MyGovCost News & Blog

The 2014 election season is underway, where the growth of the national debt driven by irresponsible spending has made a surprise appearance in an ad attacking an incumbent politician. The Hill reports:

Generation Opportunity, a nonprofit advocacy group with ties to billionaire donors Charles and David Koch that’s geared toward young adults, is attacking Sen. Mary Landrieu (D-La.) on economic issues in its second ad this cycle.

The ad, shared first with The Hill, shows a young woman pushing a Landrieu look-a-like around a grocery store in a shopping cart. The politician greedily grabs items off the shelves, munching cookies and hoarding goods as the young woman admonishes, “I told you, we can’t afford that!”
“Washington politicians, like Sen. Mary Landrieu, have a spending problem. They’re wasting money they don’t have, and sticking our generation with the bill,” a narrator says in the ad.

When a cashier finally rings up all of the groceries, the sum comes out to $800,000 — an 18-year-old’s share of the national debt, per a Budget Committee analysis — and the Landrieu stand-in dismisses it: “She’s got it.”

Here’s the ad:

http://youtu.be/WCLmRUFGzGM

We thought it might be fun to check the $800,000 figure against the results one might get from using the MyGovCost calculator. Here, we assumed an average wage for a working 18-year old American with just a high school education of $26,000 and found that for such an individual, their expected share of federal government spending over their lifetime would be $1.25 million, while their share of taxes would be $600,000. The difference is $650,000, which would represent their share of the national debt from the federal government spending far more than it can collect.

For an 18-year old to have a lifetime share of $800,000 of the national debt, they would need to have an annual income of roughly $33,000.

As we have noted, California’s vaunted $68 billion “bullet train” is unpopular with taxpayers but a big hit with politicians, always eager for a new place to spend. So no surprise that the train to nowhere has already succeeded in bulking up government. Last year California’s High-Speed Rail Authority nearly tripled its staff to 116 employees, and payroll soared from $2.5 million to almost $7 million. Now, according to Chris Megerian of the Los Angeles Times, “California’s controversial bullet train would receive hundreds of millions of dollars in the coming year under a budget deal reached by Gov. Jerry Brown and lawmakers.”

The deal is “a critical step toward beginning construction as the project continues to face legal and political challenges.” The money “would be drawn from the cap-and-trade program, which charges fees to polluters who emit greenhouse gases above certain limits. Under the budget deal, $250 million would be allocated to high-speed rail in the next fiscal year, which begins July 1. In each following year, the bullet train would receive 25 percent of cap-and-trade revenue.” That revenue was not intended for rail construction, so court challenges will surely follow.

Further, as the Sacramento Bee noted, “the amount falls short of the 33 percent Brown initially wanted, but is more than Senate Democrats proposed.” The cap-and-trade funding “though insufficient alone to fund construction, holds the promise of a perpetual revenue stream – one not controlled by the federal government.” That will bring joy to spenders in Sacramento but not to taxpayers. The project would doubtless cost much more than $68 billion and even if completed would still be slower and more expensive than air travel.

The bullet train spending comes in a high-tax state that deploys an onerous regulatory regime that is driving business to other states. The state economy has yet to recover, and California faces about $340 billion in unfunded liabilities for pensions and retiree health care. Even so, it’s “all aboard” for more spending on the bullet train boondoggle.

It sometimes takes years to get a clear picture of historical events. Take 2009’s “stimulus” package, also known as the American Recovery and Restoration Act, which was supposed to revitalize the private sector of the U.S. economy at a time of crisis. Via Jim Pethokoukis, we find that the St. Louis branch of the Federal Reserve has weighed in on a big reason why President Obama’s trillion-dollar increase in government “stimulus” spending failed to meaningfully stimulate the U.S. economy:

Over one-half of the fiscal spending component of the American Recovery and Reinvestment Act (ARRA; i.e., the Recovery Act) was allocated via grants, loans, and contracts. Businesses, nonprofits, and nonfederal government agencies that received this type of stimulus funding were required to report the number of jobs directly created and saved as a result of their funding. …

It is estimated that at the one-year mark following the start of the stimulus, 166,000 of the 682,000 jobs directly created/ saved were in the private sector. Examples of private sector stimulus jobs include social workers hired by nonprofit groups to assist families, mechanics to repair buses for public transportation, and construction workers to repave highways.

Examples of government stimulus jobs include public school teachers, civil servants employed at state agencies, and police officers. While fewer than one of four stimulus jobs were in the private sector, more than seven of nine jobs in the U.S. economy overall reside in the private sector. Thus, stimulus-funded jobs were heavily tilted toward government.

Doing some quick math with the Fed’s numbers, President Obama’s 2009 “stimulus package” went toward creating or saving 516,000 government jobs out of the 682,000 jobs created or saved that have been attributed to it. That means that government workers claimed nearly 7 out of every 9 jobs created or sustained by the federal government’s near trillion dollar increase in spending over previously budgeted levels that year. Or very nearly the direct opposite ratio that exists for private sector jobs with respect to all jobs.

Why, it’s almost as if the politicians and bureaucrats who were running the U.S. government in 2009 were looking out more for their own interests rather than those of regular Americans! Meanwhile, six years later, millions of Americans are wondering why the economic recovery following the stimulus is taking so long.

We recently noted that California governor Jerry Brown’s 2014-15 budget would result in the overstaffing of Caltrans design and construction departments by about 3,500 full-time employees at a cost of more than $500 million. This comes at a time when, as Dan Walters of the Sacramento Bee observed, a declining workload is “not being matched by a declining staff.” But as Mr. Walters noted, Professional Engineers in California Government, the union representing Caltrans engineers, is adverse to cuts of any kind.

The union wants to keep staff on government payrolls for “shelf projects,” even if there is no money for them. Union boss Cathrina Barros, president of Professional Engineers in California Government, thinks there might be. “There may be new federal assistance on the way,” she explains. “The U.S. Senate has proposed tying the gas tax to inflation, and President Barack Obama recommends increasing federal highway funding by 20 percent per year for the next four years.” But there’s a catch. This is for “shovel ready” projects, and Barros laments that, at this very time, the legislature’s budget analyst recommends cutting Caltrans staff by another 3,500 positions.

The union boss calls this “irresponsible” and wants the state the keep those government workers because federal dollars may be flowing. In her view, government employees should get all the work, and in that cause she trots out a real whopper: “A Caltrans engineer – salary, benefits and overhead – costs the taxpayer $116,000 per year. Outsourcing the same job costs $237,000, primarily because contracts with private firms are awarded without competitive bidding.” If anybody believes that, Caltrans has a bridge to sell you – the one that was $5 billion over budget, ten years late, and still riddled with problems. And just so you know, overstaffing government by 3,500 employees, at a cost of $500 million, is not exactly an example of “competitive bidding.”

Barros is right that the state’s roads are a mess and need fixing, but that is not a call to further featherbed a bloated and irresponsible state agency. Instead the state should abandon the proposed bullet train and apply the funds to highway repair and construction. The state should outsource all this work to the independent (non-government) sector in a process of truly competitive bidding. That is, the work is open to all contractors, including those whose workers are not union members.

We’ve been following the story of the perverse incentives that the VA’s administrators had in creating the secret wait lists to ration and restrict needed medical care to American veterans. The latest salvo in fixing that problem was just fired in the U.S. House of Representatives, where a ban on further bonuses to the VA’s senior leadership was included in an amendment to the Military Construction and Veterans Affairs Act, which went on to pass in the House. The Washington Post reports:

The House on Wednesday passed a bill amendment that would ban bonuses for senior executives with the Department of Veterans Affairs.

Rep. Tim Huelskamp (R-Kan.), a co-sponsor of the proposal and a member of the House Veterans Affairs Committee, said the measure is needed because of “systematic leadership failures,” including preventable deaths at VA health centers, a backlog of longstanding disability claims and extensive delays for many of the department’s construction projects.

“This culture of anything-goes has got to stop,” Huelskamp said in a statement on Wednesday. “And the best way to stop this is to send a strong signal across the Department of Veteran Affairs that Congress means business.”

To understand why the issue of bonuses for the VA’s veteran health care rationing scheme is so important, let’s review how the VA has been spending money during the past 10 years. The following chart shows where the VA spent its rapidly increasing budget for each year since 2003:

Political Calculations describes the evolution of that spending over time, but more importantly, provides some background into the VA’s last scandal involving bonuses paid to its staff in 2011:

Here, we find that the VA’s spending for the compensation and pensions of its employees have grown the most since 2003, followed by spending on the medical services consumed by veterans who successfully obtained care from the VA, and then followed in a distant third place by spending to support education and vocational job training programs for U.S. veterans.

But beyond that, we find that the spending to support the pay, bonuses and pensions of VA employees has grown considerably faster than that to provide medical care to veterans – particularly in the period since 2008, which corresponds to President Obama’s tenure in office.

We also observe an unusual “spike” in the amount spent on VA employee compensation and pensions in 2011. This corresponds to the 2011 VA Bonus Scandal, in which the Department issued over $400 million in “merit” bonuses to VA employees with little evidence of actual merit in their work, inflating the amount of employee compensation that year.

The effect of the scandal was such that VA administrators and others who benefited from the lavish outpouring of bonuses in 2011 were denied bonuses in 2012, causing the amount of compensation and pensions paid to VA employees to dip in that year.

As you can see next, the compensation and pensions of VA employees surged to new highs in 2013. This increase corresponds to the re-establishment of the VA’s employee bonus programs in 2013, this time based on the false merit of their having “successfully” met President Obama’s goal of reducing the backlog and wait times for veterans seeking medical care.

It would seem that no one in a position of responsibility at the VA learned anything from the Department of Veterans Affair’s 2011 bonus scandal. Keep that in mind when considering the reaction of VA officials to the House’s action to sever their bonuses:

The VA has pushed back against the proposed restriction on executive bonuses, saying in a statement on Wednesday that the department must “remain competitive to recruit and retain the best people” to ensure quality service.

The VA also downplayed the notion of widespread problems at the department, highlighting some of its accomplishments in recent years, including enrolling 2 million former troops into the VA health-care system, reducing veterans homelessness by 24 percent and trimming its backlog of longstanding disability claims by 44 percent.

The Senior Executives Association said it “strongly disagrees” with Wednesday’s vote. “A blanket ban on performance awards only serves to punish those senior executives who are high performing and those who may not have a direct line of responsibility for the issues being raised in Congress,” the group said in a statement.

The bureaucrats behind this statement really want people to think that they have no responsibility for the Department’s health care rationing scheme, which allowed them to claim big bonus payouts even as they denied medical care to America’s veterans.

That’s a lot of money that could have instead gone to provide veterans with medical care outside of the VA’s system, if only they really cared about connecting U.S. veterans with the health care they need. But it was and is more important to the VA’s bureaucrats that they have both bonuses and absolute control over when and where U.S. veterans receive health care.

That bureaucratic reaction is why the House’s bill to ban bonuses for the VA’s top officials doesn’t go anywhere near far enough. Instead of denying them future bonuses, the Congress should act to claw back their previous ones.

And then we’ll find out if they really get the message this time.

The proposed budget for the federal Environmental Protection Agency for fiscal year 2015 is $7.89 billion. That should be plenty of money for the EPA to colonize more of American life.

As Keith Matheny notes in the Lansing State Journal, the EPA is advancing new regulations that will make life more difficult for farmers. According to Laura Campbell of the Michigan Farm Bureau, the rules could require federal permits to modify a farm’s drainage ditches that are dry 11 months of the year. Dan Wyant, director of Michigan’s Department of Environmental Quality, told Matheny that the regulations will “require more permitting, slow business down and cost more time and expense to business owners; there’s just no doubt about that.”

Iowa farmer Dean Lemke told Ron Nixon of the New York Times, “If I have to go to the EPA to figure out if I need a permit because a ditch I’m planting next to sometimes has water in it, that’s time I’m not planting. And if I’m not planting, I’m not making money.”

EPA critics have a strong case that the rules will quash economic growth, infringe on property rights, and increase the price of food. This is clearly a power grab on the part of the federal agency, and that should come as no surprise. As James V. DeLong noted in Out of Bounds, Out of Control, the EPA has few checks on its authority, writes rules with limited guidance from Congress, and has created entire programs out of thin air by changing the standard of evidence as it prosecutes alleged violations.

As we noted in EPChe: An Expensive, Oppressive Agency Gets a Symbol, the federal agency abounds in regulatory zealots. Consider how Al Armendariz, an EPA regional boss and Obama appointee, described the EPA enforcement style: “It is kind of like how the Romans used to conquer villages in the Mediterranean — they’d go into a little Turkish town somewhere and they’d find the first five guys they saw and they’d crucify them. Then that little town was really easy to manage for the next few years.”

The EPA is not the only obstruction to sound water policies. As Rep. Tom McClintock notes, federal policy abets California’s current drought by making it difficult to expand dams and water storage facilities. This stems from a “nihilistic vision of increasingly severe government-induced shortages, higher and higher electricity and water prices, massive taxpayer subsidies to politically well-connected and favored industries, and a permanently declining quality of life for our children.”

We have noted that California’s Parks Department protected its budget by hiding more than $50 million in a secret fund, at a time when it was shutting down parks and giving government employees lucrative vacation payouts. Now, in “California State Departments Play Shell Game,” Jon Ortiz and Jim Miller of the Sacramento Bee have charted another way bureaucrats protect their budgets and abuse taxpayers.

According to state law, if a state government position goes unfilled for six months the department loses the money. To keep the funds flowing, write Ortiz and Miller, the departments “simply altered the identifying numbers to make it appear that a job was filled with a transferred employee, thus avoiding a cut to their budgets.” They cite the case of Lindsay Rains, an environmental scientist at the Department of Food and Agriculture. She held that job steadily over many years, but in one fiscal year “she transferred 14 times through nine positions in one fiscal year. Her title never changed, but the serial numbers the state uses to identify her position changed repeatedly.” Department of General Services boss Ricardo Martinez was transferred 11 times in 18 months. Daniel Kieselhorst of the State Department of Hospitals shuttled between two positions 15 times in three years.

And so on, enabling the departments to keep the money coming. Bureaucrats can use the unspent salary money to cover operating costs such as “leave balances, office rent, new equipment or employee raises.” The last one is very important for government employees.

The State Department of Finance knows about the practice, but nobody seems to be doing anything about it. The state attorney general is not investigating, and as Ortiz and Miller note, “There’s no watchdog” to determine whether state departments “are manufacturing personnel moves to keep vacant slots and the tax dollars budgeted for them.” They estimate that at least $80 million is in play here. All of that comes from taxpayers, who are getting a raw deal.

As the shell game and hidden money scandal confirm, California’s bureaucrats’ bosses have no incentive to prevent waste, fraud and abuse. Indeed, bureaucrats can indulge waste, fraud and abuse with impunity. That’s why government remains off limits to reform.

Count this among the dubious milestones of government achievement: Through the end of 2012, the Federal Register, the ever-growing compendium of the federal government’s regulations, now includes over one million instances of words — such as “shall,” “must,” and “required” — whose only reason for being is to restrict the economic activities in which Americans might otherwise be free to engage.

The Mercatus Center’s Patrick McLaughlin and Robert Williams explain why the increasing frequency in which these words appear in the Federal Register is a bad thing:

In its most basic definition, a regulation is a law that “seeks to change behavior in order to produce desired outcomes,” and it does this by requiring or forbidding certain actions. Figure 1 shows the growth of federal regulations from 1997 to 2012, as measured by counting the number of restricting words, such as “shall,” “must,” or “required,” that are printed in the Code of Federal Regulations each year. (For information on the methodology behind this chart, see our paper.) The total number of restrictions in federal regulations has grown from about 835,000 in 1997 to over 1 million by 2010. Over time, these accumulated restrictions can either directly foreclose paths to innovation or entrepreneurship or add up to the point where their cumulative cost makes certain actions prohibitively expensive.

For more insight, McLaughlin’s latest paper on the topic, written with Omar Al-Ubaydli, is available online.

For some months now the story has been going around that California is experiencing an economic turnaround. As Ben Boychuk noted in City Journal California, the story “describes a state emerging from a decade of fiscal darkness to reclaim its place as an innovative, diverse, entrepreneurial haven.” The tale may be compelling but remains incomplete.

For one thing, it ignores California’s unemployment rate of 7.8 percent, much higher in rural counties, and higher than the national average of 6.3 percent. The turnaround tale also ignores the exodus of business from California, such as Toyota’s recent move of 3,000 marketing and finance jobs from California to Texas. In similar style in 2006, Nissan moved its U.S. headquarters from southern California to a suburb of Nashville, Tennessee. And as Boychuk observes, federally subsidized Tesla “won’t be locating its new $5 billion lithium-ion battery factory in California. It’s considering Arizona, Nevada—and Texas.”

Other problems concern the state’s high income taxes, with a top rate of 13.3 percent, and the “wall of debt.” Governor Jerry Brown pegs that at $24.9 billion, but that’s only what the state pinched from special funds to balance the budget. Boychuk writes that the governor “ignores the much larger wall of debt: between $330 and $600 billion in unfunded public pensions, health care, and bonds.” Dan Walters of the Sacramento Bee recently weighed in on this theme.

“The state now owes about $340 billion, with unfunded liabilities for pensions and retiree health care by far the largest pieces,” Walters explains. The State Teachers Retirement System (STRS) has an unfunded liability of $70 billion, and Brown says it needs $5 billion a year to regain solvency. Likewise, the state increased unemployment benefits, and when the recession hit had to borrow $10 billion from the federal government. And so on.

For Boychuk, California remains a place of opportunity but “its promise is imperiled by legislators and elected officials, who give little thought to the consequences, intended or otherwise, of their policy choices.” A genuine resurgence is possible, “but the only renaissance underway right now is in the heads of certain politicians” and their friends in the media.

The new eastern span of the Bay Bridge cost $6.4 billion, $5 billion more than the original estimate, and came in ten years late. Despite the long delay serious safety issues remain. These prompted Caltrans geologist Michael Moore to call for a “criminal investigation,” but that never took place. Instead state senator Mark De Saulnier tapped the California Highway Patrol to conduct an “administrative inquiry” that gave only the appearance of accountability. Now politicians are rewarding the very agency responsible for the cost overruns and safety issues.

As Dan Walters reports in the Sacramento Bee, Governor Jerry Brown’s 2014-15 budget proposals would result in the overstaffing of Caltrans design and construction departments by about 3,500 full-time employees at a cost of more than $500 million. As Walters observes, “That’s $500 million that would be unavailable for actual improvements of a system that has the nation’s worst congestion and its second worst pavement conditions.” And it comes at a time when a declining workload is “not being matched by a declining staff.” But Professional Engineers in California Government, the union representing Caltrans engineers, is adverse to cuts of any kind.

Legislators did cut 195 positions but conveniently added them back to develop a $1 billion “shelf” of projects to be built when money is available. The shelf may not survive, but that still leaves overstaffing of 3,500 positions at a cost of more than $500 million. For government employees the message should be clear.

They can run up $5 billion in cost overruns on a long-delayed bridge with lingering safety concerns. Politicians will profess outrage and hold hearings but resist calls for a criminal inquiry and make only a show of accountability. And in the end they will reward the very state agency responsible for the waste and unaccountability. Nice deal for California’s ruling class but bad deal for California taxpayers.