MyGovCost News & Blog

Beginning yesterday, the U.S. Treasury Department began its now-routine use of “extraordinary” measures to slow down the rate at which it borrows money to keep the nation’s total public debt outstanding below the limit set by Congress. In announcing those measures, Treasury Secretary Jack Lew ruled out some common-sense suggestions that members of Congress have proposed for reducing the need for such “extraordinary” measures. USA Today reports:

The Treasury Department explained its measures in a five-page document sent to Congress with Lew’s letter. In it, the department specifically ruled out other alternatives — like selling off government assets to stay under the debt limit.

“Selling the nation’s gold to meet payment obligations would undercut confidence in the United States both here and abroad, and would be extremely destabilizing to the world financial system,” the Treasury Department said. Also ruled out: Selling the remainder of Treasury stock in institutions bailed out during the financial crisis, or selling its portfolio of student loans.

Some quick research found that the United States holds more gold than any other nation in the world by a wide margin, with a total of 8,134 tons of the shiny yellow metal deposited in vaults in places like Fort Knox and deep under the New York branch of the Federal Reserve. All that gold ever does is sit in its vaults – it is not and has never been used for any productive purpose since coming into the grasp of the U.S. government.

But what if the Treasury Secretary had a change of heart and instead chose to use that gold to strike some 5,205,760,000 half-ounce coins with it, which the Treasury could sell to the public, just like it did in the decades before President Franklin D. Roosevelt issued Executive Order 6102 in 1933 to seize gold coinage and bars from the public?

Some of those old half-ounce coins are still in the public’s hands, where their prices have recently been recorded within a range of $614.50 to $657.34 per coin.

At that range of valuations, the total value of the U.S. government’s entire gold hoard would be anywhere from $3,198,939,520,000 (just under $3.2 trillion) to $3,421,954,278,400 (or just over $3.4 trillion). That would provide quite a lot of breathing room under the nation’s statutory debt limit, and frankly, only a fraction of it would even be needed.

Curiously, if the U.S. government were to mint such coins with the same face value of $25 as it did previously, the U.S. government’s gold hoard would be worth just $130,144,000,000 (a little over $130 billion).

But that doesn’t answer the question, Why does the U.S. government even need all that gold? After all, the only thing it does with it is stick in it all in underground vaults — much like Smaug, the evil gold-hoarding dragon from J.R.R. Tolkien’s The Hobbit.

By failing to consider selling even a small portion of the U.S. government’s gold hoard to people who have real uses for it (despite the fact that it would avoid the need for extraordinary measures on his part), U.S. Treasury Secretary Jack Lew is effectively putting himself into the same class of gold hoarding as the legendary Walter Samaszko Jr.:

Walter Samaszko Jr. was not a guy who wanted company. He covered the windows of his house in Carson City, Nev., with cardboard so the neighbors couldn’t see inside. He made the postman stick the mail through the slot in his garage rather than coming to the front door. He was so good at keeping people away that when he died of heart failure at age 69 in June, nobody noticed until his house began to smell. Someone called the sheriff’s department. A hazmat team removed Samaszko along with part of the floor he was stuck to.

That’s when everybody found out why he hadn’t been more sociable: The dour, white-haired recluse had been hoarding $7 million worth of gold coins, most of them hidden in the crawl space beneath the house. Some were in an old washing machine. There were British sovereigns dating back to the 1840s, Austrian ducats, and South African Kruggerands. But mostly Samaszko had collected rolls and rolls of $20 American gold pieces, the kind with double eagles on them. He also had $12,000 in cash, a stock account worth $165,000—and $200 in the bank….

It’s easy to see why Samaszko’s death and the revelations that followed fascinate people. How many of us would have kept $7 million in a crawl space and not touched it? It makes you wonder what other secrets died with him.

Samaszko’s methods for protecting his golden hoard pretty much match the methods used by the U.S. government. There really must be something about having so much gold that turns some people into such crazy hoarders that they are absolutely unwilling to make rational decisions about how to use it in the real world. Like selling a portion of it to pay down their bills when their credit cards are maxed out.

As consumers know, modern computers are incredibly reliable machines that work right out of the box, simplify many tasks, and save consumers money. In the hands of government employees, however, computers often fail to work, make life more complicated, and cost taxpayers much more money than advertised.

As Jon Ortiz notes in the Sacramento Bee, California’s Department of Consumer Affairs has been implementing a BreEZe computer system that was supposed to cost $27 million. The system, however, “spit out unreliable data,” and problems like that boosted the budget to $77 million. So far the department has spent $37 million, but officials describe the system as “a mess.” Consumer Affairs boss Awet Kidate conceded that “the department failed miserably at change management.” But he still wants another $17.5 million for the department that failed miserably. That will bring the final cost to $96 million, more than three times the original estimate.

Ortiz also outlined similar problems with IT systems in the state Employment Development Department, the Department of Fair Employment and Housing, and the payroll system for the University of California. As a consultant told Ortiz, these problems arise because of the government’s antipathy to honest assessment. On the assessment theme, consider the following development.

As we previously noted, Proposition 63 raised $13.2 billion but California’s Little Hoover Commission, a state watchdog, reported that the state cannot even document whether or not the $13.2 billion improved Californians’ lives. Not to worry, because the measure is providing relief for tens of thousands of Californians and decreasing homelessness, hospitalizations, and arrests among the mentally ill. That is the glowing assessment of, yes, former Senate boss Darrell Steinberg. He not only wrote Proposition 63 but recently became director of policy and advocacy for the UC Davis Behavioral Health Center of Excellence, which Proposition 63 funds to the tune of $7.5 million.

Steinberg, a lawyer, will be a visiting professor at Davis’s Department of Psychiatry and Behavioral Sciences. That will enable him immediately to lobby the Legislature on behalf of the Center. For ruling-class high-rollers, it’s always a wonderful world.

We’ve been busy behind the scenes here at the MyGovCost project at the Independent Institute, as we’ve just completed our major annual update to the MyGovCost Government Cost Calculator!

The MyGovCost Government Cost Calculator is the only tool available for you, the ordinary taxpayer, to get a sense of what the U.S. government’s expected spending and tax revenue will cost you, in terms of what you could otherwise have earned if you had been able to invest your hard-earned money instead.

So, let’s consider a simple example of that math! Let’s say that you’re 40-years old, you have earned a Bachelors degree, you’ll have an income growth trajectory to similar peers with the same educational level, and that you currently earn what we estimate the median household income for 2014 will be reported to be later this year: $53,601.

The chart below shows what the federal government’s current spending and tax collection projections and national debt accumulation will really cost you over the next 40 years:

In terms of the U.S. government’s spending, your personal share would be $615,014 from 2015 to 2056, while your personal share of federal taxes would be $398,532. These figures are in today’s U.S. dollars.

But if you had instead been able to keep your money and invest it over the long term in a well-diversified investment like an S&P 500 index fund and earn its very long-term inflation-adjusted average rate of return, you could have had an extra $1,729,792 to show for what the U.S. government’s spending will cost you!

The cool thing is that the MyGovCost Government Cost Calculator can create a personalized estimate of the impact of the U.S. government’s spending in the future for anyone, based just on their educational attainment, their current age, and their current income.

So check out the latest update to the MyGovCost Government Cost Calculator. And as a bonus feature, after checking out your own numbers, check out how they might change for a hypothetical situation, say if you were someone like Apple’s Tim Cook, television icon Oprah Winfrey, or former U.S. President Bill Clinton, or if you were someone at the opposite end of the income-earning spectrum!

We’re going to summarize the biggest takeaway from the CBO’s latest update to its budget projections with a single chart:

Note that the trend for revenues flattens out after 2016, when most of the tax hikes that are mandated as part of the Patient Protection and Affordable Care Act (a.k.a. “Obamacare”) are fully implemented.

And yet, after 2016, the gap between the U.S. federal government’s tax collections, which now include the profits it collects through its Federal Direct Student Loan program, and its spending only ever grows larger.

P.S. We’ll soon be updating the MyGovCost calculator with all the latest projections!

Whenever the U.S. government’s cumulative spending reaches the point where the national debt racked up to support it nears the nation’s debt limit ceiling, it creates problems for the U.S. Treasury Department, because it has to resort to playing a shell game with the accounts it controls to keep the nation’s debt under that limit, which has become a fairly routine event.

According to Reuters, they’re about to get started playing that shell game again:

(Reuters) – The Obama administration on Friday said it would start using emergency cash measures to allow the government to keep paying the nation’s bills once it hits the legal debt limit in about a week.

Congress is expected to face another contentious debate over raising the U.S. legal borrowing authority, which is due to expire on March 15. If it stretches to the final deadline, the timing would coincide with the debate over government agency funding for the new fiscal year, which starts Oct. 1.

The Congressional Budget Office said this week that if Congress does not raise the federal debt limit, the Treasury Department will exhaust all of its borrowing capacity and run out of cash in October or November, slightly later than a previous forecast.

The first step in the U.S. Treasury’s shell game will be to stop issuing “slugs”, or rather, state and local government series debt securities, which many state and local governments are required under U.S. tax laws and IRS regulations to “invest” in whenever they have surplus funds.

The next steps, which are likely to be taken later in the year, will be for the Treasury Department to suspend making cash interest payments to three different federal government employee retirement funds that it controls: the Civil Service Retirement and Disability Fund, the Postal Service Retiree Health Benefit Fund, and the Government Securities Investment Fund (G-Fund). (This last fund is a government-securities money market fund available only to federal employees through the federal government’s Thrift Savings Plan – the federal government’s version of a 401(k) retirement account, which it provides as an additional benefit for federal government employees in addition to its exceptionally generous traditional pension plan benefits and Social Security benefits.)

In place of these cash interest payments, the U.S. Treasury Department will issue I.O.U.s to these retirement funds. Once the debt limit ceiling is increased, the U.S. Treasury will rush out to borrow money to immediately repay these I.O.U.s, at which time, the U.S. national debt will surge to the level it would otherwise have reached if not for the U.S. Treasury’s shell game.

Of course, none of these so-called “extraordinary” measures would be necessary if the U.S. government reigned in its spending to sustainable levels.

As we recently noted, California’s Little Hoover Commission, a state watchdog, reported that the state cannot even document whether or not the $13.2 billion raised by Proposition 63 improved Californians’ lives. That is of interest because the 2004 measure, sponsored by Sen. Darrell Steinberg, was supposed to keep people off the street, out of jail, and out of the hospital. Steinberg was never up front about how much of the $13.2 billion went to salaries for government workers and well-connected mental health providers. But now Proposition 63 has come through big-time for its sponsor.

As David Siders reports in the Sacramento Bee, Steinberg will become director of policy and advocacy for the new $7.5 million UC Davis Behavioral Health Center of Excellence, “an institution funded by a measure he championed while in the Legislature.” That would be Proposition 63, which Steinberg authored. The position is unpaid, “which allows Steinberg to lobby the Legislature on behalf of the center without violating California’s revolving-door law.” Not to worry, because, as Mr. Siders explains, “Steinberg will be a visiting professor at Davis’ Department of Psychiatry and Behavioral Sciences.” How convenient, given that Steinberg is neither a psychiatrist or a behavioral scientist.

He’s the politician who wrote Proposition 63. It raised $13.2 billion, but soon after Steinberg leaves office, a state watchdog says can’t determine how it helped anybody. Taxpayers know it funded the $7.5 million UC Davis Behavioral Health Center of Excellence, and now Steinberg has a job there, and he will be a visiting UC Davis professor as well. As this caper confirms, for ruling-class high-rollers California will always be the Golden State.

We’re returning to the troubles of EPA Administrator Gina McCarthy today, because she’s made the news again due to her oversight at the out-of-control government agency. CBS News reports:

In the private sector, if you’re caught viewing porn on company time or intimidating a co-worker, you’d probably be fired immediately; not so if you’re a federal employee.

A CBS News investigation looks at how hard it is for the U.S. government to discipline or fire employees who behave badly. With examples ranging from extravagant to explicit, civil service rules meant to protect public workers from political pressure may be backfiring, and costing you big, reports CBS News correspondent Don Dahler.

At the Environmental Protection Agency (EPA), red tape is preventing the removal of a top level employee accused of viewing porn two to six hours a day while at work, since 2010. Even though investigators found 7,000 pornographic files on his computer and even caught him watching porn, he remains on the payroll.

At a Congressional hearing, EPA administrator Gina McCarthy was asked why she hadn’t fired the employee and said, “I actually have to work through the administrative process, as you know.”

The administrative process meant to prevent against politically motivated firings is the civil servant protection system. The rules give employees the right to appeal a termination, a process that can take up two years.

Now, we’re going to emphasize how bad the federal government’s and Gina McCarthy’s management failures are with the following YouTube video. In it, you’ll see McCarthy’s congressional testimony, with Representative Kerry Bentivolio (R-MI) challenging the EPA Administrator on the bonuses that were paid to the EPA’s prolific porn-watching employee after it was well established that the employee was engaged in gross misconduct. We’ll explain why it demonstrates such a tremendous failure of management in the federal government below the video.

That video was posted on YouTube on June 25, 2014, well over eight months ago. Now, guess who’s still collecting a federal government paycheck?

At this point, the real outrage is that the EPA’s porn-watching-on-the-job employee and EPA Adminstrator Gina McCarthy are both still collecting federal government paychecks. If the federal government had competent leadership, both heads would have rolled long ago.

Unless, of course, the kind of creepy on-the-job behavior of the federal government’s employees is supported by its top officials, who are turning a blind eye toward both sexual harassment and the establishment of an extremely hostile work environment.

And without action to fire such employees engaged in clear misconduct and the officials who tolerate the ongoing misconduct as their managers, what other conclusion can we logically draw from this continuing situation? After all, wouldn’t a competent leader with a pen and a phone find ways to cut through red tape to get rid of misbehaving employees? Especially if doing so could save U.S. taxpayers hundreds of millions of dollars a year?

Or do they perhaps have other priorities?

When government says it’s going to be “neutral” about something, taxpayers can’t go wrong thinking that precisely the opposite is the case. Consider, for example, the latest government power grab, disguised as “Internet Neutrality.” If government were indeed neutral it would leave the Internet alone. But under Federal Communications Commission chairman Tom Wheeler, government regulators are classifying broadband as a telecommunications service, like telephone land lines. Prior to their vote in late February, FCC bosses declined to make their massive proposal available to the public or Congress. Treating the Internet like a public utility makes no sense, as Commissioner Ajit Pai said, “a solution that won’t work to a problem that doesn’t exist.” So what, exactly, is going on here?

As Mark Hyman notes in the American Spectator the FCC vote was “not the first but merely the latest step toward regulating speech.” He notes that President Obama’s first FCC boss was Julius Genachowski, who “directed a multi-pronged effort aimed at increasing government control of news, information, and entertainment.” Hyman also recalls that Cass Sunstein of the White House Office of Information and Regulatory Affairs argued that the government should impose “must carry” rules on popular websites, and implement a “fairness doctrine” requiring websites to offer opposing viewpoints.

That doesn’t sound much like the free speech the government is supposed to protect. Internet “neutrality,” meanwhile, is anything but, and the FCC vote confirms that the government is out to grab more power, regulate speech and quash innovation.

Under federal law, no agency or department can spend money on any discretionary purpose without authorization by the Congress of the United States. But apparently, when it comes to spending money to prop up the Affordable Care Act, neither the U.S. Treasury Department nor the Department of Health and Human Services can apparently be bothered to follow the law, subsidizing health insurers to the tune of $3 billion in 2014.

Philip Klein of the Washington Examiner explains more:

At issue are payments to insurers known as cost-sharing subsidies. These payments come about because President Obama’s healthcare law forces insurers to limit out-of-pocket costs for certain low income individuals by capping consumer expenses, such as deductibles and co-payments, in insurance policies. In exchange for capping these charges, insurers are supposed to receive compensation.

What’s tricky is that Congress never authorized any money to make such payments to insurers in its annual appropriations, but the Department of Health and Human Services, with the cooperation of the U.S. Treasury, made them anyway.

The law that the Health and Human Services and Treasury Departments would appear to be violating is called the Antideficiency Act. Here is how the U.S. Government Accountability Office describes the law:

The Antideficiency Act prohibits federal employees from

• making or authorizing an expenditure from, or creating or authorizing an obligation under, any appropriation or fund in excess of the amount available in the appropriation or fund unless authorized by law. 31 U.S.C. § 1341(a)(1)(A).
• involving the government in any obligation to pay money before funds have been appropriated for that purpose, unless otherwise allowed by law. 31 U.S.C. § 1341(a)(1)(B).
• accepting voluntary services for the United States, or employing personal services not authorized by law, except in cases of emergency involving the safety of human life or the protection of property. 31 U.S.C. § 1342.
• making obligations or expenditures in excess of an apportionment or reapportionment, or in excess of the amount permitted by agency regulations. 31 U.S.C. § 1517(a).

Federal employees who violate the Antideficiency Act are subject to two types of sanctions: administrative and penal. Employees may be subject to appropriate administrative discipline including, when circumstances warrant, suspension from duty without pay or removal from office. In addition, employees may also be subject to fines, imprisonment, or both.

The main legal question that needs to be answered in this situation is whether or not the Affordable Care Act allows these corporate welfare payments for health insurers to be made without having the money be appropriated by the U.S. Congress for that express purpose. Klein reports that the Obama administration, as evidenced through its 2014 budget proposal, clearly believes it does:

For fiscal year 2014, the Centers for Medicare and Medicaid Services (the division of Health and Human Services that implements the program), asked Congress for an annual appropriation of $4 billion to finance the cost-sharing payments that year and another $1.4 billion “advance appropriation” for the first quarter of fiscal year 2015, “to permit CMS to reimburse issuers …”

In making the request, CMS was in effect acknowledging that it needed congressional appropriations to make the payments. But when Congress rejected the request, the administration went ahead and made the payments anyway.

What we would seem to have here, then, is a pretty clear cut example of how far Washington, D.C.’s spending has gotten out of control during the Obama administration’s tenure in office.

But it gets worse. After asking the U.S. Treasury Department for an explanation detailing the basis under which they and the HHS made the unauthorized payments, U.S. House of Representatives Ways and Means Committee Chairman Paul Ryan was told to take the matter up with the U.S. Department of Justice:

In response, on Wednesday, the Treasury Department sent a letter to Ryan largely describing the program, without offering a detailed explanation of the decision to make the payments. The letter revealed that $2.997 billion in such payments had been made in 2014, but didn’t elaborate on where the money came from. Over the next decade, cost-sharing payments to insurers are projected by the Congressional Budget Office to cost taxpayers nearly $150 billion.

Instead of detailing the basis for making the payments without appropriations, Treasury officials cited the ongoing House GOP litigation, and referred Ryan to the Department of Justice.

Put a bit differently, the U.S. Treasury Department and Department of Health and Human Services are stonewalling the U.S. Congress and have “lawyered up“.

It’s perhaps an unfortunate coincidence that the “lawyer” defending their interests would also appear to be the U.S. government’s prosecutor, and would therefore have the “prosecutorial discretion” to not enforce the nation’s criminal law.

One wonders if that might change if Americans were to became more familiar with the legal definitions of the words “embezzlement” and “racketeering“. Or would they turn a blind eye to the newest and least legal form of corporate welfare?

Comparing the spending in President Obama’s budget proposal for 2016 with his budget proposal for 2015 is turning out to be a very interesting exercise. It’s one that may shed much light on future spending for the roughly 5 million undocumented immigrants subject to the president’s controversial executive action on immigration announced last November.

First, it’s helpful to recall that White House budget proposals can tell us a lot about a president’s ambitions and expectations. In our previous installments, we’ve found indications that President Obama is conceding that his foreign policy is failing and that he believes that the outlook for the U.S. housing recovery is dimming.

Following up that last observation, it was natural to next examine the amount of spending that President Obama is proposing to spend during the next four years for the federal government’s major welfare/economic security programs. Here, if President Obama believes that the U.S. economy is heading toward recession, he would be proposing large increases in the amounts budgeted for federal welfare programs.

The chart below shows how much President Obama’s spending proposals for unemployment compensation, housing assistance, food and nutrition assistance (a.k.a. “food stamps”), social services, training and employment and “other income security” programs have changed from his FY2015 budget to his FY2016 budget for each of the next four years.

What’s most important to recognize in this data is that the amount of spending for these welfare-related expenditures is directly tied to the health of the U.S. economy. Each of these expenditures will generally rise and fall together when the U.S. economy is going through periods of economic expansion or contraction, as large numbers of Americans either enter or exit welfare programs based on the state of the U.S. economy.

But what the data shows in the chart above is contradictory. President Obama’s budget request for Unemployment Compensation points to a growing economy, while all the other welfare programs would seem to indicate that he believes a deep recession is imminent.

Since President Obama has recently stated that the economy is growing, the expectation that a declining economy is imminent likely cannot be the explanation for the president’s request to expand the federal government’s welfare spending.

There are two other possibilities that could potentially explain the increase in spending for these welfare programs. First, the president could be increasing the amount of welfare benefits that will be given to each of the nearly 110 million Americans currently receiving welfare benefits. Second, he could be proposing to massively increase the number of people who are eligible to collect welfare benefits.

We can rule out the first possibility because President Obama has not called for more generous welfare benefits.

Meanwhile, his legally stalled executive action to defer deportation proceedings for over five million undocumented immigrants and to provide them with work visas would account for the increase in spending proposed for these welfare programs.

The largest expansion would be the eligibility of these individuals to collect the Earned Income Tax Credit (covered under “Other income security”), with food stamps (“Food and nutritional assistance”) following close behind. Here’s how much President Obama’s combined proposed spending on all these welfare programs outside of Unemployment Compensation changes in each year from 2016 through 2019, along with the amount of benefits that each individual covered by the President’s executive amnesty would receive if equally divided among five million individuals:

2016: $1.708 billion ($341.60 per person)
2017: $18.417 billion ($3,683.40 per person)
2018: $19.236 billion ($3,847.20 per person)
2019: $17.229 billion ($3,445.80 per person)

The actual figures would likely be larger since we’ve omitted spending related for the Medicaid welfare program, where we don’t have the data to separate the expansion of government benefits to undocumented immigrants from the state-by-state expansion of those benefits provided under the Affordable Care Act.

Over these four years, the total increase in spending proposed for these welfare programs would be $56.5 billion. And we should note that this elevated spending of about $18 billion per year on these welfare programs would essentially become a permanent increase in the amount of federal spending.

That four-year figure though can be compared with the left-leaning Center for American Progress’ estimate that deporting 5 million undocumented immigrants who unlawfully entered the U.S. would cost the federal government $50.3 billion.

We can’t help but note the irony that the leftist Center for American Progress, which can normally be counted upon to support President Obama’s political positions, has actually published a number that supports the deportation of these individuals from a fiscal perspective!

But still, we have to thank President Obama for providing the numbers that indicate how much he believes his executive action on immigration will cost American taxpayers.