MyGovCost News & Blog

Bullet Train Cap and Raid


Monday March 30th, 2015   •   Posted by K. Lloyd Billingsley at 9:41am PDT   •  

HiSpeedCATrain_200Politicians promoted the California high-speed rail project as a rapid route between Los Angeles and the San Francisco Bay Area. But as we noted, the “bullet train” broke ground near Fresno. Now Dan Walters of the Sacramento Bee finds a gap between other bullet-train claims and reality.

The California High-Speed Rail Authority claims that by 2040, “the system will reduce vehicles miles of travel in the state by almost 10 million miles of travel every day.” The rail authority further claims that “Over a 58-year period (from the start of operations in 2022 through 2080), the system will reduce auto travel on the state’s highways and roads by over 400 billion miles of travel.” As Walters notes, Californians travel about 330 billion miles in cars every year, nearly a billion miles each day. Therefore, “the bullet train’s projected reduction in driving would be scarcely 1 percent.” And the claimed reduction of 400 billion vehicle-miles over 58 years works out to “just over one year of driving.” This assumes a “very high train ridership” that can hardly be assumed, and it would come “at a very high cost.”

The bullet train is supposed to cost of $68 billion but with more federal financing in doubt, high-speed rail bosses may seek loans. Walters projects a debt of $100 billion with interest, a lot of money for “an unnoticeable tiny dent in automotive travel.” And how will the debt be repaid? Probably through the use of cap-and-trade funds, which were supposed to be for emission goals. California’s Legislative Analyst pointed that out, but legislators ignored him and gave 25 percent of cap-and-trade funds to the bullet train. The grounds for this money grab was that the train would reduce carbon emissions through reduction in automobile travel. But it doesn’t do much of that, and doesn’t go where politicians said it would. So what is this all about?

California’s four-term governor Jerry Brown, Walters says, “sees the bullet train as a legacy.” That’s why he “pushed hard for the cap-and-trade funds.” As we noted, the bullet train also provides a soft landing spot for washed-up politicians like High Speed Rail Authority board member Lynn Schenk, a former congresswoman who served as chief of staff for California governor Gray Davis. And of course the project gives politicians a new place to spend money. That’s why the ruling class is “all aboard” the bullet train.

How to Rack Up $18 Trillion in Debt and How to Pay It Down


Friday March 27th, 2015   •   Posted by Craig Eyermann at 6:21am PDT   •  

We’ve answered the following question that was recently asked at Quora:

How did the USA end up with $18,000,000,000,000 of debt? More importantly, can the US government pay back the debt?

The United States federal government has ended up with a total public debt outstanding of more than $18 trillion (at this writing) because it has chronically run annual budget deficits for decades, as indicated in the following chart that was put together by the Heritage Foundation:

SR-fed-spending-numbers-2012-p4-chart-4_HIGHRES

But these chronic deficits only explains a little over $17 trillion of the national debt. In addition, there is also a hidden budget deficit, where since 2009, the U.S. government has borrowed well over $700 billion for the purpose of issuing direct student loans:

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

This additional borrowing adds to the national debt, but is not reflected in the U.S. government’s annual budget deficit figures.

The U.S. could pay down its national debt rather painlessly if it adopted a policy where it restrained the growth rate of government spending to be less than the growth rate of the nation’s Gross Domestic Product. This kind of policy has been extremely successful in places like Switzerland, to name one international example, and also individual U.S. states like Colorado.

The U.S. government would also improve its fiscal situation with respect to the growth of the national debt by getting out of the student loan business, which the Obama administration primarily did as a backdoor way to increase the amount of money the federal government collects from low and middle income earners without appearing to directly increase their income tax rates. Selling its portfolio of student loans back to the private lenders would go a long way toward moving that portion of the national debt off the government’s books.

More Government IT Waste


Wednesday March 25th, 2015   •   Posted by K. Lloyd Billingsley at 5:36am PDT   •  

headoncomputer_200As we recently noted, California’s Department of Consumer Affairs was implementing a computer system pegged at $27 million. Problems with the system boosted the cost to $77 million, but that still didn’t get it done. Consumer Affairs bosses want another $17.5 million, bring the cost to $96 million, more than three times the original estimate. Now Jon Ortiz of the Sacramento Bee shows how this is merely a drop in the waste bucket.

“The state has spent about $900 million on three stalled or terminated IT projects in the last few years,” Ortiz writes. These include: a failed overhaul of the state payroll system, a DMV project for licensed and registration, and “a statewide court system that burned through a half-billion dollars before it was shut down.” Adds Ortiz, “future failures could be even more costly,” noting a combined budget of $3.5 billion for the “dozen most expensive projects” in the pipeline, according to the state’s Department of Technology. Will these projects cost three times that estimate, bringing the tab to some $10 billion? It is certainly possible to guess.

The problem is not with technology itself but government. As Consumer Affairs boss Awet Kidate told Jon Ortiz, his department “failed miserably at change management.” But they get the money anyway. So did the bosses at Caltrans, who managed construction of the new eastern span of the San Francisco-Oakland Bay Bridge. It cost $5 billion more than the original estimate, came in ten years late, and remains riddled with safety issues. Besides defective welds, cracked rods and such, as the San Francisco Chronicle noted, “access to the top and midlevel sections of the tower are next to impossible for maintenance work after the elevator failed after just a few uses.” In similar style, the Golden State fails miserably at management of technology projects.

Who Owns the ‘Public’ Portion of the National Debt?


Tuesday March 24th, 2015   •   Posted by Craig Eyermann at 6:15pm PDT   •  

At the end of its 2014 fiscal year, the total public debt outstanding of the U.S. government stood at $17.860 trillion.

That amount, however, consists of two parts: “Debt Held by the Public” and “Intragovernmental Holdings”. The Intragovernmental Holdings portion of the debt is really made up of a number of trust funds that are operated by the U.S. government, which includes Social Security, and both civilian and military retirement pension funds.

Debt Held by the Public, however, is the kind of debt that anyone willing to loan money to the U.S. government can acquire through auctions operated by the U.S. Treasury, its TreasuryDirect website, or through the open market.

At the end of its 2014 fiscal year, the amount of the U.S. Government’s Debt Held by the Public stood at $12.785 trillion—about 71.2% of the nation’s Total Public Debt Outstanding. As for who owns it, about 52.5% is owned by U.S. individuals and institutions (banks, insurance companies, pension funds, etc.). The remaining 47.5% is owned to foreign entities:

fy2014-who-owns-public-portion-of-US-national-debt

Of those foreign entities, China is the largest single holder of U.S. government-issued debt, owning 11.1% of the publicly held portion of it. Meanwhile, Japan is the second-largest holder at 9.6%, while all the other foreign nations and entities in the world own just over a quarter of the publicly held portion of the U.S. government’s debt, or 26.8%.

That state of affairs hopefully helps explain why the U.S. Treasury set up special accommodations for China to loan the U.S. money, and also why the U.S. is now so apparently upset that a number of European nations have likewise sought their own special accommodations with the world’s second largest national economy. Not to mention President Obama’s unique deference to both Chinese and Japanese customs.

It’s simply not wise to irritate those upon whom one depends so much.

Government Greed Gone Wild


Monday March 23rd, 2015   •   Posted by K. Lloyd Billingsley at 5:42am PDT   •  

State-of-California-Franchise-Tax-Board-logo_200California’s Franchise Tax Board (FTB) says inventor Gilbert Hyatt owes $55 million in taxes. Hyatt says he’s the target of a vendetta, and as Dale Kasler shows in the Sacramento Bee, Hyatt has a strong case. In 1990 Hyatt was awarded the patent for the first single-chip microprocessor and earned $350 million in royalties. Hyatt said he moved to Nevada, which has no state income tax. The FTB claimed Hyatt lied about his residency, and owed $7.4 million, which has ballooned to $55 million over more than 20 years. Hyatt sued the FTB for harassment and violation of privacy and in 2008 a Las Vegas jury awarded him $388 million, including $250 million in punitive damages. That has since been reduced and a new trial ordered on the money Hyatt, now 76, deserves for emotional distress. Despite the reduction, that was a victory for Hyatt but California continues to pursue the case, with recent encouragement from a federal judge.

“It is an overreach,” former Board of Equalization member Bill Leonard told Newsmax. “In my experience, no other case has gone on this long.” Leonard, who also served in the state Senate and Assembly, said the FTB action “does amount to a persecution at this point.” The FTB, “just pick on anyone successful and extract their due.”

Analyst Paul Hatfield wonders if any FTB employees were ever disciplined over the case. The answer appears to be no. And despite losses, the FTB is willing to keep spending taxpayer dollars in pursuit of Hyatt, without any attempt to justify the growing expense for the public.

The case confirms that government greed is truly fathomless, and that California’s Pillage People are out of control and not accountable to the people. Nobody in Sacramento seems intent on doing anything about it.

Comparing the Budget Proposals


Friday March 20th, 2015   •   Posted by Craig Eyermann at 11:41am PDT   •  

Earlier this week, both the U.S. House of Representatives’ and the U.S. Senate’s budget committees released their own respective budget proposals for the federal government’s 2016 fiscal year, which when combined with President Obama’s spending proposal from February, means that we now have three different proposals of what the future trajectory of the federal government’s spending will look like. The chart below presents those future trajectories in the context of how much the federal government has spent in each year since 1980, which you can use as your basic scorecard for evaluating the impact of each proposal:

FY2016-budget-proposals

In the chart, we can see that all the budget proposals greatly increase the federal government’s spending over the next 10 years. The difference however is that President Obama proposes that the U.S. government spend money at an exponential growth rate with respect to its historic trajectory, where by 2025, the U.S. government would be spending $1 trillion more than either the U.S. House of Representatives or the U.S. Senate propose.

Besides this difference in spending, President Obama also proposes higher taxes to offset the negative impact of his higher spending on the fiscal condition of the U.S. government. Even with those projected higher tax collections, the CBO’s analysis of the President’s budget proposal confirms that the U.S. government will run progressively higher deficits year after year, adding trillions of dollars to the nation’s total public debt outstanding.

By contrast, the House of Representatives’ and Senate’s budget proposals would not impose higher taxes, but their slower rate of spending increases would lead to progressively lower deficits over time that would minimize or potentially eliminate the U.S. government’s annual budget deficits, where the growth of the U.S.’ national debt would at first be greatly slowed and potentially reversed.

There are some differences in how the House’s and Senate’s respective budget proposals each achieve that goal, which will be resolved as the U.S. Congress’ budgeting process moves forward before the federal government’s overall blueprint for future spending will be sent to the White House.

Data Sources

White House Office of Management and Budget. Budget of the United States Government. Fiscal Year 2016. Historical Tables. Table 1.1 — Summary of Receipts, Outlays, and Surpluses or Deficits (-): 1789-2020. [Excel Spreadsheet]. February 2, 2015.

Congressional Budget Office. An Analysis of the President’s 2016 Budget. [PDF Document]. March 12, 2015.

U.S. House of Representatives Committee on the Budget. Fiscal Year 2016 Budget Summary Tables. [PDF Document]. March 18, 2015.

U.S. Senate. A Balanced Budget That Supports Economic Growth and Expands Opportunity for Hardworking Families. Summary of FY2016 Budget Resolution Chairman’s Mark. [PDF Document]. March 17, 2015.

Bay Bridge Crack-up Continues


Wednesday March 18th, 2015   •   Posted by K. Lloyd Billingsley at 5:19am PDT   •  

NewBayBridge_200As we have noted several times, the new eastern span of the San Francisco-Oakland Bay Bridge was $5 billion over budget and ten years late. Despite all that time and money, safety issues with the bridge seem to be getting worse, as Jaxon Van Derbeken of the San Francisco Chronicle explains. For example, the high-strength steel rods that secure the base of the tower “show more widespread cracking than Caltrans officials had previously acknowledged.” Further, “rust and microscopic cracking were found after one of 424 fasteners intended to keep the tower from being damaged in an earthquake was removed for testing last year.” A “botched grouting and caulking job” left “many of the 25-foot-long fasteners stewing in water for several years.” And as Van Derbeken notes, cracks were also found at the top, a troubling development “because such cracks can get worse over time, leading to total failure, possibly during a quake.”

Caltrans bosses Will Kempton and Malcolm Dougherty told the reporter they had no record of overseeing the manufacturing process or testing the tower rods before they were installed. Chief engineer Brian Maroney lamented that Caltrans can’t even conduct ultrasonic tests that could reveal whether one of the tower rods has already snapped. And for Steve Heminger of the Metropolitan Transportation Commission it was the construction budget that was “under severe stress.”

Charles McMahon, professor emeritus at the University of Pennsylvania and an expert on steel embrittlement, told Van Derbeken that those in charge of the bridge were “clueless” on the selection of materials and “had no idea what they were doing. The whole thing is a disaster.” Such concerns emerged last year in Sacramento hearings, where whistleblowers called for a criminal investigation. None took place. Sen. Mark DeSaulnier, who conducted the hearings, has moved on to Congress. And as we observed, Tony Anziano, the lawyer who managed the bridge construction for Caltrans, has conveniently retired.

So here’s how it all adds up: $5 billion in excess costs, plus 10 years, equals an increasingly troubled bridge. And as Rep. DeSaulnier told reporters, “it’s frustrating that there’s never been anyone in the management of the bridge who has been held accountable.”

Gold Sickness at the U.S. Treasury


Tuesday March 17th, 2015   •   Posted by Craig Eyermann at 7:22am PDT   •  

Beginning yesterday, the U.S. Treasury Department began its now-routine use of “extraordinary” measures to slow down the rate at which it borrows money to keep the nation’s total public debt outstanding below the limit set by Congress. In announcing those measures, Treasury Secretary Jack Lew ruled out some common-sense suggestions that members of Congress have proposed for reducing the need for such “extraordinary” measures. USA Today reports:

The Treasury Department explained its measures in a five-page document sent to Congress with Lew’s letter. In it, the department specifically ruled out other alternatives—like selling off government assets to stay under the debt limit.

“Selling the nation’s gold to meet payment obligations would undercut confidence in the United States both here and abroad, and would be extremely destabilizing to the world financial system,” the Treasury Department said. Also ruled out: Selling the remainder of Treasury stock in institutions bailed out during the financial crisis, or selling its portfolio of student loans.

Some quick research found that the United States holds more gold than any other nation in the world by a wide margin, with a total of 8,134 tons of the shiny yellow metal deposited in vaults in places like Fort Knox and deep under the New York branch of the Federal Reserve. All that gold ever does is sit in its vaults — it is not and has never been used for any productive purpose since coming into the grasp of the U.S. government.

But what if the Treasury Secretary had a change of heart and instead chose to use that gold to strike some 5,205,760,000 half-ounce coins with it, which the Treasury could sell to the public, just like it did in the decades before President Franklin D. Roosevelt issued Executive Order 6102 in 1933 to seize gold coinage and bars from the public?

Some of those old half-ounce coins are still in the public’s hands, where their prices have recently been recorded within a range of $614.50 to $657.34 per coin.

10269759_S

At that range of valuations, the total value of the U.S. government’s entire gold hoard would be anywhere from $3,198,939,520,000 (just under $3.2 trillion) to $3,421,954,278,400 (or just over $3.4 trillion). That would provide quite a lot of breathing room under the nation’s statutory debt limit, and frankly, only a fraction of it would even be needed.

Curiously, if the U.S. government were to mint such coins with the same face value of $25 as it did previously, the U.S. government’s gold hoard would be worth just $130,144,000,000 (a little over $130 billion).

But that doesn’t answer the question, Why does the U.S. government even need all that gold? After all, the only thing it does with it is stick in it all in underground vaults—much like Smaug, the evil gold-hoarding dragon from J.R.R. Tolkien’s The Hobbit.

By failing to consider selling even a small portion of the U.S. government’s gold hoard to people who have real uses for it (despite the fact that it would avoid the need for extraordinary measures on his part), U.S. Treasury Secretary Jack Lew is effectively putting himself into the same class of gold hoarding as the legendary Walter Samaszko Jr.:

Walter Samaszko Jr. was not a guy who wanted company. He covered the windows of his house in Carson City, Nev., with cardboard so the neighbors couldn’t see inside. He made the postman stick the mail through the slot in his garage rather than coming to the front door. He was so good at keeping people away that when he died of heart failure at age 69 in June, nobody noticed until his house began to smell. Someone called the sheriff’s department. A hazmat team removed Samaszko along with part of the floor he was stuck to.

That’s when everybody found out why he hadn’t been more sociable: The dour, white-haired recluse had been hoarding $7 million worth of gold coins, most of them hidden in the crawl space beneath the house. Some were in an old washing machine. There were British sovereigns dating back to the 1840s, Austrian ducats, and South African Kruggerands. But mostly Samaszko had collected rolls and rolls of $20 American gold pieces, the kind with double eagles on them. He also had $12,000 in cash, a stock account worth $165,000—and $200 in the bank....

It’s easy to see why Samaszko’s death and the revelations that followed fascinate people. How many of us would have kept $7 million in a crawl space and not touched it? It makes you wonder what other secrets died with him.

Samaszko’s methods for protecting his golden hoard pretty much match the methods used by the U.S. government. There really must be something about having so much gold that turns some people into such crazy hoarders that they are absolutely unwilling to make rational decisions about how to use it in the real world. Like selling a portion of it to pay down their bills when their credit cards are maxed out.

Consuming More Taxpayer Dollars


Monday March 16th, 2015   •   Posted by K. Lloyd Billingsley at 5:03am PDT   •  

CA_St_Capitol_200As consumers know, modern computers are incredibly reliable machines that work right out of the box, simplify many tasks, and save consumers money. In the hands of government employees, however, computers often fail to work, make life more complicated, and cost taxpayers much more money than advertised.

As Jon Ortiz notes in the Sacramento Bee, California’s Department of Consumer Affairs has been implementing a BreEZe computer system that was supposed to cost $27 million. The system, however, “spit out unreliable data,” and problems like that boosted the budget to $77 million. So far the department has spent $37 million, but officials describe the system as “a mess.” Consumer Affairs boss Awet Kidate conceded that “the department failed miserably at change management.” But he still wants another $17.5 million for the department that failed miserably. That will bring the final cost to $96 million, more than three times the original estimate.

Ortiz also outlined similar problems with IT systems in the state Employment Development Department, the Department of Fair Employment and Housing, and the payroll system for the University of California. As a consultant told Ortiz, these problems arise because of the government’s antipathy to honest assessment. On the assessment theme, consider the following development.

As we previously noted, Proposition 63 raised $13.2 billion but California’s Little Hoover Commission, a state watchdog, reported that the state cannot even document whether or not the $13.2 billion improved Californians’ lives. Not to worry, because the measure is providing relief for tens of thousands of Californians and decreasing homelessness, hospitalizations, and arrests among the mentally ill. That is the glowing assessment of, yes, former Senate boss Darrell Steinberg. He not only wrote Proposition 63 but recently became director of policy and advocacy for the UC Davis Behavioral Health Center of Excellence, which Proposition 63 funds to the tune of $7.5 million.

Steinberg, a lawyer, will be a visiting professor at Davis’s Department of Psychiatry and Behavioral Sciences. That will enable him immediately to lobby the Legislature on behalf of the Center. For ruling-class high-rollers, it’s always a wonderful world.

MyGovCost Updated!


Friday March 13th, 2015   •   Posted by Craig Eyermann at 8:06am PDT   •  

We’ve been busy behind the scenes here at the MyGovCost project at the Independent Institute, as we’ve just completed our major annual update to the MyGovCost Government Cost Calculator!

The MyGovCost Government Cost Calculator is the only tool available for you, the ordinary taxpayer, to get a sense of what the U.S. government’s expected spending and tax revenue will cost you, in terms of what you could otherwise have earned if you had been able to invest your hard-earned money instead.

So, let’s consider a simple example of that math! Let’s say that you’re 40-years old, you have earned a Bachelors degree, you’ll have an income growth trajectory to similar peers with the same educational level, and that you currently earn what we estimate the median household income for 2014 will be reported to be later this year: $53,601.

The chart below shows what the federal government’s current spending and tax collection projections and national debt accumulation will really cost you over the next 40 years:

Your-40-Year-Future-bachelors-age40-income-53601

In terms of the U.S. government’s spending, your personal share would be $615,014 from 2015 to 2056, while your personal share of federal taxes would be $398,532. These figures are in today’s U.S. dollars.

But if you had instead been able to keep your money and invest it over the long term in a well-diversified investment like an S&P 500 index fund and earn its very long-term inflation-adjusted average rate of return, you could have had an extra $1,729,792 to show for what the U.S. government’s spending will cost you!

The cool thing is that the MyGovCost Government Cost Calculator can create a personalized estimate of the impact of the U.S. government’s spending in the future for anyone, based just on their educational attainment, their current age, and their current income.

So check out the latest update to the MyGovCost Government Cost Calculator. And as a bonus feature, after checking out your own numbers, check out how they might change for a hypothetical situation, say if you were someone like Apple’s Tim Cook, television icon Oprah Winfrey, or former U.S. President Bill Clinton, or if you were someone at the opposite end of the income-earning spectrum!

Twitter Facebook Youtube RSS

Search


By linking to Amazon.com from this page, The Independent Institute earns referral fees of 4% to 15% from whatever you buy. Bookmark the above link and you can support the Institute when you do your normal shopping!

Seminars
TIR

RSS Recent Posts on The Independent Institute’s Other Blog, The Beacon

Categories

April 2015
S M T W T F S
« Mar    
 1234
567891011
12131415161718
19202122232425
2627282930