Say what you will about government bureaucrats, but when the full power of their incompetence is released, it is a sight to behold.
We mean that in a good way this time, because for once, that incompetence might work to the advantage and benefit of regular Americans!
Let’s start at the beginning. Earlier this week, we commented upon the sorry state of unfunded liabilities for the nation’s public sector employees. Even large tax hikes, we noted, weren’t going to be anywhere near enough to erase the fiscal deficits caused by the growing gap between what government employers have promised to pay for retiree pensions and medical benefits, and what they can actually afford to pay. Because of that difference, we can reasonably expect that their government employers will stop making those benefits so excessively generous.
Today, we know how, thanks to the unintended consequences of policies made by another government entity. The consequences may even by large enough to send the Affordable Care Act into its well-deserved death spiral far sooner than expected. Alison Schrager of Quartz describes the likely impact of a little-noticed accounting change approved by an influential private organization this past summer:
Earlier this summer the Governmental Accounting Standards Board (GASB) released new recommendations urging states and municipalities to include retiree health care when they calculate their liabilities. When private sector firms had to do the same thing in 1990, they ditched the health benefits for retired workers altogether. If state and local governments do the same, it could have serious consequences for Obamacare.
A key feature of the Affordable Care Act are the exchanges where people can buy health care directly from insurers and comparison shop. Insurance markets inherently face an adverse selection problem: The only people who want to buy lots of insurance are the ones most likely to need it. That’s why it was so important that the “young invincibles”—young, healthy people—buy insurance on the exchanges to balance out the high cost of older, sicker people. So far, the population appears sufficiently diverse. The government claims 11.7 million people enrolled through the exchanges and 4.1 million are under 35.
But the new accounting rules might change the group’s composition. Many state and municipal workers retire under the age of 65, when they qualify for Medicare. Since minimum retirement ages for these workers are below age 60, this can leave a significant coverage gap to fill. In addition, some pensions offer health care that subsidizes or supplements Medicare after retirees turn 65. All these benefits are extremely expensive—the total liabilities are estimated to total $1 trillion. State and local governments have almost no money put aside to pay for retiree health care. The average funding ratio—how much money is put aside relative to how much is owed—is only 6%. Compare that to state pensions, which are allegedly about 70% funded….
The creation of ACA health exchanges may be the final nail in the coffin for retiree health-care benefits. The exchanges make it easier for states to phase out health-care plans because pre-Medicare retirees now have other, affordable options. Paul Frostin of the Employee Research Benefits institute anticipates this will open the door to more plan terminations; he’s even found some evidence it’s already happening.
It’s not often we get to see how a single, uncoordinated action by an obscure organization can force hundreds of excessively generous and unaffordable public employee retirement benefit programs onto a sound financial footing while also destroying the single most controversial government welfare benefits program ever devised by U.S. politicians and bureaucrats, but we really have to tip our hats to the unelected and unknown members of the GASB.
Normally, when that sort of thing happens, it hurts regular Americans. But this time, thanks to the incompetence of thousands of policitians and bureaucrats at all levels of government, a blow for sanity might finally be struck.
Who ever said that all unintended consequences have to be bad?!
In 2012, California assemblywoman Fiona Ma backed AB 2482, a bill to license, yes, interior designers. Backers of the measure claimed it would protect consumers from unqualified home decorators, but as Dan Walters of the Sacramento Bee notes, “it was quite evidently aimed at limiting who could offer design services to potential clients – in effect, a state-enforced monopoly.”
As Walters saw it, licensure regulation made sense for doctors, dentists, and medical practitioners, but licensing requirements for others “provide, at best, marginal protection to consumers and exist mainly to carve out monopoly markets for those who obtain the licenses.”
Nationwide, “about 25 percent of jobs require state licenses, 5 times as many as in the 1950s.” In California the figure is 20.7 percent. The decision of which occupations are licensed, says Walters, “is essentially an arbitrary, and therefore political, matter, rather than a uniform effort to protect consumers.” The various boards that grant licenses, which belong to the state Department of Consumer Affairs, “are typically dominated by licensees themselves, so they have a built-in interest in dampening competition.” Arbitrary licensure results in “higher costs for consumers,” says Walters, and the requirements “make it much more difficult for those on the lower rungs of the economic ladder – especially women and ethnic minorities – to climb up.”
In a recent appearance on C-SPAN, economist Walter Williams recalled that an Italian immigrant could once buy a used car, paint “Taxi” on the side, and earn a living. With taxi medallions now costing hundreds of thousands of dollars, that is now impossible, and entrenched interests fight new ventures such a Uber. Williams also observed that medical boards are dominated by doctors, who claim they are best qualified to regulate the medical profession. By this standard, said Williams, Al Capone would make the best attorney general. Who better than a criminal to regulate criminals?
Fiona Ma, meanwhile, moved on to California’s Board of Equalization, a tax agency that doesn’t actually equalize anything. In 1990, some drone at this board proposed taxing editorial cartoons, like works of art purchased in a gallery. The “laugh tax” proposal made California a national joke. So does much of what goes on in Sacramento.
People who work for the federal, state, or local governments in the United States are really well compensated compared to their peers in the private sector.
That’s not so much because of the take-home pay, which is often in the same ballpark as what people with similar education and training earn in similar occupations in the private sector, but because of the fringe benefits they receive.
A very good case in point are the retirement benefits that federal, state, and local government employees collect. Many government workers are able to retire far earlier than their private sector peers because of the extraordinarily generous pensions and retiree medical benefits that their government employers promise.
The problem is so bad it goes by a special name—unfunded pension liabilities—and the average state government unfunded pension liability in the United States is $15,052. The Manhattan Institute’s Diana Furchtgott-Roth and Jared Meyer summarized the findings of their recent research on how that largely invisible form of public debt has grown so large in a CBS Marketwatch article:
States are in this situation because during economic booms they deliver more generous pensions to their employees, but during economic downturns, these increases are rarely pared back. This means that states make promises to public-sector unions that they usually cannot afford.
Absent major concessions, these pensions will have to be paid over time to the 19 million men and women who work for a state, county, municipal or school-district government. If pension-fund income is insufficient to cover those obligations, as is expected, those who will be on the hook to pay will be today’s young Americans, who have college loans, high unemployment rates and lower incomes than the public-sector workers. As they progress in the workforce, they will be responsible for the debts.
Unfortunately, unlike the private sector, where businesses are required by law to continually set aside sufficient funds to fully pay such defined benefits to their employees when they retire, public-sector entities have no “full-funding” requirements. They instead choose to set aside only a fraction of the promised benefits and then count on their power to hike taxes on their residents to make up any shortfall between what they’ve promised and what they can actually deliver to their retired employees.
In fact, that is exactly what is happening in Chicago, Illinois, where the city government has a long history of promising far more in benefits to its employees than it can ever hope to deliver. A. J. LaTrace of Curbed Chicago reports:
The city’s budget crisis isn’t going away anytime soon, but in order to help fill the hole, Mayor Emanuel has proposed what is being widely reported as “the biggest property tax hike in recent Chicago history.” The mayor is looking to raise $500 million through the hike, which will squeeze an additional $500 annually from homeowners whose property is worth $250,000. In addition, the mayor wants to start charging for garbage collection separately, which will come to somewhere around $10 to $12 per household per month.
Alderman Patrick O’Connor tells the Tribune that the plan would provide $450 million for police and fire department pensions while $50 million would be used for a Chicago Public Schools construction program. While the mayor attacked his opponent Jesus “Chuy” Garcia for voting for a big property tax hike during the Harold Washington years, the one that Rahm is currently proposing would be over triple the amount when adjusting for inflation. Weary homeowners may have suspected that the city would raise property taxes to help provide some relief from the pension crisis, and it appears that some sort of tax hike is on the horizon.
And yet, notice that even the largest property tax hike it its history won’t be enough to end Chicago’s fiscal problems. The public employee beneficiaries of the city’s excessively generous retirement pension, and medical benefit plans, should really start planning to have those benefits made less generous.
Back in April 2014, we described the newly unfolding tragedy of fraudulent waiting lists at the Department of Veterans Affairs’ medical facilities as a rationing scheme – one that was operated by knowing individuals within the VA for the purpose of enriching themselves:
The VA has been wracked in recent weeks by reports of negligence on the part of the department’s managers and admininistrators, who allegedly have implemented a unique health care rationing scheme aimed at making the system appear to be meeting the needs of ailing veterans, but is instead denying critical care to them.
The rationing scheme involves the use of multiple waiting lists for veterans seeking medical care at a number of VA health care facilities across the United States. Here, a number of facilities have been discovered to be maintaining an “official” waiting list, which is meant to communicate the VA is successfully limiting waiting times to 14 days or less before providing care. But in reality, the “official” waiting list is a fraud, as these facilities would appear to also be maintaining secret waiting lists – ones where the veterans seeking care are effectively placed in a virtual waiting room where months pass before they can even get on a schedule to receive care.
That kind of deception carries a real human cost, as the story first broke in Phoenix, where as many as 40 veterans have died before receiving care after seeking it from the VA as they were placed on the facility’s secret wait list instead. Since that story first broke, it would appear that this secret rationing system has been adopted at a number of Veterans Administration facilities across the nation – something that could only happen with the knowledge and assent of the Department’s administrators.
In other words, the situation being discovered by the public today is not an isolated incident resulting from the actions of a few rogue administrators at a local facility. Instead, it is the result of deliberate actions taken on the part of the department’s top administrators, which we can see by the system of incentives they created to reward those who adopted the secret wait list scheme and punish those who did not.
On Wednesday, September 2, 2015, we learned the magnitude of what the U.S. government’s single payer health care system for the nation’s military veterans cost the nation in the terms of the medical treatment it denied them. CNN reports:
Hundreds of thousands of veterans listed in the Department of Veterans Affairs enrollment system died before their applications for care were processed, according to a report issued Wednesday.
The VA’s inspector general found that out of about 800,000 records stalled in the agency’s system for managing health care enrollment, there were more than 307,000 records that belonged to veterans who had died months or years in the past.
In other words, if a veteran had the processing of their application to obtain medical treatment at the VA grind to a halt in the VA’s bureaucratic limbo, they had a 38% chance of dying before the VA’s Inspector General found their stalled application years later. The remaining 62% in bureaucratic limbo were simply never permitted to obtain care.
What did the VA’s bureaucrats do with the applications instead? CNN describes what the Inspector General found:
The inspector general found the VA’s office responsible for enrollment “has not effectively managed its business processes to ensure the consistent creation and maintenance of essential data.”
Additionally, the investigation states the Veterans Health Administration “has not adequately established procedures to identify individuals who have died, including those with pending health care enrollment records.”
The report said an internal VA investigation in 2010 found staffers had hidden veterans’ applications in their desks so they could process them at a later time, but human resources later recommended the staffers responsible not be disciplined.
And once again, we find that when given both the responsibility and the opportunity to hold themselves accountable in looking out for the interests of regular Americans, the U.S. government’s bureaucrats looked out for their own interests instead.
We have good news and bad news on the U.S. government’s budget deficit for 2015. First, the good news from Reuters:
The U.S. budget deficit is likely to fall by $60 billion in 2015 due to strong revenue gains, the Congressional Budget Office said on Tuesday, enabling the government to stave off default without a debt limit hike perhaps through early December.
The CBO said it now estimates a $426 billion deficit for fiscal year 2015, down from its $486 billion forecast made in March. It also forecast a fiscal 2016 deficit of $414 billion, a reduction of $41 billion from the previous 2016 estimate.
The new forecast would bring the deficit to its lowest dollar amount since 2007, and as a 2.4 percent share of U.S. economic output, it would be below the 50-year average.
Now the bad news, which was picked up and emphasized by the Washington Times in covering the same news story:
The good news will continue for a couple of years as the economy belatedly but fully rebounds from the recession of December 2007 to June 2009. By 2018, though, debt will rise as government spending grows and the economy will cool again, the CBO said.
“The growth in debt is not sustainable,” CBO Director Keith Hall said in presenting the estimates. “At some point, it’s going to get to a very high level. Obviously, you can’t predict tipping points, but at some point this becomes a problem.”
Tipping points often only become clearly evident in hindsight. That’s something that is almost part and parcel of “why change so often happens as quickly and unexpectedly as it does”, to quote, historian Malcolm Gladwell.
Which is to say that when such a tipping point with the nation’s debt arrives, it will do so both quickly and unexpectedly. At least that would be the perspective of the people who are responsible for putting it into that state in the first place.
As we noted in 2013, politicians seemed intent on buying 280 more M-1 Abrams tanks the U.S. military didn’t want or need. The M-1 Abrams is a formidable machine but not really suited for counterinsurgency operations, and the tanks run $8 million each. Last year we alerted taxpayers to the new fleet of presidential helicopters, each at $400 million, with the entire fleet coming in between $10 billion and $17 billion. That is hard to top, but the United States Air Force is making a gallant effort.
As Jonah Bennett explains in the Daily Caller, “Air Force leaders didn’t seem fazed recently when lawmakers pointed out that the service completely miscalculated the cost of its secretive Long-Range Strike Bomber program to the tune of $27 billion.” Last year Air Force leaders pegged the cost of the bomber at $33.1 billion from 2015 to 2014. This year it’s $58.2 billion for 2016 to 2015, an increase of 76 percent, which Rep. Jackie Speier, ranking member of the House Armed Services Committee’s Subcommittee on Oversight and Investigations, called “alarming.” In fact, according to the Air Force, the real cost for both fiscal periods is $41.7 billion. Air Force Chief of Staff Gen. Mark Welsh told reporters he was “surprised by the number” and that “it looked like the number had grown.” Air Force Secretary Deborah Lee James said someone in the process simply did the math wrong.
The Air Force may purchase between 80 and 100 bombers at a per-unit cost of $550 million. But that figure is a “wild fantasy,” according to T.X. Hammes, a U.S. National Defense University research fellow cited in Bennett’s piece, and the real per-unit cost of the bomber may rise to $3 billion. Bennett concludes that “cost-overruns are often a common feature of weapon acquisitions, mostly because providing low estimates and fast-paced schedule increase the likelihood of purchasing the weapon.” For taxpayers that’s only part of the story.
Whether tanks, ships, or planes, weapons systems always cost more than what their backers claim. Politicians may complain, but they usually go along if contractors for the projects are in their district. So military spending is a convenient conduit for pork. And the process continues whether or not the weapons system is suitable for the nation’s defense needs.
In this latest episode of our occasional series Bureaucrats Behaving Badly, we’ll focus on “the case of the federal worker who hardly ever worked,” to borrow the Washington Post‘s own headline! Lisa Rein reports:
A federal patent examiner racked up more than 18 weeks of pay last year for work he didn’t do, but his manager didn’t notice until he received an anonymous letter claiming the employee only showed up for his job sporadically and turned in work that was “garbage.”
The letter turned out to be spot on, according to an investigation released this week by the watchdog for the U.S. Patent and Trademark Office. The examiner, a poor performer for years who was never disciplined, came and went as he pleased, swiping his badge through the turnstile at the patent office headquarters in Alexandria, Va., where he was assigned to work.
He frequently told colleagues he was leaving work to go to the local golf driving range, play pool or grab a beer — then claimed a full day on the job on his time sheet. On most of the days when the examiner was gaming the system, “there was no evidence” he even went to the office or did any work on his government-issued laptop, investigators found.
The article goes on to describe the unidentified patent examiner’s case as “the most egregious example to surface so far of an examiner defrauding the government for work not done.”
But it’s not the worst ever. For that story, we’ll return once again to the halls of the poorly-led and ethically troubled Environmental Protection Agency. Michael Isikoff of NBC News reports on the December 18, 2013, criminal sentencing of John C. Beale, formerly the EPA’s highest-paid employee and also its leading expert on climate change:
John C. Beale’s crimes were “inexplicable” and “unbelievably egregious,” said Judge Ellen Huvelle in imposing the sentence in a Washington. D.C. federal court. Beale has also agreed to pay $1.3 million in restitution and forfeiture to the government.
Beale said he was ashamed of his lies about working for the CIA, a ruse that, according to court records, began in 2000 and continued until early this year.
“Why did I do this? Greed – simple greed – and I’m ashamed of that greed,” Beale told the court. He also said it was possible that he got a “rush” and a “sense of excitement” by telling people he was worked for the CIA. “It was something like an addiction,” he said.
Beale pled guilty in September to bilking the government out of nearly $1 million in salary and other benefits over a decade. He perpetrated his fraud largely by failing to show up at the EPA for months at a time, including one 18-month stretch starting in June 2011 when he did “absolutely no work,” as his lawyer acknowledged in a sentencing memo filed last week.
Beale would appear to still be serving his sentence at the Federal Correctional Institution Cumberland, where he is scheduled to be released on June 1, 2016. The facility has been described in the Washington Post as follows:
The Federal Correctional Institute in Cumberland, Md. is the go-to for white-collar Washington criminals. Disgraced lobbyist Jack Abramoff and former Clinton administration official Webb Hubbell served time at Cumberland, where prisoners are free to leave the premises to do yard work and the like, as long as they return.
One top D.C. defense attorney said his clients describe Cumberland as a “boys dormitory” with food that’s “nothing to write home about.” It’s got a commissary (where canned tuna — which, oddly, is used as a kind of currency in the camp — is sold) and a bare-bones fitness facility. The biggest perk, though, is that prisoners tend to be on their best behavior for fear of being sent somewhere rougher. “Nothing bad happens to you there,” said the attorney.
If you know of a more egregious story involving a federal government bureaucrat who hardly, if ever, works, please share it in the comments!
As we recently noted, the California Department of Transportation (Caltrans) pays 3,500 full-time employees to sit around at their desks, as one legislator put it. According to Investigations of Improper Activities by State Agencies and Employees, a new report by state auditor Elaine Howle, they were doing much more than that.
One Caltrans engineer, unnamed in the report, played golf on 55 workdays between August 2012 and March 2014. As Jon Ortiz of the Sacramento Bee noted, the unnamed Caltrans engineer fessed up that he played golf “as much as possible,” but only if he had worked at night or had already run up 40 hours for the week. But according to his time sheet, he worked only days, and all his time was spent working, not playing as much golf as possible. The unnamed Caltrans engineer was not fired or suspended. He was reassigned and went on medical leave. A Caltrans boss had signed off on his timesheets. According to the report, the Caltrans engineer has conveniently retired and his supervisor also plans to retire. Caltrans claims to be monitoring the pair, should they apply for other state jobs.
The investigation, auditor Howle notes, identified more than $4.2 millions in wasted funds, improper payments, and misuse of state time involving several major government departments. According to the report, the California Correctional Health Care Services wasted $3.2 million of a $17 million procurement, “because it paid the contractor to do nothing more than process invoices of the subcontractor, who performed all of the work.”
Rather than perform work at the Department of Industrial Relations, one supervisor peddled DVDs and music CDs. At the Employment Development Department, an accounting officer adjusted a family member’s tax account. Department of Corrections bosses continued to give extra pay and leave credits to chief psychologists, even after being informed that this policy was incorrect. And over at Caltrans, an engineer played as much golf as possible when he was supposed to be working. California’s embattled taxpayers are supporting a wasteful, pampered and indolent ruling class.
California borders the Pacific Ocean, the largest body of water in the world, so desalination is a no-brainer for the Golden State. But as Dan Walters of the Sacramento Bee shows, government is not exactly eager to slake the parched state’s thirst.
The San Diego County Water Authority is building a desalination plant near Carlsbad. The company in charge of the project, Poseidon Resources, is planning another at Huntington Beach in Orange County. As Walters notes, “Last week, a scientific panel gave a positive nod to the state Coastal Commission for Poseidon’s plan to draw in seawater, which has been a sticking point in its permit application. There was no particular reason why it should have been, other than that some folks in the environmental community reflexively oppose any project to increase California’s water supply, even in the midst of a historic drought.”
San Diego County has an elected government and so does the city of Carlsbad. But the desalination plant must bend the knee to the California Coastal Commission (CCC) an unelected body that overrides the elected governments of coastal counties and cities on land use and property rights issues. The CCC started as a temporary body during the first reign of Jerry Brown, and in typical style the state made it permanent. Headed and staffed by regulatory zealots, the CCC combines Stalinist-style regulation with Mafia-style corruption. In the 1990s, Commissioner Mark Nathanson served prison time for shaking down celebrities for bribes.
A scientific panel may have given the CCC the nod for seawater induction, but that is no guarantee the CCC will approve further plans. It does not need to face the voters, and it now has power to levy fines directly. Worse, the CCC serves the interest of those who, as Walters says, oppose “any” project to increase the state’s water supply.
Governor Jerry Brown wants to drill two massive tunnels under the Sacramento–San Joaquin River Delta at an estimated cost of $25 billion. If the governor supports the southern California desalination plants, Walters explains, “he would be undercutting the tunnel project, which he clearly sees as completing the State Water Project his father began and adding to his own political legacy.” San Diego County’s desalinated water, meanwhile, will cost $2,000 an acre-foot, but as Walters observes, that is scarcely a half-cent per gallon. Therefore, “It makes a lot of sense – perhaps more sense than spending billions of dollars on a couple of pipes that won’t increase supply.”
A century ago, Americans going to the recently invented movie theater would often be entertained by short comedy films, such as Mack Sennett’s Keystone Cops series.
Aside from the visual gags, many of these early films drew their humor from depicting people employed in a government profession as being something other than competent in their jobs, which in real life, was something that nearly everyone believed to be the opposite of what was true. Americans had considerable confidence in their public officials in those days.
A century later, stories of competence on the part of government bureaucrats are the exception and not the rule. That is a major reason why the average of Americans’ confidence ratings of the three branches of the U.S. government is currently tracking near its all-time lows.
As a case in point, just consider the following headlines from just the last two weeks for just the Environmental Protection Agency. Which of these stories gives you the greatest confidence in the ability of EPA officials to protect the environment?
It certainly hasn’t been a good August for the EPA and the reputation of its employees, has it? Then again, perhaps no month is a good one for the troubled agency.
And unlike the misadventures of the Keystone Cops, none of what they do is funny.
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