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Archive for the ‘Bureaucrats’ Category

More than two years ago, I shared a couple of humorous images showing the languorous lifestyle of lazy bureaucrats.

While those images were amusing, they didn’t really capture the true nature of bureaucracy.

For a more accurate look at life inside Leviathan, here’s a video showing an unfortunate woman trying to get a permit from a government agency.

It should probably be accompanied by a trigger warning lest it cause flashbacks for readers who have been in the same situation.

Very well done, I think you’ll agree. I especially like the subtle features of the video, such as the bureaucrat’s competitive desire to show his coworker that he won’t let a mere citizen prevail. And the part at the end showing the disappointment by all the bureaucrats also was a good touch.

Sadly, the story in the video isn’t just satire.

First, there are many absurd rules that require people to get permission from bureaucrats in order to work. All those laws and rules should be repealed. If consumers value certification and training, that can be handled by the private sector.

Second, it does seem as if bureaucrats relish the opportunity to torment taxpayers. I recall having to make four trips to the DMV when helping my oldest kid get his learner’s permit. Each time, I was told an additional bit of paperwork that was required, but at no point was I told all the forms and paperwork needed. Hence I had the pleasure of waiting in lines over and over again.

Though I did learn as time passed. By the time my last kid needed his permit, it only took two trips.

Since we’re on the topic of bureaucrat humor, regular readers know about the Bureaucrat Hall of Fame. Well, just as the Baseball Hall of Fame has a committee that looks back in time to find players who were overlooked and deserve membership, we need something to recognize deserving bureaucrats who somehow escaped my attention.

And if we travel back in time to 2013, John Beale of the Environmental Protection Agency clearly can make a strong case that he belongs in the Hall of Fame.

The EPA’s highest-paid employee and a leading expert on climate change was sentenced to 32 months in federal prison Wednesday for lying to his bosses and saying he was a CIA spy working in Pakistan so he could avoid doing his real job. …Beale told the court…that he got a “rush” and a “sense of excitement” by telling people he was worked for the CIA. …He perpetrated his fraud largely by failing to show up at the EPA for months at a time, including one 18-month stretch starting in June 2011 when he did “absolutely no work,” as his lawyer acknowledged in a sentencing memo filed last week.

Though, in his defense, he wasn’t goofing off all the time.

He also spent time trying to learn about new ways to hinder the private sector.

…he used the time “trying to find ways to fine tune the capitalist system” to discourage companies from damaging the environment. “I spent a lot of time reading on that,” said Beale.

For what it’s worth, he probably spent most of his time figuring out how to bilk colleagues.

Nor was that Beale’s only deception, according to court documents. In 2008, Beale didn’t show up at the EPA for six months, telling his boss that he was part of a special multi-agency election-year project relating to “candidate security.” He billed the government $57,000 for five trips to California that were made purely “for personal reasons,” his lawyer acknowledged. (His parents lived there.) He also claimed to be suffering from malaria that he got while serving in Vietnam. According to his lawyer’s filing, he didn’t have malaria and never served in Vietnam. He told the story to EPA officials so he could get special handicap parking at a garage near EPA headquarters. …Beale took 33 airplane trips between 2003 and 2011, costing the government $266,190. On 70 percent of those, he traveled first class and stayed at high end hotels, charging more than twice the government’s allowed per diem limit. But his expense vouchers were routinely approved by another EPA official

Not surprisingly, the EPA took years to figure out something was amiss.

After all, why care about malfeasance when you’re spending other people’s money?

Beale was caught when he “retired” very publicly but kept drawing his large salary for another year and a half.

Heck, I’m surprised the EPA’s leadership didn’t award themselves bonuses for incompetence, like their counterparts at the VA and IRS.

P.S. Here’s a new element discovered inside the bureaucracy, and a letter to the bureaucracy from someone renewing a passport.

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Last year, I shared some remarkable research from the Organization for Economic Cooperation and Development about the negative relationship between government spending and economic performance.

The economists at the Paris-based bureaucracy looked at data from its member nations (primarily Europe, North America, and the Pacific Rim), discovered that the countries with bigger government experienced less growth, and concluded that there would be much more prosperity if those nations merely reduced government modestly.

So you can imagine what sort of numbers that study would have generated if a few jurisdictions with genuinely modest-sized government, such as Hong Kong and Singapore, were part of the data.

But that’s a separate issue. Today’s topic is about a study from another international bureaucracy. The European Central Bank has new research looking at the impact specifically of excessive pay for government bureaucrats. Here are the key findings from the nontechnical summary at the beginning of the paper.

…there are benefits from government wage bill reform that go beyond the objective of fiscal consolidation. …a rationalisation of government wages and employment policies can generate favourable labour market effects in the medium to longer term through competitiveness and efficiency gains. Competitiveness gains materialise through the spillovers effects of public wage moderation on the determination of private sector wages. …An important aspect of the debate on public wage bill restraint concerns how long such policies can be sustained over time. …Additional margins of short-term adjustment include the moderation of still high public-to-private wages gaps, or a possible continuation of the downsizing trend in public employment, depending on the country-specific situation. …Finally, the paper argues that reforms affecting public sector personnel are most effective and have more sustained effects when the measures implemented are of a structural nature… Some examples are…measures to streamline the size and scope of government.

Wow, an international bureaucracy writing about the economic benefits that accrue if policy makers “streamline the size and scope of government.” Be still, my beating heart!

If you’re a policy wonk, you’ll like the fact that the study is filled with lots of interesting data and charts.

…aggregate data show that the euro area government wage differential with respect to the private sector increased from 20% in 2007 to 25% in 2009, and subsequently fell to 23% in 2014.

Here’s the relevant chart. The blue line, which links to the left axis, shows the degree to which bureaucrats are overpaid compared to the private sector. For the past 10 years, the “pay premium” has been in the 20 percent-25 percent range.

This problem of excessive pay for the bureaucracy has been a growing problem.

…general government compensation of employees grew faster than nominal GDP over the whole 2007-2014 crisis period

Though once the “austerity” era began about 2010, there was a bit of reform to bureaucrat compensation (in Europe, “fiscal consolidation” mostly meant higher taxes, but some spending restraint), particularly in nations that were forced to make changes because investors were becoming increasingly reluctant to lend them more money..

Here’s a chart showing bureaucrat pay as a share of GDP, with the blue bar showing the amount of economic output consumed by government workers in 2010 and the yellow dots showing the level in 2014. Some countries increased the relative burden of bureaucrat compensation and others reduced it, but what strikes me as noteworthy is that Germany and the Czech Republic deserve praise for keeping the burden low (honorable mention for Luxembourg and Slovakia) while Denmark stands out for being absurdly extravagant.

For a longer-term perspective, at least with regards to the size of the bureaucracy, here’s a table showing the share of the population getting a paycheck from government. Fascinating data. I especially like the columns on the right, which show that Ireland, the Netherlands, and the United Kingdom deserve credit for reducing over time the amount of bureaucrats relative to the private sector. The nations that have moved farthest in the wrong direction, by contrast, are Greece (gee, what a surprise), Spain, Portugal, and Finland.

Now let’s get to the meat of the study, which looks at the economic impact of less bureaucracy.

The authors cite some of the existing academic research, much of which focuses on the degree to which excessive pay for the public sector causes economy-wide distortions that make nations less competitive and result in slower growth. Basically, excessive pay for bureaucrats forces private employers to increase pay as well, but in ways that aren’t sustainable based on underlying levels of productivity.

A seminal work Alesina et al. (2002) found that reducing public wage expenditure generates reductions in private wages per employee, which improves competitiveness, increasing profits, investment, and economic growth. …A key argument is that public wage restraint may set in motion a labour market adjustment through the inter-linkages with private wages. …The literature has found robust evidence of significant interrelations between public and private sector wages per employee. A wealth of recent empirical papers provides evidence of a direct causal relationship between these variables. …The empirical literature tends to find that public employment crowds-out private sector employment.

But when fiscal pressures force politicians to cut back on the excessive pay for government employees, this enables the private sector to have pay levels that are consistent with sustainable long-run growth.

The authors share some of their new findings.

…the recent consolidation period has contributed to some competitiveness gains in the euro area, in view of the evidence provided on the partial correction of the public-private wage premium. …Overall, the restraint in public wages directly reduced unit labour cost (ULC) growth in the euro area during the 2010-2014 period. …The existence of distortions in public-private wage gaps…can be particularly harmful for competitiveness given that public sector activities are concentrated in non-tradable sectors, which are less exposed to international competition. …There is evidence that the recent public wage restraint has driven the partial correction of the existing positive public-private wage premium in the euro area.

The authors close by discussing some policy implications.

Well-designed government wages and employment policies and reforms may generate overall economy competitiveness gains and increase the efficiency of the labour market. …public employment adjustments can affect GDP and total economy employment positively if there are large inefficiencies in the government sector… In addition, if a public pay gap exists, the latter positive effect of public wage restraint becomes amplified as labour market inefficiencies are also reduced.

This is helpful research. It’s not often that a government bureaucracy releases a study showing that overpaid bureaucrats hinder overall economic performance.

Though I hasten to add that the study only looked at the macroeconomic effect of excessive pay. As I argue near the end of this video I narrated for the Center for Freedom and Prosperity, the additional problem is that various bureaucracies are engaging in activities that are economically harmful. In the case of the United States, the Department of Agriculture, Department of Education, and Department of Housing and Urban Development would be just a few examples of agencies where programmatic spending surely is more damaging that bureaucrat compensation.

The good news is that the ECB study also recognizes the need for structural reform. That’s why there was a reference to the need to “streamline the size and scope of government.”

The bad news is that politicians don’t care about this consensus.

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Yesterday I shared some very good news about Brazil adopting a spending cap.

Today, I also want to share some good news, though it’s not nearly as momentous.

Indeed, it’s not even good news. Instead, it’s just that some bad news isn’t as bad as it used to be.

I’m referring to the fact that the nation’s capital region used to be home to 10 of the nation’s 15-richest counties.

That was back in 2012, and I viewed it as a terrible sign that the DC area was packed with overpaid bureaucrats, oleaginous rent seekers, and government cronies, all of whom were enjoying undeserved wealth financed by hard-working taxpayers from the rest of America.

Well, now for the “good news.”

Terry Jeffrey has a column for CNS News about the current concentration of wealth in the national capital area.

The four richest counties in the United States, when measured by median household income, are all suburbs of Washington, D.C., according to newly released data from the Census Bureau. …Of the Top 20 richest counties in the nation, nine are suburbs of the city that serves as the seat of a federal government that in fiscal 2016 taxed away $3,266,774,000,000 from the American people, spent $3,854,100,000,000, and ran a $587,326,000,000 deficit.

The reason this awful data is good news (relatively speaking) is that the DC region is now home to “only” nine out of the 20-richest counties rather than 10 out of the 15-richest counties.

Here’s Terry’s list, which I’ve augmented by highlighting the jurisdictions that are home to many of the bureaucrats, lobbyists, and other insiders that are living on Easy Street thanks to the federal leviathan.

I also awarded a star to Los Alamos County in New Mexico since that’s another jurisdiction that has above-average income because of Uncle Sam.

To be sure, not every private-sector worker in these rich counties is a cronyist, lobbyist, or rent seeker, so it’s difficult to accurately say what share of the income and wealth in these various counties is earned and how much is a transfer from government.

But we can say with confidence that the bureaucrats who are over-represented in these jurisdictions get a lot more compensation than their counterparts in the private sector. Chris Edwards has been relentless in his efforts to document excessive pay for bureaucrats.

Since we’re on this topic, let’s enjoy some additional bits of data about the cushy life of our bureaucratic overlords.

In addition to lavish pay, federal employees also receive gold-plated benefits. Most of the money goes for pensions and healthcare, but you’ll be happy to know the feds have also figured out more creative ways of pampering the protected class.

…a variety of federal agencies in a number of locations provide “free” yoga classes to employees. But these classes are not free; since 2013, they have cost taxpayers over $150,000. The State Department spends $15,000 for yoga in the nation’s capital. A yoga instructor in from Berkeley, California is paid $4,000 a year from the Department of Agriculture’s Research Service. Of course, the Department of Energy…has gotten in on taxpayer financed yoga; but for $11,000 annually they also offer pilates at a California location. …The Railroad Retirement Board spends $11,000 annually for yoga classes for office workers at its Chicago headquarters.

And many federal bureaucrats have figured out how to enjoy another fringe benefit of federal employment.

The federal government is full of people pulling in six-figure compensation packages who spend their days…watching porn on government computers… One compulsive porno-phile over at the EPA was watching so much porn that it caught the attention of the Office of the Inspector General — i.e., he was watching so much porn that a federal official noticed — and when the OIG investigator showed up to see what the deal was, you know what that EPA guy did? He kept right on watching porn, with the OIG inspector in his office. At the FCC, bureaucratic home of the people who enforce such obscenity laws as we have, employees routinely spend the equivalent of a full workday each week watching porn. Treasury, General Service Administration, Commerce — porn, porn, and more porn. Of course nobody gets fired. Nobody ever gets fired. …Federal employees, according to OIG reports, also spend a great deal of time browsing online-dating sites (apparently without much success) and shopping.

By the way, the jab about “nobody gets fired” isn’t 100 percent accurate.

But if you want lots of job security, then latch on to the federal teat.

Federal workers are far more likely to be audited by the IRS or get arrested for drunk driving than they are to be fired from the civil service payroll for poor performance or misconduct. The odds are one-in-175 for the IRS audit and one-in-200 for the drunk driving arrest, while the odds for a fed to be fired in a given year are one-in-500, according to the Government Accountability Office. …Private sector workers face just the opposite situation. They have a roughly one-in-77 chance of being involuntarily terminated — the Bureau of Labor Statistics doesn’t distinguish between fires and layoffs — in a given month.

By the way, bureaucrats are sometimes forced into early retirement as “punishment” for misbehavior.

All things considered, though, we serfs shouldn’t complain too much.

After all, would it be proper to grouse about a group that does superlative work?

In the ranks of the federal government, 99 percent are really good at their jobs — and almost two-thirds exceed expectations or do outstanding work. That’s the conclusion of a new report by the Government Accountability Office, which also found that 78 percent of high-level civil servants — those in GS grades 13 through 15 — were given top performance scores of outstanding or fully successful….The glowing picture of everyone in calendar year 2013, the most recent data available to auditors, is…good news for federal agencies.

In reality, of course, these glowing performance reviews are highly suspect.

…a more likely reality to many in and outside of government. Rather than so many federal workers being exceptional, the system for rating them isn’t working right. …Federal workers themselves have long complained in annual surveys that their agencies do not deal with poor performers, hurting morale and efficiency. Lawmakers complain that it is nearly impossible to fire these employees, but bills to take away some of their their rights to appeal bad reviews have languished in Congress. …“Apparently the federal bureaucrats grading one another think virtually everyone who works for the government is doing a fantastic job,” Rep. Jeff Miller (R-Fla.), chairman of the House Committee on Veterans’ Affairs, said in a statement. “But given the dysfunction we’ve seen throughout the federal government over the last several years, that can’t possibly be true,” Miller said.

Of course it’s not true.

Misbehavior and malfeasance at bureaucracies such as the IRS and VA doesn’t prevent high ratings and generous bonuses. Instead, it’s almost as if doing the wrong thing is a job requirement.

Isn’t big government wonderful?

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I’m not a fan of federal bureaucracies and I don’t like the undeserved wealth of the Washington, DC metro region.

So I’m very open to ideas that would address these problems.

Paul Kupiec of the American Enterprise Institute suggests, in a thought-provoking column in the Wall Street Journal, that one possible solution would be to move federal bureaucracies out of Washington.

Donald Trump pledged to rebuild America’s troubled inner cities, “drain the swamp,” and restore Americans’ confidence in their government. The president-elect can deliver on these promises by moving federal government agencies out of the nation’s capital and closer to the citizens they serve in cities like Detroit, Cleveland or Milwaukee.

He points out that two bureaucracies are currently looking to build new headquarters.

The FBI’s current headquarters, the J. Edgar Hoover Building, was built in 1975. It is now too small to meet the FBI’s needs, and it requires major repairs. The specifications for a new FBI headquarters include 2.1 million square feet of office space with access to adequate transportation. The construction budget alone is about $2.5 billion. …The Labor Department is also looking for a new headquarters… The new building could be as large as 1.4 million square feet and, if costs are similar to those proposed by the FBI, the building budget alone would exceed $1 billion.

So why, he asks, don’t we locate those headquarters in places that would benefit from federal redistribution?

…consider what relocating the FBI headquarters to Detroit would do. Moving 11,000 FBI employees would hardly make a dent in the D.C. economy. Over 275,000 people—over 14% of the workforce—are federal-government employees, according to the Office of Personnel Management. In contrast, 11,000 well-paid federal government jobs and $2.5 billion in construction spending would provide a significant boost to the Detroit economy, where less than 2% of the workforce are federal employees.

Here’s the basic argument.

With modern communications technology, there is no reason that the FBI’s new headquarters, or the headquarters of other federal government agencies, must be located in the nation’s capital. The concentration of federal agencies in a single area increases the potential for a breakdown of government services in the event of a terrorist attack… Reducing risk is but one benefit. It would also be healthy for the country to more broadly distribute the wealth and power of federal-government agencies across the nation.

And Kupiec points out that it’s not fair that the DC-metro region gains such disproportionate benefits from overpaid bureaucrats and fat-cat consultants.

According to the 2010 U.S. Census, 11 of the 20 richest U.S. counties—including the three richest counties—are in the Washington, D.C., metro area. Incomes near the national capital are bloated not only by generous federal-government payrolls, but also by “Beltway bandit” consultancy firms that provide contract services to federal agencies. It is little wonder that many Americans view the federal government as a money machine for bureaucrats and political insiders.

Here’s the most persuasive argument for moving government departments to other spots in America.

Taxpayers would save money if bureaucracies were built and operated outside of DC.

Many towns and cities across America would welcome the economic development and stability that accompanies a well-paid federal-agency workforce like the FBI or the Labor Department. The expense of managing the federal government should be used to spread wealth beyond the nation’s capital and revitalize the economies of America’s ailing cities. Moving agencies out of Washington will also save millions of dollars because the costs of acquisition, building maintenance and housing for federal employees will shrink outside of the Washington bubble. In 2016 federal employees in the D.C. area receive a 24.78% premium over the base federal pay scale because they work in a high-cost region, according to the Office of Personnel Management.

Part of me likes this idea, especially since the burden on taxpayers presumably would decrease.

But I confess to being conflicted on the issue. Here are my concerns.

  • Shouldn’t we focus on shutting down counterproductive bureaucracies rather than moving them? Whether based in Detroit or DC, departments such as HUD, Agriculture, Energy, Education, and Transportation shouldn’t exist.
  • If we move bureaucracies (whether they are necessary ones or useless ones), does that create the risk of giving other parts of the nation a “public-choice” incentive to lobby for big government since they’ll be recipients of federal largesse?
  • Will we simply get duplication, meaning a new bureaucracy somewhere in America without ever really getting rid of the original bureaucracy in Washington, DC?

Though maybe if I was in charge of the process, it wouldn’t be a bad idea.

I could locate some bureaucracies in the dodgy parts of cities such as Detroit. Especially departments such as HUD and HHS since they helped cause the economic misery in inner cities.

And the Department of Education could be placed somewhere like Newark where government-run schools are such awful failures.

As for other federal bureaucracies, I’m wondering whether seasonal switches would be possible? Maybe stick them in North Dakota in the winter and Brownsville, Texas, in the summer?

Any ideas from readers on this libertarian quandary?

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I routinely grouse about the heavy economic cost of red tape.

I’ve also highlighted agencies (such as the EEOC) that seem especially prone to senseless regulations.

And I’ve explained why private regulation actually is a very effective way of promoting health and safety.

Today, let’s get specific and look at the Food and Drug Administration. This bureaucracy ostensibly is supposed to protect us by making sure drugs and medical devices are safe and effective before getting approval, which seems like it might be a reasonable role for government.

But the FDA routinely does really foolish things that undermine public health. The likely reason is that the bureaucracy has a bad incentive structure. As Professor Alex Tabarrok has explained.

…the FDA has an incentive to delay the introduction of new drugs because approving a bad drug (Type I error) has more severe consequences for the FDA than does failing to approve a good drug (Type II error). In the former case at least some victims are identifiable and the New York Times writes stories about them and how they died because the FDA failed. In the latter case, when the FDA fails to approve a good drug, people die but the bodies are buried in an invisible graveyard.

This video from Learn Liberty looks at some data on how the FDA’s Type II errors have led to thousands of deaths, but mostly focuses on whether people and medical professionals should have the freedom to makes choices different from what the FDA has officially blessed.

It’s also worth mentioning that the process of drug approval is jaw-droppingly expensive, as Professor Tabarrok noted in another column.

It costs well over a billion dollars to get the average new drug approved and much of that cost comes from FDA required clinical trials. Longer and larger clinical trials mean that the drugs that are eventually approved are safer. But longer trials also mean that good drugs are delayed. And the more expensive it is to produce new drugs the fewer new drugs will be produced. In short, longer and larger trials mean drug delay and drug loss.

The FDA bureaucracy can’t even approve things it already has approved. There was a big controversy a few months ago about the EpiPen, which is a very expensive device that auto-injects medication to people suffering severe allergic reactions.

But the device is only costly because the FDA is hindering competition, as noted by the Wall Street Journal.

Epinephrine is a basic and super-cheap medicine, and the EpiPen auto-injector device has been around since the 1970s. Thus EpiPen should be open to generic competition, which cuts prices dramatically for most other old medicines. Competitors have been trying for years to challenge Mylan’s EpiPen franchise with low-cost alternatives—only to become entangled in the Food and Drug Administration’s regulatory afflatus. …the FDA maintains no clear and consistent principles for generic drug-delivery devices like auto injectors or asthma inhalers. …injecting a kid in anaphylactic shock with epinephrine…is not complex medical engineering. But no company has been able to do so to the FDA’s satisfaction.

Research from the Mercatus Center reveals that the FDA imposes ever-higher costs and gets ever-higher budgets, but also how the bureaucracy fails to deliver on its obligation to facilitate innovation.

The expense of putting drugs and devices through this system is almost unimaginable. The cost of bringing low- to medium-risk 510(k) medical devices to market averages $31 million, $24 million (75 percent) of which is dedicated solely to attaining FDA approval within an average of about six months. Any significant improvement to the device requires reapplication. For higher-risk medical devices where there may be significant health gains, the costs are about $94 million, $75 million (80 percent) of which is dedicated to attaining FDA approval. For drugs, the situation is much worse. It costs an average of $2.6 billion simply to get a drug through the FDA process and onto the market. This does not include postmarket monitoring, the terms of which are laid out by FDA upon approval. These costs have increased from about $1 billion between 1983 and 1994. …we continue to increase the funding and authority for FDA and assume that we will somehow boost innovation in medical products (drugs and devices) despite the growing obstacles. This has not happened. …Congress continues to increase funding for FDA through both the general fund and industry user fees…with the hope that performance goals and additional funding would increase FDA’s performance and lead to an increase in innovations. …but FDA finds strategic ways to narrowly meet each goal while frustrating the original goal of improving health outcomes through innovation.

By the way, the FDA also does really bone-headed things. I’ve previously written about the bureaucracy’s war against unpasteurized milk (including military-style raids on dairies!). Now the bureaucrats think soldiers shouldn’t be allowed to get cigars.

The Wall Street Journal has the details of this silly nanny-state intervention.

You might think GIs in Iraq and Afghanistan have enough to worry about with Islamic State and the Taliban. But it turns out they’ve also got a problem called the Food and Drug Administration. In August a new FDA rule went into effect that forbids tobacco makers and distributors from handing out free samples. Some companies that have been donating cigars to service members for decades have now stopped for fear that this is now illegal. The FDA nuttiness has attracted the attention of Rep. Kathy Castor, a Democrat who represents Florida’s 14th district, which includes “Cigar City,” or Tampa. She has introduced a bill to “reinstate the tradition of donating cigars to our military members to provide them with a taste of home while deployed.” Her press release notes that cigars are the “second-most requested item” from troops overseas. …cigars for service members is in question because it’s a proxy for the political war on tobacco, but the first casualty is common sense. The FDA’s bureaucrats are happy to have U.S. soldiers, sailors, airmen and Marines dodge bullets overseas but they’re horrified they might relax by lighting up a stogie.

But the nanny-state war against soldiers enjoying cigars is downright trivial compared to the deadly impact of the FDA’s attack on vaping.

Jacob Sullum of Reason outlines some of the horrifying details.

The Food and Drug Administration’s e-cigarette regulations, which took effect last week, immediately struck two blows against public health. As of Monday, companies that sell vaping equipment and the fluids that fill them are forbidden to share potentially lifesaving information about those products with their customers. They are also forbidden to make their products safer, more convenient, or more pleasant to use. The FDA’s censorship and its ban on innovation will discourage smokers from switching to vaping, even though that switch would dramatically reduce the health risks they face. That effect will be compounded by the FDA’s requirement that manufacturers obtain its approval for any vaping products they want to keep on the market for longer than two years. The cost of meeting that requirement will force many companies out of business… All of this is unambiguously bad for consumers and bad for public health. Yet the FDA took none of it into account…the Family Smoking Prevention and Tobacco Control Act…gave the FDA authority over tobacco products, a category to which it has arbitrarily assigned tobacco-free e-cigarettes, even when they contain nicotine that is not derived from tobacco or no nicotine at all. …A brief that 16 advocates of tobacco harm reduction filed last week in support of Nicopure’s lawsuit notes that the cost of the FDA’s regulations will far outweigh their benefit if they cause even a small percentage of vapers to start smoking again or deter even a small percentage of current smokers from switching. That’s because of the huge difference in risk between e-cigarettes and the conventional kind (at least 95 percent, according to the Royal College of Physicians)… The FDA acknowledges that its regulations might also harm public health by retarding the substitution of vaping for smoking. But it does not include that cost in its analysis, deeming it too speculative. The FDA literally assigns zero value to the lives of smokers who would have quit were it not for the agency’s heavy-handed meddling.

Oh, I suppose I also should mention that FDA red tape is responsible for the fact that Americans have a much more limited selection of condoms than Europeans.

I’m sure there’s a good joke to be made about the bureaucrats screwing us in ways that interfere with us…um…well, you know.

Let’s wrap up with some tiny bits of good news. First, Arizona’s Goldwater Institute has been remarkably successful in getting states to adopt “Right to Try” laws that give seriously ill people the right to try investigational medications.

Sadly, those laws will have limited use until there’s also reform in Washington. Fortunately, there’s some movement. Here’s a video from a congressional hearing organized by Senator Johnson of Wisconsin.

Here’s a second item that sort of counts as good news.

If there is one silver lining to the dark cloud of FDA incompetence, it’s that the bureaucrats haven’t figured out how to criminalize those who use drugs for “off-label” purposes (i.e., for reasons other than what was approved by the government). A good example, as reported by the New York Times, is a tooth desnsitizer that’s only been recently approved by the FDA (after being available for decades in nations such as Japan), and already dentists are using it to fight cavities.

Nobody looks forward to having a cavity drilled and filled by a dentist. Now there’s an alternative: an antimicrobial liquid that can be brushed on cavities to stop tooth decay — painlessly. The liquid is called silver diamine fluoride, or S.D.F. It’s been used for decades in Japan, but it’s been available in the United States, under the brand name Advantage Arrest, for just about a year. The Food and Drug Administration cleared silver diamine fluoride for use as a tooth desensitizer for adults 21 and older. But studies show it can halt the progression of cavities and prevent them, and dentists are increasingly using it off-label for those purposes. …Silver diamine fluoride is already used in hundreds of dental offices. Medicaid patients in Oregon are receiving the treatment…it’s relatively inexpensive. …The noninvasive treatment may be ideal for the indigent, nursing home residents and others who have trouble finding care. …But the liquid may be especially useful for children. Nearly a quarter of 2- to 5-year-olds have cavities

Since I’m not familiar with the history of the FDA, I wonder whether the bureaucrats have ever tried to block medical professionals from using drugs and devices for “off-label” purposes.

Let me close with one final point. Our leftist friends aren’t very interested in reforming the FDA.

Instead, they argue that the big problem is greedy pharmaceutical companies and suggest European-style price controls.

That could save consumers money in the short run, I’m sure, but it would gut the incentive to develop new medications.

One expert looked at the Rand Corporation estimates that such policies would lead to a decline in life expectancy of 0.7 years by 2016. He then crunched the numbers and concluded that the aggregate impact would be worse thing to ever happen. Even worse than the brutality of Mao’s China.

…let me put this in context. In 2060 there will probably be 420 million Americans and 523 million Europeans. And suppose that whatever changes we make in drug regulations today last for one human lifespan, so that everybody has a chance to be 55-60. So about a billion people each losing about 0.7 years of their life equals 700 million life-years. Since some people live in countries outside the US and Europe [citation needed] and they also benefit from First-World-invented medications, let’s round this up to about a billion life-years lost. What was the worst thing that ever happened? One strong contender is Mao’s Great Leap Forward, in which ineffective agricultural reforms and very effective purges killed 45 million people. Most of these people were probably already adults, and lifespan in Mao’s China wasn’t too high, so let’s say that each death from the Great Leap Forward cost what would otherwise be twenty healthy life years. In that case, the worst thing that has ever happened until now cost 45 million * 20 = 900 million life-years. Once again, RAND’s calculations plus my own Fermi estimate suggest that prescription drug price regulation would cost one billion life-years, which would very slightly edge out Communist China for the title of Worst Thing Ever.

I guess the bottom line is that the FDA is a typical regulatory agency, both incompetent and expensive. But if the statists have their way, things could get a lot worse.

P.S. While the regulatory burden in the United States is stifling and there are some really inane examples of silly rules such as the FDA’s war on vaping, I think Greece and Japan win the record if you want to identify the most absurd specific examples of red tape.

P.P.S. Here’s what would happen if Noah tried to comply with today’s level of red tape when building an ark. And here’s some clever anti-libertarian humor about deregulated breakfast cereal.

P.P.P.S. Just in case you think regulation is “merely” a cost imposed on businesses, hopefully today’s column drives home that red tape can have terrible consequences for human health. And don’t forget that bureaucratic red tape is the reason we’re now forced to use inferior light bulbs, substandard toilets, second-rate dishwashers, and inadequate washing machines.

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My main problem with bureaucrats is that there are too many of them (because government is too big) and that they are paid too much (almost twice the level of compensation as workers in the private sector).

But even the government was the proper size (America’s Founders had the right idea on that issue) and even if pay levels were more reasonable, that wouldn’t solve all problems. There’s also the issue of making sure that bureaucrats work hard and don’t cause trouble, something that is a big problem in government agencies and departments because of policies that make it virtually impossible to fire anybody.

I recently explored the issue of how to deal with bad bureaucrats and noted that civil service rules have the effect of shielding ” slackers, trouble makers, and other undesirable employees.”

We have an example from Oklahoma that is a perfect (in a rather disturbing way) illustration of this phenomenon.

A community is wondering why a teacher who is accused of lewd acts with a child is still getting paid. State agents arrested 48-year-old Shelley Jo Duncan, accusing her of having inappropriate contact with a 14-year-old boy. …messages detail the pair’s plans for future sexual encounters, including Duncan allegedly texting the boy she would give him “oral sex with a cough drop in her mouth.” ….The Tishomingo Public Schools Superintendent Ken Duncan, who is Duncan’s husband, said that she is entitled to her pay while she is suspended. “The district has been instructed by legal counsel, per the Teacher Due Process Act governed by Oklahoma statute, that the teacher is entitled to compensation during her suspension,” Duncan reportedly said during the meeting.

I don’t know whether to laugh or cry.

Why isn’t sexual contact with a child an immediate cause for termination? I can’t imagine that private employers would have any tolerance for this kind of behavior.

To be sure, the rule of law is vitally important. If there are legal procedures for dealing with bad bureaucrats, they should be followed. So, in this specific case, perhaps Ms. Duncan’s husband is correct and that she should be paid.

But this is why I wrote earlier this month that “there needs to be a much tougher approach when contract negotiations take place.” Simply stated, politicians like to curry votes from powerful interest groups, so contract negotiations between governments and government unions generally are a sham. All too often, the politicians and unions conspire against taxpayers.

This is why pay levels for bureaucrats tend to be exorbitant. It’s why pensions are so extravagant (and a fiscal nightmare, as I wrote just yesterday). And it’s why civil service rules protect deadbeats and sketchy people.

Unfortunately, there’s a big difference between identifying a problem and solving a problem. It doesn’t really matter if we can identify the “public choice” incentives that lead to bad decisions in government if we can’t then figure out the policies that counteract those bad incentives.

Yes, this is why a no-tax-increase position should be a no-brainer. And this is another piece of evidence why the natural profligacy of all governments should be constrained by spending caps. But even I will admit that those are macro-type solutions that only indirectly make it harder for politicians and bureaucrats to misbehave.

On that depressing note, I guess all that’s left is for us to decide whether Ms. Duncan deserves to be in the Bureaucrat Hall of Fame. For what it’s worth, I think we have to wait before making that decision. If she (and perhaps her husband) can manipulate the rules and get paid for 12 months while doing nothing, even though she was caught red-handed (or perhaps we should say Altoid-mouthed) for misbehaving with a child, she’ll deserve membership. And if you think that’s asking too much, don’t forget that a bureaucrat in India managed to get paid for more than two decades even though he stopped showing up for work.

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America’s main long-run retirement challenge is our pay-as-you-go Social Security system, which was created back when everyone assumed we would always have a “population pyramid,” meaning relatively few retirees and lots of workers.

But as longevity has increased and fertility has decreased, the population pyramid increasingly looks like a cylinder. This helps to explain why the inflation-adjusted shortfall for Social Security is now about $37 trillion (and if you include the long-run shortfalls for Medicare and Medicaid, the outlook is even worse).

But Social Security is not the only government-created retirement problem. State and local governments have “defined benefit” pension systems for their bureaucrats, which means that their bureaucrats, when they retire (often at an early age), are entitled to receive monthly checks for the rest of their lives based on formulas devised by each state (based on factors such as years employed in the bureaucracy, pay levels, contributions, etc).

Unlike Social Security (which has a make-believe Trust Fund), these pension systems are supposed to be “funded” in the proper sense, which means that money supposedly is set aside and invested every year so that there will be a big nest egg that can be used to pay benefits to future retirees.

At least that’s how it’s supposed to work in theory. In reality, politicians like promising big retirement benefits to government bureaucrats, but they oftentimes aren’t willing to actually set aside the money needed to fund the nest egg. After all, it’s more fun to spend the money appeasing other interest groups (state and local bureaucrats don’t approve of underfunding, but their retirement benefits generally are seen as a contractual obligation, so they don’t have much incentive to lobby for honest accounting).

The net result is that every retirement system for state government workers is underfunded. How far in the red? That’s a hard question to answer because you have to make long-run assumptions about the investment earnings of the various pension funds.

But the answer is going to be a big number regardless of methodology. According to a new report from the American Legislative Exchange Council, the shortfall is enormous.

When state pension funds are examined through the lens of a more realistic valuation, pension funding gaps are revealed to be much larger than reported in official state financial documents. This report totals state-administered plans’ assets and liabilities and finds nationwide total unfunded liabilities to be $5.59 trillion. The nationwide funding level is a mere 35 percent, which is one percentage point lower than two years ago. Combined across all states, the price tag for unfunded pension liabilities is now $17,427 for every man, woman and child in the United States. …Taxpayers are on the hook for the legal obligation to cover the promised benefits of traditional, defined-benefit pension plans. …When unfunded pension liabilities are viewed as shared debt placed on each individual, Alaska, where each resident is on the hook for a staggering $42,950, tops the list. Ohio and Illinois follow for the highest per person unfunded pension liabilities.

Here’s a map from the report. It’s bad news if your state is dark blue. And if your state is gray, your burden is relatively low.

Though keep in mind that these numbers are not adjusted for state income.

Louisiana, Mississippi, and Kentucky get bad scores, but they probably are in even deeper trouble that lower-ranked states like California and New Jersey where per-capita income is higher (yes, the cost of living is lower in those southern states, but that doesn’t matter since the relevant comparison is per-capita income vs per-capita pension liabilities.

The ALEC report is more pessimistic than other estimates, but that’s because they use more cautious assumptions about the potential investment earnings of the various pension funds that manage money for state and local bureaucrats.

State Budget Solutions uses a more reasonable valuation to determine the unfunded liabilities of public pension plans. Given that many plans’ assumed rates of return are too high and invite risk, State Budget Solutions uses a more prudent rate of return, rather than the loftiest goals of money managers. This study uses a rate of return based on the equivalent of a hypothetical 15-year U.S. Treasury bond yield. …. State Budget Solutions is not alone in calling attention to the flawed accounting practices of state agencies. A recent study released by the Stanford Institute for Economic Policy Research, Pension Debt: United States Public Employee Pension Systems, also suggests that states use unrealistically high rates of return to discount their pension liabilities. The study found that pension debt totals $4.8 trillion, a finding similar to this report.

A new study from Pew isn’t nearly as pessimistic, but it still shows a huge gap.

The nation’s state-run retirement systems had a $934 billion gap in fiscal year 2014 between the pension benefits that governments have promised their workers and the funding available to meet those obligations. …This brief focuses on the most recent comprehensive data from all 50 states and does not reflect the impact of weaker investment performance in fiscal 2015, which averaged 3 percent. Performance has been even weaker in the first three quarters of fiscal 2016. …Total pension debt is expected to be over $1 trillion for state plans, an increase of more than 10 percent from fiscal 2014. When combined with the shortfalls in local pension systems, this estimate reaches more than $1.5 trillion for fiscal 2015 and will likely remain close to historically high levels as a percentage of U.S. gross domestic product (GDP).

Here’s a visual from the report showing how the fiscal outlook for state pension systems has deteriorated over the past 15-plus years.

Equally troubling, most states are heading in the wrong direction.

…this brief shows that 15 states currently follow policies that meet the positive amortization benchmark—exceeding 100 percent of needed funding—and can be expected to reduce pension debt in the near term. The remaining 35 states fell short; those performing the worst on this measure typically had the largest unfunded pension liabilities.

Here’s the chart from the study. As you can see, Kentucky, New Jersey, and Illinois are falling deeper in the red at the fastest rate.

Kudos to New York and West Virginia, by the way, for being the most aggressive in trying to address long-run problems.

Moody’s Investor Services also has a new report on pension shortfalls. Here are some of the highlights, or perhaps lowlights would be a more appropriate word.

Total US state aggregate adjusted net pension liabilities (ANPL) totaled $1.25 trillion, or 119% of revenue in fiscal 2015, Moody’s Investors Service says in a new report. The results, based on compliance with new GASB 68 accounting rules, set a new ANPL baseline and are poised to rise for the next two fiscal years as market returns fall below annual targets. “The median return for public pension plans in FY 2016 was 0.52% compared to an average assumed investment return of 7.5%,” Moody’s Vice President — Senior Credit Officer Marcia Van Wagner says. “We project that aggregate state ANPL will grow to $1.75 trillion in FY 2017 audits.” Moody’s new report also introduces a new “Tread Water” benchmark, which measures whether states’ annual contributions to their pensions are enough to keep the unfunded net liability from growing. …there were several states whose pension contributions were notably below the Tread Water mark, including Kentucky (Aa2 stable), New Jersey (A2 negative), Illinois (Baa2 negative), and Texas (Aaa stable). …The states with the highest pension burdens — measured as the largest three-year average ANPL as a percent of state governmental revenue — were consistent with previous years. Illinois topped the list with pension liabilities at 280% of total governmental revenue, followed by Connecticut (Aa3 negative) at 209%, Alaska (Aa2 negative) at 179%, Kentucky at 162%, and New Jersey at 157%.

Wow, it doesn’t matter what report you look at, or what methodology is being used, Illinois, New Jersey, and Kentucky are a big mess (Alaska’s numbers also are awful, but the state – within certain limits – can use energy tax revenues to cover much of its shortfall).

So what’s the solution to all this mess? As I noted a couple of months ago when sharing other grim numbers about state pension systems, the answer is to, 1) stop promising excessive benefits to bureaucrats (and stop giving them excessive pay as well), and 2) switch to “defined contribution” plans so that workers have their own piles of money and the underfunding problem automatically disappears.

P.S. I’ve already granted the “Politician of the Year Award” to the President of the Philippines, the Prime Minister of Malaysia, and the President of France, which probably means I should have a “Politician of the Month Club” instead. And if the Award is expanded, the politicians from the Solomon Islands obviously would be good candidates for the honor.

There was a public outcry in the Pacific island nation in May 2015, when a parliamentary commission voted to exempt MPs’ earnings from tax. …now the Court of Appeal – the Solomon Islands highest court – has said that MPs can benefit from tax-free salaries after all. It ruled that while the policy may be unpopular with the public, it’s still legal.

Living off taxpayers while paying no tax. Who do they think they are, IMF or OECD bureaucrats?

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