California imposes some of the highest income and sales taxes in the nation, and Governor Jerry Brown’s own budget team says the state could face a budget deficit of $4 billion by the summer of 2020. Even so, the governor maintains the statist view that there is always money for everything. The Golden State has an attorney general, Xavier Becerra, but is now hiring former U.S. Attorney General Eric Holder’s law firm, at $25,000 a month, to fight the policies of the incoming Trump administration.
As one legislator noted, the 1,592 attorneys and legal staff at California’s Attorney General’s Office are apparently not up to the task. Beyond the waste and redundancy, Holder seems a rather curious choice. As U.S. Attorney General, Holder was fond of harassing the press, seizing phone records of AP reporters. Holder also managed the “Fast and Furious” firearms sting, a failure by his own admission, and when he failed to turn over documents he became the first U.S. Attorney General to be held in contempt of Congress. Even so, the governor wants to hire him, and the dynamic is not new for California.
Unsatisfied with Richard Nixon’s HUD policies, the Golden State created the California Housing Finance Agency in 1973. When President George W. Bush declined to fund embryonic stem-cell research, California Democrats, led by real-estate tycoon Robert Klein, launched the initiative that created the $3 billion California Institute for Regenerative Medicine, which in more than a decade has failed to produce any of the promised cures and therapies.
Governor Jerry Brown, who wants to spend $15 billion on diversion tunnels, took the reactionary pose to a new level. “If Trump turns off the satellites,” the governor said, “California will launch its own damn satellites.” The governor didn’t say what the satellites would cost, but he still believes that in California there is always money for everything.
As the Associated Press reports, on Thursday, January 5, Shiloh Heavenly Quine, 57, “became the first U.S. inmate to receive state-funded sex-reassignment surgery.” The procedure cost some $100,000, so Californians might wonder what Shiloh Heavenly Quine did to receive such an expensive procedure on the taxpayers’ dime.
In February of 1980 in Los Angeles, Rodney Quine and an accomplice gunned down Shahid Ali Baig, a father of three, then stole Baig’s car and $80. According to Baig’s daughter Farida, her father pleaded for his life. Quine was twice married and divorced and fathered two daughters but claims to have sought female status since the age of nine. So apparently it was a he-said-she-said sort of case. When previously denied the female overhaul, Quine reportedly attempted suicide and failed. But the convict gained hope in 2015, when California became the first state to pony up taxpayers’ money for the sex-change operations of convicted violent criminals.
What role Obamacare may have played in the taxpayer-funded sex change remains unclear, though in California, Obamacare has already caused “widespread consumer misery,” according to health reporter Emily Bazar. According to an August, 2015 LifeSiteNews report, San Francisco federal judge Jon Tigar, an Obama appointee, “assigned himself to Quine’s case and appointed a team of San Francisco lawyers and the Transgender Law Center to represent him.” Tigar’s view was that denying a prisoner’s sex-change operation may constitute “deliberate indifference” to a serious medical need and, if so, would be unconstitutionally “cruel and unusual punishment.” In 2015 California agreed to pay, and on January 5, 2017 Shiloh Heavenly Quine duly got the state-funded “reassignment,” which transgender activists construe as a right.
Actually, nothing is a right that puts mandates and costs on other people, and Quine’s surgery wasn’t a right. It was an unnecessary elective procedure that taxpayers were forced to fund. If paroled, the svelte Shiloh Heavenly Quine could perhaps audition for a “Tootsie” role. Trouble is, Quine has no possibility of parole and will now be heading to a women’s prison, where life will be much easier. California taxpayers can be forgiven for believing that a quick session on Old Sparky would have been the best treatment for this convicted killer.
Over the past eight years, much of the U.S. federal government’s operations have become something of an unmitigated bureaucratic mess. Whether we’re talking about the Defense Department, the EPA, the DEA, the IRS, the VA, the Energy Department, Medicare, Medicaid, the Department of Health and Human Services or the Department of the Interior, to name just a few, we have all seen far too many recent examples of mismanagement-enabled wasteful spending.
That’s why it was interesting to read the steps that Washington, D.C., budget wonks Paul L. Posner and Steve Redburn would recommend to rein in such wasteful spending practices. From the pages of Government Executive, here’s the short list of their suggestions:
These are decent ideas, which were developed by the National Budgeting Roundtable. However, considering just how badly managed so many U.S. government departments have become with respect to their fiscal stewardship of U.S. taxpayer funds, it may be more beneficial to fold these suggestions into a much more comprehensive approach that would go considerably deeper to achieve positive results: Zero Based Budgeting.
Accounting firm Deloitte explains what Zero Based Budgeting (ZBB) means:
ZBB is a budgeting process that allocates funding based on program efficiency and necessity rather than budget history. As opposed to traditional budgeting, no item is automatically included in the next budget. In ZBB, budgeters review every program and expenditure at the beginning of each budget cycle and must justify each line item in order to receive funding. Budgeters can apply ZBB to any type of cost: capital expenditures; operating expenses; sales, general, and administrative costs; marketing costs; variable distribution; or cost of goods sold. When successful, ZBB produces radical savings and liberates organizations from entrenched departments and methodologies. When unsuccessful, the costs to an organization can be considerable.
Deloitte also provides the following infographic describing the key concepts behind it (click for a larger version).
Perhaps the most surprising thing about ZBB is that it was originally employed to right the federal government’s fiscal house back in the 1970s, long before it was rediscovered by private sector firms bleeding cash in the years following the 2008 Financial Crisis and used to turn their financial fortunes around. Deloitte recognizes the potential for the federal government’s current situation in needing to get its spending under some semblance of control.
For organizations looking to grow by releasing capital through improved cost management, ZBB offers appealing possibilities for reducing costs while bringing additional value in the form of operational efficiency. In a best case scenario, ZBB may reduce SG&A costs by 10 – 25% within six months. The potential impact can be especially pronounced in the public sector, where ZBB could theoretically encourage Congress to only pay for necessary and efficient programs as opposed to sanctioning automatic increases in government spending.
This could be especially insightful when applied to programs and agencies that claim the biggest portions of government funding. For instance, while defense spending for 2016 was originally set at $523 billion, Congressional support for additional spending increases will bring total defense funding for that year to $619 billion. This $96 billion increase will occur on top of the previous budget, without adjustment for any previous fluctuation in needs or priorities. If government agencies were to actively seek an accurate base budget before spending increases were applied, additional funding could be allocated more effectively and efficiently.
Additionally, by forcing agencies and lawmakers to actively prioritize each program, ZBB could increase organizational efficiency by encouraging stakeholders to work together to analyze operations. In turn, this forces cost centers to identify their mission and priorities, which helps align resource allocations with strategic goals. Furthermore, by creating a budget and baseline from zero, government agencies would benefit from perceived increases in transparency and accountability both internally within their organization and externally with the public.
That’s the kind of outcome that both elected and appointed officials across the entire political spectrum in Washington, D.C., need to deliver. Zero Based Budgeting has delivered those kinds of results in the past – its time has come again for the U.S. federal government’s desperately needed comprehensive fiscal reform.
Customers of Staples Inc. have been enjoying the conveniences of in-store postal services but as Bloomberg reports, that will soon come to an end. The cancellation is a “coup for the Postal Service’s largest union,” the American Postal Workers Union, which fought Staples’ merger with Office Depot and urged customers to boycott the company. Had they not done so, said APWU president Mark Dimondstein, all Staples stores “would have had full-blown post offices, not staffed by postal employees but rather Staples employees, and the Post Office also would have used that model to spread to other major retailers.” Union boss Dimondstein thus confirms that what is good for government employee unions is bad for consumers and taxpayers. As they can easily confirm, a visit to a regular post office is like stepping into the eighteenth century, but this is hardly the only problem with the US Postal Service, a perennial money loser.
The USPS posted a net loss of approximately $5.6 billion for fiscal year 2016, worse that the $5.1 billion for fiscal year 2015. As we noted, during years of massive losses approaching $16 billion, USPS bosses got hefty raises. Postal bosses have sought to cut costs by ending Saturday delivery, but the letter carriers union had a problem with that. So did some politicians, who called Saturday delivery a vital service. It isn’t, and the use of “snail mail” continues to decline. Still, if one did have to mail something, it would be nice to do so in a Staples store. Government employee unions have now quashed that convenience, and the USPS remains an inefficient money losing monopoly.
The only way to fix this problem is to cancel the USPS monopoly on first-class mail deliver and open such service for competition. In 2017 and beyond, taxpayers will see if the new administration in Washington is up to the task.
President-elect Donald Trump has selected South Carolina Representative Mick Mulvaney to be the next director of the White House’s Office of Management and Budget (OMB).
Mulvaney is an interesting choice for the job, which given many of the public positions that he has taken over the years with respect to wasteful spending in Washington D.C., suggests that business may not continue as usual for the federal government’s budget. Politico‘s Danny Vinik reports on one aspect of how Mulvaney’s appointment to the OMB Director position may terminate the back door method by which the Pentagon has been getting around complying with the defense spending cuts that imposed during the last four years.
Since 2001, the Department of Defense has spent more than $9 trillion on everything from new weapons systems to soldier salaries, and nearly 20 percent of that money — $1.7 trillion in total — has come from an “off-the-books” budget account called the Overseas Contingency Operations fund. It’s the best-known budget gimmick in Washington, a classic example of Democrats and Republicans finding common ground when they want to boost defense spending while technically abiding by the current budget caps….
Mulvaney has been one of the loudest critics of the fund during his time in Congress, hammering it as a “slush fund” and sponsoring legislation to eliminate it. Now, suddenly, he will find himself in a unique position to kill it off. Could he do it?
Vinik provides additional background about the Defense Department’s Overseas Contigency Operations fund and also why it has become a target for a new OMB director who may be serious about restraining wasteful spending.
On paper, the budget gimmick serves a real purpose. The Overseas Contingency Operations fund, or OCO, was established in 1997 and is typically referred to as an emergency fund; Congress appropriates money into the OCO account for the Pentagon to fund unplanned needs, like a war. During the George W. Bush administration, OCO defense spending increased dramatically as the U.S. tapped the account to pay for its wars in Afghanistan and Iraq. It peaked in fiscal 2008, at $187 billion, accounting for 28 percent of total Pentagon spending.
Since then, it has slowly declined as Obama has adopted a lighter-touch military strategy, pulling out troops in Iraq and Afghanistan. OCO defense spending in fiscal 2016 was $59 billion, 10 percent of total Pentagon spending.
Mulvaney calls this a “slush fund,” and few budget experts disagree. Its real role, they say, is to allow the Pentagon to keep spending money on overseas wars without violating the spending caps imposed by the 2011 budget deal. Todd Harrison, an expert on the defense budget at the Center for Strategic and International Studies, said that starting in 2014, the Pentagon began shifting its base defense spending into the OCO account, which — unlike the main budget — doesn’t have a limit. That gave defense hawks in Congress and the Pentagon an easy way to boost defense spending without looking like they were violating the budget cap: Simply put the money in the OCO, and pretend that the defense spending caps aren’t violated.
Both President Obama and the current OMB director, Shaun Donavan, have called for ending the OCO slush fund, but neither have been willing to back up the move toward establishing more effective fiscal discipline by actually doing so in President Obama’s annual budget requests, which confirms a lack of seriousness on their parts.
It may well be that supporting the nation’s defense requires higher spending than is currently specifically allocated for in the federal government’s budget, but that is something that needs to be established through the regular appropriations process in the U.S. Congress. Without reform, like the U.S. Department of Justice’s Judgment Fund that the Obama administration has been using as its own slush fund to achieve its political objectives without express Congressional approval, the Defense Department’s OCO fund will enable far too much spending to occur without sufficient restraint, which can only harm the nation’s interests.
Time will tell how seriously Mulvaney takes the opportunity to terminate the Pentagon’s slush fund’s role in the ongoing budgetary shell game of Washington’s bureaucrats.
“We are not now in deficit, we were never in deficit and we won’t be in deficit at the end of the year.” That was Susan Hansch, chief deputy director of the California Coastal Commission last August, explaining that the CCC had received almost enough money to repay $1.45 million from the state Department of Finance. According to a year-end audit by that same department, however, the CCC is such a mess that such loans, as Adam Ashton notes in the Sacramento Bee, “could be a regular occurrence.” The Commission responded that it was too shorthanded to clean up its books and requested that the Department of Finance “consider an ongoing year-end cash flow loan,” to keep the agency afloat.
California’s embattled taxpayers will surely wonder what is going on here. They provide the Commission’s annual $24 million budget and $1.2 million monthly payroll for 163 permanent employees. For all that spending, taxpayers get nothing of any value. All cities and counties on California’s coast have governments elected by the people. These elected governments are entirely capable of handling land-use issues but the unelected Coastal Commission overrides them all.
The Commission was supposed to be temporary, but before the end of the 1970s legislators predictably made it permanent. In practice, the CCC became the private domain of Peter Douglas, a regulatory zealot with little regard for property rights. On his watch the Commission became known for Mafia-style corruption. During the 1990s, Coastal Commissioner Mark Nathanson attempted to shake down celebrities for bribes and wound up serving a prison term.
As we noted, the Commission has been expanding its power into new areas such as animal management and surfing tournaments. The CCC keeps busy adding new commissioners and deploying its new power to bypass the courts and levy fines directly. Now the powerful Commission claims it is too shorthanded to clean up its own books and seeks a regular loan to keep itself afloat. Instead of rewarding unaccountability, California should take the opportunity to eliminate this arrogant, abusive and redundant Commission. That kind of leadership would set a positive example for the nation.
Sometime shortly before January 17, 2016, after the Obama administration had withdrawn roughly $400 billion of U.S. taxpayer money from the U.S. Department of Justice’s Settlement Fund account at the U.S. Treasury, it transferred the withdrawn funds electronically overseas to U.S. accounts at the Swiss National Bank in Geneva, Switzerland.
On January 17, 2016, the Obama administration then exchanged those dollars for the equivalent value of Swiss francs in the form of physical banknotes, loading up several wooden pallets with stacks of the bills and wrapping them in plastic before transporting the pallets of cash to Geneva’s international airport, where the money would be traded for four U.S. citizens that Iran’s government had previously arrested on spurious charges and had been holding as hostages.
After the Iranians freed the four Iranian-Americans it had been holding in Tehran and sent them on their way to Tehran’s international airport, the Obama administration loaded the pallets holding the equivalent of $400 billion of U.S. taxpayer cash onto the Iranian government’s plane at the Geneva airport, which then departed.
The Wall Street Journal has uncovered a video posted by a plane spotter at Geneva’s international airport on that day as it was departing, where the arrival of the antiquated Iranian government-owned 737 marked a very rare occurrence for seeing such an old aircraft at the airport.
The video above is the planespotter’s YouTube video. The WSJ has annotated the video at its site, which I’ve transcribed below.
On January 17, 2016, an Iranian government jet picked up $400 million in Swiss francs in Geneva paid by the Obama administration.
The same day, four Iranian-American prisoners were released from Iran.
This video, posted without details to YouTube by an amateur plane spotter, shows the Boeing 737 as it departs Switzerland at around 1:15 p.m., after the U.S. received word that the prisoners had been freed in Tehran and were en route to the airport.
Just before takeoff, the Iranian jet passes two U.S. Air Force planes that had arrived to retrieve the freed Americans.
The two U.S. Air Force planes appear to be C-40C transport aircraft, which is a military version of Boeing’s more modern 737-700 commercial aircraft that is typically used to transport senior ranking U.S. government officials.
Since the transfer of funds, Iran’s government and military have used the cash that they were provided by the Obama administration to increase their aggressive activities across the Middle East and the Persian Gulf.
And that is the story of how $400 billion of U.S. taxpayer dollars that had been sitting idle in a little known account at the U.S. Treasury Department was put to work by the Obama administration.
According to the U.S. Government’s Office of Personnel Management, more than 2.7 million people work as civilian employees of the U.S. federal government. For all practical purposes, they are entirely compensated by taxes imposed on the 140 million Americans who are employed in occupations outside of the federal government.
Chris Edwards of Downsizing the Federal Government has been keeping track of the trends for the average compensation of federal bureaucrats and for Americans who work everywhere else since 2000.
In 2015 federal civilian workers had an average wage of $86,365, according the U.S. Bureau of Economic Analysis (BEA).5 By comparison, the average wage for the nation’s 112 million private-sector workers was $58,726. Figure 1 shows that average federal wages grew rapidly for a decade, then slowed during the recent partial pay freeze, and then started rising again in 2014 and 2015.
When benefits such as health care and pensions are included, the federal compensation advantage over private workers is even larger, according to the BEA data. In 2015 total federal compensation averaged $123,160 or 76 percent more than the private-sector average of $69,901, as shown in Figure 2.
The BEA data can be broken down by industry. Among 21 major sectors that span the U.S. economy, the federal government has the fourth highest paid workers after only utilities, mining, and management of companies. Federal compensation is higher, on average, than compensation in the information industry, finance and insurance, and professional and scientific industries.
With an average income of $86,365 in 2015, the typical federal bureaucrat would fall in the 86th percentile of all income-earning individual Americans, which is to say that only 14 percent of Americans make more than the average civilian employee of the U.S. government. And that’s without counting the very generous benefits they receive as part of their total compensation.
President Obama is vacationing in Hawaii, the state where he was born and spent his childhood. According to Anita Kumar of McClatchy News, this annual trip cost taxpayers $3.5 million and the total cost of the first family’s travel comes to $85 million, possibly $90 million when further records are released. All told, except for the current Hawaii trip, President Obama has taken 28 vacations spanning all or part of 217 days. Critics are surely right that the president abuses the Secret Service, Air Force, and of course taxpayers with unnecessary travel. He does have a regal, autocratic style, and his 1995 book Dreams from My Father, most likely written by David Axelrod, said his father lived according to principles that promised “a higher form of power.” To cost out the president, however, taxpayers should note some other figures.
By the time Obama leaves office, the national debt will approach $20 trillion, nearly double the $10.6 trillion when he took office in 2009. By some calculations, the president has added more to the debt than 41 U.S. presidents from George Washington through George H.W. Bush combined. The current president has added entitlements such as Obamacare, a new misery index, and created new federal agencies such as the Consumer Financial Protection Bureau. The president is shrink-wrapped in statist superstition, which holds that there is always money for everything, regardless of need, record of performance, or how much spending burdens generations not yet born.
Even with the fathomless debt of $20 trillion, President Obama makes no effort to trim his extravagant travel expenses, which approach $100 million for his two terms. Taxpayers should not be surprised, but they might take a cue from Mose Allison, who passed away in November. Many politicians’ minds are on vacation, and their mouths working overtime.
Shortly before the holiday season, the Social Security Administration sent out an official letter titled “Important Information.” If you are now at the full retirement age of 66 or older, the letter says, “you may keep all of your benefits no matter how much you earn.” That kind of generosity is hard to top, but on the other hand, if you are younger than the full retirement age, “there is a limit to how much you can earn before we reduce your benefits” and the earnings limit is $16,920. Try paying your bills with that. If you are under 66 and earn more than that, “we deduct $1 from your benefits in 2017 for each $2 you earn over $16,920,” equivalent to a tax of 50 percent. If you are turning 66 in 2017, SS allows you to earn $44,880 and grabs $1 for every $3 you earn above that limit, equivalent to a tax of 33 percent. This kind of federal poverty enforcement, however, does not apply to everybody.
As we noted, those in the Federal Employees Retirement System (FERS) can retire at the age of 55, a full seven years earlier than Social Security allows. By all indications, they are not subject to income restrictions and the government even helps early federal retirees get more money through a secretive Special Retirement Supplement (SRS). For privileged federal employees, this is a Dream Act guaranteed to keep the government ruling class far ahead of the working masses. The Obama administration made no attempt at reform.
Meanwhile, the Social Security Administration has been sending money to former Nazis and continued payments to dead people for twenty years. The Social Security Administration has also attempted to grab money from the children of people who were allegedly overpaid benefits decades ago. This happened on the watch of Acting Commissioner Carolyn Colvin, who faced allegations that on her watch the Administration hid a report on a $300 million computer boondoggle and retaliated against a whistleblower. Obama nominee Colvin remains “acting” commissioner and reports of retaliation against whistleblowers have continued in 2016. Beyond such waste, abuse and incompetence, the Social Security Administration will still punish productive work in 2017. Happy New Year everybody!
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