Customers of Staples Inc. have been enjoying the conveniences of in-store postal services but as Bloomberg reports, that will soon come to an end. The cancellation is a “coup for the Postal Service’s largest union,” the American Postal Workers Union, which fought Staples’ merger with Office Depot and urged customers to boycott the company. Had they not done so, said APWU president Mark Dimondstein, all Staples stores “would have had full-blown post offices, not staffed by postal employees but rather Staples employees, and the Post Office also would have used that model to spread to other major retailers.” Union boss Dimondstein thus confirms that what is good for government employee unions is bad for consumers and taxpayers. As they can easily confirm, a visit to a regular post office is like stepping into the eighteenth century, but this is hardly the only problem with the US Postal Service, a perennial money loser.
The USPS posted a net loss of approximately $5.6 billion for fiscal year 2016, worse that the $5.1 billion for fiscal year 2015. As we noted, during years of massive losses approaching $16 billion, USPS bosses got hefty raises. Postal bosses have sought to cut costs by ending Saturday delivery, but the letter carriers union had a problem with that. So did some politicians, who called Saturday delivery a vital service. It isn’t, and the use of “snail mail” continues to decline. Still, if one did have to mail something, it would be nice to do so in a Staples store. Government employee unions have now quashed that convenience, and the USPS remains an inefficient money losing monopoly.
The only way to fix this problem is to cancel the USPS monopoly on first-class mail deliver and open such service for competition. In 2017 and beyond, taxpayers will see if the new administration in Washington is up to the task.
President-elect Donald Trump has selected South Carolina Representative Mick Mulvaney to be the next director of the White House’s Office of Management and Budget (OMB).
Mulvaney is an interesting choice for the job, which given many of the public positions that he has taken over the years with respect to wasteful spending in Washington D.C., suggests that business may not continue as usual for the federal government’s budget. Politico‘s Danny Vinik reports on one aspect of how Mulvaney’s appointment to the OMB Director position may terminate the back door method by which the Pentagon has been getting around complying with the defense spending cuts that imposed during the last four years.
Since 2001, the Department of Defense has spent more than $9 trillion on everything from new weapons systems to soldier salaries, and nearly 20 percent of that money—$1.7 trillion in total—has come from an “off-the-books” budget account called the Overseas Contingency Operations fund. It’s the best-known budget gimmick in Washington, a classic example of Democrats and Republicans finding common ground when they want to boost defense spending while technically abiding by the current budget caps....
Mulvaney has been one of the loudest critics of the fund during his time in Congress, hammering it as a “slush fund” and sponsoring legislation to eliminate it. Now, suddenly, he will find himself in a unique position to kill it off. Could he do it?
Vinik provides additional background about the Defense Department’s Overseas Contigency Operations fund and also why it has become a target for a new OMB director who may be serious about restraining wasteful spending.
On paper, the budget gimmick serves a real purpose. The Overseas Contingency Operations fund, or OCO, was established in 1997 and is typically referred to as an emergency fund; Congress appropriates money into the OCO account for the Pentagon to fund unplanned needs, like a war. During the George W. Bush administration, OCO defense spending increased dramatically as the U.S. tapped the account to pay for its wars in Afghanistan and Iraq. It peaked in fiscal 2008, at $187 billion, accounting for 28 percent of total Pentagon spending.
Since then, it has slowly declined as Obama has adopted a lighter-touch military strategy, pulling out troops in Iraq and Afghanistan. OCO defense spending in fiscal 2016 was $59 billion, 10 percent of total Pentagon spending.
Mulvaney calls this a “slush fund,” and few budget experts disagree. Its real role, they say, is to allow the Pentagon to keep spending money on overseas wars without violating the spending caps imposed by the 2011 budget deal. Todd Harrison, an expert on the defense budget at the Center for Strategic and International Studies, said that starting in 2014, the Pentagon began shifting its base defense spending into the OCO account, which—unlike the main budget—doesn’t have a limit. That gave defense hawks in Congress and the Pentagon an easy way to boost defense spending without looking like they were violating the budget cap: Simply put the money in the OCO, and pretend that the defense spending caps aren’t violated.
Both President Obama and the current OMB director, Shaun Donavan, have called for ending the OCO slush fund, but neither have been willing to back up the move toward establishing more effective fiscal discipline by actually doing so in President Obama’s annual budget requests, which confirms a lack of seriousness on their parts.
It may well be that supporting the nation’s defense requires higher spending than is currently specifically allocated for in the federal government’s budget, but that is something that needs to be established through the regular appropriations process in the U.S. Congress. Without reform, like the U.S. Department of Justice’s Judgment Fund that the Obama administration has been using as its own slush fund to achieve its political objectives without express Congressional approval, the Defense Department’s OCO fund will enable far too much spending to occur without sufficient restraint, which can only harm the nation’s interests.
Time will tell how seriously Mulvaney takes the opportunity to terminate the Pentagon’s slush fund’s role in the ongoing budgetary shell game of Washington’s bureaucrats.
“We are not now in deficit, we were never in deficit and we won’t be in deficit at the end of the year.” That was Susan Hansch, chief deputy director of the California Coastal Commission last August, explaining that the CCC had received almost enough money to repay $1.45 million from the state Department of Finance. According to a year-end audit by that same department, however, the CCC is such a mess that such loans, as Adam Ashton notes in the Sacramento Bee, “could be a regular occurrence.” The Commission responded that it was too shorthanded to clean up its books and requested that the Department of Finance “consider an ongoing year-end cash flow loan,” to keep the agency afloat.
California’s embattled taxpayers will surely wonder what is going on here. They provide the Commission’s annual $24 million budget and $1.2 million monthly payroll for 163 permanent employees. For all that spending, taxpayers get nothing of any value. All cities and counties on California’s coast have governments elected by the people. These elected governments are entirely capable of handling land-use issues but the unelected Coastal Commission overrides them all.
The Commission was supposed to be temporary, but before the end of the 1970s legislators predictably made it permanent. In practice, the CCC became the private domain of Peter Douglas, a regulatory zealot with little regard for property rights. On his watch the Commission became known for Mafia-style corruption. During the 1990s, Coastal Commissioner Mark Nathanson attempted to shake down celebrities for bribes and wound up serving a prison term.
As we noted, the Commission has been expanding its power into new areas such as animal management and surfing tournaments. The CCC keeps busy adding new commissioners and deploying its new power to bypass the courts and levy fines directly. Now the powerful Commission claims it is too shorthanded to clean up its own books and seeks a regular loan to keep itself afloat. Instead of rewarding unaccountability, California should take the opportunity to eliminate this arrogant, abusive and redundant Commission. That kind of leadership would set a positive example for the nation.
Sometime shortly before January 17, 2016, after the Obama administration had withdrawn roughly $400 billion of U.S. taxpayer money from the U.S. Department of Justice’s Settlement Fund account at the U.S. Treasury, it transferred the withdrawn funds electronically overseas to U.S. accounts at the Swiss National Bank in Geneva, Switzerland.
On January 17, 2016, the Obama administration then exchanged those dollars for the equivalent value of Swiss francs in the form of physical banknotes, loading up several wooden pallets with stacks of the bills and wrapping them in plastic before transporting the pallets of cash to Geneva’s international airport, where the money would be traded for four U.S. citizens that Iran’s government had previously arrested on spurious charges and had been holding as hostages.
After the Iranians freed the four Iranian-Americans it had been holding in Tehran and sent them on their way to Tehran’s international airport, the Obama administration loaded the pallets holding the equivalent of $400 billion of U.S. taxpayer cash onto the Iranian government’s plane at the Geneva airport, which then departed.
The Wall Street Journal has uncovered a video posted by a plane spotter at Geneva’s international airport on that day as it was departing, where the arrival of the antiquated Iranian government-owned 737 marked a very rare occurrence for seeing such an old aircraft at the airport.
On January 17, 2016, an Iranian government jet picked up $400 million in Swiss francs in Geneva paid by the Obama administration.
The same day, four Iranian-American prisoners were released from Iran.
This video, posted without details to YouTube by an amateur plane spotter, shows the Boeing 737 as it departs Switzerland at around 1:15 p.m., after the U.S. received word that the prisoners had been freed in Tehran and were en route to the airport.
Just before takeoff, the Iranian jet passes two U.S. Air Force planes that had arrived to retrieve the freed Americans.
The two U.S. Air Force planes appear to be C-40C transport aircraft, which is a military version of Boeing’s more modern 737-700 commercial aircraft that is typically used to transport senior ranking U.S. government officials.
Since the transfer of funds, Iran’s government and military have used the cash that they were provided by the Obama administration to increase their aggressive activities across the Middle East and the Persian Gulf.
And that is the story of how $400 billion of U.S. taxpayer dollars that had been sitting idle in a little known account at the U.S. Treasury Department was put to work by the Obama administration.
According to the U.S. Government’s Office of Personnel Management, more than 2.7 million people work as civilian employees of the U.S. federal government. For all practical purposes, they are entirely compensated by taxes imposed on the 140 million Americans who are employed in occupations outside of the federal government.
In 2015 federal civilian workers had an average wage of $86,365, according the U.S. Bureau of Economic Analysis (BEA).5 By comparison, the average wage for the nation’s 112 million private-sector workers was $58,726. Figure 1 shows that average federal wages grew rapidly for a decade, then slowed during the recent partial pay freeze, and then started rising again in 2014 and 2015.
When benefits such as health care and pensions are included, the federal compensation advantage over private workers is even larger, according to the BEA data. In 2015 total federal compensation averaged $123,160 or 76 percent more than the private-sector average of $69,901, as shown in Figure 2.
The BEA data can be broken down by industry. Among 21 major sectors that span the U.S. economy, the federal government has the fourth highest paid workers after only utilities, mining, and management of companies. Federal compensation is higher, on average, than compensation in the information industry, finance and insurance, and professional and scientific industries.
With an average income of $86,365 in 2015, the typical federal bureaucrat would fall in the 86th percentile of all income-earning individual Americans, which is to say that only 14 percent of Americans make more than the average civilian employee of the U.S. government. And that’s without counting the very generous benefits they receive as part of their total compensation.
President Obama is vacationing in Hawaii, the state where he was born and spent his childhood. According to Anita Kumar of McClatchy News, this annual trip cost taxpayers $3.5 million and the total cost of the first family’s travel comes to $85 million, possibly $90 million when further records are released. All told, except for the current Hawaii trip, President Obama has taken 28 vacations spanning all or part of 217 days. Critics are surely right that the president abuses the Secret Service, Air Force, and of course taxpayers with unnecessary travel. He does have a regal, autocratic style, and his 1995 book Dreams from My Father, most likely written by David Axelrod, said his father lived according to principles that promised “a higher form of power.” To cost out the president, however, taxpayers should note some other figures.
By the time Obama leaves office, the national debt will approach $20 trillion, nearly double the $10.6 trillion when he took office in 2009. By some calculations, the president has added more to the debt than 41 U.S. presidents from George Washington through George H.W. Bush combined. The current president has added entitlements such as Obamacare, a new misery index, and created new federal agencies such as the Consumer Financial Protection Bureau. The president is shrink-wrapped in statist superstition, which holds that there is always money for everything, regardless of need, record of performance, or how much spending burdens generations not yet born.
Even with the fathomless debt of $20 trillion, President Obama makes no effort to trim his extravagant travel expenses, which approach $100 million for his two terms. Taxpayers should not be surprised, but they might take a cue from Mose Allison, who passed away in November. Many politicians’ minds are on vacation, and their mouths working overtime.
Shortly before the holiday season, the Social Security Administration sent out an official letter titled “Important Information.” If you are now at the full retirement age of 66 or older, the letter says, “you may keep all of your benefits no matter how much you earn.” That kind of generosity is hard to top, but on the other hand, if you are younger than the full retirement age, “there is a limit to how much you can earn before we reduce your benefits” and the earnings limit is $16,920. Try paying your bills with that. If you are under 66 and earn more than that, “we deduct $1 from your benefits in 2017 for each $2 you earn over $16,920,” equivalent to a tax of 50 percent. If you are turning 66 in 2017, SS allows you to earn $44,880 and grabs $1 for every $3 you earn above that limit, equivalent to a tax of 33 percent. This kind of federal poverty enforcement, however, does not apply to everybody.
As we noted, those in the Federal Employees Retirement System (FERS) can retire at the age of 55, a full seven years earlier than Social Security allows. By all indications, they are not subject to income restrictions and the government even helps early federal retirees get more money through a secretive Special Retirement Supplement (SRS). For privileged federal employees, this is a Dream Act guaranteed to keep the government ruling class far ahead of the working masses. The Obama administration made no attempt at reform.
Meanwhile, the Social Security Administration has been sending money to former Nazis and continued payments to dead people for twenty years. The Social Security Administration has also attempted to grab money from the children of people who were allegedly overpaid benefits decades ago. This happened on the watch of Acting Commissioner Carolyn Colvin, who faced allegations that on her watch the Administration hid a report on a $300 million computer boondoggle and retaliated against a whistleblower. Obama nominee Colvin remains “acting” commissioner and reports of retaliation against whistleblowers have continued in 2016. Beyond such waste, abuse and incompetence, the Social Security Administration will still punish productive work in 2017. Happy New Year everybody!
It’s no different for U.S. politicians.
For example, President-elect Donald Trump has big plans to boost the U.S. government’s spending on the nation’s infrastructure, which is something he really wants, but paying for it is going to be a big problem. Politico‘s Lauren Gardner describes what’s being talked about behind the scenes in Washington D.C. in advance of Trump’s upcoming inauguration on January 20, 2017.
It was supposed to be a big, beautiful infrastructure bill. But President-elect Donald Trump’s pitch for a $1 trillion upgrade of the nation’s roads, bridges, tunnels and airports is already running into potholes as it meets reality in Washington.
The overwhelming sticking point, as always, is how to pay for it.
Trump’s advisers are so far floating the same kinds of financing schemes that Congress has batted around for years with little success, including proposals to lure private investors or reap a revenue windfall through an overhaul of the tax code. Key lawmakers say they’re in the dark on how Trump’s plan would work—with some conservatives simply hoping that his call for massive tax breaks will provide an economic jolt that makes the hard spending decisions easier.
With Washington D.C. being the political swamp that it is, it is a sure bet that no matter what financing schemes are considered, the U.S. government will end up spending far more than it will collect in taxes to pay for it, which means big increases in the federal government’s borrowing and the national debt. In fact, one of the actions that the U.S. Congress will need to take early in 2017 will involve increasing the national debt ceiling by enough to account for its planned new spending, which presumably would include a lot of President-elect Trump’s infrastructure initiative.
This is where it would be really nice if there were an exchange for politicians, where they could trade something they have but don’t want for something they actually want more.
There may be a way to make that work in 2017.
Over the last eight years, the U.S. government has racked up nearly a trillion dollars of national debt to support outgoing President Obama’s decision to get the federal government into the business of making student loans on a big scale. Meanwhile, it is already well established that incoming President-elect Trump would really rather have a trillion dollars worth of new infrastructure in the U.S., but is going to have trouble funding it.
Normally, U.S. politicians would just run up the national debt more, but what if the U.S. government’s student loan business was sold off to financial institutions in the private sector to clear space within the existing national debt limit to accommodate the new spending on infrastructure projects?
By packaging the U.S. government’s student loan assets together with its related liabilities, the massive amount of money that the U.S. government has had to borrow specifically for the purpose of being in the business of originating student loans in the last eight years, the U.S. government could potentially erase nearly a trillion dollars of the national debt off its books by selling its student loan business.
Having that cleared that much space in its national debt liabilities, the U.S. government would then be able to substitute new borrowing to fund more productive investments with better returns for American taxpayers in the nation’s infrastructure than what it was getting through its money losing student loan business.
Best of all, should the new amount of spending to be dedicated to infrastructure be less than the amount of national debt liabilities cleared off the U.S. Treasury Department’s books by the sale of the government’s Federal Direct Student Loan business, the national debt burden of American households would be lessened.
If you could make that kind of deal, where you can get something you would really rather have in exchange for something you really don’t want or need, why wouldn’t you do it?
That’s the title of a new paper by a team of five economists that really answers a different question: What is the best way for a government to reduce its budgetary red ink, when the alternatives are to raise taxes, cut spending, or do some combination of both?
To answer that question, the paper’s authors examined data from 16 countries from 1981 through 2014, taking into account the unique economic conditions that applied for each country. Dan Mitchell summarizes the results of their analysis:
The economists crunched the numbers and found that tax increases impose considerable damage, whereas spending cuts cause very little harm to short-run performance.
We find that the composition of fiscal adjustments is more important than the state of the cycle in determining their effect on output. Fiscal adjustments based upon spending cuts are much less costly in terms of short run output losses – such losses are in fact on average close to zero – than those based upon tax increases which are associated with large and prolonged recessions regardless of whether the adjustment starts in a recession or not.... what matters for the short run output cost of fiscal consolidations is the composition of the adjustment. Tax-based adjustments are costly in terms of output losses. Expenditure-based ones have on average very low costs.
These findings are remarkable. Even I’m willing to accept that spending cuts may be painful in the short run (not because of Keynesian reasons, but simply because resources don’t instantaneously get reallocated to more productive uses).
So if the economists who wrote this comprehensive study find that there is very little short-run dislocation associated with spending cuts, that’s powerful evidence.
And when you then consider all the data and research showing the positive long-run effects of smaller government, this certainly suggests that the top fiscal priority should be shrinking the size and scope of government.
Shrinking the government through significant spending cuts is a promise that many politicians make, but few ever try to keep. Too often, the promise is broken because the politicians prove to be unwilling to face up to the loud cries and political influence of the few who benefit the most from the continuation of high government expenditures: special interests who are often also the politicians’ biggest campaign contributors.
Nevertheless, if politicians need to stop burdening the people with excessive national debt, the latest economic research indicates that cutting government spending should be the preferred path to putting their country’s fiscal house in order.
Maybe it is the season to be jolly, but California taxpayers are still getting over their sticker shock on higher property tax bills, and the extension of steep income-tax hikes that were supposed to be “temporary.” Governor Jerry Brown, a born-again tax hiker, promoted that extension and has also been playing the sinecure Santa by handing out lucrative board positions to positions to political retreads. These developments prompt a meditation on the government’s process of give and take.
Government cannot give anybody anything it does not take from somebody else. Politicians aim to “redistribute wealth,” the same thing thieves do, and thieves, like politicians, pay close attention to “ability to pay.” As Frederic Bastiat noted in The Law, “See if the law takes from some persons what belongs to them, and gives it to other persons to whom it does not belong. See if the law benefits one citizen at the expense of another by doing what the citizen himself cannot do without committing a crime.”
Politicians also imagine that a tax cut amounts to a gift from the government. Actually, to allow a worker to keep more of what she or he has earned is not to “give” them anything. Workers should be aware that government already gets their money before they do, in the form of withholding from their paychecks. This World War II policy was also supposed to be temporary but the pillage people kept it in place. Government still gets the money first, and what a worker receives back in April is not a gift but his or her own money.
As a matter of basic rights, nobody should get workers’ money before the workers themselves. Any politician serious about reform should drop withholding, junk the current tax code, and simplify the system so everybody pays the same rate. That might not make bureaucrats jolly, but it is the right thing to do.
California politicians, led by Jerry Brown, cry “bah humbug” to all that. In the nation’s least tax-friendly state, the ruling class prefers to celebrate government’s fathomless greed. As Jon Coupal explains, “No matter how high taxes are increased, it’s never enough for public officials and bureaucrats who live off taxpayer funded paychecks.” Happy holidays everybody!
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