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Archive for the ‘Boondoggle’ Category

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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President Trump has released his budget blueprint. From a big picture perspective, the size of government won’t change. He’s kicking the can down the road on entitlements, which is obviously disappointing for people who can add and subtract. He does cut some domestic programs, but taxpayers won’t reap the benefits since those savings will be spent elsewhere, mostly for a bigger Pentagon budget.

But I’m going to be optimistic today (the glass isn’t 9/10ths empty, it’s 1/10th full). Let’s look at the good parts of his budget.

First, some background. Redistribution is bad public policy since it simultaneously encourages inactivity and dependency among recipients and discourages activity and initiative by taxpayers.

That’s the standard argument against conventional handouts such as welfare, food stamps, Medicaid, EITC, and housing subsidies. The plethora of such programs in Washington is bad news for both taxpayers and poor people.

But there’s another type of redistribution that’s far worse, and that’s when politicians use the coercive power of government to take money from lower-income people in order to provide goodies for upper-income people.

This is why I am so unrelentingly hostile to programs like the Export-Import Bank, agriculture subsidies, so-called disaster relief, green-energy scams like Solyndra, and Fannie Mae/Freddie Mac subsidies.

Indeed, I even developed a “Bleeding Heart Rule” back in 2012 to describe how such giveaways are morally reprehensible.

Now let’s add another program to the list.

The National Endowment of the Arts is a federal program that subsidizes art, with upper-income people reaping the vast majority of the benefits.

That’s the bad news. The good news is that President Trump is proposing to defund this elitist bureaucracy.

Before explaining why the program should be abolished, let’s look at the case for federal involvement. This is how the NEA describes its mission.

The National Endowment for the Arts is an independent federal agency that funds, promotes, and strengthens the creative capacity of our communities by providing all Americans with diverse opportunities for arts participation.

That sounds noble. But are we really supposed to believe that our communities won’t have any creative capacity without some handouts from the federal government to museums and other politically connected organizations that primarily serve rich people?

And for those of us who have this old-fashioned notion that the federal government should be constrained by the Constitution, it’s also worth noting that art subsidies are not one of the enumerated powers in Article 1, Section 8.

Here is the pro-NEA argument from a column in the New York Times.

Sadly, it has become clear that the N.E.A. is, once again, under threat of being abolished… The N.E.A.’s budget is comparatively minuscule — $148 million last year, or 0.004 percent of the total federal budget — while the arts sector it supports employs millions of Americans and generates billions each year in revenue and tax dollars. …the N.E.A., founded in 1965, serves three critical functions: It promotes the arts; it distributes and stimulates funding; and it administers a program that minimizes the costs of insuring arts exhibitions through indemnity agreements backed by the government. …The grants, of course, receive the most attention, if not as much as they deserve. Thousands are distributed in all 50 states, reaching every congressional district, urban and rural, rich and poor. …They support live theater for schools; music, dance and jazz festivals; poetry and literary events; arts programs for war veterans; and, of course, museum exhibitions.

This actually makes my point. The NEA spends $148 million per year, which is just a tiny fraction of what is spent by the private sector.

In other words, we had museums, plays, music festivals, and art programs before the NEA was created and all of those activities will exist if the NEA is abolished.

All that will change is that politicians and bureaucrats won’t be doling out special grants to select institutions and insiders that have figured out how the manipulate the system.

The column also has some absurd hyperbole.

I fear that this current call to abolish the N.E.A. is the beginning of a new assault on artistic activity. Arts and cultural programming challenges, provokes and entertains; it enhances our lives. Eliminating the N.E.A. would in essence eliminate investment by the American government in the curiosity and intelligence of its citizens.

The author actually wants readers to conclude that a failure to subsidize is somehow akin to an assault on artistic creativity. Oh, and don’t forget that our curiosity and intelligence somehow will suffer.

Here’s a story about an interest group that wants to keep the gravy train on the tracks.

The heads of five Boston arts museums are pushing back against feared Trump administration cuts to the National Endowment for the Arts and the National Endowment for the Humanities. The museums’ directors say in an open letter that the agencies…help foster knowledge of the arts, create cultural exchanges, generate jobs and tourism, and educate young people. They say NEA and NEH funding has been instrumental at each of the Boston museums.

My immediate reaction is that there are lots of rich people and well-heeled companies in Boston. Surely NEA handouts can be replaced if these museum directors are remotely competent.

I’ll also take a wild guess that the directors of these five museums earn an average of more than $500,000 per year. Perhaps it’s not right for them to be using tax dollars to be part of the top 1 percent. Heck, trimming their own salaries might be an easy place for them to get some cost savings.

But enough from me. Let’s look at what some others have written about the NEA.  Let’s start with George Will’s assessment.

…attempting to abolish the NEA is a fight worth having, never mind the certain futility of the fight. …Government breeds advocacy groups that lobby it to do what it wants to do anyway — expand what it is doing. The myriad entities with financial interests in preserving the NEA cloyingly call themselves the “arts community,” a clever branding that other grasping factions should emulate… The “arts community” has its pitter-patter down pat. The rhetorical cotton candy — sugary, jargon-clotted arts gush — asserts that the arts nurture “civically valuable dispositions” and a sense of “community and connectedness.” And, of course, “diversity” and “self-esteem.” Americans supposedly suffer from a scarcity of both. …the NEA’s effects are regressive, funding programs that are…“generally enjoyed by people of higher income levels, making them a wealth transfer from poorer to wealthier.” …Americans’ voluntary contributions to arts organizations (“arts/culture/humanities” institutions reaped $17 billion in 2015) dwarf the NEA’s subventions, which would be replaced if those who actually use the organizations — many of them supported by state- and local-government arts councils — are as enthusiastic about them as they claim to be. The idea that the arts will wither away if the NEA goes away is risible.

Now let’s hear from members of the “arts community” who understand that art doesn’t require handouts.

We’ll start with Patrick Courrielche, who wrote in the Wall Street Journal about the need to free the arts from federal dependence.

The NEA, created in 1965, has become politically tainted and ill-equipped to handle today’s challenges. Mr. Trump and Congress should ax it as soon as possible. …For the American arts to flourish—and for art to reach all Americans—artists must be able to make a living from their efforts.

And a theater director from Brooklyn explains in the Federalist why the art world will be better off without the NEA.

…as Trump prepares to spike the ball and end the game by axing the NEA, there is reason to be optimistic that this decision will be very good for the arts in America. …Arts institutions, which receive the bulwark of NEA funding, are failing badly at reaching new audiences, and losing ground. This is a direct result of the perverse market incentives our nonprofit arts system creates… As the artistic director of an unsubsidized theater company in New York City for more than a decade, I had to compete in a closed marketplace, where wealthy gatekeepers and the government rather than ticket sales pay the bills. …The industry receives more free money than it did a decade ago, and has fewer attendees. That is a broken system by any estimation. …Taking away free government money for the arts won’t make art disappear. After all, art is older than government. It will force artists and arts organizations to finally come to terms with their market realities. Audiences are better than experts at deciding what art is good or important. If a piece of art is so good that nobody to wants to pay for it, maybe it isn’t all that good. …In the American tradition, vaudeville, jazz, standup comedy, and many other art forms were created and grew within the free market, free from government assistance. Under this system there was a tremendous appetite for high art among Americans… President Trump is wise to get the government out of the art game, and all of us will be better off for his decision.

Here’s another artist, writing for PJ Media, about the benefits of ending federal handouts.

For over a decade as a theatre artist, my salary was made possible by taxpayers funding the arts. …In hindsight, and after much reflection and a better understanding of economics, I am truly sorry, and ask the taxpayer to forgive my thievery. However, spilled milk can’t be put back into the bottle. That doesn’t mean that we have to keep spilling the milk, though. It’s way past time to defund and shutter the National Endowment for the Arts. … The NEA and their supporters will trot out research about how many dollars are added to local economies due to things like theatres, symphonies, and museums. Of course, as almost every person with at least half a semester of Economics under their belt is screaming, the NEA’s argument embraces the broken window fallacy. The economic stimulus felt and supposedly generated by the arts community comes at the expense of other markets. …The National Endowment for the Arts model artificially props up mostly unwanted markets by using tax dollars that get funneled through inefficient and wasteful bureaucracies. …What it does to the arts is create a marketplace that supports bad art. …Don’t misunderstand, I love art. Like, a lot. And I’m willing to pay for it, as are many other patrons of the arts. If the National Endowment for the Arts were to be defunded and shuttered, it would help clear the deck of bad art that people aren’t willing to pay the real cost for. …art does enhance life, but having your life enhanced at the expense of others is not a right. People don’t have a right to other people’s money just so they can watch a play or visit a museum. …It’s time for the National Endowment for the Art to be defunded and shuttered.

Amen.

Since I started today’s column with optimism, I’ll be balanced and end with pessimism. I very much doubt that Congress will defund the NEA bureaucracy.

In part, this is a classic example of “public choice.” The recipients of the handouts have strong incentives to mobilize and lobby to keep their goodies. Taxpayers, by contrast, mostly will be disengaged because their share of the cost is trivial.

But it gets worse. The NEA also is very clever. A Senator once told me that it was difficult to vote against the bureaucracy because the “arts community” cleverly placed the wives of major donors on local arts councils. That made it difficult to vote against the NEA, though this Senator did say that making this tough vote would be worthwhile. Yes, there would be some short-term grousing by interest groups (and donor wives) if the agency actually was shut down, but that would quickly dissipate as people saw the arts were able to survive and thrive without sucking at the federal teat.

For the sake of the nation, let’s hope most lawmakers think this way.

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When politicians create programs and announce projects, they routinely lie about the real costs. Their primary goal is to get initial approval for various boondoggles and they figure it will be too late to reverse path once it becomes apparent that something will cost for more than the initial low-ball estimates. Obamacare is a classic (and discouraging) example.

These “cost overruns” are very bad news for taxpayers, of course, but the system works very well for insiders. Bureaucrats get more money. Interest groups get more money. Government contractors get more money. Government consultants get more money. And some of that money gets funneled back to politicians in the form of campaign contributions, so they get more money as well.

This scam is particularly prevalent whenever politicians decide to build infrastructure. And there are lots of local examples in the Washington area.

But it’s definitely not limited to Washington. There are ridiculous examples of cost overruns elsewhere in the world.

And it goes without saying that places controlled by statists often produce the most absurd examples of wasteful boondoggles. Indeed, is there anyone in the world surprised to see this headline from a story in the Los Angeles Times?

Here are some of the details from the report.

A confidential Federal Railroad Administration risk analysis, obtained by The Times, projects that building bridges, viaducts, trenches and track from Merced to Shafter, just north of Bakersfield, could cost $9.5 billion to $10 billion, compared with the original budget of $6.4 billion. …The California High-Speed Rail Authority originally anticipated completing the Central Valley track by this year, but the federal risk analysis estimates that that won’t happen until 2024, placing the project seven years behind schedule.

Over budget and overdue? Gee, who could have predicted that would happen with a government infrastructure project (other than every single person with an IQ above room temperature).

What happens next is unclear. The federal bureaucracy that disburses grants presumably wants to keep the gravy train on the tracks (pun intended), though hopefully Congress will tell California there won’t be any more federal handouts.

The Federal Railroad Administration is tracking the project because it has extended $3.5 billion in two grants to help build the Central Valley segment. …Rep. Jeff Denham (R-Turlock), chairman of the House rail subcommittee, said Friday… “Despite past issues with funding this boondoggle, we were repeatedly assured in an August field hearing that construction costs were under control,” he said in a statement. “They continue to reaffirm my belief that this is a huge waste of taxpayer dollars.” …About 80% of all bullet train systems incur massive overruns in their construction, according to Bent Flyvbjerg, an infrastructure risk expert at the University of Oxford who has studied such rail projects all over the world.

Unsurprisingly, the various interest groups that are feasting on this boondoggle want it to continue, whether the money comes from federal taxpayers or state taxpayers.

The California system is being built by an independent authority that has never built anything and depends on a large network of consultants and contractors for advice. …Proponents of the project, including many veteran transportation experts, have said that California’s massive economy can handle higher costs for the project — even more than $100 billion — by increasing sales taxes.

For what it’s worth, I don’t particularly care if California voters want to squander their own money and hasten the state’s economic decline.

But I’m very much against the idea that my income should be forcibly redistributed to support this foolish bit of pork. And this is why I’m very nervous about Donald Trump’s infatuation with infrastructure. Though since he hasn’t provided many details, so we don’t know whether he wants a business-as-usual expansion of pork or a much-needed expansion of private-sector involvement. But I’m not optimistic.

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Last month, I explained that America’s fiscal problems are almost entirely the result of domestic spending programs, particularly entitlements.

Some critics immediately decided this meant I favored a blank check for the Pentagon, even though I specifically stated that “I’m very sympathetic to the proposition that trillions of dollars that have been misspent on foreign adventurism this century.”

Moreover, if they bothered to do any research, they would have found numerous columns on Pentagon waste, including here, here, here, here, and here.

Indeed, I get especially upset about military boondoggles precisely because national defense is a legitimate function of government.

I want money being spent in ways that will minimize the threat of an attack on the United States, not on the basis of padding jobs in a particular politician’s hometown or in response to clever lobbying by a defense contractor.

Unfortunately, wasting money is what government does best. And it happens at the Pentagon just as often as elsewhere in the federal behemoth.

Let’s look at a recent exposé about Pentagon profligacy in the Washington Post.

The Pentagon has buried an internal study that exposed $125 billion in administrative waste in its business operations amid fears Congress would use the findings as an excuse to slash the defense budget… Pentagon leaders had requested the study to help make their enormous back-office bureaucracy more efficient and reinvest any savings in combat power. But after the project documented far more wasteful spending than expected, senior defense officials moved swiftly to kill it by discrediting and suppressing the results. …Based on reams of personnel and cost data, their report revealed for the first time that the Pentagon was spending almost a quarter of its $580 billion budget on overhead and core business operations such as accounting, human resources, logistics and property management. …the Defense Department was paying a staggering number of people — 1,014,000 contractors, civilians and uniformed personnel — to fill back-office jobs far from the front lines. That workforce supports 1.3 million troops on active duty, the fewest since 1940.

Here’s a rather sobering chart from the story.

Predictably, bureaucrats in the military tried to cover up evidence of waste and inefficiency.

…some Pentagon leaders said they fretted that by spotlighting so much waste, the study would undermine their repeated public assertions that years of budget austerity had left the armed forces starved of funds. Instead of providing more money, they said, they worried Congress and the White House might decide to cut deeper. So the plan was killed. The Pentagon imposed secrecy restrictions on the data making up the study, which ensured no one could replicate the findings. A 77-page summary report that had been made public was removed from a Pentagon website.

Here’s a final excerpt from the story. The “no one REALLY knows” quote is rather revealing.

“We will never be as efficient as a commercial organization,” Work said. “We’re the largest bureaucracy in the world. There’s going to be some inherent inefficiencies in that.” …while the Defense Department was “the world’s largest corporate enterprise,” it had never “rigorously measured” the “cost-effectiveness, speed, agility or quality” of its business operations. Nor did the Pentagon have even a remotely accurate idea of what it was paying for those operations… McKinsey hazarded a guess: anywhere between $75 billion and $100 billion a year, or between 15 and 20 percent of the Pentagon’s annual expenses. “No one REALLY knows,” the memo added. …the average administrative job at the Pentagon was costing taxpayers more than $200,000, including salary and benefits.

Let’s close with some blurbs from other stories.

Starting with some specific examples of waste from a recent story by U.S. News & World Report.

The Special Inspector General for Afghan Reconstruction has uncovered scandal after scandal involving U.S. aid to that country, including the creation of private villas for a small number of personnel working for a Pentagon economic development initiative and a series of costly facilities that were never or barely used. An analysis by ProPublica puts the price tag for wasteful and misguided expenditures in Afghanistan at $17 billion, a figure that is higher than the GDP of 80 nations. …A Politico report on the Pentagon’s $44 billion Defense Logistics Agency notes that it spent over $7 billion on unneeded equipment. …overspending on routine items – such as the Army’s recent expenditure of $8,000 on a gear worth $500 – continues.

Let’s also not forget that the Pentagon is quite capable of being just as incompetent as other bureaucracies.

Such as forgetting to change the oil on a ship.

The USS Fort Worth, a Navy littoral combat ship, has suffered extensive gear damage while docked at a port in Singapore. …According to reports, the crew failed to use sufficient lube oil, leading to excessively high temperatures on the gears. Debris also found its way into the lubrication system, which also contributed to failure, Defense News reports. The crew did not follow standard operating procedures.

And accidentally allowing a missile to get shipped to the hellhole of communist Cuba.

An inert U.S. Hellfire missile sent to Europe for training purposes was wrongly shipped from there to Cuba in 2014, said people familiar with the matter, a loss of sensitive military technology that ranks among the worst-known incidents of its kind. …officials worry that Cuba could share the sensors and targeting technology inside it with nations like China, North Korea or Russia. …“Did someone take a bribe to send it somewhere else? Was it an intelligence operation, or just a series of mistakes? That’s what we’ve been trying to figure out,” said one U.S. official. …At some point, officials loading the first flight realized the missile it expected to be loading onto the aircraft wasn’t among the cargo, the government official said. After tracing the cargo, officials realized that the missile had been loaded onto a truck operated by Air France, which took the missile to Charles de Gaulle Airport in Paris. There, it was loaded onto a “mixed pallet” of cargo and placed on an Air France flight. By the time the freight-forwarding firm in Madrid tracked down the missile, it was on the Air France flight, headed to Havana.

And let’s not forget about the jaw-dropping absurdity of an intelligence chief who isn’t allowed to…um…see intelligence.

For more than two years, the Navy’s intelligence chief has been stuck with a major handicap: He’s not allowed to know any secrets. Vice Adm. Ted “Twig” Branch has been barred from reading, seeing or hearing classified information since November 2013, when the Navy learned from the Justice Department that his name had surfaced in a giant corruption investigation involving a foreign defense contractor and scores of Navy personnel. …More than 800 days later, neither Branch nor Loveless has been charged. But neither has been cleared, either. Their access to classified information remains blocked. Although the Navy transferred Loveless to a slightly less sensitive post, it kept Branch in charge of its intelligence division. That has resulted in an awkward arrangement, akin to sending a warship into battle with its skipper stuck onshore. …Some critics have questioned how smart it is for the Navy to retain an intelligence chief with such limitations, for so long, especially at a time when the Pentagon is confronted by crises in the Middle East, the South China Sea, the Korean Peninsula and other hotspots.

The bottom line is that any bureaucracy is going to waste money. And the bureaucrats in any department will always be tempted to care first and foremost about their salaries and benefits rather than the underlying mission.

So I’m not expecting or demanding perfection, regardless of whether the department has a worthwhile mission or (in most cases) shouldn’t even exist. But I do want constant vigilance, criticism, and budgetary pressure so that there’s at least a slightly greater chance that money won’t be squandered.

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President-Elect Trump has picked Ben Carson as his Secretary for the Department of Housing and Urban Development (HUD), which immediately produced two thoughts.

First, since he had the best tax plan of all the 2016 candidates, too bad he wasn’t named Secretary of Treasury.

Second, I hope his job at HUD is to shut down the department, raze the building, and get the federal government out of the housing business.

Then I realized I was thinking too narrowly. Shouldn’t all Trump appointees start with the assumption that their department, agency, or program is an unconstitutional waste of money? I’ve already written columns explaining why some cabinet-level bureaucracies should be abolished.

Now let’s expand this list by taking  a look at the Department of Energy.

And our job will be easy since William O’Keefe has a very persuasive column for E21. Let’s look at some of the highlights, starting with the observation that the bureaucracy was created based on the assumption that the world was running out of energy and that somehow politicians and bureaucrats could fix that supposed problem.

The Department of Energy (DOE) traces its roots to the energy crisis of 1973, which was made worse by misguided government policy.  …there was, at the time, a firm belief that the world was going to run out of oil by the end of the century. Not only does the world have plenty of oil, but the United States is now a net exporter of natural gas–and would be exporting more if DOE was faster with its approvals. …Prior to DOE, the federal government played a very limited role in energy policy and development.  Presumed scarcity, excessive dependence on OPEC nations, distrust in markets, and the search for energy independence became the foundation for what is now a $32.5 billion bureaucracy in search for relevance.

In other words, the ostensible problem that led to the creation of the department was preposterously misdiagnosed.

The market produced lots of energy once the shackles of government intervention (including those from the Energy Department) were sufficiently loosened.

So what, then, does the department do?

What DOE has done is squander money on the search for alternative energy sources. In the process, it enabled Bootlegger and Baptist schemes that enriched crony capitalists who are all too willing to support the flawed notion that government can pick winners and losers.  For 2017, a large chunk of DOE spending–$12.6 billion, or 39 percent—is earmarked to “support the President’s strategy to combat climate change.” This is not a justifiable use of taxpayer dollars. Over 36 years, DOE’s mission has morphed from energy security to industrial policy, disguised as advanced energy research and innovation.  There is a long and failed history of industrial policy by the federal government.

Here’s the bottom line.

DOE has become the Department of Pork. …Energy firms do not need government subsidies to innovate and develop new technologies.  Horizontal drilling and fracking came from the private sector because the incentives to develop shale oil and gas were stronger than the illusions driving alternative energy sources. …Abolishing DOE would punish only the crony capitalists who have become addicted to its support.

Amen.

By the way, Mr. O’Keefe’s argument is primarily based on the fact that DOE doesn’t produce value.

Since I’m a fiscal wonk, I’ll add another arrow to the quiver. We also should abolish the department so that we can save a lot of money.

My colleague Chris Edwards has an entire website filled with information about the uselessness of the department. You can – and should – spend hours perusing all of the information he has accumulated.

But here’s the part that jumped out to me. Over the years, the federal government has squandered hundreds of billions of dollars on a department that is most famous for wasteful Solyndra-style scams.

By the way, there are a small handful of activities at DOE that should be shifted to other departments (such as transferring nuclear weapons responsibilities to the Department of Defense).

But the vast majority of DOE activities never should have been created and produce zero value, so the sooner the bureaucracy is eliminated, the better.

P.S. We can have tons of evidence about the desirability of shutting down the Department of Energy, but it doesn’t matter if there aren’t politicians who think it is more important to protect taxpayers rather than to funnel money to cronyists and interest groups. We’ll have to wait and see whether Trump chooses wisely, though I’m not holding my breath. We certainly didn’t get any pro-taxpayer shift of policy the last time GOPers were in charge of the White House. And Trump’s commitment to the notion of smaller government doesn’t seem overly robust, though I very much hope I’m wrong.

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We have good news and bad news.

The good news is that President Obama has unveiled his final budget.

The bad news is that it’s a roadmap for an ever-growing burden of government spending. Here are the relevant details.

  • The President wants the federal budget to climb by nearly $1.2 trillion over the next five years.
  • Annual spending would jump by an average of about $235 billion per year.
  • The burden of government spending would rise more than twice as fast as inflation.
  • By 2021, federal government outlays will consume 22.4% of GDP, up from 20.4% of economic output in 2014.

I guess the President doesn’t have any interest in complying with Mitchell’s Golden Rule, huh?

While all this spending is disturbing (should we really step on the accelerator as we approach the Greek fiscal cliff?), the part of this budget that’s really galling is the enormous tax increase on oil.

As acknowledged in a report by USA Today, this means a big tax hike on ordinary Americans (for what it’s worth, remember that Obama promised never to raise their taxes).

Consumers will likely pay the price for President Obama’s proposed $10 tax per-barrel of oil, an administration official and a prominent analyst said Thursday. Energy companies will simply pass along the cost to consumers, Patrick DeHaan, senior petroleum analyst for GasBuddy.com, which tracks gas prices nationwide, said in an interview with USA TODAY. ….a 15-gallon fill-up would cost at least $2.76 more per day.  It would also affect people who use heating oil to warm their homes and diesel to fill their trucks.

Isn’t that wonderful. We’ll pay more to fill our tanks and heat our homes, and we’ll also pay more for everything that has oil as an input.

While middle-class consumers will see a big hit on their wallet, the Washington Post explains that Obama wants the new tax revenue to fund an orgy of special-interest spending.

…the tax would raise about $65 billion a year when fully phased in. …The administration said it would devote $20 billion of the money raised to expand transit systems in cities, suburbs and rural areas; make high-speed rail a viable alternative to flying in major regional corridors and invest in new rail technologies like maglev; modernize the nation’s freight system; and expand the Transportation Investment Generating Economic Recovery program launched in the 2009 economic stimulus bill to support local projects. …The budget would also use roughly $10 billion per year in revenues for shifting how local and state governments design regional transportation projects. Obama would also propose investing just over $2 billion per year in “smart, clean vehicles” and aircraft.

More railway money pits and Solyndra-style boondoggles? Gee, what could go wrong?

By the way, the Administration is claiming that the big new energy tax won’t really hurt our pocketbooks because oil prices have been falling. Here are parts of a story by the Washington Examiner.

President Obama said the oil supply glut that has forced prices down to about $30 a barrel makes his proposal to levy a $10 per-barrel tax on crude oil timely. …the White House appears to be of the view that consumers would have an easier time paying it during record low prices.

Gee, how thoughtful of them.

But is anybody under the illusion that the politicians in Washington will repeal the tax when energy prices rise?

Anybody? Bueller?

Here’s one last gem. As cited by the Los Angeles Times, the President offered this pithy statement.

“Rather than subsidize the past, we should invest in the future,” Obama said during his weekly Saturday address.

Now think about what he’s saying. Obama wants us to believe that the absence of a tax today and in the past is actually a subsidy!

Not that we should be surprised. Our friends on the left have a strange habit of arguing that we’re getting a subsidy when we’re allowed to keep our own money. Indeed, they even have a concept called “tax expenditures” that is based on that perverse notion.

P.S. The folks at Politico have a story about Obama’s plan, and there’s a bit of speculation about how it could become an issue for Hillary Clinton in the 2016 presidential race.

…the proposal could be particularly awkward for Hillary Clinton, who has embraced most of Obama’s policies but has also vowed to oppose any tax hikes on families earning less than $250,000 a year.

I think this analysis is absurd.

Hillary will promise all through the campaign that she opposes tax hikes on everyone other than the rich. But then, just like Obama, she’ll break that promise if she gets to the White House.

P.P.S. Lest anyone think I’m taking a partisan jab at Hillary because she’s a Democrat, keep in mind that I’m terrified that Republicans may decide (not withstanding their “dead on arrival” comments) to like Obama’s scheme. After all, many of them last year were very tempted by gas tax hikes to fund more pork-barrel spending.

P.P.P.S. And what’s really depressing is that I explained just last month that it would be very simple to shrink the relative burden government (and also balance the budget very quickly if that’s what you care about) if the federal budget “only” grew by the rate of inflation.

P.P.P.P.S. One final comment is that I might be tempted to accept an oil tax in exchange for the abolition of a tax – perhaps the death tax or capital gains tax – that collects a similar amount of revenue.

But I’d have two condition: First, the net result has to be a tax system that is less destructive to prosperity. Second, I’d have to be convinced that the swap wouldn’t backfire, with politicians somehow winding up with more power and/or money when the dust settles (which has been my concern about the Rand Paul and Ted Cruz plans to impose a value-added tax, even though their plans theoretically would produce a much less destructive tax system).

P.P.P.P.P.S. Oops, several people have reminded me that I forgot to include predictions for New Hampshire. These are only worth what you’re paying for them (in other words, nothing).

Trump  31
Kasich  17
Bush     12
Rubio   11
Cruz     10
Christie  7
Fiorina   5
Carson   4

Sanders   57
Clinton    42

Given what he did to expand Medicaid dependency in Ohio, I’m not sure I’m happy about Kasich’s strong showing. On the other hand, he played a key role in the spending restraint of the 1990s.

Since Hillary and Bernie are two peas in a pod, I have no strong thoughts about that race.

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Here’s a simple rule. When a politicians says a new program will cost X, hide your wallet because it actually will cost three or four times as much. Or even more.

Obamacare is a particularly painful example from recent history.

Simply stated, politicians and bureaucrats routinely under-estimate costs because they figure once a project or program is underway, voters can be tricked into throwing good money after bad.

It happens all the time in Washington. And it happens in other nations as well.

And even though I’m a fan of decentralization, that doesn’t mean I’m oblivious to the fact that state and local governments are very capable of similar behavior.

Consider, for example, the streetcar project in our Washington, DC. The main problem is that taxpayers are getting reamed. The current price tag, according to a report in the Washington Times, is about $3 billion.

And what are taxpayers getting for that “investment”?

So far, based on a story in one of the city’s other newspapers, the Washington Post, they’re getting long delays.

In the early 2000s, an ambitious band of city officials set out to cut through the bureaucratic mire and launch a vast streetcar network that would be a model for the nation, eventually running 20 to 40 miles or more. The first leg was supposed to open in 2006. But as 2015 comes to a close, officials are scrambling toward their latest goal of opening a diminished, 2.2-mile streetcar line.

But major delays are just the tip of the iceberg.

The Post‘s report highlights how one small part of the project – a maintenance facility for the streetcars – has become symbolic of grotesque cost overruns and waste.

The District is spending three or four times what other cities have to build a maintenance facility for its fledging streetcar system… The “Car Barn” project was originally designed as a simple garage and rail yard for light repairs and storage, with some offices for staff. But it has ballooned in ambition and nearly tripled in cost — to $48.8 million. It will now include a number of pricey and unusual features, including grass tracks for parking the fleet of six streetcars and a cistern for washing them with rainwater. …The District says it…is projected to open in 2017 after long delays. Tucson spent $13 million. Cincinnati’s was $11.5 million. Seattle’s came in at $11.1 million.

I’m sure local taxpayers (plus taxpayers around the nation that also subsidized this farce) will be happy to know they paid for a solar roof and other useless quirks.

Here are some of the details on why costs exploded.

…the building has…become a teaching tool for how public projects can be saddled with immense new costs. The historic designation “prompted an immediate six-month stop-work order,” DDOT said, and required, along with the green building rules, numerous upgrades. Those included using stone and brick materials; adding a saw-toothed roof with skylights; and hiding a streetcar power supply under photovoltaic cells and behind “green screen walls.” …Among the other major additions was an intricate system of turf tracks and paving stones that allow rainwater to drip into an underground vault for storage and filtering before flowing toward the city’s storm-water pipes.

Though taxpayers may think the “drip” is the sound of their money being flushed down a toilet.

In 2011, under Mayor Vincent C. Gray (D), the District estimated it would spend $6.2 million on a maintenance yard and a temporary shelter — basically, a big tent. Then, with the temporary tuneup location in place, the permanent building, additional track and other work in the yard would be finished for an additional $10.7 million. …The yard-and-tent total grew to $10.4 million, DDOT said, including environmental work and hundreds of thousands of dollars to keep some Dean-Facchina workers on the job 12 hours a day, six days a week to speed things up. By last year, estimates for the second phase, including the permanent Car Barn, had risen to $24 million. In July, the city agreed to spend $38.4 million on this phase, bringing the total to $48.8 million. Among the unforeseen costs listed by DDOT are $1 million in storm drainage and $824,000 in “indirects.”

So what’s the bottom line?

Well, the late former Mayor of DC, Marion Barry, is not normally a credible source. And I’m not sure I trust any numbers that came out of his mouth.

But I suspect he ventured very close to the truth when he was quoted in a Washington Times story from 2014.

…the late former Mayor Marion Barry said D.C. taxpayers would be spending $2,000 to subsidize each ride, calling it “a streetcar to nowhere.”

In other words, it would have been cheaper to hire chauffeured limousines for the handful of people who will use the streetcar. Assuming, of course, it ever gets opened.

By the way, there must be something in the local water, because there’s a similar example of grotesque waste on the other side of the Potomac River.

But let’s not just pick on profligate local governments.

Never forget that the federal government is the real expert at waste.

National Review has a very depressing list of ways that Uncle Sam has been squandering our tax dollars.

Federal spending gets more ridiculous every year, and a new congressional report details 100 of the most egregious examples. Following in the footsteps of chronic-waste chronicler Tom Coburn, Oklahoma senator James Lankford published “Federal Fumbles” late on Monday afternoon. …Here are NR’s top-ten favorite — which is to say, most scoff-worthy and absurd — examples of how the government wastes your time, energy, and hard-earned cash.

Here are some of the highlights, though lowlights might be a better term.

…the Department of Defense…approved a $283,500 grant to monitor the day-to-day life of baby gnatchatchers. …the U.S. National Institutes of Health…announced it would grant some hapless grad student $48,500 to pen the definitive history of smoking in Russia over the past 130 years. …the National Science Foundation…gave Massachusetts Institute of Technology more than $400k to ponder the burning question: “Does media choice cause polarization, or does polarization cause media choice?” …five federal agencies alone spent $3.1 billion on workers placed on administrative leave in a two-year timespan. A lot of that cash — $775 million, to be exact — went to public employees banned from their desks for more than a month. …The National Park Service forked over $5,000 to Mars Hill University so it could make a documentary film about a local musician. …$65,473 to figure out what bugs do near a lightbulb…$35,000 for solar-powered beer.

To be sure, these items are just a drop in the bucket compared to entitlement spending.

And these examples of pork-barrel waste also are minor compared to all the supposedly non-controversial outlays that are part of the discretionary budget that funds various agencies and departments.

That being said, keep the above list in mind the next time some politicians says that we need more taxes to finance ever-bigger government.

And never forget that the real waste is when governments spend money on things that should in the private sector or civil society.

In other words, the real waste is about 80 percent-90 percent of what happens in Washington.

P.S. If you have a strong stomach, you can watch some short videos on government waste here, here, here, and here.

P.P.S. And some egregious additional example of waste can be perused here, here, and here.

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