MyGovCost News & Blog

CBO: Excessive Spending Drives Deficits


Monday April 16th, 2018   •   Posted by Craig Eyermann at 6:47am PDT   •  

Last week, the Congressional Budget Office released its annual 10-year projection for the U.S. government’s budget and economic outlook. What makes this year’s outlook stand out from previous editions is that the CBO’s analysts have taken the effects of the significant tax cuts and spending increases that have recently passed into law into its accounting, which the following chart from the report summarizes in visual form.

Simply put, the CBO expects that the U.S. government’s tax collections will continue to keep pace with their historical average as a percentage of the nation’s Gross Domestic Product, while spending is set to grow to far exceed its historic long term average.

Together, the combined effects of the tax cuts and spending increases will herald the permanent return of annual trillion dollar deficits two years earlier than the CBO had projected a year ago. The only good news here is that since the economy has grown since the days of President Obama’s trillion dollar deficits, the red ink is relatively more affordable as a percentage of GDP, where the CBO projects annual deficits as a percent of GDP will be consistent with what was recorded during the early 1980s.

Since excessive spending is the biggest driver of those future annual budget deficits, the CBO identifies which major budgetary categories are the main contributors to the spending growth it projects.

The biggest contributor to future budget deficits continues to be “mandatory” spending, which in this case, represents the combination of money spent to provide Social Security, Medicare and Medicaid welfare program benefits.

But, the biggest change perhaps is the category of “Net Interest”, where the cumulative effect of borrowing to sustain its spending and higher interest rates causes this “mandatory” budget category to grow much faster than the CBO had previously projected.

The Federal Reserve, which as a single institution, holds the largest share of U.S. government-issued debt, has acknowledged the role of rising interest rates on the size of the U.S. government’s debt payments. They write:

Rising interest rates mean higher interest rates on debt payments, which means it becomes more expensive to buy a home, buy a car, or even go to college. It also becomes more expensive for the federal government to finance its debt.

As interest rates rise, payments on federal government debt also increase.

The U.S. Treasury Department’s Monthly Statement for February 2018 confirms a 7% increase in the U.S. government’s gross interest payments on debt securities issued by the U.S. Treasury for the first five months of the U.S. government’s 2018 fiscal year (October 2017 to February 2018) as compared to the same period of time in its previous fiscal year, where higher interest rates are the main factor behind that increase.

The bottom line is that the U.S. government needs to do much more to bring its excessive spending down to more fiscally sustainable level.

Facebook.Gov.Con


Wednesday April 11th, 2018   •   Posted by K. Lloyd Billingsley at 8:53am PDT   •  

The April 11 written congressional testimony of Mark Zuckerberg is already available, and what the Facebook CEO told senators on April 10 is of considerable interest. It was “my mistake,” he said, that the Cambridge Analytica firm had purloined the data of 87 million Facebook users. Zuckerberg said he was sorry and was taking steps to prevent it from happening again. It emerged in testimony that the 2012 presidential incumbent had strip-mined data on a massive scale with full cooperation from Facebook, which is now colluding with government in a different way.

As Zuckerberg confirmed, Facebook is cooperating with the investigation by Robert Mueller. The former FBI boss has interviewed some Facebook employees, but Zuckerberg would not say who they are. “I want to be careful here because our work with the special counsel is confidential,” he explained, “and I want to make sure that in an open session I’m not revealing something that is confidential.” This is the same guy who either approved, facilitated, or looked the other way at massive transfers of private data to non-government actors. He also told senators that Facebook would “proactively” cooperate with law enforcement only in the case of an “imminent threat of harm,” or when law enforcement presented a “valid legal request” for data.

Some senators complained about issue ads, and Zuckerberg responded by saying he was hiring as many as 20,000 new people to vet this material. Senator Cory Booker wanted “civil rights organizations” to be involved, which the Facebook CEO called a “good idea,” agreeing with Booker that the entire tech industry “lacks diversity.” When asked by Sen. Ted Cruz if Facebook was a “neutral forum,” the CEO seemed puzzled. Asked by Sen. Cory Gardner if the government had ever demanded that Facebook remove a page from the site, Zuckerberg said “yes, I believe so.” The Facebook CEO did not indicate the content of the page, which government official had demanded its removal, and when the removal had taken place.

Zuckerberg touted new measures to guard user privacy, but he did let slip that Facebook had been hacked. Details were sketchy, but as the CEO explained, “security is never a solved problem.” Observers could be forgiven for believing that their Facebook data is never secure and that the billionaire boss is most careful to guard confidentiality when he is collaborating with government investigators.

A Just-For-Show Balanced Budget Amendment Vote


Wednesday April 11th, 2018   •   Posted by Craig Eyermann at 6:59am PDT   •  

4753896 - a copy of the united states constitution on an amercan flag background Three weeks ago, the U.S. House of Representatives voted to pass a bipartisan $1.3 billion spending bill that, because it eliminated the spending caps imposed by the Budget Control Act of 2011, guarantees the return of the kind of annual trillion dollar budget deficits that characterized much of President Obama’s tenure in office.

Perhaps belatedly sensing that they may have done something wrong, the U.S. House of Representatives is expected to vote perhaps as early as tomorrow on adding a balanced budget amendment to the U.S. Constitution. Juliegrace Brufke of The Hill tells the story:

The House is slated to vote next week on a balanced budget amendment to the Constitution after lawmakers return from their Easter recess.

The decision to bring the measure—which would require Congress not to spend more than it brings in—to the floor comes just weeks after the passage of a $1.3 trillion spending package that is projected to add billions to the deficit.

The amendment, introduced by House Judiciary Chairman Bob Goodlatte (R-Va.), would require a “true majority” in both the House and Senate to pass tax increases and a three-fifths majority in both chambers to increase the debt limit.

The measure has virtually no chance of becoming law as it would need Democratic support in the Senate and ratification from the majority of states. While conservative hard-liners largely support the proposal, critics argue adding a constitutional amendment could weaken economic activity and exacerbate recessions by limiting the government’s ability to spend money.

The decision to take up the measure stems from an agreement struck between Speaker Paul Ryan (R-Wis.) and Republican Study Committee Chairman Mark Walker (R-N.C.) in October. Ryan agreed on a vote on the amendment in exchange for conservative support on a procedural budget measure needed for Republicans to move forward on tax reform.

Even as a largely symbolic measure, that is something that could at least be a tiny step toward establishing more effective fiscal discipline over the U.S. government’s spending. Unfortunately, the proposed text for the balanced budget amendment that the House would be voting upon is perhaps the worse they could possibly have chosen. Dan Mitchell excerpts the a portion of the proposed text and explains why it is such a lousy proposition:

Here’s the core provision of H.J. Res 2.

Section 1. Total outlays for any fiscal year shall not exceed total receipts for that fiscal year, unless three-fifths of the whole number of each House of Congress shall provide by law for a specific excess of outlays over receipts by a rollcall vote.

Sound reasonable and innocuous, but I’ve been telling folks on Capitol Hill this is the wrong approach. I pointed out that 49 out of 50 states have some form of balanced budget requirement, yet that doesn’t stop states such as Illinois, California, and New Jersey from over-taxing and over-spending, or from accumulating more debt.

I also explained that the so-called Maastricht rules in the European Union operate in a similar fashion, yet that hasn’t stopped nations such as Greece, France, and Italy from over-taxing and over-spending, or from accumulating more debt.

The problem, I explained, is that anti-deficit rules simply give politicians an excuse to raise taxes (which leads to more spending and more red ink, but I don’t think that causes many sleepless nights for elected officials).

Let’s use the recent passage of the Bipartisan Budget Act of 2018 as an example for why this version of a balanced budget amendment is such a bad idea. Starting with the vote in the U.S. Senate, the bill passed with far more than a three-fifths majority of that legislative body, so the amendment’s principal barrier to preventing budget deficits was easily hurdled by a coalition of politicians seeking a free license to spend and borrow more than they could under the terms of Budget Control Act of 2011.

However, in the House of Representative, the bill received 240 “Yea” votes (167 Republicans and 73 Democrats) and 186 “Nay” votes (67 Republicans and 119 Democrats), passing with a 56.3% majority, so at first glance, it would seem that the U.S. Congress would have to go back to the drawing board to get the spending number down to something more affordable for the nation.

But that’s not how Washington D.C. works. For the 426 members of the House who were present to vote on that day, it would have taken just 16 members to switch their votes from “Nay” to “Yea” to pass what would be constitutional muster to unlock the opportunity for unconstrained spending for themselves.

Now consider this: the motivation behind a very large percentage of the “Nay” votes in the House of Representatives was because the spending cap-busting Bipartisan Budget Act of 2018 didn’t spend as much as the opposing politicians wanted. All the bipartisan majority of politicians seeking to spend more would need to do to flip 16 votes from “Nay” to “Yea” to reach the magical three-fifths majority requirement under the proposed balanced budget amendment is to add even more spending to the bill.

For the 16 unprincipled politicians who would be willing to flip their votes for money, the sky would be the limit for what extra spending they could get. And because that kind of spending would by definition exceed the amount of revenue the government collects in taxes, it would all get added to the $21.1+ trillion national debt.

There is much more that’s wrong with the proposed balanced budget amendment that the House will be voting upon this week, but it is not worth going into at this time because, let’s be honest, it is going nowhere. If the House of Representatives wanted to make a more serious statement about establishing fiscal discipline in the U.S. government, it would be considering a balanced budget amendment that spells out how much the U.S. government’s total spending can grow from one year to the next, tying that value to how much revenue the government can prove that it can successfully collect in taxes to constrain it.

Alas, it is not. This week’s vote is just for show.

New Jackboot City


Tuesday April 10th, 2018   •   Posted by K. Lloyd Billingsley at 10:48am PDT   •  

The squad came at dawn, Remington model 870 shotguns at the ready. They broke down the door, rushed in and handcuffed a man before shoving him into a police car. One might think they were after a terrorist, escaped convict, or murderer. In reality, this was a raid by the enforcement division of the office of the Inspector General of the U.S. Department of Education. The target was a woman wanted on some student loan issue. She was not there, but the armed squad carted off her estranged husband Kenneth Wright and their three kids. Such armed raids, the DOE explains, are necessary to combat issues such as bribery, fraud, and embezzlement of federal student aid funds.

An armed squad decked out in bulletproof vests worked their way through a crowded train station and an observer might have thought they pursued an armed attacker. Actually, this was an operation of the Visible Intermodal Prevention and Response squad of the Transportation Security Administration. Tasked to screen airline passengers, the TSA has expanded to sporting events, music festivals, rodeos and train terminals. With bomb-sniffing dogs in tow, the armed VIPR squads stop people at random, which amounts to an unwarranted search that violates constitutional protections.

The sniper adjusted his scope and squeezed off a round. The target never heard rifle’s report before dropping dead from the kill-shot. One might think this was a scene from American Sniper, perhaps in Iraq. Actually, it was Ruby Ridge, Idaho, in 1992. The shooter was FBI sniper Lon Horiuchi and his target was Vicki Weaver, who was holding her infant daughter and was not guilty of any crime. The next year the FBI used military tanks to attack the Waco compound and the 75 casualties included women and children.

The federal government increasingly deploys military force and thuggish tactics against civilians, and this should be the context for the recent raid on the offices of President Trump’s lawyer Michael Cohen. He had been cooperating with the probe by former FBI boss Robert Mueller, but the federal armed squad burst in and confiscated many items and documents. As Alan Dershowitz noted, civil liberties types were pretty quiet about the raid. Everybody ought to be concerned, especially with former Supreme Court Justice John Paul Stevens calling for repeal of the Second Amendment.

China’s “Nuclear Option” For Its U.S. Debt Holdings?


Monday April 9th, 2018   •   Posted by Craig Eyermann at 6:11am PDT   •  

35902018 - falling bombs falling dollar on a white background A trade war between the U.S. and China has ramped up in recent weeks, with both nations proposing new tariffs on the goods that each imports from the other in a series of tit-for-tat announcements.

The Reuters news service however has been exploring a scenario where China’s role as a major creditor to the U.S. government could be used as a weapon against the United States as part of its retaliation strategy.

Overall, as of the end of the U.S. government’s 2017 fiscal year on September 30, 2017, China held at least 6.8% of the U.S. government’s $20.2 trillion total public debt outstanding, and a slightly larger share (9.4%) of the $14.7 trillion “publicly-held” portion of the national debt, which is the part of the government’s debt that isn’t owed to another federal government entity like Social Security or the pension funds that it operates for the benefit of the U.S. government’s military and civilian employees.

Last week, Reuters‘ Trevor Hunnicutt and Kate Duguid described how China might use its holdings of U.S. government-issued debt against the U.S. as the “nuclear option” in the trade dispute between the two countries:

China held around $1.17 trillion of Treasuries as of the end of January, making it the largest of America’s foreign creditors and the No. 2 overall owner of U.S. government bonds after the Federal Reserve. Any move by China to chop its Treasury portfolio could inflict significant harm on U.S. finances and global investors, driving bond yields higher and making it more costly to finance the federal government....

Asked by a reporter on Wednesday if China would reduce its U.S. Treasury holdings in retaliation, Vice Finance Minister Zhu Guangyao reiterated China’s long-standing policy regarding its foreign exchange reserves, saying it is a responsible investor and that it will safeguard their value.

China’s foreign exchange reserves, the world’s largest, stood at about $3.13 trillion at the end of February, with roughly a third of it held in Treasuries.

“If they wanted to pull the nuclear switch, if they committed to dumping Treasuries, it would have an immediate and temporary impact on money markets in the United States,” said Jeff Klingelhofer, a portfolio manager who oversees more than $6 billion at Thornburg Investment Management Inc.

Hunnicutt and Duguid go on to report that Klingelhofer and other analysts believe that China taking such an action would be a low-probability event, one that would be at “cross-purposes” to the nation’s interest in safeguarding the value of its foreign exchange reserves.

Moreover, at least one analyst speculated that such a move would be very counterproductive, where the action could backfire against China:

Brad Setser, senior fellow for international economics at the Council on Foreign Relations in New York, said China can sell Treasuries and buy lower-yielding European or Japanese debt.

But the effect would likely be to strengthen the yuan against the dollar, weakening the relative desirability of its exports, analysts said. The sale could also tank the value of the Treasuries China retains, with nothing to show for the aggression.

To borrow a phrase from J. Paul Getty: “If you owe the bank $100 that’s your problem. If you owe the bank $100 million, that’s the bank’s problem.”

Since we’re talking about $1.17 trillion owed by the U.S. government to China however, it is probably safe to err on the side of that amount of debt being a really big problem for everybody.

More insight: Over at Credit Writedowns, Edward Harrison explains why China would have a very difficult time in using its U.S. Treasury holdings as leverage in a trade war with the U.S.

Fiscally Troubled Connecticut Bails Out Nearly Bankrupt State Capital


Thursday April 5th, 2018   •   Posted by Craig Eyermann at 7:36am PDT   •  

Bailout Alert! The nearly bankrupt city of Hartford, the state capital of Connecticut, was bailed out by the fiscally troubled state government of Connecticut last week. Jenna Carlesso of the Hartford Courant describes the city’s bailout package that will avoid the city having to officially declare bankruptcy:

The state’s bailout for Hartford has cleared its final hurdle, with a unanimous vote by the city council Monday that allows Connecticut to pay off the struggling city’s $550 million in general obligation debt over the next 20 years.

Those payments will begin as early as this week – the state will pick up Hartford’s $11 million debt contribution due April 1. It will pay another $1 million on the city’s debt by June 30.

Hartford leaders said the deal was essential in helping the city to avoid bankruptcy.

“This was the state of Connecticut recognizing that we do not want our capital city going into bankruptcy,” Council President Glendowlyn Thames said Monday. “That has long-ranging repercussions for the region and for the state of Connecticut, so they stepped up and provided us with a new framework.”

The bailout is coming as a bipartisan surprise to many of the state’s legislators, who had voted last October on a state budget deal to provide support to Connecticut’s capital city, WTNH‘s Mark Davis reports:

Some legislative leaders say the deal for the state to pay off half-billion dollars in bonded debt for the City of Hartford is not what they thought they were voting for back in October. Sen. Martin Looney (D-New Haven), the Democratic Senate President Pro tem saying, “We did not, at the time, assume that it would be the state paying the entire debt for twenty years.” The Republican Senate President Pro tem, Sen. Len Fasano (R-North Haven) saying, “I think the Democratic majority leaders did not understand that the Governor had a different purpose for the language that was in that bill.” And the House Minority Leader, Rep. Themis Klarides (R-Derby) adding, “We made the decision to give them a two year ‘life line,’ an additional $40 million in a two year budget.”

But the agreement that has emerged from that vote back in October, has the state making those debt payments for the city starting this week and for the next 20 years. Democratic House Majority Leader Matt Ritter, who represents Hartford in the Assembly, appears to be the only one besides Mayor Bronin, with that understanding of the legislation and the deal saying, “The state is paying it, it’s the same thing legally
speaking, the guarantee, the state is making the payment.”

Most lawmakers apparently thought the state was just guaranteeing the payments; like a parent guaranteeing a loan for a son or daughter, with the expectation the son or daughter would make the payments.

Instead, they will be paying all of the city’s $550 million of unsustainable debt under the language of the October 2017 budget deal developed by state governor Daniel Malloy, whose tenure in office has been characterized by tax increases and larger spending increases, chronic deficits and the highest tax-supported state debt per capita in the nation.

So much so that Connecticut’s state government is having trouble borrowing money. Reuters‘ Hillary Russ reports on what happened when the state tried to borrow $620 million last week:

Connecticut, one of the lowest rated U.S. states, cut the size of its general obligation bond deal this week by 15 percent to $526.4 million, according to final pricing information on Thursday.

The Connecticut Treasurer’s office did not immediately reply to a request for comment on why the deal shrank from $620 million.

Typically, a deal can be reduced because investors wanted more yield than the issuer could pay, or because demand for the bonds was lower than expected.

Final prices on the deal did not change from preliminary levels. The state’s spread over top-rated municipal bonds widened since it last issued similar debt a year ago.

That means that the state, which has budget problems and high debt levels despite being one of the wealthiest in the country, had to pay more to borrow in part because of its credit woes.

With such costs, filing for bankruptcy may very well have been a better course of action for Connecticut’s state capital. At the very least, taking that action would not have transferred the burden of Hartford’s looming insolvency onto a financially-strapped state government that doesn’t have the capacity to bear the additional burden. Much less the taxpayers of Connecticut.

Medi-Cal Misery Loves Company


Wednesday April 4th, 2018   •   Posted by K. Lloyd Billingsley at 10:06am PDT   •  

During its heyday, we tracked Covered California, the wholly owned subsidiary of the federal Affordable Care Act, through the services of health journalist Emily Bazar. She charted problems with the $454 million computer system, skyrocketing premiums, automatic cancellations, glitches with tax credits and such. All told, it added up to “widespread consumer misery,” particularly for the 2000 pregnant women automatically dropped from their Covered California plans and dumped into Medi-Cal, the state’s division of Medicaid. As it turns out, these women were hardly the only victims.

“California signed up an estimated 450,000 people under Medicaid expansion who may not have been eligible for coverage,” explains Chad Terhune of California Healthline.

According to federal auditors, California spent $738.2 million on 366,078 expansion beneficiaries who were ineligible and an additional $416.5 million for 79,055 enrollees who were “potentially” ineligible. Nearly 90 percent of the $1.15 billion in questionable payments involved federal money, with the rest from Medi-Cal, the state’s division of Medicaid. From Oct. 1, 2014, to March 31, 2015, Medicaid paid of $6.2 billion to 1.9 million newly eligible enrollees.

“One woman indicated she didn’t want Medi-Cal but was enrolled anyway,” Terhune reports, and “many people complained about being mistakenly rejected for coverage, or their applications were lost in the state or county computer systems.” So the glitches and widespread misery continues, and that should be no surprise. The ACA was always a stepping stone to government monopoly health care, what statists call “single payer.” In this system, common in one-party dictatorships, people get only the care the government wants them to have. In a market system people choose the health plan they believe best meets their needs. That would be the best replacement for the Affordable Care Act but Congress still seems inclined to the big-government approach, a proven failure as Covered California confirms.

Black Hawks Up


Monday April 2nd, 2018   •   Posted by K. Lloyd Billingsley at 10:06am PDT   •  

Helicopters have proven their worth in fighting the wildfires that devastate California. Cal Fire, the state agency in charge of these operations, wants to replace its aging fleet of Huey helicopters. The legislature set aside the money and launched a bidding process that took two years, and as the Sacramento Bee reports, “rejected the low bidder, Italian manufacturer AgustaWestland, each time.” Those helicopters cost $16 million each but Cal Fire wants the Black Hawk, which Cal Fire bosses claim will meet the agency’s needs for 20 years. Trouble is, “the helicopters in Brown’s budget request run about $24 million a pop, more than double the low bid of $11.4 million.” Cal Fire wants 12 of the Black Hawks, so “the original low bid swells to north of $100 million.” The AgustaWestland AW189 was capable of hovering at 14,200 feet but the Black Hawk got the nod and the governor wants to start spending the money. Whether the Black Hawk’s firefighting performance matches its upscale price has yet to be determined, but some lessons are already clear for the state’s embattled taxpayers.

The government likes to spend money and shows no preference for the lowest bidder on any project. When government is the buyer, things will always cost more than advertised. In the case of the Black Hawks, it is more than double the original cost but that is no guideline. The new span of the Bay Bridge, for example, cost about five times its original $1.5 billion estimate. Apply that to the governor’s $16 billion delta tunnel and costs soar to some $80 billion. By the bridge standard, the vaunted bullet train, now estimated at $77 billion, could wind up at $385 billion, or more. And like the new span of the Bay Bridge, neither project is necessary.

The tycoon Nelson Rockefeller always needed “a little more” money to keep him happy. With government it’s always a lot more.

Reform Coming to the VA, Whether It Wants This or Not


Monday April 2nd, 2018   •   Posted by Craig Eyermann at 6:45am PDT   •  

New scandals continue to erupt at the troubled U.S. Department of Veterans Affairs on a regular basis, where in the latest gyration, David Shulkin, the head of the VA who had promised to implement serious reforms to improve the accountability of the department’s supervisors and staff, has now been shown the exit door.

President Trump fired his embattled Veterans Affairs secretary Wednesday and tapped as his replacement atop the chronically mismanaged agency the president’s personal physician, who gained prominence with his effusive praise of the 71-year-old’s physical and mental health.

The ouster of Veterans Affairs Secretary David Shulkin, who has been mired in scandal over his charging taxpayers for luxury travel expenses and the infighting among his senior aides, had been widely expected and was made official at 5:31 p.m. by presidential tweet.

Trump said he would nominate Ronny L. Jackson, 50, an active-duty rear admiral in the Navy who has served for the past three administrations as a White House physician.

Shulkin had been occupying the VA’s executive suite on borrowed time ever since the agency’s Office of Inspector General revealed that the VA had funded an unusual travel junket for him and his wife to Europe at taxpayer expense. Shulkin had claimed that he was the victim of “subversion” from within the scandal-plagued federal government department, where he indicated that he had Trump administration approval to “clean house of insiders at the VA who sought to take him down.” Shulkin had even gone so far as to have an armed guard stationed outside his office.

At the time, MyGovCost noted “that mandate would now be held by either Shulkin or his replacement should the travel scandal prove to claim his career in public service at the VA.”

That replacement is Rear Admiral Ronny L. Jackson, who has served as the White House’s physician under Presidents George W. Bush, Barack Obama and Donald Trump.

Rory E. Riley-Topping, a veterans advocate who is seeking to reform the VA, described how difficult that may be in a recent op-ed in The Hill:

The number one question reverberating throughout the veterans’ community right now is whether Admiral Ronny Jackson is qualified to be the next secretary of the Department of Veterans Affairs.

This begs the question, what exactly qualifies one to lead the nation’s second largest government agency?

Unfortunately, no one knows yet. The VA has been plagued by controversy since its elevation to a cabinet Department in 1988. Not a single VA secretary has won universal praise from veterans, stakeholders and Congress for the duration of their term. And, more importantly, not a single VA secretary has successfully shown the ability to eliminate the toxic culture that permeates from within the bureaucracy.

To date, there have been nine VA Secretaries that have received Senate confirmation. Of those nine, with the exception of David Shulkin, the only common denominator seems to be military service....

More importantly, however, is that seven of the nine ultimately resigned due to scandal or frustration with the agency. The only two to serve out the remainder of their term until a change in the administration—Peake and McDonald—served only two and two and a half years, respectively.

As a job, it may very well be several orders of magnitude more difficult than dealing with President Trump. And it’s not going to get any easier until the VA is reformed to eliminate the culture of corruption that has become institutionalized throughout the 360,000 employee department that has an annual budget of $186 billion. The “extraordinary rebellion” against the reforms that Shulkin was seeking to implement must come to an end, the employees of the VA must become fully accountable to both U.S. taxpayers and to the veterans they claim to serve.

Should Admiral Jackson prove to be unequal to the task, the mandate for cleaning house will pass to his replacement. And so it must go until the VA’s corrupt culture has been cleaned out, whether the VA wants it to be, or not.

Medicaid and Bureaucrat Pensions Creating Budget Crisis for States


Thursday March 29th, 2018   •   Posted by Craig Eyermann at 6:46am PDT   •  

X Marks the Spot: Budget Crisis! It is getting to be crunch time for state legislators looking to establish the budgets for their state governments across the U.S. With most states following a fiscal year that starts on July 1 and runs through June 30 of the following year, the clock is ticking down for determining how each will spend the tax money and other revenue that they will collect over the next year.

Unfortunately, each U.S. state government’s budget is coming to be dominated by two line items over which state legislators have very little influence. The Wall Street Journal‘s Cezary Podkul and Heather Gillers report:

As state and local officials prepare their next budgets, many are finding that spending decisions have already been made for them by two must-fund line items that barely mattered when baby boomers such as Mr. Leavitt were growing up: Medicaid, the state-federal health insurance program for the poor and disabled, and public-employee health and retirement costs.

These days, they consume about one out of every five tax dollars collected by state and local governments. That is the highest share since Medicaid was created in 1965. Postretirement health benefits, which are harder to quantify, add to that burden and have cumulatively cost states more than $100 billion since 2008, according to government financial disclosures compiled by Merritt Research Services.

Those costs are outpacing growth in tax revenue year after year. In 2016, state and local governments collected about $136 billion more in taxes than they did in 2008, adjusting for inflation. Two-thirds of those additional dollars went to fund pensions and Medicaid, according to a Wall Street Journal analysis of Commerce Department spending data.

“The more we stare at the data, the more we realize all roads lead back to Medicaid and pensions,” says Dan White, a director at Moody’s Analytics who has studied the issue.

The resulting revenue squeeze is making it harder for governments to pay for core services such as education, infrastructure, police and fire protection.

Until Medicaid is reformed and state and local government employee pensions are reined in to fiscally sustainable levels, an increasing number of states can expect to experience a budget crisis that will cause core services to be cut in 2018 and beyond.

Facebook Twitter Youtube

Search


By linking to Amazon.com from this page, 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!

TIR
June 2018
S M T W T F S
« May    
 12
3456789
10111213141516
17181920212223
24252627282930