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Archive for the ‘Boondoggle’ Category

Every so often, I’ll see a story (or sometimes even just a photo, a court decision, or a phrase) that sums up the essence of government – a unseemly combination of venality and incompetence.

Today, we’re going to review three examples that make my point.

We’ll lead with a story that is a perfect case study of Washington.

It starts with Trump imposing tax increases on imports. That’s bad.

Then Trump says we have to subsidize sectors of the economy hurt by retaliatory tariffs. That’s one bad policy leading to another bad policy (hmmm…., there’s a name for that).

And that second bad policy leads to something else bad, at least according to the New York Daily News.

The Department of Agriculture cut a contract in January to purchase $22.3 million worth of pork from plants operated by JBS USA, a Colorado-based subsidiary of Brazil’s JBS SA, which ranks as the largest meatpacker in the world. …The bailout raised eyebrows from industry insiders at the time, as it was sourced from a $12 billion program meant for American farmers harmed by President Trump’s escalating trade war with China and other countries. …previously undisclosed purchase reports…reveal the administration has since issued at least two more bailouts to JBS, even as Trump’s own Justice Department began investigating the meatpacker, whose owners are Joesley and Wesley Batista — two wealthy brothers who have confessed to bribing hundreds of top officials in Brazil. Both brothers have spent time in jail over the sweeping corruption scandal. …Nonetheless, Trump’s Agriculture Department issued $14.5 million in bailout cash for pork products from JBS in February and another $25.6 million earlier this month, totaling more than $62.4 million, according to the purchase reports. …Including the JBS bailouts, the administration doled out $11 billion in relief payments to farmers hurt in the trade war last year.

Wow. I don’t know if this is better or worse than the Administration spending $13.6 million to hire two agents for the border patrol.

And I don’t know whether it’s better or worse than this next example of government foolishness.

A report published by Quartz estimates the amount of many Washington has wasted on abstinence programs.

Between 1982 and 2017, Congress spent over $2 billion on programs which teach teens that the best way to address their desire to have sex is to wait until they get married, according to a new study… Called abstinence only until marriage (AOUM), these programs accurately explain that the best way to avoid pregnancy and sexually transmitted diseases is to not have sex. …From 1995 to 2011–2013, the share of US adolescents who received instruction on abstinence but no instruction about birth control methods, increased from 8% to 28% of females and from 9% to 35% of males, according to the report. …Scientific evidence shows the approach doesn’t actually delay teens having sex, or engaging in risky sexual behaviors.

Just like the money spent to encourage marriage is a waste.

By the way, I’m also sure that the money spent on regular sex education and birth control education hasn’t worked, either.

Indeed, I wonder if such spending actually makes things worse (such as the Indiana driver education program that turned kids into worse drivers).

For our third example, here’s some of what the New York Times wrote about refrigerators on Air Force One.

…two of the refrigerators on the president’s plane need to be upgraded, and these specially designed “chillers” aren’t cheap. The Boeing Company was awarded a nearly $24 million contract in December to engineer the refrigerators for Air Force One, the Defense Department said. …Perhaps in anticipation of taxpayer sticker shock, the Air Force also said “the engineering required to design, manufacture, conduct environmental testing and obtain Federal Aviation Administration certification” were all included in the cost. …Air Force One must be able to feed passengers and crew for weeks without resupplying, according to the news website Defense One. …Two galleys can provide up to 100 meals at one sitting, according to the Air Force.

This story presumably involves two common features of government contracting.

First, pay too much for what is ordered (and this doesn’t even count the seemingly inevitable cost overruns).

Second, ask for something excessive in the first place. What’s the point, for instance, of storing several weeks of food when the longest-possible trips are maybe 20 hours? Yes, I watched Independence Day and I realize that Air Force One may become the mobile White House in an emergency, but wouldn’t MREs be acceptable for our pampered politicians and senior staff if there was a real crisis?

I’ll conclude by observing that these three stories reminded me of this satirical version of The Candyman.

P.S. There’s also an Obamaman version of Candyman.

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I spend much of my time analyzing the foolish and counterproductive policies imposed by Washington. Often accompanied by some mockery of politicians and their silly laws.

And I also employ the same approach when reviewing the bone-headed policies often pursued by state governments and local governments.

And since this is “International Liberty,” I obviously like to pay attention to what happens in other nations as well. I guess you could call it the global version of misery-loves-company.

So today we’re going to add to our collection of “Great Moments in Foreign Government.”

We’ll start in Egypt, where we got a version of alchemy. Except instead of turning a base metal into gold, a donkey was turned into a zebra.

A zoo in Egypt has denied painting black stripes on a donkey to make it look like a zebra after a photo of the animal appeared online. Student Mahmoud Sarhan put the images on Facebook after visiting Cairo’s International Garden municipal park. Aside from its small size and pointy ears, there were also black smudges on its face. …the enclosure contained two animals and that both had been painted. When contacted by local radio station Nogoum FM, zoo director Mohamed Sultan insisted the animal was not a fake.

The most amusing part of the report, though, was learning that zoos routinely try to mislead customers.

This is not the first time that a zoo has been accused of trying to fool its audience. Unable to find a way around the Israeli blockade, a zoo in Gaza painted two donkeys to look like zebras in 2009. Another Gaza zoo put stuffed animals on display in 2012 because of the shortages of animals. In 2013, a Chinese zoo in Henan province tried to pass off a Tibetan mastiff dog as an African lion, and in 2017 a zoo in Guangxi province disappointed visitors by exhibiting blow-up plastic penguins. Weeks later, another Guangxi zoo drew condemnation for displaying plastic butterflies. …Papua New Guinea is one of the poorest countries in Apec, with 40% of the population living on less than $1 a day according to the UN.

I have to confess, though, that I don’t know if any of these zoos were private. So maybe we have a problem that isn’t just limited to government.

Our next story is from India.

It seems that the military doesn’t understand that submarines are supposed to be watertight.

…it’s a good idea to, like, close the hatches before you dive. Call it a lesson learned for the Indian navy, which managed to put the country’s first nuclear-missile submarine, the $2.9 billion INS Arihant, out of commission in the most boneheaded way possible. The Hindu reported yesterday that the Arihant has been out of commission since suffering “major damage” some 10 months ago, due to what a navy source characterized as a “human error” — to wit: allowing water to flood to sub’s propulsion compartment after failing to secure one of the vessel’s external hatches. …It’s hard to articulate how major a foul-up this is… Indian authorities ordered the pipe replacement because they “likely felt that pipes exposed to corrosive seawater couldn’t be trusted again, particularly pipes that carry pressurized water coolant to and from the ship’s 83 megawatt nuclear reactor.”

Sounds like India’s navy would have been better off if the person in charge of the hatch had been one of the country’s famous no-show bureaucrats.

Now let’s turn our attention to Papau New Guinea, where the roads are so poor that it makes no sense to have fancy, high-speed cars.

Yet that didn’t stop the government from using a summit as an excuse to buy 40 Maseratis

Papua New Guinea’s government is under scrutiny for importing 40 luxury Maserati cars from Italy for the…Asia-Pacific Economic Cooperation (Apec) summit. The Quattroporte sedans, which cost more than $100,000 each (£75,000), will be used by foreign leaders. Media and activists have questioned if the poor Pacific country has wasted millions. …Apec Minister Justin Tkatchenko said the cars, which can reach speeds of 240 km/h (149 mph), would “provide the level of carriage for leaders that is the standard for vehicles used at Apec summits”. …Some of the Pacific country’s main roads are poorly maintained, with vehicle speeds limited to 80 km/h (50 mph). Other roads wind through mountainous terrain and often require a four-wheel-drive vehicle to navigate.

Incidentally, the government claimed that the Maseratis would be resold to private buyers, meaning no net cost to taxpayers. Highly unlikely, to be sure.

Moreover, if there was a follow-up story, I wouldn’t be surprised to learn that they magically wound up in the hands of politicians and their family members.

The bottom line is that governments manage to combine malicious venality with staggering incompetence. Quite a feat.

P.S. For what it’s worth, America’s political elite prefers to rely on taxpayer-financed limousines.

P.S.S. I’ve noticed on my trips to Cayman that there are lots of fancy, high-performance cars. In some sense this isn’t surprising. After all, zero-tax Cayman is a wealthy place. Yet I’ve always wondered why people buy such cars on a small island where high-speed travel is both difficult and unnecessary. But at least those are people spending their own money (though the government there certainly is capable of over-spending in other ways).

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When I wrote about “crazy Bernie Sanders” in 2016, I wasn’t just engaging in literary hyperbole. The Vermont Senator is basically an unreconstructed leftist with a disturbing affinity for crackpot ideas and totalitarian regimes.

His campaign agenda that year was an orgy of new taxes and higher spending.

Though it’s worth noting that he’s at least crafty enough to steer clear of pure socialism. He wants massive increases in taxes, spending, and regulation, but even he doesn’t openly advocate government ownership of factories.

Then again, there probably wouldn’t be any factories to nationalize if Sanders was ever successful in saddling the nation with a Greek-sized public sector.

He’s already advocated a “Medicare-for-All” scheme with a 10-year price tag of $15 trillion, for instance. And now he has a new multi-trillion dollar proposal for guaranteed jobs.

In a column for the Washington Post, Robert Samuelson dissects Bernie’s latest vote-buying scheme. Here’s a description of what Senator Sanders apparently wants.

Sen. Bernie Sanders (I-Vt.) wants the federal government to guarantee a job for every American willing and able to work. The proposal sounds compassionate and enlightened, but in practice, it would almost certainly be a disaster. …Just precisely how Sanders’s scheme would work is unclear, because he hasn’t yet submitted detailed legislation. However, …a job-guarantee plan devised by economists at Bard College’s Levy Economics Institute…suggests how a job guarantee might function. …anyone needing a job could get one at a uniform wage of $15 an hour, plus health insurance (probably Medicare) and other benefits (importantly: child care). When fully deployed, the program would create 15 million public-service jobs, estimate the economists. …the federal government would pay the costs, the program would be administered by states, localities and nonprofit organizations.

As you might expect, the fiscal costs would be staggering (and, like most government programs, would wind up being even more expensive than advertised).

This would be huge: about five times the number of existing federal jobs (2.8 million) and triple the number of state government jobs (5 million). …The proposal would add to already swollen federal budget deficits. The Bard economists put the annual cost at about $400 billion. …overall spending is likely underestimated.

But the budgetary costs would just be the beginning.

Bernie’s scheme would basically destroy a big chunk of the job market since people in low-wage and entry-level jobs would seek to take advantage of the new government giveaway.

…uncovered workers might stage a political rebellion or switch from today’s low-paying private-sector jobs to the better-paid public-service jobs… The same logic applies to child-care subsidies.

And there are many other unanswered questions about how the plan would work.

Does the federal government have the managerial competence to oversee the creation of so many jobs? …Can the new workers be disciplined? …Finally, would state and local governments substitute federally funded jobs for existing jobs that are supported by local taxes?

If the plan ever got adopted, the only silver lining to the dark cloud is that it would provide additional evidence that government programs don’t work.

The irony is that, by assigning government tasks likely to fail, the advocates of activist government bring government into disrepute.

But that silver lining won’t matter much since a bigger chunk of the population will be hooked on the heroin of government dependency.

In other words, just as it’s now difficult to repeal Obamacare even though we know it doesn’t work, it also would be difficult to repeal make-work government jobs.

So we may have plenty of opportunity to mock Bernie Sanders, but he may wind up with the last laugh.

P.S. Regarding getting people into productive work, I figure the least destructive approach would be “job training” programs.

Beyond that, I’m not sure whether make-work government jobs are more harmful or basic income is more harmful.

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A few years ago, John Stossel did an undercover investigation of a government job-training program and he found that the operation was basically a scam.

Not that we should be surprised. Back in 2014, I explained to a C-Span audience that a healthy private sector was the only sure-fire way of producing a good job market. Which is why politicians (assuming they actually want job creation) should simply “get out of the way.”

Let’s now take a fresh look at the issue. The Wall Street Journal editorialized on this topic a few days ago.

…a new report from the Labor Department’s inspector general shows that the $1.7 billion federal Job Corps training program is a flop. …Nearly 50,000 people enrolled in 2017…the Job Corps provides meals, medical care, books, clothing and supplies, as well as an allowance for child care and living expenses. Such comprehensive support doesn’t come cheap—the taxpayer cost per student last year was $33,990—and the IG suggests that the investment often doesn’t pay off. …in 27 of 50 cases where full employment data existed, graduates were working the same sort of low-wage, low-skill jobs they held before training.

But there are beneficiaries of the program. The bureaucrats and contractors involved in the program make out like bandits.

The new report suggests that Job Corps’ biggest beneficiaries may be government contractors, not rookie job seekers. Job Corps spent more than $100 million between 2010 and 2011 on transition-service specialists to place students in a job after training. But among 324 sampled Job Corps alumni, the IG found evidence that contractors had helped a mere 18 find work. The contractors often claimed credit for success even though they provided no referrals or résumé and interview help.

Once again, this should not be surprising. It’s what we find over and over and over again.

Here are some excerpts from a report prepared a few years ago by then-Senator Tom Coburn.

…the government has taken on a role for which it was never intended, pouring billions of taxpayer dollars into a broken web of job training and employment programs that are rife with waste, fraud and abuse and lacking demonstrable effectiveness. …In FY 2009, nine federal agencies spent approximately $18 billion to administer 47 separate employment and job training programs, according to the U.S. Government Accountability Office (GAO). GAO identified another 51 federal programs that could be categorized as federal job training programs… The GAO found all but three of the 47 programs overlap with at least one other program in that they provide similar services to similar populations – yet maintain separate administrative structures.

All that bureaucracy and duplication might be an acceptable price to pay to get good results.

Except the programs are a miserable flop.

GAO finds ―little is known about the effectiveness of most programs. …impact studies that were conducted ―generally found the effects of participation were not consistent across programs, with only some demonstrating positive impacts that tended to be small, inconclusive or restricted to short-term impacts.

The report then lists 25 separate examples of wasteful and fraudulent spending.

It’s difficult to pick the most egregious example, but #14 caught my attention.

…a Department of Labor official was found to be taking bribes from a Job Corps contractor, even approving contracts that billed for ghost employees. …the government provided Job Corps with $1.68 billion in fiscal year 2009 and $1.7 billion in FY 2010. Job Corps also received $250 million in stimulus funding in addition to regular annual appropriations. …As part of the Inspector General‘s investigation, a search warrant was executed at the contractor‘s home. The contractor said that Brevard assisted in getting him contracts in exchange for payments. The contractor paid Brevard because if he did not do so, she would not process his invoices. When asked by law enforcement, Brevard admitted to receiving payments from the contractor paid her, and that she approved contracts – of which she knew were false.

Let’s look at a recent real-world example of failure.

The Daily Signal has done some solid reporting on this topic, including this look at the high cost and low benefits of job-training programs.

A government-funded job training program that promised to turn hundreds of residents of Kentucky’s coal country into computer coders so far has spent $2 million to place 17 people in tech jobs and may have left others worse off… The job training program, budgeted for a total of $4.5 million, was supposed to last through 2019 and train up to 200 people from an economically depressed region of Kentucky for middle- to high-skill careers in information technology. …But less than a year later, workers have torn down signs at Big Sandy Community and Technical College, where the program was based, and are closing shop on what appears to be a government-funded program run amok. A total of 32 of the 49 Kentuckians who originally enrolled in the TechHire program in Eastern Kentucky, known as TEKY, have not obtained jobs in the tech industry, according to government figures.

Predictably, the contractors were beneficiaries.

EKCEP spent $1.98 million on the partnership with Interapt. That total includes payments of $861,612 to Interapt for staff salaries and management fees, $706,146 for program service fees, and $115,287 for travel. In one case, Interapt billed EKCEP $5,200 a month for rental of a five-bedroom, five-bathroom house in Paintsville, complete with swimming pool, for Interapt staffers working on the training program. But Gopal, Interapt’s CEO, submitted as an expense and was reimbursed $1,022.40 in December alone for staying at a Ramada Inn in Paintsville, which is about 200 miles east of Louisville. …“Companies like Interapt can rely on the federal government as a crutch because the government has traditionally funded these job training programs, and it creates this vicious circle where industry supports it, politicians support it, but the results don’t bear out the intentions of the programs,” said Nick Loris, an economist who researches and writes about energy policy at The Heritage Foundation.

Let’s close with a meaty excerpt from an overview of job-training programs by Chris Edwards and Daniel Murphy.

The most thorough assessment of federal job training programs was a $25 million National JTPA study in 1994, which was commissioned by the Department of Labor. It tracked 20,000 people over a four-year period who used various training services, and compared them to control groups who did not. The study found that for most participants, federal programs had no significant benefits. …(Labor experts James Heckman and Jeffrey Smith note: “For youth, the record of government training programs for the disadvantaged is almost uniformly negative.”) All in all, the National JTPA study found that the modest benefits of the program were outweighed by the program’s costs. A 2002 book, The Job Training Charade, examines the failures of federal job training programs over the decades. The author, Gordon Lafer of the University of Oregon, is very liberal in his politics… But based on his detailed review, he finds that federal job training programs have provided very small or insignificant benefits. He argues that these programs exist for political reasons alone. Politicians have championed these programs in order to be seen as “doing something” to help workers, and whether they actually work or not is less important. Lafer argues that “as successive generations of job training programs fail to produce the hoped for results, policymakers have cycled through a stock repertoire of procedural fixes that promise to solve the problem.” CETA was supposed to fix problems of the 1960’s training programs. JTPA was supposed to fix CETA, and the WIA was supposed to fix JTPA. Lafer notes that “repeated reports of [JTPA’s] failure seem to have little impact on its political popularity… JTPA was succeeded by the Workforce Investment Act which . . . largely repeats the same strategies found to have failed under JTPA.” Job training legislation is little more than “political symbolism,” he says.

Unfortunately, empty “political symbolism” is the specialty of Washington.

Politicians don’t see the “unseen” and they don’t understand “creative destruction.”

So their efforts at job creation hinder rather than help.

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I try not to pay much attention to the staffing decisions of President Trump’s “Boston-phone-book presidency.” Yes, I realize those choices are important, but my focus is policy.

As such, I don’t have any strong opinions on the ouster of David Shulkin, the now-former Secretary at the Department of Veterans Affairs. But I definitely have something to say about whether America’s military vets should be consigned to an inefficient (at best) and costly form of government-run healthcare.

We should never forget that the VA put vets on secret – and sometimes fatal – waiting lists. And then the bureaucrats awarded themselves big bonuses. That is horribly disgusting.

By the way, the VA scandals haven’t stopped.

Here are some excerpts from a report in USA Today.

A USA TODAY investigation found the VA — the nation’s largest employer of health care workers — has for years concealed mistakes and misdeeds by staff members entrusted with the care of veterans. …In some cases, agency managers do not report troubled practitioners to the National Practitioner Data Bank, making it easier for them to keep working with patients elsewhere. The agency also failed to ensure VA hospitals reported disciplined providers to state licensing boards. In other cases, veterans’ hospitals signed secret settlement deals with dozens of doctors, nurses and health care workers that included promises to conceal serious mistakes — from inappropriate relationships and breakdowns in supervision to dangerous medical errors – even after forcing them out of the VA. …The VA has been under fire in recent years for serious problems, including revelations of life-threatening delays in treating veterans in 2014 and efforts to cover up shortfalls by falsifying records.

So what’s the answer? How can we fix a dysfunctional bureaucracy?

The honest answer is that we can’t. Inefficiency, sloth, and failure are inherent parts of government (yes, the free market also is far from perfect, but at least there’s a profit-and-loss incentive that rewards good firms and punishes bad ones).

So it’s time to get the private sector involved. Though I noted in the TV discussion that not all privatization is created equal. If the government simply contracts with selected healthcare providers, that could be a recipe for cronyism since politicians would try to help their campaign contributors.

I much prefer the advance-funding model developed by Chris Preble and Michael Cannon, which would give active-duty service members added money, up front, to purchase a benefits package to cover future costs related to their military service.

For what it’s worth, former VA Secretary Shulkin, in a recent column for the New York Times, was very critical of privatization. But it isn’t clear whether he was referring to the contracted-out version or the advance-funding version.

I am convinced that privatization is a political issue aimed at rewarding select people and companies with profits, even if it undermines care for veterans. …individuals, who seek to privatize veteran health care as an alternative to government-run V.A. care, unfortunately fail to engage in realistic plans regarding who will care for the more than 9 million veterans who rely on the department for life-sustaining care. …privatization leading to the dismantling of the department’s extensive health care system is a terrible idea.

But even if you accept that he’s criticizing the less-preferred from or privatization, he definitely likes throwing rocks in a giant glass house considering the VA received ever-larger amounts of money and generated a horrible track record.

As I said at the end of my interview, a private healthcare provider might get a contract via cronyism, but it still would be a better option for vets since that company presumably wouldn’t let them die on secret waiting lists.

And since the advance-funding option obviously would be for future veterans, we do need a better market-based approach for current veterans.

I’ll close by sharing a Politico article on the infamous boondoggle that got Shulkin in trouble.

Veterans Affairs Secretary David Shulkin’s chief of staff altered an email to create a pretext for taxpayers to pay for Shulkin’s wife to accompany him on a 10-day trip to Europe last summer, the agency’s inspector general reported… The report by Inspector General Michael Missal also claims that Shulkin improperly accepted a gift of Wimbledon tickets during the trip, and a VA employee’s time was misused planning tourist activities for Shulkin and his entourage. …the VA paid for Shulkin’s wife’s airfare, which cost more than $4,300.

This obviously does not reflect well on Shulkin. But the real scandal almost certainly is that the trip to Europe occurred. We don’t know how many bureaucrats participated and what supposedly was going to be achieved by this junked, but I’m guessing the total tab was enormous and the total value was zero. The fact that taxpayers also were saddled with the cost of Shulkin’s wife’s trip merely added insult to injury.

P.S. Since money isn’t unlimited, I think the focus should be on helping veterans injured in battle rather than providing lavish benefits to anyone and everyone who ever wore a uniform.

P.P.S. I mentioned in the interview that the VA is run for the benefit of its bureaucrats. If you doubt me, check out this double-dipping bureaucrat with the triple-dipping scam.

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In 2011, I wrote about how taxpayers were getting pillaged to finance a new metro line in Fairfax County, Virginia.

But you won’t be surprised to learn that California taxpayers are getting screwed even worse.

I’ve since learned, however, that the real experts at wasting money are in the Big Apple. Earlier this year, as part of a column on why the federal government shouldn’t be involved with infrastructure, I shared some depressing details about a far more expensive subway project in New York City.

And now the New York Times has a must-read report about how another big infrastructure project in NYC is an even more absurd boondoggle. The story starts with an anecdote

The budget showed that 900 workers were being paid to dig caverns for the platforms as part of a 3.5-mile tunnel connecting the historic station to the Long Island Rail Road. But the accountant could only identify about 700 jobs that needed to be done, according to three project supervisors. Officials could not find any reason for the other 200 people to be there. …“All we knew is they were each being paid about $1,000 every day.”

Nice “work” if you can get it, as the old saying goes. A pretend job that pays $1,000 per day.

That makes the gravy train for federal bureaucrats seem miserly by comparison.

Unfortunately, that anecdote is just the tip of the iceberg. The entire project is a monument to how money gets wasted in New York City.

The estimated cost of the Long Island Rail Road project, known as “East Side Access,” has ballooned to $12 billion, or nearly $3.5 billion for each new mile of track — seven times the average elsewhere in the world. …a host of factors have contributed to the transit authority’s exorbitant capital costs. …public officials have stood by as a small group of politically connected labor unions, construction companies and consulting firms have amassed large profits.

In other words, the story’s headline is no exaggeration.

The special deals for unions are jaw-dropping.

Trade unions, which have closely aligned themselves with Gov. Andrew M. Cuomo and other politicians, have secured deals requiring underground construction work to be staffed by as many as four times more laborers than elsewhere in the world, documents show. …Worker wages and labor conditions are determined through negotiations between the unions and the companies, none of whom have any incentive to control costs. The transit authority has made no attempt to intervene to contain the spending.

The featherbedding belies belief.

Mr. Roach, a California-based tunneling contractor, was…stunned by how many people were operating the machine churning through soil to create the tunnel. “I actually started counting because I was so surprised, and I counted 25 or 26 people,” he said. “That’s three times what I’m used to.” …documents reveal a dizzying maze of jobs, many of which do not exist on projects elsewhere. There are “nippers” to watch material being moved around and “hog house tenders” to supervise the break room. Each crane must have an “oiler,” a relic of a time when they needed frequent lubrication. Standby electricians and plumbers are to be on hand at all times, as is at least one “master mechanic.” Generators and elevators must have their own operators, even though they are automatic. …In New York, “underground construction employs approximately four times the number of personnel as in similar jobs in Asia, Australia, or Europe,” according to an internal report by Arup, a consulting firm that worked on…many similar projects around the world.

The international cost comparisons are the most persuasive part of the story.

Taxpayers in New York City are paying far more to get far less.

…transit construction is booming around the world. At least 150 projects have been initiated since 1990, according to a recent study by Yale University researcher David Schleicher. The approximate average cost of the projects — both in the U.S. and abroad — has been less than $500 million per track mile, the study concluded. “There was one glaring exception,” Mr. Schleicher said. “New York.”

If you want a partial explanation of why this staggering level of graft and corruption is allowed, this sentence is a good place to start.

The unions working on M.T.A. projects have donated more than $1 million combined to Mr. Cuomo during his administration, records show.

And I’m sure huge amounts of money have also been diverted to city politicians as well.

It’s almost as if the whole thing is a racket, with politicians and union bosses conspiring to rip off taxpayers.

“Almost”? I must be getting soft in my old age. Let me rephrase that sentence: It is a racket to rip off taxpayers.

But let’s be fair. I don’t want to imply that it’s all the fault of the unions. The contractors also buy off the politicians.

…the…main engineering firm: WSP USA, …has donated hundreds of thousands to politicians in recent years, and has hired so many transit officials that some in the system refer to it as “the M.T.A. retirement home.”

Speaking of the M.T.A., the bureaucrats also get a sweet deal, with the rest of us picking up the tab.

More than a dozen M.T.A. workers were fined for accepting gifts from contractors during that time, records show. …A Times analysis of the 25 M.T.A. agency presidents who have left over the past two decades found that at least 18 of them became consultants or went to work for authority contractors, including many who have worked on expansion projects. “Is it rigged? Yes,” said Charles G. Moerdler, who has served on the M.T.A. board since 2010.

There’s a lot more to read in the article, including details on how a big French infrastructure project is being built at far lower cost.

It’s basically a perfect example of what Milton Friedman said about what happens when you get to spend other people’s money.

For instance, the story also has grim data about cost overruns, which are a routine feature of government infrastructure scams, both in America and other nations.

But one thing that isn’t in the report is the degree to which Washington is subsidizing this wretched boondoggle.

This is the part that irks me. I wouldn’t get too upset if New York City politicians were conspiring with interest groups to rip off New York City taxpayers. Heck, I wouldn’t even care if they were ripping off taxpayers from elsewhere in the state.

But the fact that I’m also paying for this pork-barrel project is very distressing. And it helps to explain why I want to shut down the Department of Transportation in Washington. That’s the real moral of this story.

P.S. Trump’s infrastructure plan will be unveiled next year. I’m not overflowing with optimism, but hope springs eternal that maybe he’ll listen to my advice.

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Government subsidies have an unfortunate habit of causing widespread economic damage and often result in huge burdens for taxpayers (though sometimes consumers are the ones getting pillaged).

The common thread is that government intervention interferes with the normal operation of the price system and thus leads to distortions since markets are prevented from functioning properly.

Let’s add another example, and it’s very timely because of the flooding in Texas. The federal government subsidizes flood insurance. And it does so in a way that is bad for taxpayers and bad for the environment, while also giving a windfall to rich people and putting lives at risk.

That’s an impressive list, even by government standards.

In a must-read column for USA Today, my old friend Jim Bovard is very critical of the program.

Hurricane Harvey…offers the clearest lesson why Congress should not perpetuate the federal National Flood Insurance Program (NFIP)… The ravages in Houston and elsewhere would be far less if the federal government had not offered massively subsidized flood insurance in high risk, environmentally perilous locales. …NFIP embraced a “flood-rebuild-repeat” model that has spawned an almost $25 billion debt.

And when Jim says “flood-rebuild-repeat,” he’s not joking.

NFIP paid to rebuild one Houston home 16 times in 18 years, spending almost a million dollars to perpetually restore a house worth less than $120,000. Harris County, Texas (which includes Houston), has almost 10,000 properties which have filed repetitive flood insurance damage claims. The Washington Post recently reported that a house “outside Baton Rouge, valued at $55,921, has flooded 40 times over the years, amassing $428,379 in claims.

And he points out that the program is reverse class warfare.

Flood insurance subsidies benefit well-off households, and payouts disproportionately go to areas with much higher than average home values. Working stiffs in Idaho and Oklahoma are taxed to underwrite mansions for the elite. …NBC News revealed in 2014 that FEMA revised its flood maps to give 95%+ discounted insurance premiums to “hundreds of oceanfront condo buildings and million-dollar homes,” including properties on its “repetitive loss list.”

My colleague Chris Edwards has a comprehensive study of the federal government’s role in disaster relief. Here’s some of what he wrote about the history of subsidized flood insurance.

In 1968 the National Flood Insurance Act offered federal insurance to properties at risk for flooding. A key justification by supporters of federal flood insurance was that it would alleviate the need to pass special aid legislation after each flood disaster. As it has turned out, however, taxpayers are now both subsidizing flood insurance and paying for special relief bills passed after floods. …NFIP was supposed to save taxpayers money by alleviating the need for Congress to pass emergency aid packages after floods. Taxpayers were also not supposed to be burdened by the program itself because insurance premiums were to cover the system’s costs. Also, the NFIP included floodplain regulations that are imposed on communities adopting the program. These regulations were supposed to mitigate the harm from floods. None of the promises panned out. …Most importantly, rather than reducing the nation’s flooding problems, the NFIP has likely made flood damage worse by encouraging more development in hazardous areas. Since 1970, the estimated number of Americans living in coastal areas designated as Special Flood Hazard Areas (SFHAs) by FEMA has increased from 10 million to more than 16 million. Subsidized flood insurance has backfired by helping to draw more people and development into flood zones.

To add insult to injury, the program is poorly run.

The GAO has had the NFIP on its “high-risk” list of troubled programs for years. …In recent years, the program has accumulated more than $24 billion in debt because payouts have far exceeded premiums. Today, the program is in financial crisis and taxpayers will likely bear the burden of its large debt. The NFIP’s financial shortcomings are typical of government-run businesses. Unlike private insurance, the NFIP charges artificially low rates, does not build capital surpluses, and does not purchase reinsurance to cover catastrophic losses. …The GAO says that “by design, NFIP is not an actuarially sound program.” …A 2011 insurance industry study found that overall NFIP premiums are only half the level needed to cover the system’s full costs, and property owners in high-risk areas pay just one-third of full market rates.

But the biggest problem is that the program encourages imprudent – and even dangerous – behavior.

…artificially low rates subsidize people to live in high-risk flood areas. …NFIP is that it has encouraged development in hazardous areas. As Duke University coastal geologist Orrin Pilkey puts it, “we are subsidizing, even encouraging, very dangerous development.” Federal flood insurance has incentivized individuals and developers to build in hazardous areas…more lives and property are put in harm’s way.

And the program has plenty of repeat business.

…some property owners repeatedly rebuild in hazardous locations knowing that the government will bail them out after each flood. Repetitive loss properties account for only about 1 percent of all policies, but are responsible for about one-third of all NFIP claims. …One Mississippi home valued at $69,900 has flooded 34 times since 1978, and the owner has received $663,000 in NFIP payments over the years.

Here’s an image from Reddit’s libertarian page. Very appropriate given today’s topic.

An article for The Week looks specifically at how the program lured the people of Houston into taking excessive risk.

Why would the practical, fiscally conservative people of Texas anchor their financial security in houses that are now literally underwater? …a major culprit is the Federal Emergency Management Agency (FEMA), and specifically its subsidiary, the National Flood Insurance Program (NFIP). …Well-meaning but drenched in perverse incentives, they are complicit in the horrifying destruction now racking the Texas gulf coast. …a normal insurance company would jack up the premium price to cover the high risk of floodplain construction, thus discouraging vulnerable building plans among those who cannot afford to cover the cost of disaster, the NFIP will insure this construction at a discount. …an artificially low premium like the NFIP offers cruelly deludes homeowners into believing their flood-prone houses are far safer than they are. …NFIP has taxpayers subsidizing unrealistically low premiums that incentivize new construction on dangerous land, and its discounts are available even to wealthy homeowners with pricey properties. “About 80 percent of NFIP households are in counties that rank in the top income quintile,” notes a recent report at Politico, and “[w]ealthier households also tend to receive larger subsidies.”

How do we solve this government-created problem?

With the same answer that Chris gave.

Axing the NFIP and transitioning back to private flood insurance, with its accurate risk signaling, is much overdue.

Writing for Reason, Ronald Bailey explains the perverse incentives created by the program.

The main lesson that the public and policymakers ought to learn from Harvey is: Don’t build in flood plains, and especially don’t rebuild in flood plains. Unfortunately, the flood insurance program teaches the exact opposite lesson, selling subsidized insurance whose premiums do not come close to covering the risks home and business owners in flood prone areas face. As a result, the NFIP is currently $25 billion in debt. Federally subsidized flood insurance represents a moral hazard, Kevin Starbuck, Assistant City Manager and former Emergency Management Coordinator for the City of Amarillo, argues, because it encourages people to take on more risk because taxpayers bear the cost of those hazards.

And, in many cases, bear those costs over and over and over again.

Federal Emergency Management Agency data shows that from 1978 through 2015, 3.8 percent of flood insurance policyholders have filed repetitively for losses that account for a disproportionate 35.5 percent of flood loss claims and 30.5 percent of claim payments, Starbuck says.

The solution, once again, is obvious.

…taxpayers should not be required to subsidize people who choose to build and live on flood plains. When Congress reauthorizes the NFIP, it should initiate a phase-in of charging grandfathered properties premiums commensurate with their risks. This will likely lower the market values of affected homes and businesses and thus send a strong signal to others to avoid building and living in such risky areas.

A couple of months ago, before Harvey, the Wall Street Journal presciently opined about the downside of government-provided flood insurance.

A classic example of government dysfunction is a federal insurance program that helps pay to drain basements in millions of America’s second homes. …The 1968 program insures more than $1 trillion in property, with about five million policies in 2016 for those who live in areas prone to flooding. The program is more than $24 billion in debt. One reason for the hole is that about 20% of policies are directly subsidized. More than 75% of such policies are in counties in the top 30% for home values, according to a Government Accountability Office analysis, and many dot the affluent coasts of Florida, California and Texas. In other words, this is a wealth transfer from low and middle-income families to the folks who own real estate on Nantucket. …The best reform would be to convert the program into a private operation, though Members of both parties would pile together like sandbags to block it.

The editorial noted that Representative Jeb Hensarling, Chairman of the Financial Services Committee, has tried to limit the program. Since he’s a Texan, it will be interesting to see if his pro-market principles remain in the aftermath of Harvey (based on his record, I’m guessing yes).

In another Reason column, Katherine Mangu-Ward put together a list of things politicians shouldn’t do once the storm is over.

Here are a few things Trump and his pals absolutely shouldn’t do in the immediate aftermath of the hurricane, but probably will: …Increase funding for the federal flood insurance program. When it comes time to rebuild, everyone will studiously avoid discussing the fact that maybe we shouldn’t be using a massive federal insurance program to incentivize building in areas that are repeatedly hit by storms. There’s a reason private insurers don’t offer policies to many coastal dwellers, and it ain’t “market failure.”

Needless to say, I’m not optimistic that her advice will be heeded.

Though you would think some Democrats would be on the correct side, if for no other reason than the program is a big fat subsidy for rich people.

One of those fat cats even confessed that the program is a boondoggle that lines his pockets. Here are some excerpts from a 2004 column by John Stossel.

…the biggest welfare queens are the already wealthy. Their lobbyists fawn over politicians, giving them little bits of money — campaign contributions, plane trips, dinners, golf outings — in exchange for huge chunks of taxpayers’ money.

John then confesses that he put his snout if the taxpayer trough.

I got some of your money too. …In 1980 I built a wonderful beach house. Four bedrooms — every room with a view of the Atlantic Ocean. It was an absurd place to build, right on the edge of the ocean. All that stood between my house and ruin was a hundred feet of sand. My father told me: “Don’t do it; it’s too risky. No one should build so close to an ocean.” But I built anyway. Why? As my eager-for-the-business architect said, “Why not? If the ocean destroys your house, the government will pay for a new one.” What? Why would the government do that? Why would it encourage people to build in such risky places? That would be insane. But the architect was right. If the ocean took my house, Uncle Sam would pay to replace it under the National Flood Insurance Program. Since private insurers weren’t dumb enough to sell cheap insurance to people who built on the edges of oceans or rivers, Congress decided the government should step in and do it. …I did have to pay insurance premiums, but they were dirt cheap — mine never exceeded a few hundred dollars a year.

Lots of rich people like this subsidy.

The insurance, of course, has encouraged more people to build on the edges of rivers and oceans. …Subsidized insurance goes to movie stars in Malibu, to rich people in Kennebunkport (where the Bush family has its vacation compound), to rich people in Hyannis (where the Kennedy family has its), and to all sorts of people like me who ought to be paying our own way.

John was even an example of the “flood-rebuild-repeat” syndrome.

…just four years after I built my house, a two-day northeaster swept away my first floor. …After the water receded, the government bought me a new first floor. Federal flood insurance payments are like buying drunken drivers new cars after they wreck theirs. I never invited you taxpayers to my home. You shouldn’t have to pay for my ocean view.

More than once!

On New Year’s Day, 1995, …The ocean had knocked down my government-approved flood-resistant pilings and eaten my house. It was an upsetting loss for me, but financially I made out just fine. You paid for the house — and its contents.

Though now another rich person will get the subsidy.

I could have rebuilt the beach house and possibly ripped you taxpayers off again, but I’d had enough. I sold the land. Now someone’s built an even bigger house on my old property. Bet we’ll soon have to pay for that one, too.

Let’s close with some systematic data on the regressivity of the program.

Two of my other colleagues, Ike Brannon and Ari Blask, authored a study on the flood insurance program. They covered lots of material, but here’s what they wrote about poor-to-rich redistribution.

Wealthier households benefit disproportionately from the reduced average cost of flood insurance brought about by government intervention. Of course, not all NFIP-insured properties are high value, but insured homes are on average more valuable than noninsured homes. …In 2007, the Congressional Budget Office (CBO) published a report containing statistics on the average and median values of properties in the NFIP. …The median value of properties in the NFIP exceeded the median value of an American home across all four categories, as shown in Table 1. …40 percent of coastal properties receiving subsidies were worth more than $500,000 and 12 percent were worth more than $1 million. …Comparisons of NFIP premiums with potential private premiums show that NFIP policyholders with the most risk exposure tend to receive the largest subsidy, with 80 percent of explicit subsidy recipients living in counties in the top income quintile.

And here’s Table 1 from their study.

My guide to having an ethical bleeding heart is very straightforward.

If taking money from rich people to give to poor people is wrong, then taking money from poor people to line the pockets of rich people is utterly reprehensible.

I’ll write in the near future about why the federal government shouldn’t be involved in disaster relief. But I wanted to specifically highlight the wretched impact of subsidized flood insurance because it is such a perverse example of how government promotes unjust inequality.

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