the north with Los Angeles and San Diego in the south, won’t materialize.” So he wonders, “what, then, happens to the $9.95 billion in bonds that California voters authorized for the project?”
Walters cites Jerry Brown advisor Dan Richard that the object was not high-speed rail but “rail modernization.” For Walters this validated the suspicion that the bond legislation was so much BS, “a bait-and-switch ploy to get state voters to finance local transit projects they otherwise would not support.” The bait-and-switch strategy helped earn the project a Golden Fleece Award, but taxpayers should not expect the High Speed Rail Authority to disappear.
Like other useless state bodies, it remains a comfy sinecure for ruling-class retreads like board member Lynn Schenk, a former congresswoman and chief of staff for governor Gray Davis. And as we noted, a convicted embezzler also found work with the rail authority, so criminals are also all aboard.
November 5 marked 20 years since Californians rejected race, ethnic and gender preferences through Proposition 209. As we noted, a major purveyor of state-sponsored discrimination was the University of California, which during tough financial times has been bulking up on vice-chancellors for equity, diversity and inclusion and such. As Stephanie Keaveney of the John W. Pope Center for Higher Education Policy notes, this is part of a national trend.
By her count, the number of non-academic administrators has more than doubled in the last 25 years, far outpacing the growth in students and faculty. Administrators will increase by 19 percent through 2020, according to the federal Bureau of Labor Statistics.
Every year, Keaveney writes, universities find a “need” for new administrators for everything, especially diversity. This results in “a vast bureaucracy living high on the hog at taxpayer expense” and it is going to get worse because new degree programs aim to churn out new administrators. As Keaveney sees it, this will create “an army of bureaucrats who have little or no connection to improving student learning.”
Likewise, the administrative courses “lack scientific rigor and have an ideological slant.” Keaveney cites a PhD thesis titled “Difficult Dialogues: How White Male Graduate Students in Student Affairs Preparation Programs Make Meaning of Their Whiteness, White Privilege, and Multiculturalism.” Another thesis, “Love and Hip Hop” dealt with “urban reality television.” Despite the lack of rigor, the newly minted administrators enjoy high placement rates that, “starkly contrast with those of graduates of other, more academic, advanced degree programs in the humanities and even science, technology, engineering, and mathematics.” Many scholars and scientists, “are unable to find academic work” and Keaveney sees this as a consequence of “administrative bloat.” If left unadressed, the nation will see “more and more universities churning out more and more overpaid, over-politicized, and over-credentialed administrators.”
Meanwhile, not a single major newspaper marked the twentieth anniversary of Proposition 209, when Californians dumped diversity dogma. Major papers also took a pass on November 4, thirty years since Californians voted out Chief Justice Rose Bird, along with state Supreme Court judges Joseph Grodin and Cruz Reynoso. All were appointees of Jerry Brown, then and now the governor of California.
Writing at RealClearPolicy, James Capretta tackled that question before the election, before anyone really appreciated that Donald Trump would beat Hillary Clinton in the race for the White House. And with that being the case, he begins by describing the deterioration of the U.S. government’s fiscal position during the past eight years under President Obama:
President Obama has rarely discussed the condition of the federal budget during his time in office. One likely reason he avoids the topic is that he and his aides understand that voters do not really care about government deficits and debt, even if they sometimes tell pollsters otherwise. What voters really care about is how government programs and tax policies affect their personal finances.
The president also has an additional reason to steer clear of the subject: His fiscal policy record is unlikely to be praised by historians. During his presidency (2009 to 2016), the federal government has borrowed $7.8 trillion. Total federal debt has climbed from $5.8 trillion (or 39 percent of GDP) at the end of fiscal year 2008 to about $14 trillion (or 77 percent of GDP) today.
The president is also leaving his successor a budget outlook that is inauspicious, to put it mildly. The Congressional Budget Office (CBO) projects the federal government will run a cumulative deficit of $8.6 trillion over the 10-year period from 2017 to 2026, assuming current laws and policies remain unchanged. The CBO also expects the deterioration in the government’s fiscal position to accelerate in the years following the coming decade, as population aging and rising health expenses push government spending to levels well above the historical norm. The CBO’s latest long-term forecast shows federal debt rising to over 100 percent of GDP in 2033 and over 140 percent of GDP in 2046.
Capretta goes on to describe the CBO’s outlook as “probably too optimistic.” He points to actions that elected U.S. politicians have already taken with respect to delaying unpopular tax hikes passed in the Affordable Care Act that he argues are likely to be repeated, before turning his attention to the 800 pound elephant in the U.S. budget: the “relentless growth” of autopilot entitlement spending for “mandatory” expenditures such as Social Security, Medicare, Medicaid, and the Affordable Care Act’s subsidies.
To deal with the growing gap between the federal government’s revenues and the spending to sustain these entitlement programs, Capretta points to a report that he co-authored with a number of individuals at a number of Washington DC center-right think tanks, aimed specifically at increasing the effectiveness and sustainability of these programs in the future, which should be particularly relevant in the upcoming Trump presidential administration.
The report pounds home three main principles for addressing the direct causes of the nation’s impending fiscal challenges:
• Promotion of Work. Much of the federal safety net is designed to help households that have inadequate resources from earned income. But it is counterproductive when government programs discourage work and thus create unnecessary dependence on public support.
• Personal Responsibility. Most working-age households with middle-class incomes (or higher) could save and provide for their own retirement without subsidization from other taxpayers. Entitlement reform should proceed on the assumption that limited public resources should provide a solid safety net against poverty in old age, but that those who can afford to save for retirement should be expected to do so.
• Innovation and High Quality in Health Care. Slowing cost escalation in health care without undermining the quality of care requires higher productivity and more efficiency in how care is provided to patients. That can be achieved only with a functioning marketplace.
The report goes on to recommend a number of reforms addressing the major entitlement programs that represent the bulk of the federal government’s “mandatory” expenditures and also other welfare programs that contribute to the threat to the nation’s future fiscal outlook.
But what if nothing happens, as occurred under each presidential administration since Ronald Reagan was in office, where these problems were well known and where efforts at reform failed? Capretta offers the following final warning:
If, instead, policymakers continue to procrastinate and ignore the problem, a crisis of some sort will eventually occur, and the needed fiscal correction will be imposed abruptly. The resulting changes will be then very disruptive to large numbers of Americans and much more painful than if political leaders had acted more responsibly when they had the chance to do so.
Going back to the Reagan era, there was a rather famous television commercial for Fram oil filters, which is still alive on YouTube, and which has a very relevant message to this issue:
As a contemporary observer noted on a wholly different topic, the commercial’s punch line—”You can pay me now, or pay me later”—communicated “that the consumer had a choice of paying a small amount for an oil filter now, or a large amount for a ruined engine later.” Where reform of the nation’s costly entitlement programs are concerned, that’s one basic principle that hasn’t changed since the last time that U.S. politicians dealt seriously with reforming the biggest threat to the nation’s fiscal future.
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