MyGovCost News & Blog

It’s not often that we’re surprised by a government spending statistic, but what Breitbart News‘ Mike Flynn reported over the past weekend about one particular line item within the U.S. Treasury Department’s annual financial report for the U.S. government floored us.

Tucked away in the report, however, was a surprising fact. Student loans now make up 37 percent of the total assets of the U.S. government. In some ways, a major business of the U.S. government now is getting students to take out loans to pay for college.

The total value of assets held by the federal government is $3.2 trillion. The government’s assets include its cash, gold reserves, property, and the value of land, equipment, and inventories. The lion’s share of the government’s assets, though, is the value of loans it has issued. The total value of government-issued loans is over $1.2 trillion, almost 40 percent of its total assets.

By far the largest loan program run by the feds is the student loan program. Last year, the federal government held as assets almost $1.1 trillion in student loans. This is up almost 10 percent from 2014. The federal government earned almost $1 billion on these loans last year.

Meanwhile, the U.S. government’s total liabilities is over $21 trillion, putting its official net worth at roughly minus $18 trillion.

Among those liabilities is the over $1 trillion worth of national debt that has been incurred because the U.S. government borrows the money it uses to make student loans. Approximately one out of every ten dollars that the U.S. government has borrowed since Barack Obama became the U.S. President has been for the purpose of sustaining its student loan “business”.

And with an annual revenue of $1 billion, the U.S. government is getting a return on its “investment” of something on the order of 0.1%. When you consider that one in four of the student loans issued by the U.S. government are delinquent, it is highly likely that the U.S. government is actually losing money on its student loan business.

California Senate boss Kevin De Leon was recently asked to approve a new chief for the state’s Bureau of Electronic and Appliance Repair, Home Furnishings and Thermal Insulation. The startled senator replied that he “never heard of this department in my entire life until Rules Committee.” He may since have learned that this bureau, apparently a licensing body, has an eleven-member advisory council. The Bureau of Electronic and Appliance Repair, Home Furnishings and Thermal Insulation is part of the state Department of Consumer Affairs, and there has plenty of company. CDE director Awet Kidane, “oversees the nearly 40 regulatory entities and other divisions within the Department.” These include the Acupuncture Board, the Board of Barbering and Cosmetology, the Board of Guide Dogs for the Blind, the Structural Pest Control Board, the Telephone Medical Advice Services Bureau, and many others.

Boards and commissions also abound outside of the state Department of Consumer Affairs. Consider, for example, the state’s Sea Urchin Commission. Besides its five commissioners, this bureaucratic body includes members “representing government entities which are significant to the sea urchin fishery.” Consider also the California Cut Flower Commission, which boasts a board of eight commissioners.

Taxpayers might recall that Republican governor Arnold Schwarzenegger promised to “blow up the boxes,” the maze of boards and commissions that often serve as soft landing spots for washed-up politicians. The boards and commissions managed to survive. Like Senator De Leon, taxpayers may not have heard of these bodies and may harbor doubts about their utility. On the other hand, taxpayers may be certain that they are paying the bills.

We have been keeping track of California’s so-called high-speed rail project, backed by governor Jerry Brown and facing huge problems. As in Blazing Saddles, one thing stands in the way of the land they need: the rightful owners. The farmers, in particular, are not eager to sell. The project will supposedly cost $68 billion, already more than double the $33 billion estimate before California voters approved $9.95 billion in bonds seven years ago. The mountains north of Los Angeles will require 36 miles of tunnels, by expert accounts the most ambitious tunneling project in the nation’s history. Facing such formidable obstacles, Dan Walters of the Sacramento Bee shows how the rail bosses are “switching tracks again.”

As he notes, a “revised version” of the route will now seek to connect the San Joaquin Valley with the San Francisco Bay Area, instead of Los Angeles. Voters of all kinds disfavor the project, the veteran columnist observes, but “conceptual support appears to be stronger in the Bay Area.” The financing will supposed come from bond money, federal aid and the cap-and-trade fees on emissions. Those fees, Walters notes, “still face a legal challenge from business groups that they are taxes and therefore must be approved by a two-thirds legislative vote.” And this puts the Brown administration “in the awkward position of arguing in court that the fees are not meant to raise revenues while counting on them to finance a multibillion-dollar project.” Even the bond money, Walters warns, is not a sure thing. Lawsuits contend it violates several conditions of the original measure.

Polls show public support for high-speed rail “dwindling steadily” as the costs have grown by “tens of billions of dollars over what the bond measure projected and as other public works deficiencies have become more evident.” Taxpayers have good reason to support of Walters’ conclusion:

“Fundamentally, it makes no sense to spend so much money, whatever its source, on a project for which there is little or no demonstrated need, while our roadway system deteriorates for lack of maintenance and while drought underscores the abject neglect of our water supply.”

Do you remember Fannie Mae? Or rather, the Federal National Mortgage Association, the government-supported enterprise which was bailed out and taken over by the U.S. Treasury Department back on September 7, 2008?

If not, ProPublica summarizes what happened to the government-backed corporation at that time:

On Sep. 7, 2008, the government took over Fannie Mae and Freddie Mac. Under the terms of the rescue, the Treasury has invested billions to cover the companies’ losses.

The Fannie and Freddie bailout is separate from the broader $700 billion bailout — known as the TARP — and instead comes via the Housing and Economic Recovery Act of 2008, passed in July 2008. In February 2009, Treasury Secretary Tim Geithner said as much as $200 billion in taxpayer money might be put into each company. In December of 2009, the Treasury removed that cap, meaning an unlimited amount of money could be invested.

In August of 2012, the Treasury announced further changes to its agreements with both Fannie and Freddie. Starting in 2013, both Fannie and Freddie began paying the Treasury dividends based on a different arrangement: Each quarter, Fannie and Freddie must make payments based on their net value above a capital reserve level. In previous years, Fannie and Freddie had paid dividends based on a 10 percent annual rate.

It is looking more and more like those millions upon millions are not going to be enough to sustain the fiction of Fannie Mae’s solvency for much longer. The Fiscal Times reports that Fannie Mae needs another big bailout (subscription required, the quoted section below is as excerpted by Mike Shedlock):

Fannie Mae’s chief executive and its regulator are sounding the alarm on a decline in the institution’s capital cushion, which is on course to vanish in 2018, when it would have to ask the US Treasury for emergency funds.

Since 2008 Fannie Mae has been in the post-crisis limbo of state-sponsored “conservatorship”, neither fully nationalized nor private, following several unsuccessful attempts by Congress to overhaul it.

Because the government does not let Fannie Mae retain profits, Tim Mayopoulos, its chief executive, told the Financial Times on Friday that its capital buffer, which has dwindled from $30bn before the crisis to $1.2bn today, was on track to disappear by January 2018.

So far investors who own Fannie Mae’s mortgage-backed securities have not been spooked, Mr Mayopoulos said, but he added: “We are a major source of liquidity to the mortgage markets and it would be better to avoid testing the market as to what the breaking point is well in advance of us getting to that point.”

In effect, Fannie Mae’s new CEO is saying ‘bail us out again soon, or else’. But then, what else might we expect from a CEO whose previous role within the firm was as its general counsel and Chief Administrative Officer and who has recently advocated minimizing any reform of the housing finance industry. Mayopoulos had previously served in a similar role at Bank of America where he continued to look out after the interests of the firm’s allegedly ethically challenged executives, despite having been fired by them.

Same people. More taxpayer-funded bailouts. Go figure.

According to estimates by the Congressional Research Service, the U.S. government spent over $892 million for public relations advertising through private firms in 2014.

And that doesn’t include the spending that various federal departments and agencies do to advance their own reputations in the public through their own PR resources! Government spending watchdog Open the Books estimates that there are 3,092 federal PR employees on the payroll today.

We estimate that the full amount of annual spending that the U.S. government devotes to advancing its reputation and programs totals well over $1.1 billion, given that it would only take some 1,275 PR bureaucrats with an average base salary of $83,887 to reach the $1 billion mark.

And that doesn’t include the bonuses and other forms of compensation that the federal government’s PR flacks enjoy, such as riding Washington D.C.’s Metro light rail system for free.

You would think that with that kind of PR budget, the U.S. federal government would have a much, much better reputation than it does!

That poor reputuation isn’t much helped by the politicians and bureaucrats who have been not responded to questions being asked about how much money the U.S. government is spending on PR by their Congressional overseers. The Washington Examiner‘s Joseph Lawler reports on the situation:

Sen. Mike Enzi, R-Wyo., has asked the Government Accountability Office to investigate how much federal agencies are spending on public relations, after having gotten no response to that question from the Obama administration.

The Senate Budget Committee chairman said Wednesday that, at his request, the GAO will investigate how much agencies are spending on PR, a subject that Enzi says remains a mystery to Congress.

Enzi asked White House Office of Management and Budget director Shaun Donovan for similar information four months ago, but didn’t receive an answer.

As a result, Enzi wrote a letter to Comptroller General Gene Dodaro for a rundown on what agencies are spending on media relations, and what they are getting out of that spending. He said spending on PR is “largely unknown,” but is also “increasing pressures on limited federal resources.”

Can you imagine what the public perception of the U.S. government would be if it weren’t spending over $1.1 billion a year to shamelessly promote itself? And the politicians and bureaucrats who run it?

Covered California has not been much in the news of late, but that does not mean that all goes well with the Golden State’s wholly owned subsidiary of Obamacare. As we noted last year, Emily Bazar of the Center for Health Reporting wrote that Covered California’s computer system is “responsible for countless glitches and widespread consumer misery.” When people turned 65 and became eligible for Medicare, they found it practically impossible to cancel their plan with Covered California. The premiums kept on coming, and their retention in the system left some Californians open to tax penalties. Covered California bosses blamed this and other problems on the $454 million computer system, and state management has not exactly been a model of transparency. On the other hand, California’s Obamacare squad has been successful at spending money on promotional campaigns, including $1.3 million on an absurd promotional video featuring exercise guru Richard Simmons. Covered California also shelled out $184 million in contracts, without competitive bidding, to firms and people with ties to Covered California bosses. That kind of cronyism remains a concern.

As Christopher Cadelago notes in the Sacramento Bee, a new report from State Auditor Elaine Howle slams Covered California for not following its own standards when awarding lucrative contracts without competitive bidding. In some cases, Covered California failed to explain why they were using a sole-source contract in the first place. Cadelago reports that Covered California did use competitive bidding in a $150 million advertising contract, and in $6 million deal for public relations. So despite all the dysfunction and consumer misery reported by Emily Bazar, Covered California continues to spend money at a rapid pace. If taxpayers don’t like this plan, they pretty much have to keep it.

On February 10 in Morro Bay, the California Coastal Commission (CCC) fired its executive director Charles Lester. For any government body to fire the boss is exceedingly rare, and this case should prove educational for all Californians. For one thing, what Lester had done wrong remained unclear.

On his watch, no major environmental disaster took place along the coast, and commissioners dismissed rumors the action was some kind of coup by developers. Indeed, Lester was the favored successor of late Peter Douglas, the regulatory zealot who played a major role in establishing the Commission and served as its executive director for 26 years. On Lester’s watch the Commission aimed to expand its regulatory reach and intruded into animal management and surfing tournaments. Yet, the CCC boss duly got the axe. That marks a stark contrast to another powerful state agency.

The California Department of Transportation Caltrans, oversaw construction of the new eastern span of the San Francisco-Oakland Bay Bridge. This bridge came in $5 billion over budget, a full 10 years late, and riddled with safety issues such as broken rods and faulty welds. Mark DeSaulnier, chairman of the Senate Transportation and Housing Committee, decided to hold hearings on the matter in January 2014. Witnesses testified that Caltrans, compromised public safety by ignoring problems with welds, bolts and rods. DeSaulnier cited “a deliberate and willful attempt to obfuscate what is happening to the public.” One whistleblower called for a “criminal investigation,” but none took place.

DeSaulnier, now a congressman, is on record that “there’s never been anyone in the management of the bridge who has been held accountable.” So Californians have good reason to wonder if any accountability exists at powerful state agencies.

The Coastal Commission shows that it is possible to get rid of the boss, but one doubts that much will be different under the new executive director, who has yet to emerge. Commission supporters are pushing for another regulatory zealot, and voters will have no say in the selection process. What voters need is the opportunity to make the call on the Commission itself, a body that runs roughshod over property rights. The duly elected city and county governments along California’s 1,000-mile coast are entirely capable of making their own land-use decisions.

President Barack Obama released his final budget proposal for the U.S. government yesterday. We thought it might be fun to visualize the proposed spending in all his previous budget proposals, from his first to this last one, adjusting each for inflation so that they’re expressed in terms of constant 2009 U.S. dollars — the year of his inauguration.

The chart below reveals our results, in which we find that President Obama really wants to be known for permanently increasing the U.S. government’s spending by one trillion dollars — a 33 percent increase over the levels proposed by his predecessor in office.

In the chart above, the solid red line indicates the actual level of U.S. government spending for the years 2008 through 2015. The dotted red line projects what that spending would be through 2021 if President Obama’s latest spending proposal were to be accepted as is. Meanwhile, although we’re currently in Fiscal Year 2016, we’re grouping it with Future Years because the U.S. government’s actual amount of spending during it won’t be known until after the fiscal year ends on September 30, 2016.

Writing at National Review Online, the Mercatus Center’s Veronique de Rugy summarized the big takeaways from President Obama’s new budget proposal in just three paragraphs.

President Obama has introduced his latest budget. On the cover we are greeted by a picture of a large mountain. It is unusual and pretty but mostly it made me wonder whether — for once — the Obama administration was demonstrating tremendous self-awareness. This budget would indeed produce a mountain of debt so the image is fitting. Debt held by the public will go from $14.1 trillion in 2016 to $14.7 trillion in 2017 and then onto $21.3 trillion in 2026. Under the budget’s very rosy assumptions, deficits, which have already grown from $438 billion in 2015 to $616 billion in 2016, fall to $503 billion in 2017 (how deficits shrink by over $100 billion is a mystery) but they will be up to $741 billion in 2026.

This increase in debt and deficit is happening in spite of the assumption of large revenue collections over the next ten years; from $3,644 in 2017 to $5,669 billion in 2026. Maybe it has a little to do with the spending, which will be exploding from $3,951 billion in 2016 to $4,147 billion in 2017 on its way to $6,462 billion in 2026.

But please don’t worry because, according to the president’s budget, all this debt and deficit will produce better than a 4 percent average growth rate for the next ten years. Never mind that we have been out of a recession for several years now and that recessions tend to happen about every ten years.

Keep in mind that the inflation-adjusted real GDP growth rate has exceeded 4 percent in only three of the past 28 quarters of Barack Obama’s presidency. President Obama apparently believes that growth will surge to average 4 percent in the four years after he leaves office — quite an admission of how poor his economic policies have been.

Also not to be missed is Daniel Mitchell’s take on President Obama’s latest budget, as he gets deeper into what President Obama’s proposed $10 per gallon tax per barrel of oil would mean for American consumers.

Contrary to what many politicians seem to believe, government makes mistakes. For example, as the intrepid Jon Ortiz of the Sacramento Bee notes, the state of California recently overpaid some 20,000 employees. The overpayments amount to $37 to $101 per employee and, overall, about 5 percent of all state paychecks in a single month. It was apparently a matter of “human error,” and as Mr. Ortiz observes “now the government wants it back.” Odds are the state will get the money back, and that seems right. On the other hand, taxpayers seldom get paybacks.

Taxpayers see their hard-earned money squandered in various ways, as this column often notes. Recall the $5 billion in cost overruns on the new eastern span of the Bay Bridge, to take just one example. The most prodigious waste, unfortunately, does not prompt any campaign to compensate the taxpayers who paid the bills, and when the state enjoys a surplus, that seems to prompt only more spending. Exceptions are rare.

In 1987, governor George Deukmejian approved a $1.1 billion refund of surplus state money that gave taxpayers checks of up to $236, before Christmas of that year. This was not a gift but a refund of surplus funds. Californians will be hard pressed to find similar examples in the nearly three decades since, and the momentum runs the other way. California is now the least tax-friendly state and the pillage people are pushing to extend the temporary tax hikes of Proposition 30. The roads may be rough in the Golden State but government greed is always in high gear.

The Denver Broncos took the game 24-10 but the real winners of Super Bowl 50 were California’s pillage people. This is due to the state’s “jock tax” on players and coaches for their “duty days” in the state. As Matthew Artz notes in the San Jose Mercury News, California’s jock tax is highest in the nation at 13.3 percent. That’s why Carolina Panthers quarterback Cam Newton, with a salary north of $20 million, will owe about $130,000 for Super Bowl and other games this year in Oakland and Los Angeles. Newton earned $51,000 for the Super Bowl and winning quarterback Payton Manning $102,000.

As Rich Carrie of taxaball.com observes, the jock tax applies to any employee who travels to another state for work. Professional athletes are simply the most recognizable class and as Carrie observes “states are constantly looking for revenue and wealthy individuals who are forced to work in your state but unable to vote for or against your laws are easy targets.” So are successful inventors such as Gilbert Hyatt.

California’s jock tax dates from 1968 when San Diego Charger Dennis Partee disputed the tax on a nonresident. California’s State Board of Equalization ruled that the state could apportion the percentage of Partee’s working days in California to his annual salary “and tax that income accordingly.” In 2013, California collected $229 million from the tax.

Florida and Texas do not deploy a jock tax and tend to be favorites of professional athletes, who command big money because people are willing to pay to watch them. Since their careers usually wrap well before they turn 40, the athletes are trying to retain as much as possible of what they earn. California’s pillage people are out to grab as much as they can from everybody, not just professional athletes. The Board of Equalization, by the way, is the same outfit that in the 1990s sought to tax editorial cartoons as though they were works of art purchased in a gallery. Government greed never sleeps, and ramps up noticeably on Super Bowl Sunday.