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Archive for the ‘Waste’ Category

I wrote yesterday that the Trump tax plan is yielding significant benefits, but one of my caveats at the end of the column warned that Trump’s weak record on spending undermines the long-run sustainability of lower tax rates.

The latest example of Trump’s profligacy is the $1.4 trillion spending bill for the 2020 fiscal year that was just approved (this is the “discretionary” money for the parts of the budget that are annually appropriated, so keep in mind that there’s also more than $3 trillion of “mandatory” spending for entitlement programs in 2020).

This pork-filled spending bill became inevitable when Trump surrendered to the Democrats this summer and agreed to bust the spending caps (something politicians also did in 2013, 2015, and 2018).

It’s hard to capture the utterly reckless nature of the new spending bill.

Here’s how Senator Rick Scott described the legislation.

…a giant spending package — 2,313 pages long — that was…negotiated in secret, spends $1.4 trillion, and is chock full of member projects and special-interest giveaways. …more than $4,200 for every man, woman, and child in America. …This package includes $25 million for the “operation, maintenance, and security” of the Kennedy Center in Washington, D.C. It includes a $7.25 million increase in funding for the National Endowment for the Arts, the largest increase in a decade. …It includes more than $1 billion in new foreign-aid funding without any discussion about what we’re getting for this funding. …This bill spends $1.4 trillion, with no cuts or reforms. …How many more trillions of dollars do we need to spend before we wake up to the danger…? We need to reform the way Washington works, and we need to do it now.

The Wall Street Journal was similarly dismayed, opining about the bipartisan spending orgy and pointing out the real problem is that all this spending violates the Golden Rule of fiscal policy.

Congress has left town for the year but alas not before another bipartisan spending party that has typified the Trump Presidency. …The budget problem isn’t a shortage of revenue. CBO says tax receipts grew 4% last fiscal year, through September, and 3% in the first two months this year. Economic growth is feeding the Treasury. But spending is growing much faster: 8% last fiscal year, more than four times the inflation rate, and 6% in October and November this year. In addition to the latest discretionary bills, spending on Social Security (6%), Medicare (6.1%) and Medicaid (9.2%) continue to soar this year. Neither party shows any inclination to do anything about those programs, except expand them. Mr. Trump may yet join Barack Obama in the spending record books.

Regarding the final sentence in the above excerpt, I will predict now that Trump will exceed Obama’s profligacy.

And I’ll have the numbers to prove that early next year when I update my data on presidential spending.

In the meantime, I’ll close with this very depressing chart from the Committee for a Responsible Federal Budget.

The bottom line is that Republican big spenders are enablers of Democratic big taxers.

  • In a couple of years, when there’s a big fight to get rid of the Trump tax cuts, every Republican who supported this awful deal (including Trump) will be responsible.
  • When there’s a Democratic president and a big push for class-warfare taxes, every Republican who supported this awful deal (including Trump) will be responsible.
  • When there’s a big fight after that to impose a European-style value-added tax, every Republican who supported this awful deal (including Trump) will be responsible.

Gee, isn’t bipartisanship wonderful?

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Way back in early 2016, I asked whether Donald Trump believed in smaller government.

A few months later, I concluded that the answer was no. Trump – like Bush and Nixon – was a big-government Republican.

I wish that I was wrong.

But if you look at the budget deal he approved last year, there’s no alternative explanation. Especially since there was an approach that would have guaranteed a victory for taxpayers.

Now it appears that he is on the verge of meekly surrendering to another big expansion of the federal budget.

The Washington Post has a story on the new deal to increase spending.

…the final details of a sweeping budget and debt deal are unlikely to include many — if any — actual spending cuts… The agreement appeared likely to mark a retreat for White House officials who had demanded major spending cuts in exchange for a new budget deal. …instead of the $150 billion in new spending cuts recently demanded by White House acting budget director Russell Vought, the agreement would include a significantly lower amount of reductions. And those reductions aren’t expected to represent actual spending cuts, in part because most would take place in future years and likely be reversed by Congress at a later date. …In practical terms, the budget agreement would increase spending by tens of billions of dollars in the next two years, a stark reversal from the White House’s budget request several months ago… Agreeing on new spending levels also avoids onerous budget caps that would otherwise snap into place automatically under an Obama-era deal, and indiscriminately slash $126 billion from domestic and Pentagon budgets.

The establishment-oriented Committee for a Responsible Federal Budget (CRFB) is aghast at the grotesque profligacy of the purported agreement.

…this agreement is a total abdication of fiscal responsibility by Congress and the President. It may end up being the worst budget agreement in our nation’s history, proposed at a time when our fiscal conditions are already precarious. If this deal passes, President Trump will have increased discretionary spending by as much as 22 percent over his first term… There was a time when Republicans insisted on a dollar of spending cuts for every dollar increase in the debt limit. It’s hard to believe they are now considering the opposite – attaching $2 trillion of spending increases to a similar-sized debt limit hike.

I sometimes differ with the folks at the CRFB because they’re too fixated on debt rather than the size of government.

But in this case, we both find this rumored deal to be utterly irresponsible.

From a liberty-minded perspective, the Wall Street Journal opines about the spendthrift agreement.

House Speaker Nancy Pelosi and Treasury Secretary Steve Mnuchin are negotiating another spending blowout as part of a two-year budget deal, and let’s hope the talks break down. The price could be another $2 trillion in deficit spending… The Budget Control Act of 2011 puts caps on spending that both parties have to agree to lift. In 2018 Congress passed a two-year budget deal that blew out domestic spending by more than $130 billion in exchange for a buildup in defense. The bipartisan spending party is hoping to repeat the exercise for fiscal 2020 and 2021… After the last two-year deal Mr. Trump vowed never to sign another one, but here he is again. …The GOP may…underestimate the political cost of campaigning on another spending deal that increases the size of government. It will be harder to run against the spending plans of Elizabeth Warren or Kamala Harris with Mr. Trump’s first-term spending record.

I’ll close with a chart I prepared based on the numbers for domestic discretionary spending from the Mid-Session Review, as well as Table 8.1 from the Historical Tables, both from the Office of Management and Budget.

The numbers show that we had more fiscal restraint under Obama (blue line) than Trump (orange line). And Trump’s numbers will now be even worse with the new deal.

I added the Excel-generated trendline to show what would have happened if Obama-era policies were maintained.

But since that produced an unrealistic assessment, I also showed (green line) what spending would have looked like if politicians had obeyed commitments from the 2011 Budget Control Act (BCA).

Some of these numbers are back-of-the-envelope calculations, but the bottom line is clear. Trump is worse than Obama on spending.

And that means big tax increases inevitably will be the result.

P.S. When I recently issued a report card for Trump’s economic policy, I gave him a “B-” because I decided his good tax policy outweighed his bad spending policy. If this deal gets finalized, he drops to a “C-” because of the big expansion in the burden of spending.

P.P.S. Trump also is weak on entitlement spending, which is the biggest part of the federal spending burden.

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San Francisco used to be famous for cable cars.

Now it’s getting well known for its “poop patrol” and maps that warn people about the ubiquitous presence of human excrement.

Why are people defecating on city sidewalks? Because there’s a major problem with government-created homelessness thanks to rent control and zoning restrictions.

And homelessness gives us our topic for today because we have an astounding example of government waste.

More specifically, a story from the San Francisco Chronicle nicely summarizes the efficiency and competence of the public sector.

An experiment to put a homeless shelter in a San Francisco public school gym has so far been a costly failure, …costing taxpayers about $700 for each person who spends the night. …only five families have used the facility at 23rd and Valencia streets in the Mission, with an average occupancy of less than two people per night… The facility is completely empty several nights each month, Kositsky said, although shelter workers are on-site seven nights a week and through holidays, whether anyone shows up or not.

I’ve been to San Francisco many times. Hotels are not cheap.

But I’ve never had to pay anywhere close to $700 per night.

Though maybe this San Francisco program is a bargain since it costs the state $1.3 million per year to house a homeless person.

So why did the city create this boondoggle? For the same reason that many programs are created. Politicians and bureaucrats exaggerated about a problem.

Supervisor Hillary Ronen and the school’s administrators…advocated for the shelter, saying there were dozens of families facing homelessness at Buena Vista Horace Mann who needed someplace to sleep. The principal at the time, Richard Zapien, said he had identified 60 families in unstable housing.

But here’s a passage that captures the real story.

This program was created to funnel money to a non-profit group and I wouldn’t be surprised to learn that officers of this group are supporters (campaign cash, get-out-the-vote, etc) of the politicians who created the program.

The city has been paying the nonprofit Dolores Street Community Services $40,000 per month to manage the shelter, and if it were to be successful, would spend up to $900,000 per year to serve up to 20 families at a time with all-night staffing, food and support services to help them find permanent housing.

In other words, we have another example of how government is a racket.

No matter how flawed and foolish a program may be, never forget that it’s putting unearned money in the pockets of some group of people. And that group of people know how to play the game, since they then recycle some of the loot back to the politicians.

Politicians don’t care if the money is wasted. They don’t care if there’s rampant fraud.

They’re simply buying votes. With our money.

P.S. There is a sure-fire way of reducing this kind of corrupt behavior, but don’t hold your breath expecting it to happen.

P.P.S. Though you may want to hold your breath if you visit the city.

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The Bureaucrat Hall of Fame recognizes government employees who go above and beyond the call of duty in terms of getting over-paid or being under-worked.

Or both.

Adding insult to injury, many recipients of this award are employed by bureaucracies that shouldn’t even exist.

Today we’re going to look at the Oakland police department, which is a part of the government that presumably should exist (though Camden, NJ, shows that maybe we shouldn’t make that assumption).

The Oakland PD is notorious for being over-compensated, but one cop stands out.

Eric Boehm of Reason has the sordid details.

When Oakland, California, police officers are needed at Golden State Warriors basketball games and other special events, Malcolm Miller is the officer in charge of making those assignments. Often, he assigns himself. As a result, Miller has become one of the highest paid officers in the department. He’s earned nearly $2.5 million over the past five years—most of it overtime pay—according to data collected by Transparent California, a watchdog group.

What a scam.

It’s highly likely that Mr. Miller is a basketball fan, so he’s figured out a great racket.

He basically gets a big pile of money for going to the games.

He and his colleagues are making out like bandits.

…he’s hardly the only officer to take advantage of poor oversight and a general lack of accountability. According to the audit, 217 officers worked roughly 520 hours of overtime last year, helping to cost the department more than $30 million in overtime pay—about twice as much as had been budgeted. Over the past four years, overtime expenditures have ranged from $28 million to $31 million. Proper documentation of overtime work was lacking in 83 percent of cases, the auditors found.

Though Officer Miller might not be the worst of the group.

One officer was paid for more than 2,600 hours of overtime—equal to 108 days of round-the-clock work—in just a single year.

So how do cops get away with this scam?

Simple, they make sure to negotiate contracts that have sweetheart provisions that they can exploit.

And why does Oakland agree to such contracts?

Well, as Michael Ramirez illustrated, bureaucrat unions give lots of money to state and local politicians, and those politicians then conspire with the unions to give them contracts with the sweetheart provisions.

Let’s close by looking at an example of this kind of scam.

Perhaps the most stunning part of the audit is the explanation of a department-wide policy that allows Oakland cops to accrue 1.5 hours of “comp time” for every hour of overtime worked. When an officer cashes in that comp time and isn’t working, other officers have to work overtime to fill the gap. That creates a cascade of additional overtime pay—10 hours of overtime creates 15 hours of comp time, which some other cop has to work, earning 22.5 hours of comp time (if they’re also working overtime), and so on.

Here’s the accompanying illustration.

How ridiculous. Extra money for overtime, combined with being able to work fewer hours in the future. Which then gives other cops an opening to rack up more overtime pay.

Everyone wins…except for taxpayers.

P.S. Some bureaucrats earn admission to the Bureaucrats Hall of Fame by misbehaving. Often in very strange ways.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

This story presumably involves two common features of government contracting.

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

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

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

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

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What’s the most inefficient and wasteful part of the federal government?

It’s impossible to answer that question without greater detail.

Are we supposed to identify the worst cabinet-level department? If that’s the case, then bureaucracies such as the Department of Housing and Urban Development or the Department of Education would be high on the list.

Or are we supposed to identify the most counter-productive activity of Washington? If that’s the case, then agriculture subsidies, job-training programs. or subsidies for the Organization for Economic Cooperation and Development come to mind.

But what if we’re simply asked to identify the dumbest single thing our overlords in D.C. have financed? That would generate a very long (and ever-growing) list of options. Today, we’re going to look at an example.

Here’s a story that perfectly symbolizes the waste, ineffectiveness, and corruption of Washington.

Customs and Border Protection hired Accenture to hire and recruit 7,500 agents within the next five years. But just 10 months into the contract, only two accepted job offers have been processed, according to the Department of Homeland Security’s Office of the Inspector General. Accenture, a global management consulting company headquartered in Ireland, was awarded a $297 million contract to achieve the hiring goal. But the report says that $13.6 million has been spent in the last 10 months, and that CBP “risks wasting millions of taxpayer dollars on a hastily approved contract that is not meeting its proposed performance expectations.” …CBP ultimately agreed to the four recommendations in the report, including that the CBP commissioner should assess Accenture’s performance.

This is outrageous on several levels.

  • First, federal employees make much more than folks in the private sector, so I’m mystified why it’s necessary to spend any money to attract applicants.
  • Second, why did Uncle Sam sign a contract to pay Accenture nearly $40,000 for each CBP agent hired, assuming the company fully delivered?
  • Third, it goes without saying (but I’ll say it anyhow) that it is absurd that taxpayers to date have paid $6.8 million each for two new CBP bureaucrats.

Sadly, there won’t be any consequences for this boondoggle, at least if history is any guide.

Nobody at the CBP will get fired.

Nobody at the CBP will be demoted.

Nobody at the CBP will lose a bonus.

Simply stated, people in the government don’t care whether our money is being wasted.

Before concluding, we need to add an additional reason to be outraged.

  • Fourth, this is an all-too-typical example of government contracting, with a “beltway bandit” scamming the system for unearned riches.

Maybe I should create a Waste Hall of Fame to augment the Moocher Hall of Fame and Bureaucrat Hall of Fame.

In addition to this squalid Accenture contract, other examples could be the $15 million scam to improve the IRS’s image, the State Department paying 35 times the market price for some Kindles, bonuses for VA bureaucrats who left veterans to die on waiting lists, gold-plated renovations for the CFPB headquarters, and $6,000-a-piece interviews about erectile dysfunction.

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When asked to pick the worst international bureaucracy, I generally respond as follows.

The International Monetary Fund (IMF) or Organization for Economic Cooperation and Development (OECD) should be at the top of the list. Both of those bureaucracies aggressively push statist policies designed to give governments more power over people. I have mixed feelings about which one deserves to be called the worst bureaucracy.

Next on my list are the United Nations (UN) and European Bank for Reconstruction and Development (EBRD). Many people are surprised the UN isn’t higher on the list, but I point out that the organization generally is very ineffective. Meanwhile, the EBRD is relatively unknown, but I have total disdain for its cronyist business model (basically a global version of the Export-Import Bank).

At the bottom of my list is the World Bank (WB). I don’t have knee-jerk hostility to the WB, in part because the bureaucrats historically have their hearts in the right place (reducing poverty) and even occasionally support the right policies (social security reform and regulatory relief).

Nonetheless, I was disappointed earlier this year to learn that the Trump Administration decided to give more money to the World Bank.

The Trump administration is backing a $13 billion increase in funding for the World Bank… The change…will allow the bank to increase lending to poor-country clients… The U.S. is the only country with veto power over any changes in bank structure, so funding increases cannot proceed without Washington’s support. …The shift to U.S. support for more funding at the Bank took some European governments by surprise, said Suma Chakrabarti, president of the European Bank for Reconstruction and Development, a London-based multilateral bank lending in Europe, the Middle East and North Africa. He said in an interview Thursday that the capital increase is “very good news,” since it would help efforts to reduce global poverty. …Mr. Mnuchin said he would work with Congress to secure approval for the U.S. contribution, a step that has in the past proved challenging.

Hopefully it will prove impossible rather than challenging to get approval for more funding (though I haven’t been following the issue, so maybe Republicans in Congress already have okayed an expansion).

Assuming the decision hasn’t yet been made, I have some evidence showing why the World Bank doesn’t deserve more funding.

And not merely because aid is not the route to prosperity. Consider the misguided advice that the World Bank is pushing on Romania.

The Romanian government should…consider switching the flat income tax to a progressive tax, said World Bank chief economist for Europe and Central Asia, Hans Timmer. …The World Bank representative…referred to the flat tax rate…, stating that they should think about whether this system is still appropriate. The World Bank’s advice would be to rethink the entire labor market taxation system in coordination with other countries in the region, and not just make small changes. ”We can not tell you what the solution is, but you need to analyze everything, including the single tax, and whether you’d be better off implementing a progressive tax system, meaning those who earn more pay more,” Timmer said.

This is horrible advice. The flat tax is very conducive to prosperity and Romania needs fast growth to help offset the damage caused by decades of communist enslavement.

Moreover, there are problems with corruption in Romania and the World Bank has admitted that tax complexity facilitates corruption.

Given Mr. Timmer’s misguided musings, I may need to get a new version of my cartoon about international bureaucracies. Especially since the World Bank once produced a study giving nations higher grades for having more oppressive tax systems.

P.S. In fairness, the WB has produced some good work on government spending, dependency, financial regulation, and free markets.

P.P.S. And I especially like the World Bank’s comparison of Chile and Venezuela.

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