MyGovCost News & Blog

There is a sad race underway between two fiscally-troubled states in the Union, where the state governments of both Connecticut and Illinois appear intent on becoming the first full U.S. state to file for the equivalent of bankruptcy.

Just over a week ago, Connecticut took a strong step backward toward reaching that status first when all three major U.S. credit rating agencies downgraded the state’s credit, which immediately made it more expensive for that state government to borrow new money by issuing new debt.

This week however, the state government of Illinois, thanks to its unadulterated dysfunction, has stormed back into the lead by achieving something that no other state has: the lowest credit rating ever assessed against a state government! Bloomberg has the story:

Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. state, as the long-running political stalemate over the budget shows no signs of ending.

S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget.

“Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance,” Ted Hampton, Moody’s analyst, said in a statement. “During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached.”…

The downgrades, which also dropped some debt backed by legislative appropriations into junk, came a day after Illinois’s legislature blew the deadline for approving a compromise budget by a simple majority. Now, it takes a higher threshold — three fifths majority vote in each legislative chamber — to pass anything. On Wednesday, Rauner, who is up for re-election in 2018, and Democratic House Speaker Michael Madigan, who controls much of the legislative agenda, faulted each other for the unprecedented gridlock.

The Bloomberg article goes on to describe the consequences that the continuing failure of the state legislature’s leadership to pass a budget leading to solvency would have if it continues its current dysfunction:

Despite the lack of a budget, Illinois has continued to cover payments due on its bonds, and, like other states, has no ability to resort to bankruptcy to escape from its debts. A downgrade to junk, though, would add further financial pressure by increasing its borrowing costs and preventing many mutual funds from buying Illinois’s securities.

The second part of that passage is right on target, but the first part, while correct today, may be subject to change in the near future. Right now, the U.S. territory of Puerto Rico is blazing the legal precedents that would enable a state government like that of Connecticut or Illinois to enter into similar bankruptcy-like proceedings to have its debts restructured. In Puerto Rico’s case, it’s shaping up to be a messy process.

Given the quality of politicians in power today in both Connecticut and Illinois however, it’s only a question of time before those states will gain direct experience in that kind of messy legal process.

In 2012, John Duarte was plowing his wheat field in Tehama County, California, when a government inspector accused him of “deep ripping” the land and violating the Clean Water Act, which declares seasonal “vernal pools” to be “wetlands.” So according to the government, Duarte needed a permit to farm his land, but the farmer, who also runs a nursery business, said he received no such notice. The government prosecuted Duarte and their expert witness claimed the furrows were “small mountain ranges.” Turns out, they were five inches deep, but the government is still coming after Mr. Duarte and wants to hit him with $2.8 million in fines.

Supporters of Mr. Duarte are waiting to see if the EPA under Scott Pruitt will drop the case and scale back the regulatory zealotry of the previous administration. As Mr. Duarte’s lawyer Anthony Francois of the Pacific Legal Foundation told reporters, “The more of your property – your land – that the government considers to be their water, the more you’re at risk of falling afoul of something like this.” As it happens, the EPA is more about attacking property rights and shaking down property owners than actually protecting the environment.

In 2015, the EPA was responsible for releasing three million gallons of contaminated wastewater into the Animas River. This unleashed 880,000 pounds of lead, arsenic and other toxic materials for dozens of miles through southwest Colorado and northern New Mexico. The EPA’s alleged vigilance also did nothing to prevent the Flint water crisis but despite both disasters EPA boss Gina McCarthy kept her job. And as we noted, the EPA has not exactly been forthcoming about what it does with the $6.3 billion it has collected from lawsuits and settlements since 1990. As it happens, the EPA lacks any meaningful accountability. For example, EPA “policy advisor” John Beale claimed to be working for the CIA and pulled off this ruse for nearly 20 years, bilking taxpayers for nearly $1 million and even gaining “retention bonuses.”

President Trump’s EPA boss Scott Pruitt is not short of clean-up projects. He should drop the case against John Duarte, eliminate all regulations that disrespect property rights, and tell the worst zealots: “you’re fired.” That will certify that needed reforms are indeed taking place.

California governor Jerry Brown has signed off on a $5.2 billion deal that will raise the tax on gasoline, raise the tax on diesel and raise user fees on motorists. Before the Memorial Day weekend, Brown ranted that those who complain about this tax hike are “freeloaders.” This doesn’t deserve a response, but taxpayers may find one helpful.

The tax hike is intended to fix California’s disastrous roads, but maintenance of roads is already part of California’s budget. Trouble is, as we noted, the California Department of Transportation developed a model for the allocation of maintenance funds but abandoned it because it would have reduced more than 100 Caltrans staff positions. Caltrans distributes funding based the previous spending patterns of the region in question, whatever the road conditions. Taxpayers might also recall that for years the state has diverted $1.5 billion in transportation infrastructure taxes to subsidize California’s General Fund bond payments.

Anybody who drives already pays substantial gas taxes every time they fill up, so in no sense are working motorists “freeloaders.” California workers already pay the highest income and sales taxes in the nation, and they are weary of government shaking them down for more. Taxpayers might note that Brown and the legislature made zero cuts to the state’s bloated bureaucracy and failed to trim wasteful spending. Brown and the legislature could have scrapped the $70 billion “bullet train” boondoggle, and $15 billion to dig tunnels under the San Joaquin-Sacramento River Delta. Fixing the roads and building new ones would be a better application for those funds.

As is happens, Caltrans employs more than 3,000 engineers who basically do nothing but Brown is okay with that sort of parasite, common in state government. The first recourse of California’s hereditary, recurring governor, is to punish the workers with higher taxes and fees then abuse them as “freeloaders.” As working taxpayers may recall, this is the same governor who responded “I mean, look, shit happens,” to safety lapses on the new span of the Bay Bridge, a project that came in 10 years late and $5 billion over budget.

While beating the drum for tuition hikes, University of California president Janet Napolitano maintained a secret slush fund of $175 million and tried to block an investigation by state auditors. That was okay with the University of California regents, who hailed the leadership of the former Arizona governor and Department of Homeland Security boss. As it happens, one of Napolitano’s favorite projects is the UC Davis Firearms Violence Research Center and on July 1 that outfit will receive its first $5 million in funding from the state.

That will help compensate for proposed cuts of nearly $6 billion from the National Institutes of Health, which during the previous administration funded what purported to be research on gun violence, including the work of Garen Wintemute, who happens to be the director of the UC Davis Firearms Violence Research Center. He claims his work is based on “science,” but Second Amendment advocates should be wary. According to Wintemute, the Center’s first project will be will be “a survey that looks at who owns guns, why they own them and how they use firearms.” That sounds more like snooping than science. UC Davis Center wants “the names,” and everybody should find that troubling.

In Gun Control in the Third Reich: Disarming the Jews and “Enemies of the State” author Stephen P. Halbrook compiled data on the way Adolph Hitler’s Germany restricted firearms. The Nazis also wanted to know “who owns guns” and they ruthlessly suppressed firearm ownership by disfavored groups. As Halbrook shows, the Nazis used the records of the Weimar Republic, which also suppressed ownership and use of firearms.

According to a Sacramento Bee report, “Wintemute hopes to assess the effectiveness of current laws, including the newly adopted requirement that people who buy ammunition have the legal right to own guns, and of California’s new gun violence restraining orders.” That sounds more like politics than science, but maybe Dr. Wintemute can use the $5 million in funding to answer a pressing question.

Do California’s new gun laws, with their heavy-handed restrictions and database of ammunition owners, resemble in any way the gun laws of National Socialist Germany? After all, Nazi Germany was one of the most repressive and violent regimes in history. We wouldn’t want the Golden State to be like that.

How much has changed at the U.S. Department of Veterans Affairs over the last three years?

That’s an important question to ask on this Memorial Day holiday. Just over three years ago, MyGovCost began covering the secret wait-list, healthcare-rationing scandal at the U.S. Department of Veterans Affairs. Here’s how we described the roots of the scandal at that time:

The rationing scheme involves the use of multiple waiting lists for veterans seeking medical care at a number of VA health care facilities across the United States. Here, a number of facilities have been discovered to be maintaining an “official” waiting list, which is meant to communicate the VA is successfully limiting waiting times to 14 days or less before providing care. But in reality, the “official” waiting list is a fraud, as these facilities would appear to also be maintaining secret waiting lists – ones where the veterans seeking care are effectively placed in a virtual waiting room where months pass before they can even get on a schedule to receive care.

That kind of deception carries a real human cost, as the story first broke in Phoenix, where as many as 40 veterans have died before receiving care after seeking it from the VA as they were placed on the facility’s secret wait list instead. Since that story first broke, it would appear that this secret rationing system has been adopted at a number of Veterans Administration facilities across the nation – something that could only happen with the knowledge and assent of the Department’s administrators.

In other words, the situation being discovered by the public today is not an isolated incident resulting from the actions of a few rogue administrators at a local facility. Instead, it is the result of deliberate actions taken on the part of the department’s top administrators, which we can see by the system of incentives they created to reward those who adopted the secret wait list scheme and punish those who did not.

Three years later, Circa‘s John Solomon describes where things stand for veterans health care in the VA’s single-payer system today after years of the Obama administration’s efforts to whitewash the scandal.

Now three years and more than 100 criminal investigations later, there is overwhelming evidence the VA wait times were in fact systematic, consequential and involved a widespread cover-up to hide the denial of timely care.

Even worse, life-threatening problems persist at VA facilities, like in the nation’s capital where the political debate on fixing the VA has malingered.

Solomon reviews the results of just-released cases investigated by the VA’s Inspector General in confirming ongoing misconduct occurring at VA facilities, which is especially notable for the comparative absence of consequences for the VA personnel who were directly responsible for the misconduct:

While the consequences were real to veterans, they were less so for responsible VA personnel. “The U.S. Attorney closed his investigation without taking any action,” the inspector general reported, meaning the only form of punishment in this case was the removal of four senior managers from the facility.

At least that limited removal is something resembling progress toward the housecleaning that badly needs to happen throughout the VA. All too often, the VA administrators who have been held accountable for the misconduct they oversaw have successfully exploited the government’s bureaucrat-friendly Merit Systems Protection Board to either overturn their removals in court or to deny any consequences altogether.

That lack of real accountability for the VA’s rationing of medical treatment is pervasive, which has become clear through the sheer scope of the problems that have slowly emerged since the first reports of the scandal broke.

Hospital by hospital, the numbers of veterans who died awaiting treatment continues to mount. At the Phoenix VA, which became the poster child of the VA wait time scandal, things haven’t improved much.

A report last October found that 215 vets died while waiting for care in 2016, specifically chronicling the story of one veteran whose death could have been forestalled if could have gotten cardiac diagnosis and treatment….

Meanwhile, tens of thousands of pages of internal reports that have emerged in the last few months make clear the VA delay scandal that emerged in 2014 was no Mickey Mouse matter but rather a true crisis of life and death.

Solomon’s “Mickey Mouse” comment refers to former VA chief administrator’s Bob McDonald’s infamous comments describing the wait times for medical treatment at VA facilities as being similar to those at Disney theme parks, which followed former President Obama’s attempt to minimize the seriousness of the VA’s problems that exploded across the nation on his watch.

Those problems arose specifically because of the perverse incentives and the government-granted monopoly power that the VA’s staff and administrators have in being the only source of health care that many U.S. veterans can access.

The first step toward fixing what ails the VA is to follow through the reforms that will break the VA’s near complete monopoly on providing medical treatment to America’s veterans and to more effectively impose accountability on its personnel for their misconduct. The VA needs to stop being the literal dead end for health care for America’s veterans.

With new leadership, the VA has the opportunity now to seriously correct its multiple deficiencies. But the longer these same ongoing problems persist, the more it will make sense to pursue actions that will permanently curtail the power of the VA’s bureaucracy and break its near monopoly, where we would argue that what matters most is providing veterans with the ability to pursue medical care wherever they choose, where the VA itself should refocus its health care provision activities to only provide specific and highly specialized care for conditions that are uniquely shared among veterans.

Before diving into the more interesting numbers in President Trump’s first official budget proposal, let’s ask a budget-history trivia question: When was the last time that any U.S. president proposed a federal budget that would be balanced within 10 years?

If you guessed President George W. Bush in 2007, you’re right!

Now, suppose you ask: When was the last time that a U.S. president proposed and delivered a balanced budget? For the answer, you would have to go back to 2000, when President William J. Clinton’s final federal budget proposal for the 2001 fiscal year produced a budget surplus.

It’s important to consider these two dates because it’s been nearly 10 years since a U.S. president even proposed a budget that would reduce the government’s annual spending deficit to zero within a ten-year period, and it’s been four whole presidential terms since a U.S. president’s budget actually delivered a surplus to the U.S. Treasury.

That makes zero the most interesting and important number in President Trump’s first budget. Sure, he gets there through the same kind of questionable accounting and optimistic assumptions that characterizes virtually all budget proposals coming out of Washington, D.C. But when you consider that President Obama’s 2017 budget was projected to leave the federal government over $9.4 trillion more in the hole after 10 years, with ever escalating budget deficits setting in after 2018, President Trump’s first budget proposal represents a notable step toward reversing what would otherwise be the government’s deteriorating fiscal condition, even with its apparent deficiencies.

The next most interesting number in President Trump’s first budget is 66. That’s the number of federal government programs that the president has targeted to be eliminated. Although getting rid of these programs would reduce the annual spending of the U.S. government by just $26.7 billion out of an annual budget of more than $4 trillion, these are exactly the kind of programs that should be eliminated, because what they do is either unnecessary or is duplicated more effectively by other federal spending programs. That they have persisted so long after their useful contributions to the American people have diminished is attributable to the power games of Washington, D.C., where they have largely become vehicles for channeling money to the parochial pet interests and campaign contributors of the politicians who champion them to demonstrate their power and influence.

The third number of interest in President Trump’s first budget proposal is $1.7 trillion. That is the amount by which the U.S. government’s total spending will have increased above 2017’s projected spending level of $4.1 trillion to reach its projected level of $5.7 trillion in 2027. To get there, the U.S. government’s spending will increase at an average annual rate of 3.5 percent over the next decade.

To put that number into historical context, in the ten preceding years from 2007 to 2017, federal spending rose from $2.7 trillion to $4.1 trillion, which works out to be an average annual increase of 4.1 percent. President Trump’s proposed pace for increasing federal government spending is just 0.6 percent slower than that!

Now, if you want to understand why so many politicians and political pundits are howling about President Trump’s budget “cuts”, President Barack Obama’s final budget proposal would have had the U.S. government’s spending increase from $4.0 trillion in 2016 to $6.5 trillion in 2026 for an average annual increase of 5 percent, an unsustainable acceleration of spending growth that the Congressional Budget Office was already projecting would cause the U.S. government’s fiscal situation to significantly worsen.

Apparently, a lot of politicians and pundits either don’t think that’s much of a problem or don’t believe that they would be on the hook for causing that problem. But that’s typical Washington, D.C. thinking for you.

As we noted, failed presidential candidate Bernie Sanders has been pushing California to establish what he calls “single payer” health care. This is a misnomer for several reasons, particularly on the issue of cost. As legislators recently learned, the price tag is $400 billion a year to cover all health and administrative costs, twice as much as California’s entire state budget.

“Where do you get the extra money?” governor Jerry Brown wonders. No “single payer,” not even Bill Gates, has that kind of dough. Since politicians must tap taxpayers, “single payer” is really “multiple payer.” Taxpayers are looking at an additional $200 billion in taxes, as Dan Walters of the Sacramento Bee notes, “the equivalent of a 15 percent tax on all of Californians’ earned income layered on top of existing income taxes” and “nearly as much as the state will collect this year in income and sales taxes with the nation’s highest tax rates.” So the slogan should be “let’s have the wallet, Jack.”

In reality, “single payer,” is government monopoly health care. In this plan, the multiple payers get only the health care government wants them to have. Contrary to politicians’ claims there is no “right” to health care, even in Canada’s government monopoly system. Backers of government monopoly health care for California include Lt. Gov. Gavin Newsom, insurance commissioner Dave Jones, and the prime mover is Sen. Ricardo Lara, Bell Gardens Democrat. The loudest voices come from government employee union bosses.

RoseAnn DeMoro of the national nurses’ union appeared with Bernie Sanders, when he made his pitch. Government monopoly health care would empower the union to negotiate with the single payer of government, in the style of the California Teachers Association with the K-12 government education monopoly. True to form, the California Nurses Association threatens to take out Democrats who refuse to play along. Taxpayers would do better to heed governor Jerry Brown’s take on “single payer.”

“This is called ‘the unknown by means of the more unknown,’” he told reporters. “In other words, you take a problem, and say ‘I am going to solve it by something that’s … a bigger problem,’ which makes no sense.”

It’s here! After months of anticipation following March release of President Trump’s “skinny” budget proposal (cover pictured on the right), the president’s “fat” budget proposal is being released today.

Bloomberg summarizes the main features that define President Trump’s first full budget proposal.

President Donald Trump would dramatically reduce the U.S. government’s role in society with $3.6 trillion in spending cuts over the next 10 years in a budget plan that shrinks the safety net for the poor, recent college graduates and farmers.

Trump’s proposal, to be released Tuesday, claims to balance the budget within a decade. But it relies on a tax plan for which the administration has provided precious little detail, the elimination of programs backed by many Republican lawmakers, and heavy use of accounting gimmicks.

Trump’s fiscal 2018 budget proposal has already been declared dead on arrival by many of his Republican allies in Congress. The plan would slash Medicaid payments, increase monthly student loan payments and cut food stamps and agricultural subsidies, each backed by powerful constituencies. The administration is unbowed.

“We’re no longer going to measure compassion by the number of programs or the number of people on those programs,” White House budget director Mick Mulvaney said. “We’re going to measure compassion and success by the number of people we help get off those programs and back in charge of their own lives.”

In the days ahead, we’ll be digging deeper into the main elements of President Trump’s budget proposal for the U.S. government’s 2018 fiscal year, particularly in spending its proposal for Medicaid, which in recent years has been the fastest growing portion of mandatory entitlement spending while also being perhaps the “civilized world’s worst health insurance program.”

By focusing on restraining only the growth of the Medicaid welfare spending program, President Trump is missing an opportunity to put Medicare and Social Security, the U.S. government’s other two big mandatory spending programs—not to mention the entire U.S. government—on a more stable fiscal footing. Leaving those two entitlement programs untouched does, however, satisfy the president’s campaign pledges, so this neglect is not surprising.

President Donald Trump has decried the “tremendous waste, fraud and abuse” in the federal government, and proclaimed “we’re going to get it.” When it comes to the Pentagon, that is going to be a tough task.

As we noted late last year, the Pentagon buried an internal study exposing $125 billion in administrative waste. The Pentagon’s purchasing bureaucracy counted 207,000 full-time workers, with 192,000 in property management and 84,000 in human-resource jobs. The Army alone employed 199,661 full-time contractors — more than the combined workforce of the Departments of State, Agriculture, Commerce, Education, Energy and Housing and Urban Development. This bulk is hardly the only example of military waste.

According to Craig Whitlock and Bob Woodward of the Washington Post, “The Pentagon has generated almost $6 billion over the past seven years by charging the armed forces excessive prices for fuel and has used the money — called the ‘bishop’s fund’ by some critics — to bolster mismanaged or underfunded military programs.” The Pentagon raked in the cash “by billing the armed forces for fuel at rates often much higher — sometimes $1 per gallon or more — than what commercial airlines paid for jet fuel on the open market.” This takes place “under a bureaucracy that dates to World War II,” but it’s not an isolated example of unaccountability.

As Paul Shinkman notes in U.S. News, the Overseas Contingency Operations Budget, once considered supplemental, “is now considered a de-facto slush fund.” Launched for operations in Iraq and Afghanistan “it accounts for the unregulated spending of $60 billion or more in taxpayer dollars per year, with no end in sight.”

As the president says, there’s tremendous waste, fraud and abuse in the federal government in general and the Pentagon in particular. He should tell those responsible, “You’re fired,” and then get to work trimming government.

What happens to Americans who have taken out student loans from the U.S. government, but aren’t able to pay them back?

Increasingly, the U.S. government is taking them to court to get its money back. National Public Radio’s Bobby Allyn reports on a relatively new policy that the U.S. Department of Education put into place during the last two years of President Obama’s tenure in office:

On Adriene McNally’s 49th birthday in January, she heard a knock on the door of her modest row-home in Northeast Philadelphia.

She was being served.

“They actually paid someone to come out and serve me papers on a Saturday afternoon,” she says.

The papers were from a government lawsuit that represents something more than just an unwelcome birthday gift — it’s an example of a program the federal government has brought to 19 cities around the country including Brooklyn, Detroit, Miami and Philadelphia: suing to recover unpaid student loans, like the ones McNally owes.

Every day, 3,000 people default on their federal student loans — and those lack of payments amount to an unpaid bill of $137 billion for the federal government. For decades, the government has tried to get borrowers to pay up by hiring debt collection agencies to call and send letters. But now the government is trying this new lawsuit strategy.

McNally filed for personal bankruptcy back in 2006, which eliminated all of her debts except for her student loans, which by federal law cannot be discharged in bankruptcy proceedings. Assuming that she now loses her lawsuit for having defaulted on her student loan payments — which is the outcome of nearly every such case brought to court — McNally can expect to have either her wages be garnished, her Social Security or disability payments be docked, or her house or other valuable personal assets have a lien placed on them until the debt has been cleared.

Quite possibly, all three actions may be taken against her. While the first two options would involve seizing a portion of any income she earns or Social Security benefits she receives, the third option of imposing a lien on any property she owns is an indirect form of leverage. NPR’s Allyn describes how imposing a lien on a student loan defaulter can provide a means for the government to recover the money the borrower owes should its more direct seizures be insufficient to fully pay off the government-issued loan.

Jennifer Schultz, an attorney with Community Legal Services of Philadelphia, says that a lien traps a person, like house-handcuffs.

“I describe a lien as a kind of marker on the house,” Schultz says. “Any time a person tries to do a transaction involving their house — a new mortgage, a refinance, or if they try to sell it — they’re going to be expected to clear up any debt that’s attached to that house.”…

Once a lien is in place, the government can force the sale of a former student’s home. That’s “exceedingly rare,” officials say, but it does sometimes happen.

The federal lawsuit program is expected to keep expanding, and with more than 8 million people currently behind on their federal student loans, it doesn’t look like the private firms will run out of work any time soon.

The private firms to which Allyn is referring are the debt collection firms that the U.S. government hires to shake down defaulting and delinquent student loan borrowers prior to taking them to court. According to Bloomberg‘s Shahien Nasiripour, the U.S. government is paying its debt collection contractors $38 for every $1 of debt they succeed in collecting.

When you consider that the U.S. government has so stacked the deck in its favor against Federal Direct Student Loan borrowers, you have to wonder why it costs so much to produce so little benefit for U.S. taxpayers. The U.S. government badly needs to get out of its failing student loan business.