National Water Quality Month is turning out rather dry in California, but trouble will soon be washing up in court. Farmers and business owners have filed more than 90 claims against the state government for causing a total of $1.7 billion in losses from the spillway failure at Oroville Dam back in February. Might they have a case?
As we noted, the failure of the spillway prompted the evacuation of 200,000 people, hardly a frivolous move, because if the spillway collapsed it could have caused complete failure of the dam, built in 1968.
As it turned out, government engineers knew for decades that the dirt spillway was unreliable but failed to reinforce it with concrete. As Representative John Garamendi (D–Walnut Grove) famously put it, the dirt spillway “worked fine until it had to be used, in which case it didn’t work so well.” State water bosses also failed to add gates above the spillway, which would have allowed the reservoir to rise another ten feet. Governor Jerry Brown claimed to be unaware of these problems and proclaimed, “stuff happens and we respond.”
One of the government’s first moves was to dam up the flow of information on safety issues. The governor and state water bureaucrats blocked public access to the dam’s design specifications, federal inspection reports, technical documents, and other crucial information. Department of Water Resources officials claimed it was a security matter, lest the information “fall into the wrong hands,” terrorists, for example. In typical style, politicians and bureaucrats are simply hiding years of negligence, faulty oversight, and misguided spending.
The state will doubtless point the finger at Mother Nature, but more evidence may emerge in court that government is to blame. Any payout will heap more costs on California’s embattled taxpayers, now staring down the barrel of a $5.2 billion hike on gasoline, diesel fuel and vehicle fees.
There is fantastic news coming out from Washington D.C. this week. The U.S. Treasury Department is shutting down a money-losing retirement account program that was aimed at getting low income-earning Americans to invest their retirement savings in its very low interest rate-paying U.S. Treasury bond fund for U.S. government employees (the Thrift Savings Plan G Fund).
The New York Times describes just how costly the program has been to U.S. taxpayers.
An Obama-era program that created savings accounts to help more people put away money for retirement is being shut down by the Treasury Department, which deemed the program too expensive.
The 30,000 participants in the program, known as myRA and intended for people who did not have access to workplace savings plans, were sent an email on Friday morning alerting them of the closing. Participants were informed that they could roll the money into a Roth individual retirement account, the Treasury Department said.
President Barack Obama ordered the creation of the so-called starter accounts three years ago, and they became available at the end of 2015. Since then, about 20,000 accounts have been opened, with participants contributing a total of $34 million, according to the Treasury; the median account balance was $500. An additional 10,000 accounts whose owners have not contributed to them have been opened.
Jovita Carranza, the United States treasurer, said in a statement that demand for the accounts was not high enough to justify the expense. The program has cost $70 million since 2014, according to the Treasury, and would cost $10 million a year in the future.
Longtime MyGovCost readers may be more familiar with the U.S. Treasury Department’s myRA program than its intended market, which we described as “little more than a channel for boosting the sales of long-term, low-yielding U.S. Treasuries by targeting low-income earners”, which we later pointed out the Treasury Department’s hypocrisy in putting the interests of the government to borrow money at the lowest rates possible ahead of the interests of the program’s customers to build up their retirement savings.
President Obama’s “myRA” retirement account program represents an early step in that direction, which is currently being targeted at exploiting the most financially illiterate Americans, who likely don’t appreciate that when more money floods into Treasury auctions to buy government bonds, the yield (or interest rate) that the government will pay to borrow the money falls, which in turn means a worse rate of return for them in their myRA retirement account, which in turn would make it harder to accumulate a decent amount of money to even be able to afford to retire.
That President Obama’s myRA program is a bad deal for regular Americans can be confirmed by what some of the same people backing the President’s initiative are doing to advance the financial interests of the federal government’s employees in their default investment options for their Thrift Savings Plan retirement accounts, where currently, the default option for federal employees is to invest in the exact same government bond funds as for the myRA accounts. Because federal employees want better returns and bigger retirement savings, they’re pushing for legislation to have the default investment option changed to one that has a much higher rate of return.
Americans who have money in a myRA account can have them rolled into a tax-free Roth Individual Retirement Account (Roth IRA). The press release announcing the termination of the myRA program revealed just how redundant the program was in noting that “retirement savers have options in the private sector that offer no account maintenance fees, no minimum balance, and safe investment opportunities”.
In other words, there was never a legitimate need to have the federal government get into the retirement savings business in the first place. U.S. taxpayers will save at least $10 million per year because the Treasury Department learned an important lesson.
Now, if the Treasury Department would just apply the lessons learned to the federal government’s failing student loan business, U.S. taxpayers might see savings in the billions.
Imagine if land that had been held in your family for decades were suddenly subject to new environmental regulations that would severely limit what you could do on that land, where you would not be able to do things like build a new house on it, cut down trees on it, or even to farm it the way your family had for generations.
As you might imagine, the value of your family’s land would plunge, because it would no longer be attractive to people who might consider buying it, because those same restrictions would apply to them.
Now imagine that those new environmental regulations were imposed by the federal government, egged on by environmental activists, that are intended to preserve the natural habitat of an endangered species of frog that had not been seen anywhere on or near your land for nearly half a century. And in a particularly cruel twist, you discover that your family’s land would not even provide a suitable habitat for the endangered species in question unless the government compelled your family to spend thousands of dollars to transform it into a suitable habitat for the endangered frog.
If that sounds like a bizarre nightmare scenario of government bureaucracy, you’re right. RealClearInvestigations James Varney describes a very peculiar case of government regulations run amuck in the name of protecting the dusky gopher frog.
The phone call came out of the blue in 2011.
A federal biologist on the other end of the line told Edward B. Poitevent II that the U.S. Fish & Wildlife Service intended to designate a large swath of Louisiana woods that had been in his family for generations a “critical habitat” for the endangered dusky gopher frog.
Poitevent was confused because the frog had been neither seen nor its croak heard on the land since the 1960s. Later he would learn that his land is not, in fact, a suitable habitat for the frog anyway.
“No matter how you slice it or dice it, it’s a taking of my land in that I can’t use it or sell it now,” said Poitevent, a New Orleans lawyer.
A half century after disappearing from the 1,500-acre parcel in Louisiana, the dusky gopher frog will likely appear this month in filings urging the U.S. Supreme Court to settle the matter after years of costly litigation.
In one sense, the case illustrates the conflicts that arise as conservationists and the government use the Endangered Species Act to protect privately held lands. But legal scholars say the absent amphibian could provide a broader test of just how far the government’s regulatory reach can extend under the Constitution.
The legal case in favor of the homeowner will come down to a court’s determination of what constitutes an “unreasonable” restriction imposed by an ambiguously-worded federal regulation, where common sense has not been allowed to enter the argument as lower level judges have found against the landowners, claiming that their legal hands were tied by a 1982 Supreme Court precedent that awarded a profound amount of legal deference to federal regulators regardless of the specific facts that apply to the case.
With that being the situation, the Case of the Phantom Frog will be an interesting one to follow as it moves through the nation’s appellate courts, particularly if it ultimately reaches the Supreme Court where it could prompt the court to overturn all or part of its previous decision that benefited the interests of federal regulators over those of regular Americans.
On a final note, this kind of environmental-activist directed policy affects far more than a family-owned farm in Louisiana. On July 31, 2017, some 1.8 million acres (2,812 square miles) of farm, ranch and timber lands in the Sierra Nevada mountain range in California had similar restrictions imposed upon them by the U.S. Fish and Wildlife Service, which were defined as “critical habitat” for three species of frogs and toads.
Would the government be so set on imposing such environmental regulations if it were required to fully compensate regular Americans for diminishing the value of their property?
As we noted, the University of California at Davis garnered national attention in 2011 when campus cops pepper-sprayed students peacefully demonstrating against tuition hikes. The ensuing lawsuits cost taxpayers more than $1 million, most of it going to crony consultants. No UCD administrators got fired, least of all chancellor Linda Katehi, who also came under fire for spending $407,000 in university funds to shore up her image on the internet. She also mounted a surge of nepotism, employing three family members on campus, including daughter-in-law Emily Prieto, recipient of hefty pay raises and promoted to “assistant vice chancellor.” Katehi resigned last August but UCD kept her on paid leave. Now she’s back in a big way.
In September, Katehi will return to UC Davis as a “distinguished professor” of computer and electrical engineering and “women and gender studies.” According to news reports, Katehi will be paid “at the same rate she received as campus leader.” Her nine-month contract for $318,000, when annualized, is “equivalent to the $424,000 salary she received as chancellor.” At UC Davis, an incompetent administrator and non-leader can do pretty much anything she wants and still pull down the big bucks at taxpayer expense. On the other hand, the entire UC system under Janet Napolitano, a former Department of Homeland Security boss and Arizona governor, is not exactly a model of accountability.
As we noted, UC bosses spent $504 million on a computer system that was supposed to cost $156 million. They also jacked up tuition while hiding $175 million in reserves. UC bosses also hiked administrative spending by 28 percent over three years, but without any method to track expenses. And so forth.
The UC regents should show Napolitano the door but she keeps her job despite miserable performance. Meanwhile, if underperforming Linda Katehi is to be a professor she should be paid like one. As it stands, Katehi and Napolitano model the waste inherent in the UC system.
August is National Water Quality Month and that might prompt a meditation on agencies such as California’s State Water Resources Control Board. The Board’s five full-time members are appointed by the governor and “the mission of the Water Board is to ensure the highest reasonable quality for waters of the state, while allocating those waters to achieve the optimum balance of beneficial uses.” Sounds good, but lately the unelected Board has been displaying some mission creep.
Federal Waters of the United States (WOTUS) policy had been limited to navigable bodies but in recent years federal regulators have expanded their reach into vernal pools, ditches and such. The Obama administration expanded the rules in 2015 and as under this policy regulatory zealots can punish farmers for using their own land. As we noted, California farmer John Duarte faces millions of dollars in fines for plowing a wheat field that contained vernal pools. In June the Trump administration rolled back “wetlands” rules and EPA boss Scott Pruitt told reporters “We are taking significant action to return power to the states and provide regulatory certainty to our nation’s farmers and businesses.” The State Water Resources Control Board, on the other hand, wants to deploy wetlands policy even stricter than the previous federal administration.
According to a Sacramento Bee report, the Board is proposing a “Waters of the State” rule that “would protect a broad array of wetlands including certain small streams and creeks, and a greater share of California’s vernal pools.” Homebuilders, farmers and business groups charge that the regulations “would create more red tape, higher costs and fewer rights for landowners.”
Reed Hopper of the Pacific Legal Foundation (PLF) is on record that the proposed rules could give the state considerably more power than the federal government. That is doubtless the intention of the unelected board, which is not just about ensuring water quality and “optimum balance of beneficial uses.”
Meanwhile, PLF is representing John Duarte, now who is attempting to have his case tossed on the grounds that the Army Corps of Engineers lacked the authority to sue him and the EPA chose not to do so.
Uniforms are a big deal at the U.S. Department of Defense for outfitting the members of the nation’s military branches, particularly its Battle Dress Uniforms (BDUs), which incorporate camouflage among other technologies to help protect the lives of American service members who will be engaged in combat operations.
As part of that mission, the Pentagon also helps outfit the service members of other nations’ militaries, particularly those that provide bases and other assistance to U.S. military forces, but which lack the resources to adequately provision their forces. The justification for providing that kind of military aid is that if the DoD didn’t step in, it would increase the risk to the lives of the American troops they are supporting.
Being a large government bureaucracy, it is perhaps not surprising to learn that the DoD periodically bungles that basic task. What is surprising is the price tag for when it does, as we just found out in the last week when $28 million worth of uniforms provided by the Pentagon to outfit Afghanistan’s army was wasted because they were produced with the wrong kind of camouflage to provide effective camouflage protection in that country. Tara Copp of the Military Times reports:
Defense Secretary Jim Mattis scolded top defense officials for a “complacent” mode of thinking that allowed $28 million to be wasted on Afghan army uniforms that were inappropriate for fighting in Afghanistan.
The Special Inspector General for Afghanistan Reconstruction exposed the waste in June when it found that the Pentagon’s decision to procure a dark forest-patterned uniform for the Afghan army was incongruous with the country’s largely desert environment. The Combined Security Transition Command-Afghanistan selected the dark uniform in 2008, SIGAR found, without determining whether it was right for Afghanistan. DoD had purchased more than 1.3 million of these uniforms as of June, SIGAR reported.
Moreso, the SIGAR found, DoD bypassed its own digital patterns it owned and contracted a firm whose proprietary rights over the forest pattern significantly increased the cost of the shirt and pants purchases.
According to the McClatchy news service, the Pentagon’s near decade-long period of wasteful spending to outfit Afghanistan’s military to assist U.S. forces operating in that country has led to a criminal investigation.
“This…procurement demonstrates what happens when people in the government don’t follow the rules,” John Sopko, the Special Inspector General for Afghanistan Reconstruction, told a House Armed Services subcommittee on Tuesday. “These problems are serious. They are so serious that we started a criminal investigation related to the procurement of the (Afghan National Army) uniforms.”
According to the special IG, the military bought more expensive, proprietary “woodland patterns” for the Afghan National Army uniforms instead of using the Defense Department’s own patterns for free, even though only 2.1 percent of the country’s total land area is covered with forest.
“This is about reason and common sense,” Sopko told McClatchy after the hearing. “It’s not fair to the taxpayer and it’s not fair to the poor Afghan walking around with a target on his back that says ‘shoot me.’”
Nor would it be fair to U.S. service members conducting operations with Afghan forces within that country’s rough environment, whose positions could be given away by the greater visibility of the uniforms provided by the Pentagon to their foreign colleagues.
The Special Inspector General for Afghanistan Reconstruction’s report is available online.
For its part, the U.S. House of Representatives voted last week to bar any purchases of uniforms for Afghanistan’s army in the U.S. government’s 2018 fiscal year budget for the DoD.
Social Security’s Trustees have released their annual report for 2017, which updates their view of the fiscal health of the single largest government program in the United States. To provide some sense of scale, the program paid out $922 billion to 61 million Americans in 2016, for an average benefit of over $15,000 per recipient, mostly in the form of its pension or retirement benefits.
As part of that report, the Trustees published the following chart that shows what their expectations are for the future of the U.S. government’s ability to make good on the promises of U.S. politicians to provide a stable income for America’s senior citizens after they retire from working.
Since there’s a lot of information packed into this one chart, let’s unpack it to get a better sense of what the Trustees are telling Americans today.
Let’s start on the left hand side of the chart. The vertical scale represents the percentage of wage and salary income that is subject to Social Security’s payroll tax, which is currently set at 12.4% and which for most Americans equally split between employees and employers (self-employed Americans pay the whole amount).
The thin black line represents the revenue that Social Security collects each year from the program’s payroll tax as a percentage of taxable income, both historically for the years from 2000 through 2016 and also what the Trustees project for the years from the current year of 2017 through 2095. Both historic data and future projections show that this line is flat.
The heavy black line represents the “promised” amount of Social Security benefits that the U.S. government will pay under current law, which really represents Social Security’s expenditures as a percentage of Americans’ wage and salary incomes that are subject to Social Security’s payroll tax, which are really the cost of all the pension, survivors and disability benefits that it pays out each year. We see that in the years from 2000 to 2009, those costs were less than the amount of money that Social Security collected in taxes, but beginning in 2010, Social Security began spending more money that it collects in taxes each year. That situation has persisted through 2016, as the program’s fiscal situation has deteriorated.
Looking forward from 2017 onward, we see that the amount of money that Social Security pays out in benefits grows to greatly exceed the amount of money that it collects through its payroll tax, which continues for 16 years through 2033. Social Security is able to do this because of the large amount of money that it has been accumulating in its trust funds for Old Age and Survivors Insurance (OASI) and Disability Insurance (DI) since 1982. (The combined trust funds are abbreviated as OASDI).
But in 2034, that ability comes to a crashing halt, because Social Security’s Trustees believe that the program’s trust funds will have been drained dry by that year. From that point on, Social Security can only pay out benefits from the money it takes from the paychecks of working Americans, which we see in the chart as the heavy black line and the thin black line laying on top of each other. When that happens, one of two things will happen that will negatively impact millions of Americans:
And that’s it. One chart tells the entire story of what is becoming the near-term future of Social Security from the perspective of both taxpayers and beneficiaries, which you can now decode!
U.S. Attorney General Jeff Sessions seeks a “new directive on asset forfeiture” and plans new policies to “increase forfeitures.” The target is supposedly big-time criminal organizations but all citizens have good cause to be wary. As U.S. Supreme Court Justice Clarence Thomas notes, the issue is “whether modern civil-forfeiture statutes can be squared with the Due Process Clause and our nation’s history.” Due process is not served when police can grab people’s assets without charging them with a crime, and according to Thomas, forfeiture operations “frequently target the poor and other groups least able to defend their interests in forfeiture proceedings.”
Previous Attorney General Loretta Lynch, called asset forfeiture “a wonderful tool,” prompting Casey Harper of the Daily Caller to cite some wonderful examples. Tan Nguyen won $50,000 at a casino but a Nevada cop confiscated the money and threatened to seize his car if he spoke up about it. Nguyen had to hire an attorney to get his own $50,000 back. On a trip to buy a car, George Reby had $22,000 in cash but a Tennessee cop suspected it was drug money and took it. In similar style, at a traffic stop Georgia police grabbed Alda Gentile’s $11,530 after searching her car for drugs and finding none. And so on. As Akil Alleyne, notes in The Hill, “perhaps the most worrisome aspect of asset forfeiture is the mercenary incentive that it gives authorities to ‘police for profit’: seizing as much property as possible—the more valuable, the better—in order to auction it off and pad their budgets with the proceeds.”
Asset forfeiture remains rampant in Illinois, not exactly a model of fiscal responsibility. As Ben Ruddell of the ACLU observes, between 2005 and 2015 Illinois law enforcement took in more than $319 million through forfeiture, with little of the haul from drug kingpins. A reform bill places the burden raises the standard of proof to preponderance of evidence at trial, and the burden of proof is on the government, not the property owner. The bill enjoys bipartisan support, and with the federal pillage people planning a surge, Congress should craft an even tougher bill to protect property rights and preserve due process. President Trump should sign it, and that would be a win for the people.
Illinois has kicked the can down the road for the state’s debts and liabilities.
Last week, Moody’s credit rating service announced that it would sustain its current rating for the state of Illinois at Baa3, one level above “junk” status, making Moody’s the third of three major credit rating agencies to not take the final step of downgrading the state’s debt to the level that would have made it the first state to have ever have its credit reach that rating.
But in having passed a budget that was largely designed by the state’s legislature to keep it from going over the fiscal brink, the state may have only managed to delay its fiscal reckoning. Bloomberg‘s Elizabeth Campbell reports on the accounting shell game that Illinois is now playing:
Illinois’s biggest financial challenge, the $130 billion debt to its workers’ pension funds, may only get bigger thanks to the budget that pulled the government back from the brink.
That spending plan, pushed through by lawmakers eager to keep Illinois’s bond rating from being cut to junk, allows the state to sink deeper into the hole by giving it five years to phase in hundreds of millions of dollars in increased contributions to four of its five retirement plans. Those extra payments stem from the funds’ decisions to roll back forecasts for what they expect to make on their investments, which means Illinois will need to set aside more money to ensure it can cover pension checks due in the decades ahead.
“The phase-in of the actuarial assumption is another exercise in kicking the can down the road, but we’re not sure how far the can travels,” said Dave Urbanek, spokesman for the Illinois Teachers’ Retirement System, the state’s largest pension, which has $73 billion of unfunded liabilities. “You pay less now, pay more later.”
By “roll back forecasts,” Campbell is referring to the predicted rates of return that the state’s pension funds are required to use to predict how much their investments will grow in the future, which after years of underperformance, had finally been reduced to more closely match the state pension funds’ actual returns in recent years.
That matters because the higher those rates are set, the less money that the state government needs to budget in order to pay out the state’s generous pension benefits for state and local government employees. By artificially inflating its predicted return assumptions back to the levels that allowed the state to significantly underfund its pension funds in the first place, the state can reduce the amount of money it puts into them.
That unrealistic accounting achieves two things. First, it makes money that may have gone to shoring up the state’s pension funds available to pay off its other debts, which is how the legislature managed to keep the state’s credit rating from collapsing into junk status at this time. Second, it digs the fiscal hole that its pension funds are in, deeper toward insolvency, ensuring that the state’s biggest liabilities will only get worse.
It’s not a question of if Illinois’ credit will be downgraded, but when. When that will happen will be now most likely be determined by the available cash balances of the state’s various government-employee pension funds, which will have less taxpayer cash to make guaranteed pension benefit payments if its investments continue to badly underperform its now legislatively set rate-of-return assumptions. As soon as they run out of cash to cover the lavish, state-guaranteed pension benefits payments to retired state government workers, the slow-motion chain reaction that will lead to junk status for the state’s credit rating will get underway.
While running for office, Donald Trump pledged to reduce the regulatory burden for Americans while also increasing the amount of spending to support federal law enforcement agencies in their work, much of which involves enforcing federal laws and regulations.
Budgets are about priorities, so perhaps it isn’t much of a surprise that President Trump’s first budget proposal appears set to achieve both seemingly contradictory tasks.
That’s the finding of analysis by Susan E. Dudley & Melinda Warren of the Regulatory Studies Center at George Washington University. Here’s a short summary of what they found:
Although President Trump has made reducing regulatory burdens a priority, he proposes to increase the regulators’ budget in FY 2018.
• The proposed 2018 regulators’ budget reflects a 3.4% real increase in expenditures.
• The proposed increase is twice the 1.7% increase estimated in 2017.
• Proposed outlays are $69.4B for 2018 compared to $65.9B in 2017 and $63.7B in 2016.
• Proposed staffing levels would decline by 0.5%—from 281,300 full-time personnel in 2017 to 279,992 in 2018. In 2017, regulatory agency staffing increased 1.5%.Some agencies are budgeted for significant increases in both expenditures and staff, while others face dramatic cuts.
• Agencies within the Department of Homeland Security (DHS) focused on immigration are the big budgetary winners including:
• Coast Guard,
• Immigration and Customs Enforcement,
• Customs and Border Control, and
• Transportation Security Administration.• Overall, DHS regulatory agencies would increase expenditures by 13.7% (an additional $4.1B) in 2018, after a 5.9% increase ($1.7B) in 2017.
• DHS staffing is also budgeted to grow by 2.3% (3,294 additional people) in 2018 following a 1.3% increase (1,896 people) in 2017.
• The Environmental Protection Agency (EPA) is targeted for sharp reductions in both expenditures and staffing. The Budget proposes a 26.2% reduction in EPA’s outlays, to $4.1B in 2018, down from $5.5B in FY 2017.
• If implemented, this would be EPA’s smallest budget since 1987.
• EPA’s staff under the proposed 2018 budget would decline by 3,811 employees—from 15,500 to 11,689—a reduction of 24.6%.
• The last time EPA employed fewer than 12,000 employees was 1984.
Writing about the study at Reason, Eric Boehm reveals that because of its emphasis on increasing funding and staff for federal law enforcement agencies, President Trump’s budget is actually increasing the U.S. government’s total spending on regulation.
Despite promising to roll back the federal regulatory state, President Donald Trump’s first budget proposal would increase regulatory spending by more than 3 percent—double the increase approved by Congress during Barack Obama’s final year as president.
If Congress were to enact Trump’s budget as written, the federal government’s regulatory staff would fall by half of 1 percent, but the total amount of taxpayer money spent by regulatory agencies would climb to $69.4 billion. That’s up from $65.9 billion in 2017 and $63.7 billion in 2016…
Rather than cutting the regulatory state, then, Trump’s first budget plan is better understood as a shifting of regulatory priorities—a shift in which the increases overwhelm the cuts.
Overall, the changes that President Trump has proposed in the regulatory portions of the U.S. government’s budget are in keeping with their long term growth trend. We will need to wait until next year to find out if President Trump is serious about restraining that growth in the future after his initial shifting the government’s priorities this year.
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