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On Tuesday, December 15, 2015, while the Republican Party’s presidential candidates were debating national security issues in Las Vegas, House Speaker Paul Ryan reached a budget appropriations deal with congressional Democrats and the White House for how the U.S. government will spend the $1.1 trillion that his predecessor, John Boehner, signed on to spend before his resignation on October 30, 2015.

Is it a good deal? From the standpoint of fiscal responsibility, the answer is “clearly not”, which perhaps explains Speaker Ryan’s comments that were reported by CNN back on December 7, 2015:

Washington (CNN) – Paul Ryan wants to prove he’s changed things in the House, and that he won’t cut the kind of late night, back room deals that former Speaker John Boehner worked out with House Minority Leader Nancy Pelosi that infuriated conservatives….

Boehner may be gone, but the underlying dynamic in House hasn’t changed – there is a bloc of conservatives that won’t back any spending bill unless it includes some controversial items — like defunding Obamacare — that are non-starters for Democrats and will draw President Barack Obama’s veto. Ryan also recognizes he will be forced to accept some Democratic priorities in the bill in order to get their votes to pass it, and that too will antagonize those on the right flank of his conference.

The balancing act is tough — and the speaker is looking to keep his fingerprints off the bill for as long as he can. He told House Republicans at a closed-door meeting on Thursday the process and end-of-year timing was a “crap sandwich.”

That said, with Boehner’s budget deal having set the amount of federal government spending that would be authorized, all that was left were the exact details of how that much money would be divided up among different political priorities in an environment where portions of the U.S. government were at risk of shutting down.

The Daily Signal‘s Josh Siegel describes some of the more notable components of the 2,009 page spending bill and a companion 233-page “tax-extenders” bill:

House Speaker Paul Ryan, R-Wis., and Senate Majority Leader Mitch McConnell, R-Ky., are able to brag about at least some policy provisions included in the spending bill, most significantly measures ending a 40-year-old ban on oil exports and stopping what Republicans refer to as a bailout of Obamacare’s risk corridor program for health insurers.

But House Minority Leader Nancy Pelosi, D-Calif., and Senate Minority Leader Harry Reid, D-Nev., were able to block most of the high-profile provisions conservatives sought.

The bill does not contain measures restricting the Syrian refugee program, ending funding for Obama’s executive actions on immigration, or defunding Planned Parenthood. Conservatives also opposed the price tag of the$1.149-trillion spending bill, which was set by the Bipartisan Budget Act last month….

The tax package, meanwhile, includes a five-year extension of wind and solar tax credits, according to The Hill.

On the whole, very little positive and a whole lot of negative, for which Americans will be paying the bills for years to come. Quite the legacy for former Speaker John Boehner.

Property tax bills, marked OPEN IMMEDIATELY and helpfully timed for the holiday season, may put taxpayers in a mood to calculate what government is costing them. In typical style, government does not make such calculation easy, but Brad Branan of the Sacramento Bee provides some guidance. When calculating the salaries of public officials, for example, never stop with their base pay.

Branan’s example is James Estep, city manager of Lincoln, near Sacramento, hardly a metropolis with a population of only 40,000. When Estep left his job in 2014, Lincoln offered a deal that “paid him $178,000 for six months of salary and benefits as severance. He received $135,000 for unused vacation, sick time and administrative leave accumulated since he started at the city in 2008.” That package jacked up Estep’s total pay for the year to “$470,000, more than three times his base pay for the time he worked.” Just so you know, that amounted to just eight months, and Estep has some company.

Marvin Stern, a deputy DA in Sacramento County, bags a total pay of $350,328, and county Sheriff captain Jim Cooper pockets $314,593. Sheriff captain Matthew Morgan gets $290,318 and fellow captain Tracie Petrie $289,371, and as Branan notes, the income “does not include employer payments for health care or pensions.” The City of Davis pays fire captain Richard Moore $297,692 and the total pay of firefighter Luis Parrilla cost taxpayers $294,308. Sacramento County dispatch supervisor Melanie Plummer takes home a total pay of $281,851. County pharmacist Michael Wanless pockets $240,031. And so on, all from just three California counties. Reporter Brad Branan knows who these people are because he uses the list of the Transparent California, an outfit dedicated to limited government. The state controller also has a salary list but the declines to reveal the names. The lessons should be clear.

Taxpayers can’t rely on government to give them the full picture. Government officials can grab several times their base pay, as in the case of James Estep, and as Branan observes, “the city also paid his interim replacement $75,000 for the four months Estep did not work last year.” So the costs are always higher than even the total pay. Those who believe these officials are all worth the money might seek counseling from Placer county chief physician Olga Ignatowicz, whose total pay costs taxpayers $329,023, aside from her pension and health care benefits.

Remember, California is the least tax-friendly state, and its ruling class of government employee unions is now seeking to extend tax hikes that were supposed to be temporary. Happy Holidays everybody!

When Senator Tom Coburn retired last year, we wondered if his retirement would also mark the end of the Wastebook – the Oklahoma senator’s annual compendium of the most absurd items that the U.S. federal government spent money upon during the previous year.

Fortunately not, as it appears that Senator Jeff Flake has picked up the mantel of collecting examples of the most bizarre projects and programs that receive federal government funding that were reported in the media over the past year with the release of Wastebook 2015: The Farce Awakens. Here’s a short list of really questionable budgetary line items that caught our attention:

The Most Wasteful Place in the USA

The Hanford Nuclear Reservation in Washington state is the most “wasteful” site in the
country, in every sense of the word.

The 586-square-mile site is contaminated with hazardous waste leftover from the Department of Energy (DOE) nuclear weapons program and is widely regarded “the most contaminated place in the country.” It has been costing taxpayers $1 billion every year, yet DOE will not even begin the clean-up of the complex—which could take decades-until 2039, making this the single most wasteful place in the country when it comes to squandering taxpayer money.

After more than $19 billion was spent on the project over 25 years without any waste ever being treated, the clean-up was suspended three years ago.

At $1 billion per year, this is the largest single line item noted in this year’s Wastebook, as the U.S. government’s Hanford site accounts for 40% of the Department of Energy’s entire budget for environmental cleanup. We wonder what the U.S. Department of Energy has been doing with the money for the last three years.

As it happens, should the ongoing failure to clean up the radioactive and toxic government-produced waste result in the Earth becoming uninhabitable, NASA is working on a solution….

Cloud City on Venus

A city in the clouds, floating in the gassy atmosphere above an alien planet.

Has the return of Star Wars to the silver screen caused an awakening in the force at
NASA?

The science fiction space adventure that took place a long time ago in a galaxy far, far away seems to be the inspiration to create a “cloud city” above Venus similar to the one in The Empire Strikes Back where Han Solo was frozen in a block of carbonite.

NASA’s High Altitude Venus Operational Concept (HAVOC) would begin by sending a
robot into the atmosphere of Venus to “check things out” with the goal of establishing “a permanent human presence there in a floating cloud city.”

Did you know that the surface temperature on Venus is 880 degrees Fahrenheit? Which is the major reason why the “cloud city” concept would be considered by NASA’s scientists in the first place. Unfortunately, we should point out that clouds on Venus aren’t made up of ice crystals, like on Earth. They’re made of highly corrosive sulphuric acid instead, which would make construction a cloud city on Venus, even if technically feasible, highly problematic for the occupants, which is why such a city would more likely be populated by robots instead of people. Speaking of which….

Jazz Playing Robots

The Defense Advanced Research Projects Agency (DARPA) is spending $2 million to hire
a team of musicians and researchers to develop musical machines including robots capable of performing a trumpet solo and jamming with human musicians.

Known as the Music Improvising Collaborative Agent (MUSICA), the system—it is hoped—will be “capable of musically improvising with a human player.”

The team working on the project is led by jazz musician Kelland Thomas and includes
researchers from the University of Arizona, the University of Illinois at Urbana-Champaign, and Oberlin College.

“We may be the first musicians ever funded by DARPA,” laughs Thomas.

Soon, ISIS will have more than President Obama’s drones to fear. But at least the clubs in Venus’ cloud cities will be hopping….

When confronted with seismic-safety issues on the new span of the Bay Bridge, which came in 10 years late and $5 billion over budget, California governor Jerry Brown famously quipped, “shit happens.” As David Siders of the Sacramento Bee observes, Brown the former seminarian does better with the orthodoxies of statist superstition.

“Never underestimate the coercive power of the central state in the service of good,” Brown explained at a Paris art museum. So it’s all about coercion, and it all starts at the top. In this beatific vision, the power of the central coercive state serves goodness, which trickles down to the masses. Regulations, the California governor told the Parisian audience, “work hand in glove” with innovation. Note the order in that statement. In statist superstition, government regulation comes first. As Brown explained it, “Progress comes from well-designed regulatory objectives that business then follows.” Therefore, he told the audience, “You can be sure California is going to keep innovating, keep regulating, and, shall I say, keep taxing.” That’s the key to the whole thing, the taxing part.

The man who once proclaimed himself a “born again tax cutter,” and as a presidential candidate even supported a flat tax, now heads the state with the highest rate of income and sales taxes. California is the state most unfriendly to taxpayers and the ruling class of government employee unions is trying to keep it that way by extending tax hikes that, in typical style, were pitched as temporary. So now abide coercion, regulation and taxes, but the greatest of these is taxes. And some heavily subsidized companies like it that way.

Also quoted in Siders’ piece was Bloom Energy boss K.R. Sridhar, who claimed “There’s almost nothing in the post-industrial age, no business, no industry that ever got started or ever flourished without policy support, without subsidy and without federal support.” According to Delawareoline.com, Bloom Energy is “extending its dominance of state subsidy programs outside of its home state of California” but “has fallen short of the hiring and wage targets it agreed to meet when it accepted $16.5 million in state funds to create jobs in Delaware.”

The California Coastal Commission (CCC) is an unelected body of regulatory zealots that overrides the elected governments of coastal counties and cities on issues of land use and property rights. As we recently noted, the powerful CCC is moving into animal management, trying to leverage SeaWorld into killing off its orca shows. Now the CCC is expanding into sports management and gender quotas.

At Mavericks, on the California coast just north of Pillar Point Harbor near Half Moon Bay, the waves break huge in the winter. For more than 15 years, surfers have held a big-wave competition there, but as Samantha Weigel of the Daily Journal notes this year “was the first time organizers were required to obtain a permit from the Coastal Commission.” As Kristin Bender of the Associated Press observes, the CCC granted a permit but told organizers, “they better have a plan for including women if they want a permit to hold the event next year.” Commissioner Mark Vargas told reporters, “there ought to be some sort of consideration for equal opportunity or at least transparency for their selection process to ensure there is no discrimination.” As organizers explained, women can participate in the competition. Women have surfed Mavericks before but no woman has ever made the top 24 in the competition. A push for women to have a heat of their own led to the Coastal Commission demand. Do it our way, the unelected CCC says in effect, or no permit. This is hardly the CCC’s only power surge.

As we noted, the unelected Commission is claiming jurisdiction over inland projects such as landfills on the grounds that rivers flow through the coastal region en route to the ocean. As Dan Walters of the Sacramento Bee warned, this means the Commission could expand to the nearly entire state. In reality, elected governments are entirely capable of handling their land use and environmental affairs. SeaWorld is capable of managing its own shows and the Mavericks organizers can run their event all by themselves. A responsible, accountable government would eliminate the Coastal Commission at the first opportunity.

How is it that the politicians and bureaucrats who run governments at all levels of society, from cities to counties to states and territories, keep putting the institutions they control into financial jeopardy?

Jeremy Liss of The Atlantic identifies the unique “cash-basis” accounting rules that politicians and bureaucrats apply to themseleves, which allows them to make financial commitments that they will never be able to fulfill.

By using an accounting method known as cash-basis accounting, legislators project future spending without having to consider billions of dollars of long-term financial commitments, leaving many budgets balanced in name only.

It may be easiest to think in terms of personal finance. Imagine you purchase a car for $20,000 in 2015, but under a special promotion no payments are due on your bill until 2018. In what year did you incur the $20,000 bill? Most people would say 2015, the year you acquired the car. That’s the answer mandated under accrual accounting, a method of financial reporting required of all public companies by the Financial Accounting Standards Board. But many state and city legislatures disagree. They operate with the conviction that a bill is not incurred until the money leaves your bank account to pay it. So if you choose not to pay the bill for your car until 2018, for accounting purposes the bill will only appear that year.

Cash-basis accounting is a recipe for fiscal disaster. State and local governments make long-term commitments for programs like employment compensation plans and public works projects. But they write their budgets on a year-to-year basis, as if starting all over again each year with fresh revenue and expenses. They leave out any revenue not received or, more importantly, any expense not incurred that year. The implications of this financial-planning decision can be immense. In 2010, Virginia reported that it had a cash-basis surplus of nearly $50 million in a budget of $34 billion. When converted to accrual accounting, the surplus turned into a $674.3 million deficit.

In the private sector, the use of accrual-basis accounting practices was mandated for large, publicly-traded companies decades ago, specifically to address the situation where these businesses might not be able to meet their financial obligations. Those rules, which require large private sector firms to demonstrate that they are capable of making future payments on things like their employees’ pensions, is one reason why the debt issued by corporations will sometimes cost less to insure against default than debt issued by governments, even though governments can impose higher taxes to increase their revenues at will to cover their “unfunded” bills as they come due.

It’s not a coincidence that the politicians and bureaucrats who are racking up the biggest bills that can never, ever be paid are also the ones who have itchiest trigger fingers when it comes to raising taxes.

On Tuesday, December 1, 2015, the government of the fiscally-troubled U.S. terrritory of Puerto Rico was set to reach the end of its long road to defaulting on its debt, having run out of both money and time. Here’s how ZeroHedge described Puerto Rico’s predicament:

Puerto Rico has a problem. The commonwealth needs to make a $354 million bond payment on Tuesday and the government is basically out of money.

We previewed this rather precarious situation twice in the last two weeks (see here and here), noting that this time is indeed “different.” Why? Because unlike August when the island paid only $628,000 of a $58 million payment (so, just about 1%), a large portion of what’s due Tuesday is GO debt guaranteed by the National Public Finance Guarantee Corp. A default on that spells litigation.

A default “would likely trigger legal action from creditors, commencing a potentially drawn-out process absent swift federal intervention,” Moody’s warned last month.

The U.S. territory’s government had been trying to force its creditors into accepting permanently lower payments in addition to a restructuring of the terms by which it would pay back the millions it has borrowed, but proved unsuccessful. The pension and hedge funds that had been enticed by the high yields that Puerto Rico’s government had offered to them in return for their loaning the territory money were proving unwilling to have the large losses that the territory’s elected leaders were demanding imposed upon them without going to court.

At least, that’s where the territorial government of the Commonwealth of Puerto Rico and its creditors were headed when Puerto Rico’s elected leaders, fearing that they wouldn’t be able to succeed in legal proceedings, became so desparate to avoid having their fate decided impartially in court after defaulting on their debt that they robbed the territory’s dedicated funds for paying highway and convention center bond debts to instead make their scheduled $354 million debt payment. Bloomberg reports:

Puerto Rico said it made all principal and interest payments due Tuesday, averting a default on directly guaranteed bonds and allowing the commonwealth to continue talks with creditors to reduce its $70 billion debt burden.

Governor Alejandro Garcia Padilla signed an executive order to permit the redirection of revenue budgeted for highway and convention center bonds and other agencies to pay for debt issued or guaranteed by the commonwealth, according to a Government Development Bank statement. The GDB, which lends to the commonwealth and its agencies, had $354 million in principal and interest payments due Tuesday.

Garcia Padilla announced the so-called claw-back provision during a Senate hearing Tuesday, where he received little support for his request to access bankruptcy to help right the commonwealth’s finances. The governor said the island is running out of cash and will focus on providing essential services while in negotiations with creditors to accept losses on their holdings. It faces another big bond payment at the start of January.

In addition to stiffing the creditors who loaned the territory money to support its highway and transportation bonds, Puerto Rico’s elected leaders have also been delaying tax rebates owed to individuals and businesses, holding up payments to suppliers for their services rendered and are also playing a shell game with the government accounts that they control to come up with the money needed to avoid defaulting on their General Obligation bonds.

Beyond that, their ability to turn to Washington D.C. to be bailed out is being limited by their not coming clean on the condition of Puerto Rico’s government’s finances. Bloomberg reports that the territory’s government has yet to file any audited financial statements for 2014.

According to President Obama, the best way to keep the terrorists who conducted a coordinated attack killing 130 in Paris, France last week from winning is for the leaders of the world’s nations to agree to a climate pact as an “act of defiance” as they meet in Paris this week. The Associated Press’ Nancy Benac reports:

Pushing for a powerful climate deal, President Barack Obama called the global talks opening Monday outside Paris an “act of defiance” against terrorism that proves the world stands undeterred by Islamic State-linked attacks in Europe and beyond.

Obama used his speech to more than 150 world leaders to salute Paris and its people for “insisting this crucial conference go on” just two weeks after attacks that killed 130 in the French capital. He said leaders had converged to show resolve to fight terrorism and uphold their values at the same time.

“What greater rejection of those who would tear down our world than marshaling our best efforts to save it,” Obama said.

Also according to President Obama, a climate deal in Paris this week would stimulate the world’s struggling economies, as reported by Agence France-Presse:

“The old rules that said we couldn’t grow our economies and protect our environment at the same time, those are outdated. We can transition to clean energy without squeezing businesses and consumers.”

Obama insisted an ambitious deal in Paris would spur investment, as it would signal to businesses that they should “go all-in on renewable energy technologies”.

“If we can get an agreement done, it could drive new jobs and opportunities, and investment in a global economy that, frankly, needs a boost right now.”

President Obama has lots of experience with investing in green energy companies, including investing billions of U.S. dollars with global firms. In fact, the U.S. government under President Obama has guaranteed loans to many of these firms, where should any green energy company fail, U.S. taxpayers will bail out the entities that lent money to them, provided that the green energy companies passed the scrutiny of the experts at the U.S. Department of Energy.

At least, that’s what the DOE claimed as it defended its loan guarantee programs back in March 2012, as reported by Patrick O’Grady of the Phoenix Business Journal:

The U.S. Department of Energy is defending its loan guarantees to First Solar Inc., Abengoa Solar and others, saying the projects are moving forward as planned and will continue to be monitored.

The DOE, which granted more than $14.5 billion in guarantees to solar manufacturers and projects, took issue with a U.S. House Committee on Oversight and Government Reform report that singled out the two firms along with others as being risky bets in the program.

“For nearly a year, Congressional critics of the Department’s loan programs have demonstrated a consistent pattern of cherry-picking individual emails from the hundreds of thousands of pages of documents the Department has provided to Congress with the sole purpose of inventing false and misleading controversy,” said DOE spokesman Damien LaVera. “As these investigations have made clear, decisions made on loan applications were made on the merits after extensive review by the experts in the loan program.”

That scrutiny by President Obama’s DOE loan program “experts” has become rather dramatically relevant today because it appears that one of the two firms specifically identified as being a “risky bet” by Congressional investigators back in 2012 is currently collapsing into bankruptcy, as the Spanish firm Abengoa failed to get an emergency injection of capital to keep its business afloat. Katie Linsell and Luca Casiraghi of Bloomberg report:

Abengoa SA’s bonds and stock tumbled to records after the embattled renewable-energy company said it was seeking preliminary protection from creditors following the breakdown of talks with a new investor….

Abengoa, which employs more than 24,000 people worldwide, has been seeking to reassure investors that it can generate enough cash to service its debt pile of about 8.9 billion euros of consolidated gross debt. The Seville-based company said earlier this month that Gonvarri Corporacion Financiera, a unit of industrial group Corporacion Gestamp, would become its biggest shareholder after agreeing to acquire a 28 percent stake by injecting new funds.

“The future of the company seems very black,” said Carlos Ortega, a trader at Beka Finance Sociedad de Valores SA. “It has a tremendous amount of debt which no bank wants to refinance and now even its partners are backing out.”

When the “experts” in the DOE’s loan program completed their “extensive review” of Abengoa, the Spanish company had been assigned the rating of Ba3 by Moody’s Investment Service, which considered the firm’s prospects to be “speculative” at best and really just one step above being “highly speculative”. Which is to say that any investment in the firm would represent more than a moderate amount of risk.

Three months after DOE spokesman Damien LaVera defended the DOE’s decision to commit to bail out firms lending money to Abengoa if it were ever to go under before the loans were paid back, Moody’s downgraded the company as its analysts recognized that investments in the politically-connected firm were becoming increasingly risky, even with the U.S. government’s backing. By the time of the Bloomberg article, Moody’s had dropped the firms’ credit rating to B3.

Since the Bloomberg article was published one week ago, Moody’s Investors Service has continued to downgrade the company, where it now ranks at Caa2, which is to say that Moody’s considers it to be in such “poor standing” that it is now eight levels below qualifying as “investment grade”.

As for why the company is failing, please consider the following explanation from Political Calculations:

A Venn diagram is a tool for visually demonstrating the relationships between different sets of things. Using these diagrams, we can quickly see what aspects of the things we’re comparing are common between the sets we’re comparing, as well which aspects are not common.

With that in mind, here is our Venn diagram showing the relationship between “Green Energy” companies, and “Energy Companies That Don’t Need Constant Government Subsidies To Stay Afloat”:

We note that there is a small area where the groups overlap, but otherwise, the two groups have little in common….

Today, that overlap remains just as small as ever, as it would appear that the only beneficiaries of the U.S. government’s support for green energy are the business world cronies of the politicians and bureaucrats in charge of approving the government’s spending for such poorly considered programs. And of course, the politicians and bureaucrats themselves.

California’s roads are an obstacle course of potholes and as Foon Rhee of the Sacramento Bee notes “the repair backlog is estimated at $78 billion for local roads and another $59 billion for state highways.” The rough roads are also highly congested but the massive California Department of Transportation (Caltrans) is not eager to build new roads and claims to have “solid science” on their side in the form of Increasing Highway Capacity Unlikely to Relieve Traffic Congestion, a National Center for Sustainable Transportation Brief. According to author Susan Handy of the Department of Environmental Science and Policy at UC Davis, “adding capacity to roadways fails to alleviate congestion for long because it actually increases vehicle miles traveled (VMT).” Handy, who is in fact the director of the federal National Center for Sustainable Transportation, further explains, “capacity expansion does not increase employment or other economic activity.” So building new roads and highways is a lose-lose proposition for the workers, and refusing to build new roads is a winner for ruling-class bureaucrats and politicians.

As Foon Rhee observes, endorsement of the induced travel theory “does keep Caltrans in tune with Gov. Jerry Brown’s crusade to put California at the forefront of adapting to climate change.” So climate change dogma gets right down to where the rubber meets the road, as the tire commercial used to say. “By being part of the climate change team with the governor,” Rhee writes, “Caltrans could eventually have fewer projects to oversee and less work to do. A government agency not expanding its empire – now that would be a new one.” That would indeed be a new one, but it won’t happen with Caltrans.

As we noted, Caltrans maintains 3,500 full-time engineers who do little more than show up at their desks, and the state recently gave them a raise. So Caltrans will hardly hesitate to maintain full-time employees who don’t build new roads. California taxpayers might also note that neither induced travel theory or climate change dogma stopped Caltrans from building the new eastern span of the Bay Bridge, which came in 10 years late, $5 billion over budget, and which remains unsafe. No Caltrans boss lost his job, and nobody has been held accountable.

As we noted, California’s government monopoly K-12 education system pays big bucks to local bosses, heaping on huge raises and boosting benefits without any connection to performance or student achievement. For local bureaucrats, as Diana Lambert explains in the Sacramento Bee, even serious misconduct can pay off big-time.

As the reporter notes, “El Dorado County schools chief Jeremy Meyers received a $125,000 buyout package this month for resigning after being arrested twice on suspicion of drunken driving.” This package equals his salary through June 2016 plus a lump sum to cover his benefits during that time. The El Dorado County Office of Education did not volunteer this information, forcing Lambert to dig it up through a Public Records Act request.

On June 9 police arrested Meyers for driving with a blood alcohol level of 0.15, about twice the legal limit. Someone, perhaps a student, could easily have been injured or killed, but the education superintendent did not learn his lesson. On the afternoon of November 5, Lambert writes, Meyers “crashed his truck into a utility box.” His blood alcohol level at the time was 0.19, more than twice the legal limit. These cases resulted in misdemeanor charges but not the felony that would have been necessary for the board to remove Meyers.

Now the board is rewarding the two-time loser with a gold-plated package including medical benefits. After all, one wouldn’t want a serial drunk driving arrestee to go without medical coverage. And think of how the $125,000 will trickle down into jobs for lawyers and local liquor stores. Everybody benefits from the deal, and of course it’s all for the children.