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What President Obama’s Budget Proposal Means to the Typical American Household


Monday February 2nd, 2015   •   Posted by Craig Eyermann at 5:10am PST   •  

What does President Obama’s new budget proposal mean to the typical American household?

The following chart illustrates the amount of spending per U.S. household that President Obama is proposing to do in the federal government’s 2016 fiscal year as a percentage share of the median income earned by U.S. households. And, as a bonus, it puts this percentage into historical context by showing how that share has evolved since Ronald Reagan’s days in office.

US-Federal-Government-Spending-per-Household-as-Percent-Share-of-Median-Household-Income-1986-2016

Although the $74 billion that President Obama wishes to increase federal spending in 2016 would appear to be small with respect to that years’ proposed budget of $4 trillion, when broken down by spending per U.S. household, that spending increase is the equivalent of more than 1 percent of the typical U.S. households annual income.

That’s the main reason why President Obama has begun floating proposals to tax the savings of middle class households. While the White House has recently backed down from President Obama’s stated desire to tax earnings from the 529 college savings plans used by many middle class households to save for their children’s higher education, so long as the President seeks to sustain federal government spending at such elevated levels, middle class households should consider themselves at an elevated risk of having these or other tax increases imposed upon them.

Speaking of which, we also see that spending during President Obama’s tenure in office consumes roughly 15 percent to 20 percent more of the typical U.S. household’s income than was typical during the tenures of his four predecessors in the Oval Office.

Data Sources

The historic portion of the data originates from the following sources:

U.S. Census Bureau. Historical Income Tables: Households. Table H-5. Race and Hispanic Origin of Householder — Households by Median and Mean Income. [Excel Spreadsheet]. Accessed 31 January 2015.

Sentier Research. Household Income Trends: January 2000 to December 2014. [PDF Document]. Accessed 31 January 2015.

White House Office of Management and Budget. The Budget of the United States Government. Fiscal Year 2015. Historical Tables. Table 1.1 — Summary of Receipts, Outlays, and surpluses or deficitis (-): 1789-2019. [Excel Spreadsheet]. Accessed 31 January 2015.

Projections

Portions of the data from 2014 onward are based upon the following projections for the number of households in the U.S. and their median incomes:

  • 2014: Households = 124,312,000. Median Income = $53,601
  • 2015: Households = 125,312,000. Median Income = $55,263
  • 2016: Households = 126,492,000. Median Income = $56,925

We assume that the rate of increase in the number of U.S. households is equal to the average annual change recorded from 2000 through 2013.

Meanwhile, the median household income data for 2014 is based on the average of the values reported each month from January 2014 through December 2014 by Sentier Research, which is based on data collected through the U.S. Census’ monthly Current Population Surveys.

The median household income figures for 2015 and 2016 were then projected by adding the amount of the annual increase from 2013 to 2014 for each year. Given the recent trend for median household income in the U.S., these figures may be highly optimistic, with the effect being that the calculated percentage share of federal spending with respect to median household income could be considerably higher than we’ve shown above for the years of 2015 and 2016.

California Is “Increasist” in Cost of Government


Monday February 2nd, 2015   •   Posted by K. Lloyd Billingsley at 5:08am PST   •  

Seal_of_California_200

California governor Jerry Brown derides critics as “declinists,” but when it comes to the cost of government, he’s definitely an increasist.

As Jon Ortiz and Phillip Reese note in the Sacramento Bee, last year California paid out $1.1 billion more to state employees than the year before. The new tab comes to $16.43 billion, a full seven percent higher than in 2013. According to state data, the payroll of the Department of Corrections went up $279 million, the California Correctional Health Care Services $91 million, the California Highway Patrol $71 million, and the Department of Forestry and Fire Protection $68 million. And in the state Water Resources Control Board, Veterans Affairs, and Office of Inspector General, salaries increased between 18 and 25 percent, but these were not the largest percentage increases.

As Ortiz and Reese note, those came at Covered California, the state’s wholly owned subsidiary of Obamacare, where the payroll grew a whopping 123 percent. This huge increase comes in an arrogant and dysfunctional agency responsible for widespread misery among Californians. But in the cost-increase department, Covered California has some stiff competition. At California’s High Speed Rail Authority, the payroll grew 72 percent. This huge increase comes on a projected $68 billion “bullet train” that recently broke ground near Fresno, not the place where it is supposed to go.

Along with a bigger payroll, the number of full-time and part-time state employees is also up to about 245,000 from 242,000 in 2013. The average salary is $67,062, and as Ortiz and Reese note, “nearly one in five state employees earned $100,000 or more, a 30 percent increase from 2013. About one-quarter of the six-figure salaries went to managers and supervisors.” A full 54 state employees were paid more than $400,000, “up from 37 in 2013.”

California also maintains 3,666 job classifications including “teletype operator” and “switchboard operator,” even though the switchboard no longer exists. These classifications, explains Mr. Ortiz, “make government more expensive.” And as Sacramento Bee columnist Dan Walters observes, oversight of California government is spotty at best. The massive payroll boost, meanwhile, gives taxpayers more evidence that California remains unreformable.

Why Is the Debt Rising Faster Than the Deficit?


Friday January 30th, 2015   •   Posted by Craig Eyermann at 5:12am PST   •  

12082739_S Following a recent story that noted that the federal government’s budget deficit in its 2014 fiscal year was the smallest since 2007, the Wall Street Journal had some questions posed to them by their readers, the answers to which will already be long familiar to MyGovCost’s readers! Excerpting part of the article:

You Ask, We Answer: Why Is the Debt Rising Faster Than the Deficit?...

What about the change over all of calendar year 2014? The Treasury reported deficits of $488 billion but borrowed $668 billion. What happened with the other $180 billion? Again, cash explains part of it. Cash rose from $162 billion to $223 billion. That’s $61 billion accounted for and $119 billion unexplained.

What else does the government do in addition to spending and accumulating cash? It issues loans. The government’s loan financing climbed by $118 billion over the course of 2014. With lending programs, the government borrows from the public and turns around and lends out that money. (Most direct lending from the government is for student loans, but the departments of transportation, agriculture and energy, the Small Business Administration and the Export-Import bank all have significant lending programs too.)

Lending is not spending. If the government spends $1 million the money is gone. If the government makes $1 million in loans to lots of different borrowers, the odds are that most of the loans will be paid back. To be sure, these programs carry credit risk and can cost the taxpayer money when loans aren’t repaid. The solar-energy company Solyndra famously defaulted on a $535 million loan from the Energy Department, for example. But even Solyndra was part of a much bigger energy lending program that has an overall loss ratio of about 2%.

Previously, we found that student loans account for nearly $1 out of every $10 of the dollars borrowed by the U.S. government since President Obama was sworn into office. The chart below shows the total amount of money borrowed for the purpose of issuing student loans since 2004:

cumulative-amount-borrowed-by-us-government-to-provide-federal-direct-student-loans-fy2004-thru-fy2014

Student loans are the single largest contributor to the U.S. federal government’s hidden budget deficit. And speaking of loss ratios, in 2014, 13.7% of all the student loans issued by the federal government were found to be in default, which is actually down from the 14.7% figure recorded a year earlier.

The high rate of student loan defaults is the primary reason why the U.S. government increased the interest rates on student loans in 2013, setting them to be equal to the interest rate it pays for money it borrows whenever it issues 10-Year Treasury bonds plus a fixed margin of 2.05% for college undergradutates. It’s an attempt to ensure the government will realize a profit margin on the scheme.

But even with that margin, it’s not clear that the federal government’s student loan programs are capable of operating in the black. Estimates based on the federal government’s current accounting methods suggest that it may earn a profit of $135 billion over the next 10 years, while better estimates based on the fair value accounting standards used by well-established lending institutions indicate that the government is actually on track to lose $88 billion over that time.

Which is to say that simply being in the business of making student loans will only add to the government’s hidden budget deficit and increase the national debt, while also swelling the ranks of regular Americans in perpetual debt servitude or outright peonage, since student debt is extremely difficult to discharge in bankruptcy proceedings.

No matter what, that’s one sure way to get to end of the road to serfdom.

Federal “Operation Choke Point” Abuses Americans


Wednesday January 28th, 2015   •   Posted by K. Lloyd Billingsley at 5:41am PST   •  

choke_200In recent years, government has been ramping up the deployment of federal agencies against the very citizens who pay for them. The National Security Agency, for example, has been conducting massive surveillance operations against innocent Americans. The Internal Revenue Service has been deployed against groups that favor smaller government and lower taxes. Now the U.S. Department of Justice is getting in the act with Operation Choke Point.

As the Daily Caller explains, “Ostensibly designed to fight consumer fraud, Operation Choke Point essentially threatens onerous oversight on financial institutions which do business with companies in industries listed as ‘high-risk.’ ” These include Ponzi schemes, escort services and such, but the DOJ has also put gun and ammunition dealers on the list. One of those gun dealers, in Hawkins, Wisconsin, is operated by Mike Schuetz, a former U.S. Marine who has worked as a probation and parole officer. His credit union suddenly told him to close his account. Schuetz traced this demand to the DOJ operation, telling reporters, “This is just a back door way for those wanting to infringe on your rights to keep and bear arms and is nothing more than discrimination to gun owners.”

Schuetz’s Hawkins Guns LLC was a perfectly legitimate business, which DOJ bosses claim they do not target. “That is a bald-faced lie,” Wisconsin Rep. Sean Duffy told Fox News. “What they’ve done is they put short-term lenders out of business, gun dealers out of business, ammunition manufacturers out of business. Because in America, if you can’t bank, you can’t do business.” Brian Wise, of the U.S. Consumer Coalition, told Fox News that thousands of businesses have had their bank accounts closed, and that Operation Choke Point is “one of the greatest abuses of power that the country has never heard of.”

That may change, however, because Rep. Duffy wants to hold hearings on Operation Choke Point, a program that fits the pattern of federal abuse against innocents, accompanied by lies and denial. The primary target is guns, so concerned Americans might review the way Nazi Germany handled the issue in Stephen P. Halbrook’s Gun Control in the Third Reich: Disarming Jews and “Enemies of the State.”

The Next 10 Years and Beyond


Tuesday January 27th, 2015   •   Posted by Craig Eyermann at 5:41am PST   •  

We’re going to summarize the key takeaways from the Congressional Budget Office’s just-released report, The Budget and Economic Outlook: 2015 to 2025, with just a picture and a quote. First, here’s the picture, which shows the expected trajectory of the U.S. government’s annual budget deficits under the CBO’s baseline projections, or rather, its best-case scenario, over the coming decade:

cbo-baseline-deficits-2014-2025

Second, here’s what the CBO expects after 2025, when trillion-dollar-plus deficits become commonplace:

The Long Term Budget Outlook

Beyond the coming decade, the fiscal outlook is significantly more worrisome. In CBO’s most recent long-term projections—which extend through 2039—budget deficits rise steadily under the extended baseline, which follows CBO’s 10-year baseline projections for the first decade and then extends the baseline concept for subsequent years. Although long-term budget projections are highly uncertain, the aging of the population, the growth in per capita spending on health care, and the ongoing expansion of federal subsidies for health insurance would almost certainly push up federal spending significantly relative to GDP after 2025 if current laws remained in effect. Federal revenues also would continue to increase relative to GDP under current law, but they would not keep pace with outlays. As a result, public debt would exceed 100 percent of GDP by 2039, CBO estimates, about equal to the percentage recorded just after World War II.

Such high and rising debt relative to the size of the economy would dampen economic growth and thus reduce people’s income compared with what it would be otherwise. It would also increasingly restrict policymakers’ ability to use tax and spending policies to respond to unexpected challenges and would boost the risk of a fiscal crisis, in which the government would lose its ability to borrow at affordable rates.

Moreover, debt would still be on an upward path relative to the size of the economy in 2039, a trend that would ultimately be unsustainable. To avoid the negative consequences of high and rising federal debt and to put debt on a sustainable path, lawmakers will have to make significant changes to tax and spending policies—letting revenues rise more than they would under current law, reducing spending for large benefit programs below the projected amounts, or adopting some combination of those approaches.

You can’t say you weren’t warned!

Federal Double Standard on Debt


Monday January 26th, 2015   •   Posted by K. Lloyd Billingsley at 5:09am PST   •  

socialsecurityadmin-seal_200“People who owe old debts to the Social Security Administration are getting a reprieve this tax season,” explains Fox News. “The federal government won’t be seizing their tax refunds.” Before anybody starts celebrating, that requires some clarification.

As we noted, the “debts” in question are highly dubious. Mary Grice, now 58, was four years old in 1960 when her father died and her mother began receiving survivor’s benefits under Social Security. The federal agency was not even sure which member of the Grice family had been overpaid. They grabbed $2,997 from Mary Grice, refunded it, then sent a new bill for the same amount they had refunded. And Social Security is after Jessica Vela for $16,888 that the government claims she owes for overpayments made to her mother in child support benefits when Vela was one year old.

Social Security mouthpiece Pete Spencer told Fox News, “The commissioner is concerned about the public perception about the way we’re running this program.” Social Security bosses were running the program badly, in other words, and didn’t like the adverse publicity. But even though they are not picking off tax returns this year, as Spencer explained, “we are bound by federal law to collect these debts and they don’t go away.” So the same federal agency that paid millions to old Nazis and dead people will deduct the money from future Social Security benefit payments. Of course, it’s all for the children.

Taxpayers might contrast this crackdown with the way the federal government runs up debt, currently in the range of $18 trillion and climbing. If any law requires them to deal responsibly with this fathomless debt, the federal government is not following it. Federal politicians launch expensive, wasteful, and dysfunctional new entitlements such as Obamacare. They fail to trim government and create new federal agencies of dubious utility, such as the Consumer Finance Protection Bureau.

By the way, Mr. Spencer misspoke when he said “the commissioner” because Carolyn Colvin, Obama’s choice for the post, is only “acting commissioner.” She faces allegations that, on her watch, the agency hid a report on a $300 million computer boondoggle and retaliated against a whistleblower.

Failing the Test of Accountability


Saturday January 24th, 2015   •   Posted by Craig Eyermann at 11:22am PST   •  

17282820_S If you were the federal government bureaucrat who is responsible for selecting an information technology (IT) company for a major computer software development project, would you select the same company that was responsible for producing the Healthcare.gov debacle?

Perhaps “debacle” is too light a word. Reason‘s Peter Suderman describes a just-issued report by the Department of Health and Human Services’ (HHS) Inspector General on that massive failure from a little over a year ago:

A new report from the Inspector General (IG) for the Department of Health and Human Services (HHS) reveals that contract managers at the Centers for Medicare and Medicaid Services (CMS) failed to take basic measures to ensure that contracts for HealthCare.gov went to reliable firms, didn’t draw up required risk mitigation plans, and agreed to multiple contracts that left taxpayers to pay for any cost overruns incurred by the work.

The HHS IG is both thorough and damning. Investigators looked at 60 different CMS contracts for the online health insurance portal as well as surrounding documentation. The IG also conducted interviews with “high level HHS and CMS staff” about how they planned the contracting process—or what little planning there was, anyway.

According to the report, CMS did “not conduct thorough past performance reviews of potential contractors,” including CGI Federal, the main contractor for the essential components of the federal exchange.

Before going any further, please re-read that last sentence, because that management failure on the part of the Department of Health and Human Services’ bureaucrats responsible for overseeing the development of the Healthcare.gov web site and all of its supporting IT systems is the key to understand what can only be described as a brand new management failure on the part of the bureaucrats who run the Internal Revenue Service. The Daily Caller‘s Richard Pollack breaks the story:

Seven months after federal officials fired CGI Federal for its botched work on Obamacare website Healthcare.gov, the IRS awarded the same company a $4.5 million IT contract for its new Obamacare tax program.

CGI is a $10.5 billion Montreal-based company that has forever been etched into the public’s mind as the company behind the bungled Obamacare main website.

After facing a year of embarrassing failures, federal officials finally pulled the plug on the company and terminated CGI’s contract in January 2014.

Yet on Aug. 11, seven months later, IRS officials signed a new contract with CGI to provide “critical functions” and “management support” for its Obamacare tax program, according to the Federal Procurement Data System, a federal government procurement database.

Pollack’s report also describes the company’s failures to develop functional IT systems in both Vermont and Massachusetts, as well as in the province of Ontario, Canada.

In the case of the Healthcare.gov debacle, the failure of the federal government’s bureaucrats to provide any effective oversight of CGI Federal’s work led to a $149 million overrun of the $58 million government contract that the company was awarded, costing taxpayers $207 million. And that was just on the contract for overseeing the project!

In all, the federal government awarded six major separate contracts to develop the Healthcare.gov web site and the various computer systems and software that were meant to support the implementation of the Affordable Care Act, the awarded value of which totaled $464 million. The HHS’ Inspector General indicates that the actual bill for all six of these contracts exceeds $824 million.

So why on earth is the IRS handing out a new multimillion dollar IT development contract to the company that is directly responsible for such massive failures in so recent years?

In 2013, the Washington Post profiled CGI Federal and its business model as follows:

CGI Federal is a wholly owned subsidiary of the Canadian firm CGI Group, which was founded in Quebec City in 1976 by a pair or 26-year-olds named Serge Godin and Andre Imbeau. (CGI stands for “Conseillers en Gestion et Informatique” in French, which roughly translates to “Information Systems and Management Consultants”). Growing through scores of acquisitions, and providing outsourced IT services to massive companies such as Bell Canada and Quebec’s provincial pension plan, CGI’s business model depends on embedding itself deeply within an institution.

“The ultimate aim is to establish relations so intimate with the client that decoupling becomes almost impossible,” read one profile of the company.

In other words, the company depends upon establishing crony relationships with their target customers: the bureaucrats who award federal government contracts, whom they entice into gifting sweetheart deals to the company. In fact, here’s how the Washington Post describes the company’s CEO’s comments regarding their work on the Affordable Care Act’s IT systems in the third quarter of 2013, just before their failures with Healthcare.gov exploded into public view:

That said, they’ve learned quickly, and see the U.S. federal government as their area of biggest growth. CGI Federal’s health-care practice has grown 90 percent year over year, largely due to the Healthcare.gov project. And for a contractor, ballooning projects are a good thing. “In the Federal Government business, we continue to see more extensions and ceiling increases on our existing work, while we further leverage our position on contract vehicles,” said CEO Michael Roach on their latest earnings call. Those “contract vehicles” now amount to $200 billion, which Roach later referred to as a “hunting license.”

“Accordingly, we continue to view U.S. Federal Government as a significant growth opportunity,” Roach continued.

As the IRS’ newly awarded contract demonstrates, having produced such massive failures hasn’t prevented them from exploiting their crony relationships to gain new business. That’s not their fault — instead, it is the judgment of the IRS’ managers that has failed the American people.

It’s just a shame that today’s IRS leadership continues to fail the test of accountability, a failure made all the worse because they have established no effective system of oversight to right their ongoing wrongs.

Same as the Old Boss?


Wednesday January 21st, 2015   •   Posted by K. Lloyd Billingsley at 5:27am PST   •  

CA_Senate_Seal_200As California Senate boss, Darrell Steinberg compiled quite a record of abuse and waste. In 2012, for example, he killed the California Channel’s live broadcast of hearings on four ballot measures dealing with taxes and spending, depriving voters of vital information. He compounded this censorship by claiming: “I pride myself on being open and transparent.” He wasn’t. Steinberg was also the author of Proposition 63, a 2004 measure that levied a surtax of 1 percent on multimillionaires, ostensibly to fund mental-health services. The measure raised some $7.4 billion but with “virtually no oversight or accountability” as to how the money would be spent, as UC law professor Barry Krisberg observed, so it was like “putting money on the stump and running.” The Sacramento Bee wondered if the billions had been “shoved down a rat hole never to been seen again?” That indeed seems to be the case. Steinberg is now termed out, but his successor Kevin de Leon shows every sign of being the same as the old boss.

Last year his handlers spent $50,000 on a lavish “Inauguration” and put it up on YouTube. As Don Thompson noted in the San Jose Mercury News, the event used “language usually reserved for presidents and governors.” The Sacramento Bee observed that this “wasn’t a party for the people.” Rather, “this was the Special Interests Ball.” The glitzy fest came during a year when two senators were charged in federal corruption cases and another sentenced to jail for perjury.

The new Senate boss shows no inclination to tackle the waste, fraud, and abuse that abounds in California government. He has set forth no plan to trim California’s bloated bureaucracies, nor to reduce Californians’ heavy tax burden, which now includes a new tax on gasoline. So taxpayers may be worse off than under the old boss.

A Preview of the 2015 State of the Union Address


Tuesday January 20th, 2015   •   Posted by Craig Eyermann at 5:44am PST   •  

p012814ps-0733 President Barack Obama will give his 2015 State of the Union Address to the United States Congress today. From a budget standpoint, here is a brief rundown of the major topics that the President will cover in his address.

Bloomberg reports that:

President Barack Obama will ask Congress for as much as $68 billion more than current budget limits in fiscal 2016, according to two people familiar with the administration’s proposal.

That $68 billion would be on top of the baseline amount of spending for the federal government’s 2016 fiscal year of $4.011 trillion that President Obama had previously agreed to spend in 2016 as part of the Bipartisan Budget Act of 2013 and would represent roughly a 1.6 percent increase over the total amount the U.S. government’s planned expenditures for the year, and about 7 percent over just the discretionary portion of the federal budget.

President Obama proposes to equally split the new spending between defense and non-defense spending, most notably to support his recent proposal to make the first two years of classes at the nation’s community colleges tuition-free, even though it would carry a high cost of a minimum of $80 billion over 10 years, of which at least $60 billion would be paid by the federal government.

The Congressional Budget Office’s 2014 projections of federal spending and revenues indicate that it will not be until 2020 that the federal government’s revenues would finally exceed President Obama’s proposed spending for 2016 ($4.079 billion).

That mismatch is one reason why President Obama is also expected to propose massive tax hikes:

The president’s plan would raise $320 billion over the next decade, while adding new provisions cutting taxes by $175 billion over the same period. The revenue generated would also cover an initiative Mr. Obama announced this month, offering some students two years of tuition-free community college, which the White House has said would cost $60 billion over 10 years.

The centerpiece of the plan, described by administration officials on the condition of anonymity ahead of the president’s speech, would eliminate what Mr. Obama’s advisers call the “trust-fund loophole,” a provision governing inherited assets that shields hundreds of billions of dollars from taxation each year. The plan would also increase the top capital-gains tax rate, to 28 percent from 23.8 percent, for couples with incomes above $500,000 annually.

Those changes and a new fee on banks with assets over $50 billion would be used to finance a set of tax breaks for middle-income earners, including a $500 credit for families in which both spouses work; increased child care and education credits; and incentives to save for retirement.

The “trust-fund loophole” was created back in 2010 by the then Democratic-party controlled Congress and signed into law by President Obama on December 17, 2010. It applies to property, such as shares of stock or real estate like homes or farmland, that is passed down from one generation to the next, where the value of the assets has increased dramatically over time, potentially exposing the people inheriting the assets to massive capital gains taxes. The “loophole” works by allowing the original purchase price of the assets to be “stepped-up” or reset to be equal to the current day’s fair market value of the property at the time of the owner’s death, which reduces the apparent amount of the capital gain on it. Not to mention the related taxes on capital gains, the tax rates for which President Obama also proposes to increase substantially.

The Farm CPA’s Paul Neiffer explains how President Obama’s proposal to close this particular loophole can potentially impact the people who inherit property that has been passed down in their family for generations, starting with a description of how the law has worked since 2010:

For example, assume Farmer John owns 1,000 acres of ground that he purchased in 1960 for $100,000. That ground is now worth $10 million. When Farmer John passes away, his heirs will be able to sell the ground for $10 million and pay no income tax.

Under President Obama’s proposal, Farmer John’s heirs would still have an income tax basis of $100,000. In addition, President Obama wants to increase the top capital gains tax rate to 28%. Let’s assume that Farmer John owes the 40% estate tax on all $10 million of value. In addition, let’s assume that Farmer John lives in Washington state with a top estate rate of 19% which lops off another $1.9 million, however, this would reduce the federal estate tax liability by $760,000. We now have total estate taxes of about $5.14 million.

The heirs all live in California and elect to sell the farmland for $10 million. This results in about $2.8 million of federal tax plus about $1.3 million of California tax. Let’s call it $4 million. the bottom line is $5.14 million of estate taxes and $4 million of income taxes. On $10 million, the heirs net about $900,000 or less than 10%. This is President Obama’s definition of a “trust fund” loophole.

12361356_S Note that the proposed closing of the “trust fund loophole” doesn’t even take inflation into account. And it applies only to assets that have appreciated in value—there’s no tax credit to cover inherited assets that have lost their value over time. Nor does it consider whether the people inheriting the assets can afford to pay the estate taxes out of pocket, where if they cannot, that fact alone might force them into selling the assets, triggering the even larger tax bill described by this worst case, but very real, scenario.

That’s an excessive amount of pain for a proposal that doesn’t even make much of a dent in the nation’s projected deficits, which would still be set to continue into the far future, perpetually adding to the nation’s debt.

It occurs to us that the biggest problem that is inherent in having allowed the federal government’s spending to swell to the gargantuan levels as President Obama has proposed in each year preceding and during his tenure in office is that the things the federal government has to do to keep up the illusion that it can afford to spend that much becomes worse and worse for the people who are destined inherit the bill. Which if President Obama’s proposed loophole closing is any indication, will be an ever increasing share of the American population.

California’s Bloated Judicial Bureaucracy


Monday January 19th, 2015   •   Posted by K. Lloyd Billingsley at 5:27am PST   •  

CA_CtsSeal_200As we have noted, government never hesitates to waste money on projects of dubious utility. For example, commuters can get along quite well without California’s $68 billion high-speed rail boondoggle. The state does not need two massive tunnels under the SacramentoSan Joaquin Delta, but the governor wants to spend $25 billion the project. Likewise, the old eastern span of the Bay Bridge did suffer structural damage in the Loma Prieta earthquake, but in normal conditions it worked well for Bay Area commuters. Local government wanted the new one for aesthetic reasons. Politicians were not disturbed when it came in $5 billion over budget and 10 years late. On the other hand, nobody disputes that state government should operate the judicial system, but as Patrick McGreevy and Maura Dolan show in the Los Angeles Times, that too is riddled with waste.

The reporters cite state auditor Elaine Howle’s claim that the state’s San Franciscobased Judicial Council and Administrative Office of the Courts (AOC) have been on something of a binge, to the tune of $30 million. Martin Hoshino, hired in 2014 to administer the Judicial Council, bags $227,000 a year. As the reporters observe, “the governor earns $177,000 a year, less than the justices he appoints to serve on the California Supreme Court and less than is earned by some county court administrators.” Further, eight of thecount ‘emnine office directors bag more than the governor’s salary. In California’s executive branch, the average salary is $62,000, and in four large trial courts it is $71,000. In the Judicial Council and AOC, the average salary is $82,000, bigger than both by a wide margin, and the system also pays the employee’s share of retirement contributions. And the waste does not stop there.

As Alexei Koseff shows in the Sacramento Bee, the judicial system maintains a fleet of 66 vehicles that have “not been justified as necessary.” And the AOC spent about $386 million on behalf of trial courts over the last four fiscal years using the trial courts’ local appropriations when, according to the auditor, those payments could have come from its own state appropriations. So the Alliance of California Judges has a strong case that that the Judicial Council is an “over-bloated bureaucracy” which operates, according to Judge Maryanne Gillard, with “no check or balance on the current system.”

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