MyGovCost News & Blog

Government corruption is a staple of the news, with politicians such as San Francisco Democrat Leland Yee, a consort of gangsters such as Raymond “Shrimp Boy” Chow, recently landing in prison. Chris Reed of Calwatchdog has charted corruption in the California city of Bell, which “was being run like a criminal enterprise.” In the city of Carson, the corruption included a brand of government agency not often in the news.

Al Robles served simultaneously as mayor of Carson and board member of the Water Replenishment District of Southern California, which ponied up money to pay Robles’ legal bills. The Central Basin Municipal Water District is facing allegations of a $2.75 million slush fund created to pay politically connected consultants such as former Assemblyman Tom Calderon, D-Montebello. Further, as Reed notes, “Central Basin board member Art Chacon was allowed to collect car allowance and mileage reimbursements from the district from 2006 to 2014, an eight-year span in which he didn’t have a driver’s license.” In 2014, “the district settled sexual harassment allegations made by a female contractor against district Director Robert Apodaca for $670,000.”

As Cross-Currents in California Water observes, water districts can be top-heavy hotbeds of cronyism. As the Goleta Water District (GWD) on the central coast shows, outlandish salaries and benefits do not guarantee sound management. Since water is not evenly distributed, the GWD has purchased water from other districts and even private landowners such as television producer Dick Wolf, whose Slippery Rock Ranch sits atop a reservoir of 200,000 acre-feet. When negotiations broke down, GWD took the ranch to court to block its sales to local municipalities and claimed that the ranch’s groundwater basin was connected to the district’s. As a spokesman for the ranch put it, “How did water that they had been negotiating to buy suddenly become theirs?”

As the Santa Barbara News Press noted, the district’s legal bills are up more than 300,000 for the lawsuit alone, and overall budget costs are $1.3 million, “considerably higher than the other three South Coast water agencies.” And of course “ratepayers are picking up the tab.”

The U.S.’ War on Terror has endured for 15 years and has cost U.S. taxpayers over 1.75 trillion dollars. MyGovCost is marking the occasion by illustrating its accumulating cost from year to year along with a timeline of the major events that have defined it.

References

• Ackerman, Spencer and Rasmussen, Sune Engel. US to deploy hundreds of troops in Afghanistan to thwart Taliban. The Guardian. February 8, 2016.
• CBS News. The War in Afghanistan: A Timeline. December 1, 2009.
• Council on Foreign Relations. Timeline: The Iraq War. Accessed September 10, 2016.
• Council on Foreign Relations. U.S. War in Afghanistan. Accessed September 10, 2016.
• de Rugy, Veronique. Mercatus Center. Wars in the Middle East Have Cost Taxpayers Almost $1.7 Trillion. January 21, 2015.
• John, Tara. Timeline: The Rise of ISIS. Time. October 9, 2015.
• New York Times. Timeline of Major Events in the Iraq War. Accessed September 10, 2016.
• Rosenberg, Matthew and Shear, Michael D. In Reversal, Obama Says U.S. Soldiers Will Stay in Afghanistan to 2017. New York Times. October 15, 2015.
• U.S. Senate Committee on Appropriations (Democrats). FY2016 Omnibus Appropriations Act. December 16, 2015.
• Wikipedia. Timeline of the Iraq War. Accessed September 10, 2016.
• Wikipedia. Timeline of the War on Terror. Accessed September 10, 2016.
• Wikipedia. Timeline of the Iraq War Troop Surge of 2007. Accessed September 10, 2016.

In 2014, the Phoenix branch of the Department of Veterans Affairs became ground zero for the national health care rationing wait list scandal that rocked the federal agency. In response, both President Obama and the department’s bureaucrats pledged to implement reforms that would fix the problems that led to thousands of the nation’s veterans being denied timely medical treatment, where hundreds died waiting for appointments without ever receiving any care.

This summer, Steve Cooper, a 45 year old veteran seeking care for Stage 4 prostate cancer, secretly recorded his encounter with VA medical staff at a recently opened regional branch of the VA in the greater Phoenix metropolitan area. Local NBC affiliate PNNX 12 News provides a transcript for some of the more remarkable statements that came out in the recording.

The most notable moments throughout the 30 minutes of recorded conversations include the following:

– A nurse calls the patient phone scheduling system “a nightmare,” admitting that even as an employee she can’t get a person on the phone line.

– The doctor who saw Cooper admitted he’s “not a fan of the VA” and complained his patient load doesn’t allow him enough time with patients.

– The doctor said that, as a new employee, he is still trying to understand how the “Choice” program works.

– The doctor expressed a desire to check Cooper’s heart and lungs but said he misplaced his stethoscope. The doctor ended up not using a stethoscope at all, but nonetheless stated that “key exam findings” on Cooper were negative.

“I especially have a problem with it because earlier the nurse said my blood pressure was high,” Cooper said in an interview with 12 News. “And the excuse that a doctor says he can’t find his stethoscope just doesn’t work when you’re a doctor making six figures working for the Phoenix VA.”

Cooper says he believes the audio reflects ongoing issues at the Phoenix VA Healthcare System first identified two years ago.

“Post two-years since the crisis broke, the audio is valuable. It’s valuable to hear from the employees themselves that the system doesn’t work because of the infrastructure,” Cooper said during an interview with 12 News.

KPNX 12 News‘ report came out on August 23, 2016. In the report, Phoenix VA medical director Diana Amdur indicated that the agency would address the allegations and take appropriate actions.

Nine days later, while visiting the Phoenix branch of the VA, the Department of Veterans Affairs’ second highest ranking official, Sloan Gibson, agreed with the statements in the recording and described the VA’s patient scheduling system as a “nightmare”. KPNX 12 News reports:

“I don’t want anyone to think that we’re hanging up a ‘Mission Accomplished’ banner,” Gibson said. “We’re not. We’ve got a lot of work left to do but the simple fact of the matter is a vast amount has changed.”…

Regarding a 12 News report last week about secret audio recordings at a VA clinic, Gibson said he agreed with a nurse who said the patient scheduling system was “a nightmare.”

Gibson vowed that a “contact center” will be established at every VA medical center nationwide by the end of the year to handle issues such as scheduling.

“I’ve directed today the executive in charge of that program to come here on the ground, for him to do an assessment,” Gibson said. “To figure out what resources do we need to bring to bare so when a veteran calls somebody answers the phone and provides the help they need.”

Gibson has been one of the VA’s few bright spots in the bureaucracy’s response to its systemic problems. He will also soon be in a position to more directly influence the lack of effective implementation of reforms uncovered at the Phoenix branch of the VA through a change in its leadership, since VA medical director Diana Amdur announced several days earlier that she will be stepping down from her position for health reasons after being on the job for just nine months.

Gibson attributed the high stress of the job as being a contributing factor to Amdur’s health condition.

Meanwhile, President Obama is rejecting a recommendation of the independent Commission on Care to reform the governance structure of the VA’s hospital network. The Washington Free Beacon reports:

President Obama is disputing a recommendation to change the governance structure of the Department of Veterans Affairs network of hospitals, saying it would undermine the authority of bureaucrats overseeing the agency-run facilities.

The proposal was one of several included in the final report of the Commission on Care, an independent panel established by Congress to examine the VA’s hospital network after veterans were found to have died waiting for care as agency employees kept secret lists to conceal long appointment waits in 2014….

In its final report, which outlined a plan for “far-reaching organizational transformation” at the VA, the commission cited “weak governance” as one of the root causes of the Phoenix VA wait list scandal uncovered more than two years ago. As a solution, the panel recommended that Congress provide for the formation of an 11-member board of directors, accountable to the president, that would be “responsible for overall VHA Care System governance” and would have “decision-making authority to direct the transformation process and set long-term strategy.” The board would also not be subject to the Federal Advisory Committee Act, under the commission’s recommendations.

“The governance limitations made evident in the Phoenix scandal have profound implications for the long term,” the commission’s report stated. “The Commission believes [the Veterans Health Administration] must institute a far-reaching transformation of both its care delivery system and the management processes supporting it.”

It’s hard to see how any of that can happen without substantial reform of the VA’s bureaucracy and management structure.

Last year an independent audit revealed that the City of Sacramento, California’s capital, had overpaid city retirees by $2.8 million. The overpayments, which had been going on since 2005, prompted the Sacramento Bee to editorialize that “a mistake can balloon into sizable money,” citing a $60 million gap between projected payouts and expected revenue for the city’s old retirement system in which the overpayments occurred. Add in CalPERS, the editorial said, and the total unfunded liability increases to $675 million, a big jump from $161 million in 2004-05. “It’s going to be tough to whittle down that debt,” the Bee’s editorial lamented. “Paying out more than retirees are owed only made it worse.” That turned out to be true, in more ways than one.

Since the overpayments went undetected for a decade, the city’s own oversight process is obviously useless and unaccountable to taxpayers. On the other hand, the overpayment of nearly $3 million did not prompt the City of Sacramento to fire those responsible. The only city employee named in connection with the overpayment is “human resources analyst” Kimberly Isaacs. According to the Bee’s Anita Chabria, last July Isaacs’ “title and duties were reduced but her pay remained the same.” So she got the same money for less work until May of 2016, when she took a pay cut of “more than $20,000.” As Chabria reports, Isaacs is now charging that her demotion was based on “race and age,” and the 54-year-old African American has filed a complaint with the state Department of Fair Employment and Housing.

However this turns out, it will not whittle down any pension debt, which the overpayment made worse. Indeed, the complaint will consume more public resources. The city’s new human resources director, Melissa Chaney, wants to hire a new “diversity manager” at a salary of $180,000. That won’t help whittle down the pension debt either, but it does confirm the dynamic. At all levels of government, mistakes can quickly balloon into sizable money.

As we noted, California’s $3 billion Stem Cell Research and Cures Act, Proposition 71, promised life-saving cures and therapies for a host of afflictions including heart disease, diabetes, Alzheimer’s and Parkinson’s. Celebrity promoters included Christopher Reeve, Michael J. Fox and Arnold Schwarzenegger. In 2004 voters approved the measure, which created the California Institute for Regenerative Medicine. Real estate tycoon Robert Klein cleverly wrote Prop. 71 to install himself as the institute’s chairman, and Klein protected CIRM from almost all legislative oversight by requiring a 70 percent supermajority of both houses to make any structural or policy changes. He awarded huge salaries to CIRM bosses such as Alan Trounson, who bagged $490,000 a year, courtesy of California taxpayers. As David Jensen of the California Stem Cell Report shows, CIRM is still paying off big time for Trounson.

The former CIRM president “received $443,500 in total compensation from the Bay Area stem cell company that appointed him to its board of directors only seven days after he left his state post.” This came courtesy of StemCells Inc., “a firm that was awarded more than $40 million in funding while Trounson headed the California Institute for Regenerative Medicine.” The company, Jensen observes, was “the only applicant ever to reach that level of success” and “one of the two $20 million awards . . . approved by the stem cell agency’s board despite being rejected twice by its grant reviewers. It is the only time that an application has been rejected twice by reviewers and then approved by the governing board.” Jensen does not explain that CIRM founder Robert Klein lobbied for the company, and that CIRM directed a full 91 percent of its research funding to institutions with representatives on its governing board. Jensen does acknowledge, however, that “conflict-of-interest allegations have dogged the agency since it was created in 2004.”

At present, by Jensen’s count, California’s $3 billion government stem-cell agency still has “about $800 million in uncommitted funds” and “expects to run out of cash for new awards in 2020 unless it finds fresh sources of funding.” With the number of promised cures and therapies still holding at zero, CIRM remains the California Institute for the Redistribution of Money.

In January 2016, the Obama administration transferred $1.71 billion to Iran from the U.S. Treasury. Of that money, the equivalent of $400 million in cash was directly flown to Iran in an unmarked Iranian cargo plane, predominantly in the form of small denomination Euros and Swiss francs that had been bundled and stacked on wooden pallets. Upon receipt of that money, Iran released three American citizens that it had imprisoned on false or trumped up charges.

While that dramatic story has gained quite a lot of attention, the story of how the U.S. Department of Justice’s Judgment Fund at the U.S. Treasury was used to fund an additional $1.31 billion to Iran’s accounts at other nation’s central banks would appear to involve a similar level of intrigue.

Specifically, the Obama administration obtained the full $1.31 billion it ultimately transferred to Iran was done through 13 withdrawals of $99,999,999.99 and one payment of $10,390,236.28 from the DOJ’s Judgment Fund.

Source: Tom Blumer

The 13 separate withdrawals of $99,999,999.99, or rather, 13 separate withdrawals of one penny less than $100 million each, appear to have been structured to specifically allow the U.S. Federal Reserve to directly transfer the funds to foreign central banks as cash items. The Associated Press’ Bradley Klapper reports:

On Jan. 17, the administration paid Iran the account’s $400 million principal in pallets of euros, Swiss francs and other foreign currency, raising questions about the unusual payment. The $1.3 billion covers what Iran and the U.S. agreed would be the interest on the $400 million over the decades….

Briefing reporters last week, a senior U.S. official involved in the negotiations said the interest payments were made to Iran in a “fairly above-board way,” using a foreign central bank. But the official, who wasn’t authorized to be quoted by name and demanded anonymity, wouldn’t say if the interest was delivered to Iran in physical cash, as with the $400 million principal, or via a more regular banking mechanism.

The money came from a little-known fund administered by the Treasury Department for settling litigation claims. The so-called Judgment Fund is taxpayer money Congress has permanently approved in the event it’s needed, allowing the president to bypass direct congressional approval to make a settlement.

Economic analyst Tom Blumer describes why these payments actually represent a transfer of cash to Iran.

The reference to a “foreign central bank” by the “senior U.S. official” Klapper quoted appears to be a classic case of misdirection. That’s because the default reason for the 13 payments of one penny less than $100 million has to be that any amount larger than that would not have been processed by the U.S. central bank, aka the Federal Reserve, as a “cash item.”

Section 3.0 of the Fed’s Operating Circular No. 3 relates to “Items We Do Not Handle as Cash Items” (emphasis: “Not”). That section includes the following dollar threshold:

We reserve the right to charge back an item if in our discretion we judge that circumstances require that it should not be handled as a cash item. We reserve the right to return an item payable by, at or through a bank that has been reported closed. We do not handle an item in the amount of $100,000,000 or more, and we reserve the right to return items in amounts of less than $100,000,000 that in our judgment are intended to avoid the $100,000,000 limit. The Reserve Bank may reject a purported electronic item and reverse any provisional credit that may have been given for it.

Thus, the payments, all but one kept just under $100 million, were from all appearances deliberately structured to ensure that the Fed would treat them as “cash items.” Additionally, the supposedly “independent” Fed failed to reject the payments, even though they clearly were “intended to avoid” the $100 million limit.

The sub-$100 million size of these 14 payments enabled them all to be processed as “cash items.” Thus, it appears that the Fed could have sent the funds after processing to the unnamed “foreign central bank” the AP’s source mentioned as immediately disbursable “cash items.”

As such, it would then appear that the Obama administration directly transferred some $1.71 billion from the U.S. Treasury to Iran or to its bank accounts in cash, the equivalent of $400 million in physical cash and $1.31 billion in electronic payments purposefully structured to ensure its delivery in ready-to-spend form to the Iranian government’s accounts at as yet unidentified foreign central banks.

One of the reasons this portion of the story is so interesting is because it is a crime for U.S. citizens to structure withdrawals from their private bank accounts this way. Writing at the New York Times, Josh Barro describes how the U.S. law prohibiting such structured withdrawals was used to prosecute former U.S. Speaker of the House of Representatives Dennis Hastert.

Dennis Hastert has not been indicted on a charge of sexual abuse, nor has he been indicted on a charge of paying money he was not legally allowed to pay. The indictment of Mr. Hastert, a former House speaker, released last week, lays out two counts: taking money out of the bank the wrong way, and then lying to the F.B.I. about what he did with the money.

Does that make sense? Conor Friedersdorf of The Atlantic, for example, is worried that the indictment constitutes government overreach, punishing Mr. Hastert for concealing payments whose disclosure he may have thought would be damaging to his reputation, but which were not illegal.

Federal prosecutors allege Mr. Hastert was paying hush money in exchange for wrongdoing that happened long ago. But Mr. Hastert is charged with structuring: making repeated four-figure cash withdrawals from his bank in order to avoid the generation of cash transaction reports, which banks are required to send the government about every transaction over $10,000. These reports have been required since 1970, with the intention of helping the federal government identify organized criminals and tax evaders.

The contrast between the Obama administration’s actions to transfer $1.71 billion to Iran and the prosecution of Dennis Hastert brings to mind the self-indictment of former President Richard Nixon’s unlawful, pardoned conduct that came to light through his 1977 interviews with David Frost:

“If the president does it, that means it’s not illegal.”

The U.S. House of Representatives’ Financial Services Committee will begin an inquiry into the Obama administration’s transfer of U.S. taxpayer funds to Iran’s government this week. It will be interesting to see what determinations will be made, since right now, answers to the questions raised by the irregularities of the whole transaction are not forthcoming from the administration.

Thanks to bills California governor Jerry Brown signed in July, Californians now face ID and background checks to purchase ammunition, and the state will create a new database of ammunition owners. Magazines holding more than 10 rounds are banned and the state now restricts the loaning of guns, without background checks, even to close family members. Californians can be forgiven for thinking that these measures burden law-abiding citizens more than they restrict the violent criminals who flout the law. The six gun-control bills that Gov. Brown signed, however, are not the limit of California’s surge in gun control.

As Diana Lambert explains in the Sacramento Bee, the UC Davis Medical Center “will house the nation’s first state-funded firearm violence research center.” The University of California Firearm Violence Research Center gets a five-year grant of $5 million, part of the governor’s budget package. Garen Wintemute, a physician and expert on “firearm violence,” will head the center, whose first project will be “a survey that looks at who owns guns, why they own them and how they use firearms.” Californians could be forgiven for thinking that, as Sam Paredes of Gun Owners of California told Lambert, the state research team seeks “any justification to control guns” and has never shown firearm ownership in a positive light.

Wintemute claimed to be “driven by data, not by a policy agenda,” and that suggests a project for his new state-funded center. 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. 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. For $5 million, California taxpayers surely deserve an answer.

Shortly after signing a contract with general manager Mike Wiley, Sacramento’s Sacramento Regional Transit “slipped into financial duress from which it has yet to recover,” wrote Tony Bizjak of the Sacramento Bee. “The agency has tapped reserve accounts in the last three years to balance its budget, leaving it with virtually no emergency funds this summer. RT raised rider fares 10 percent on Friday, making its buses some of the most expensive to ride in the country.” Though a bust as a manager, Regional Transit rewarded Wiley with a pension of $278,000, a full $48,000 more than his final salary of $230,000. The transit boss selected an option that will pay him $220,000 a year, still $10,000 above the federal pension maximum of $210,000. When Wiley departed, Regional Transit cut 20 administrative positions, but as Denny Walsh of the Sacramento Bee observes, the federal government is blocking state efforts at pension reform.

In 2012, California adopted a pension-reform measure that requires government employees to pay at least half the cost of their pensions. Under this measure, government employees have to work longer before retirement, and the state caps their pay for pension purposes. “At the time of its passage,” writes Walsh, “the statute was projected to save the state up to $60 billion over 30 years.” The federal Department of Labor, however, charges that California’s pension reform deprived Regional Transit employees of collective bargaining rights. Therefore, the federal government has cut off grants for millions of dollars. Federal labor officials only approved grants to transit agencies “that agreed to restore pre-reform-act pension benefits and bargaining rights.”

As Lawrence McQuillan explains in California Dreaming: Lessons on How to Resolve America’s Public Pension Crisis, extravagant government pensions are depleting budgets and threatening vital public services. The federal government makes the task of pension reform more difficult.

Six years ago, the U.S. Congress passed the Telework Enhancement Act of 2010, which permitted eligible bureaucrats who work in the civilian portion of the executive branch of the U.S. federal government to telecommute to work. When the law was passed, lawmakers expected to realize several benefits, particularly in the nation’s capital:

• Less traffic congestion.
• Less pollution related to commuting.
• Less energy use at government offices.

Today, nearly 25% of these bureaucrats have taken advantage of the Telework law to work part time from home. Unfortunately, the General Accounting Office has issued a report that suggests that none of these expected benefits have yet to be measured. The Post and Courier reports:

… the GAO has concluded in a review of six agencies, big and small, that there is no compelling evidence to show that working from home delivers the anticipated benefits. Those include less congestion and fewer auto emissions by reduced commuting, and fewer energy costs at federal agencies when office space isn’t occupied.

Auditors found “little data to support the benefits or costs associated with their telework programs.”

Allowing federal bureaucrats to telecommute to work would also appear to not enhance the productivity of the workers who participate in the program. The Post and Courier recalls what was learned in a case study involving patent examiners employed by the U.S. Patent and Trademark Office.

After whistleblowers in 2014 alerted federal auditors to abuses, investigators found little oversight of stay-at-home workers. Consequently, the quality of work suffered, leading to the issuance of faulty patents and, later, litigation.

Moreover, the system was subject to abuses by the teleworkers and their supervisors. Stay-at-home examiners were given credit for work yet to be reviewed, and many workers didn’t complete their assignments until the very last minute.

Nevertheless, 99 percent of those examiners were given a “quality” rating that qualified them for bonus payments.

Teleworking might have a place in the federal bureaucracy, but the findings so far say it should be very limited, and closely monitored.

If the telework program for the employees of the federal government is going to work, the work they do has to get done and it has to get done right. Otherwise, the days of bureaucrats being allowed to work from home in their pajamas deserves to be extremely short.

The CBO has issued its mid-year update to its Budget and Economic Outlook, which covers the years from 2016 through 2026. Here’s their summary of the main change in what they project for the next 10 years.

CBO’s estimate of the deficit for 2016 has increased since the agency issued its previous estimates in March, primarily because revenues are now expected to be lower than earlier anticipated. In contrast, the cumulative deficit through 2026 is smaller in CBO’s current baseline projections than the shortfall projected in March, chiefly because the agency now projects lower interest rates and thus lower outlays for interest payments on federal debt. Nevertheless, by 2026, the deficit is projected to be considerably larger relative to gross domestic product (GDP) than its average over the past 50 years.

That seems like something of a mixed bag, where the U.S. government’s budget deficit will be larger than projected in 2016 and 2017, but will be smaller than the CBO had previously projected in the following 8 years, but the reason for that change is the same: the U.S. economy is currently growing more slowly than they previously anticipated. In 2016, that slower economic growth means larger deficits, but in future years, that same slower growth translates into lower than previously expected interest rates, which means smaller payments on the U.S. national debt, which they believe will offset the reduction in the U.S. government’s tax revenues in those years.

Figure 1-1 of the CBO’s mid-year update shows what they now expect for the U.S. government’s annual budget deficit, which after 2018, is projected to steadily grow to levels that in the previous 50 years, were typically only seen during deep U.S. recessions.

Figure 1-2 in the report shows what the CBO now expects for the U.S. government’s current spending and revenue collection trends.

Under current law, the CBO projects that the U.S. government’s revenue will rise as a percentage share of GDP throughout the next 10 years. At the same time, the CBO projects that the U.S. government’s spending will rise even faster, which is why the government’s annual budget deficits are projected to steadily rise. Both trends are well above the government’s long-term historical averages, which means that the cause of the projected growing deficit problem isn’t that the government won’t be collecting enough taxes, but rather that it will be spending too much money.

Compared to 2015, the U.S. government’s budget deficit in 2016 will be 35% larger at $590 billion. And though future budget deficits through 2026 are now projected to rise more slowly than what was anticipated 6 months ago, the cumulative effect of those budget deficits will increase the public portion of the U.S. government’s total public debt outstanding from 77% of GDP to 86% of GDP.

Considering the bigger picture for the U.S. government’s fiscal outlook by including the intragovernmental portion of the national debt, the U.S. government’s total public debt outstanding of $19.4 trillion is about 106% of GDP. If the CBO’s 10 year projection holds, the total national debt of the U.S. government will rise to be around 125% of GDP by 2026.

The historic record for that figure was set in 1945, when the U.S. was fighting World War 2, which drove the national debt up to reach 119% of GDP. According to the CBO’s new projections, it looks like the U.S. government could beat that record sometime in 2022.