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.
The California State Controller, the state’s chief fiscal officer, has a mandate to “make sure the state’s $100 billion budget is spent properly.” In that cause, the Controller’s Office recently asked the state’s school districts to provide data on salaries. As Loretta Kalb notes in the Sacramento Bee, “about 70 percent of the public school systems across the state – and a slightly higher share in Sacramento County – did not provide the requested information.” And education bosses did not thank the Controller for asking.
David Gordon, superintendent of the Sacramento County Office of Education, said “the controller doesn’t have any obligation to keep salaries.” That is actually the Controller’s call to make, and they want the data. Gordon claims his office is transparent, so there should be no problem. The county superintendent also said release of salary data would be “misleading.” Bill McGuire, deputy superintendent of the Twin Rivers Unified School district, told Kalb the salary request means “an enormous amount of work” for district staff. The state’s request, he said, is “not reflective of the wages.” The real problem here is that bureaucratic blowhards want to keep their gold-plated salaries in the dark.
As we noted, the Twin Rivers District recently boosted McGuire’s annual salary by $16,000, raising his yearly take to $239,000, a full $24,000 more than when he started 18 months ago. Twin Rivers superintendent Steven Martinez bagged a salary increase of $20,000, boosting his pay to $260,000. The district also double his retirement payment and allowed Martinez to convert a $10,000 car allowance into salary. Pay hikes for Maguire and Martinez were not linked to any improvement in student achievement. The district also employs two “associate superintendents,” both paid more than $200,000.
County superintendent David Gordon did not mention his own whopper pay and benefits package of $315,422.94 but perhaps he has a point that the salary data is misleading. With California’s K-12 students ranking near the bottom, no taxpaying parent should think that bloated bureaucratic salaries lead to increased academic performance.
Following the headlong rush by a bipartisan coalition of House and Senate members to jetison the only effective restraint on the growth of U.S. government spending in modern history before House Speaker John Boehner’s resignation became effective, it occurred to us that one way that we could quantify the badness of the deal is to consider what the bipartisan alliance of establishment politicians behind it had to do to get it to pass through the U.S. Congress.
To pass the debt deal, they had to:
While not nearly as bad as the shenanigans that allowed the slow motion implosion that is the failing Patient Protection and Affordable Care Act to become law, the fact that the former leader of the U.S. House of Representatives failed to learn anything from that legislative debacle, where lawmakers literally were told that they needed to pass the bill to find out what was in it by Nancy Pelosi, John Boehner’s predecessor in the Speaker’s chair, it occurred to us that such “lawmakers” really need to have more obstacles placed before them, so regular Americans can be better protected from their selfish actions.
The Compact for a Balanced Budget could do that by helping establish a new balance of power between Americans and their elected officials. Developed by Compact for America’s Nick Dranias, the proposed federal balanced budget amendment to the U.S. Constitution would add a new level of protection for regular Americans from such legislative roughshodding, by forcing any measure that might increase the U.S. federal government’s statutory debt ceiling to also be considered by every state legislature.
It’s covered under Section 3 in the short summary describing the different sections of the proposed amendment:
Section 1 – balances federal budget by limiting spending to taxes except for borrowing under a constitutional debt limit.
Section 2 – establishes a constitutional debt limit equal to 105% of outstanding debt at time of ratification
Section 3 – requires approval of a majority of the state legislatures if Congress desires to increase the debt limit
Section 4 – requires the President to protect the constitutional debt limit through impoundments Congress can override
Section 5 – encourages spending and tax loophole reductions to bridge deficits, as opposed to general tax increases
Section 6 – provides necessary definitions
Section 7 – provides for self-enforcement of the amendment
What we wonder now, after having seen what happens when politicians who lack any real sense of fiscal restraint have too free a hand to abuse the rules they set just so they can get their way, is if the benefit of that feature might outweigh our previous criticism of other aspects of the Compact for a Balanced Budget’s proposed Constitutional amendment.
We’d love to hear more from our readers in the comments! Please take time to review the compact and let us know what you like or don’t like about the Compact for a Balanced Budget.
In 2011, U.S. House of Representatives Speaker John Boehner realized the most significant achievement of his entire career in the U.S. Congress when he reached a deal with the White House to restrain the growth of U.S. government spending: the Budget Control Act of 2011.
Here, using the leverage of the threat of not increasing the nation’s statutory debt ceiling, which would force the U.S. government to immediately balance its budget with the increased risk of defaulting on its scheduled debt payments, the Speaker was able to compel President Obama to back off his preferred policy of greater spending without any constraints.
As a result, the U.S. government’s spending has grown at a much slower pace than its revenues have as the U.S. economy has slowly recovered, which has helped the U.S. economy avoid having its national debt otherwise spiral out of control in the same way that Greece’s and Puerto Rico’s have in recent years. While the national debt has continued to grow, it has done so much more slowly than it would have otherwise as a result of the achievement.
That deal however has never been popular with the big-money interests that benefit from government spending, many of which are not just among the Speaker’s biggest financial contributors, but are also major contributors to other established members of the current leadership of the House of Representatives.
On September 25, 2015, after coming under increasing fire by members of his own party as they became increasingly suspicious that he was about to reverse the achievement of the Budget Control Act at his backers’ behest, John Boehner announced his resignation from both the Speakership and from the Congress, which would take effect on October 30, 2015.
In doing so, he avoided the situation where he was at great risk of being involuntarily removed as Speaker, while also retaining his power to act for a long enough time to undo the only effective legislation to ever meaningfully limit the growth of U.S. government spending in the modern era.
Reuters describes the deal that Speaker Boehner was so desperate to strike before giving up his power:
A U.S. budget and debt ceiling deal headed toward quick action in Congress on Tuesday as lawmakers rushed to avert yet another fiscal standoff, which threatened to push the federal government into an unprecedented default early next month.
House Speaker John Boehner told fellow Republicans he was clearing the way for a vote on Wednesday on the double-barreled measure, which would bust strict spending caps by $80 billion over the next two years in order to pump up defense and domestic programs. It also would extend the Treasury Department’s borrowing authority until March 2017.
Business Insider provides more details:
- It would raise spending levels in equal amounts in defense and nondefense areas and avert a potential government shutdown in December. Those spending increases would be offset through spending cuts.
- It would tackle a glitch that could leave many seniors with Medicare premium hikes next year.
- The accord would cut spending on Medicare and Social Security disability benefits. Beneficiaries of the Social Security disability system face steep cuts next year unless Congress acts, as the fund is set to run dry. A source familiar with the negotiations told Business Insider that the deal would include “long-term entitlement reforms” to the Social Security disability program. The source said it would save $168 billion in long-term spending.
- Attached to the deal would be separate legislation to raise the nation’s debt limit well past the 2016 election, through March 2017. The Treasury has warned that Congress needs to raise the debt ceiling by November 3 to avoid a potential first-ever default.
Meanwhile, Daniel Mitchell describes what advocates of reasonable government spending growth restraint will get:
Well, if you peruse the agreement, it’s apparent they don’t get anything. Sure, there are some promises of future restraint. But if the 2013 deal and the current agreement are any indication, those promises don’t mean much.
The deal has a handful of back-door revenue increases, including an assumption that the IRS will be more aggressive in squeezing money out of taxpayers. And there are some budget gimmicks, along with some tinkering with entitlement programs, especially the fraud-riddled disability program, that ostensibly will lead to some modest savings.
The net result is that we have a pact that leads to guaranteed spending increases over the nest few years, combined with some nickel-and-dime proposals that will probably offset each other in the future.
So the bad news – assuming the goal is enforceable spending restraint – is that policy has moved in the wrong direction.
The main difference between a statesman and a politician is that a statesman will always adhere to sound principles in seeking to move policies in the right direction, even as they engage in political maneuvering, while a politician has no such guiding compass—for them, it’s all about the maneuvering. Soon to be former-Speaker Boehner is a politician.
We have been keeping track of California’s bullet train boondoggle, or as some call it, a “Browndoggle” after governor Jerry Brown. He backs the train and wants to dig two massive tunnels under the Sacramento-San Joaquin River Delta at an estimated cost of $25 billion. Now taxpayers learn that the bullet train also has a problem with tunnel vision.
As Ralph Vartabedian notes in the Los Angeles Times, “the monumental task of building California’s bullet train will require punching 36 miles of tunnels through the geologically complex mountains north of Los Angeles.” This entails crossing the tectonic boundary between the North American and Pacific plates, plus unmapped earthquake faults. “It will be the most ambitious tunneling project in the nation’s history,” Vartabedian writes, but the California High Speed Rail Authority “hasn’t yet chosen an exact route through the mountains” and is “behind schedule on land acquisition, financing and permit approvals, among other crucial tasks, and is facing multiple lawsuits.”
The reporter cited expert James Monsees that the tunneling project is not realistic and that faults cause trouble. Bent Flyvbjerg of Oxford University, an expert on megaproject risk, told the Times, “You have an 80% to 90% probability of a cost overrun on a project like this.” Robert Bea of the National Academy of Engineering told the reporter “you can never make up an early cost increase,” and the bullet train has already had such increases. As Vartabedian explains, “at $68 billion, the budget is already more than double the $33-billion estimate made by the rail authority before California voters approved bonds for the project seven years ago.” By one estimate, the first phase from Burbank to Merced had risen 31% to $40 billion.
Add the most ambitious tunneling project in U.S. history and the bullet train is certain to cost many times the $68 billion budget. Even if it manages to go from Los Angeles to the Bay Area, as advertised, the bullet train will be slower than air travel and doubtless more expensive. For taxpayers it’s a boondoggle at any speed.
Puerto Rico is proving to be something of a case study for how politicians and bureaucrats, when finally faced with the consequences of their excessive spending as they run out of money to pay the debts they racked up to sustain it, will engage in even more unethical conduct to escape them.
In today’s example, that means bad faith negotiations with the government’s creditors. Here, on Wednesday, October 21, 2015, Puerto Rico’s Government Development Bank (GDB), which is fully owned by the Commonwealth of Puerto Rico and is therefore the government’s primary representative in dealing with Puerto Rico’s creditors, broke off negotiations on restructuring the government’s debt with them.
In breaking off those debt restructuring negotiations at this time, the GCB is effectively seeking to increase the risk that the government defaulting on its upcoming debt payments, in an attempt to force the creditors to take larger losses on the loans they made to Puerto Rico, through bonds issued by the GCB, by deliberately driving down their value.
Barron’s describes the details of the current negotiations.
The big problem, John Miller, who runs municipal bond investing at Nuveen Asset Management, told Barron’s, is that GDB owes a more than $350 million payment to creditors Dec. 1 and is unlikely to be able to pay it without the liquidity a debt restructuring could provide. Puerto Rico has said it will run out of cash in November.
Miller says GDB debt is backed by the government and considered to have nearly as strong guarantees as government obligation (GO) debt. If Puerto Rico can’t make payments on the GDB debt, it probably won’t be able to make payments on the bigger chunk of GO debt it owes either.
“A lot of investors said that the government can’t default on the GO debt because it is constitutionally protected,” Miller said. “But Constitutional protection can’t prevent Puerto Rico from defaulting if it is running out of money.”
However, there is still more than a month to go until the tell-tale GDB payment is due.
Walking away from the table will likely cause the GDB debt to fall in price, which could influence negotiations, points out Miller. Investors may be willing to accept worse terms for an exchange when the bonds are falling in price. Nuveen, which manages $105 billion in munis, has only about $300 million in insured Puerto Rico bonds, mostly in in state specific closed-end funds.
Here’s how Unilex, a database on international case law, describes bad faith negotiations:
(1) A party is free to negotiate and is not liable for failure to reach an agreement.
(2) However, a party who negotiates or breaks off negotiations in bad faith is liable for the losses caused to the other party.
(3) It is bad faith, in particular, for a party to enter into or continue negotiations when intending not to reach an agreement with the other party.
Regardless of how Puerto Rico’s debt restructuring negotiations play out, the GCB’s bad faith conduct in this case is very likely to prompt future litigation, as the creditors harmed by the GCB’s action will be able to demonstrate losses resulting from its bad faith conduct. In turn, that means that the people of Puerto Rico will be faced with even greater liabilities in the future. Unlike its debt obligations today, where it knows to the penny how much its liabilities are, the magnitude of what those additional liabilities have yet to be defined.
That Puerto Rico’s politicians and bureaucrats would seek such a remedy for what ails it confirms that the real causes of their current debt ailment will not ever be cured by simply restructuring their debts, as the bad faith they are demonstrating now is only the latest evidence of what their conduct has been all along. It will only be when good faith prevails and the practice of sound fiscal policies returns that the territory’s fortunes might change for the better.
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