Posts Tagged ‘Bureaucracy’

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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What are the main problems with government bureaucrats?

Is it that they’re paid too much? Given that they get far more compensation than workers in the economy’s productive sector, that certainly true.

Is it that there are too many of them? Well, we have lots of bureaucracies that shouldn’t exist, such as HUD, Education, Transportation, Agriculture, etc. So that’s true as well.

But there’s another possible answer. People employed by government take advantage of preferential rules in ways that should get all decent people upset.

Writing for Reason, Eric Boehm tells us about a cop who successfully mugged taxpayers in Paterson, New Jersey.

Despite not having to show up for work since June 2007, Manuel Avila received periodic increases in pay, managed to double his monthly pension and qualified for free healthcare for the rest of his life at the expense of city taxpayers. Avila qualified for all those benefits while spending the past nine years on paid leave from the Paterson, New Jersey, police department because he was under investigation for having sex with a female prisoner at the city’s jail.

Wow, go fishing every day, get pay increases, a fat pension, and free healthcare. Where can I sign up for that deal?

Government, of course.

And let’s not overlook sex with a female prisoner, which gives a whole new meaning to the notion of fringe benefits. Reminds me of the Pennsylvania bureaucrat who came up with the clever idea of trading welfare benefits for sex.

But the story is actually more disturbing (at least from the perspective of taxpayers) than you think.

It gets worse, though, because that crime would never have happened if Avila’s bosses hadn’t already been trying to give his retirement benefits a little boost. …Avila—apparently with plenty of help, or at least an abundance of people willing to look the other way—was able to boost his annual pension to about $70,000 from an estimated $32,000 if he had been forced to retire in 2007 when a police psychiatrist recommended removing Avila from the force. “But instead of forcing Avila out of the police department, city law enforcement officials decided to allow him to stay on the job for another six months so he could reach a critical pension milestone of 20 years, the court records show,” the Paterson Press wrote. While there, he was charged with sexually assaulting a female prisoner. Those charges were dropped in 2010 after the city paid an undisclosed amount of money to the accuser as part of a settlement, but Avila remained on paid leave from the department until finally retiring this year.

This is galling. If Mr. Avila misbehaved and was declared unfit, why wasn’t he immediately terminated?

And now that we’ve learned about this scandal, why aren’t the officials who enabled this ripoff being fired?

At the risk of repeating myself, the answer is government.

There are two broader policy lessons from this scandal.

First, the use of “defined benefit” pension systems for bureaucrats should be discontinued. By way of background, these “DB” plans promise workers guaranteed monthly payments based on formulas including factors such as years worked and highest pay levels. There is no reason why DB plans can’t be feasible and successful (indeed, the Netherlands has a private Social Security system based on this model), but politicians at the state and local level repeatedly have demonstrated that they are incapable of operating this type of system, both because they promise lavish benefits (on top of overly generous pay levels) as a means of buying political support (using our money) from government workers and because they then don’t set aside enough money to finance the generous benefits they have promised. That system may be good for getting reelected in the short run, but it’s also why there’s a multi-trillion dollar shortfall that is contributing to deep fiscal problems in states such as Illinois and California. To stop from going deeper in the red, states should switch to “defined contribution” plans, which work similar to the IRAs and 401(k)s that are now prevalent in the private sector.

Second, something needs to be done to curtail the power of government unions. It’s not just that they conspire with politicians to get excessive pay for bureaucrats, but they compound that damage by also insisting on rules that make it very difficult to discipline or terminate problem employees. In the private sector, employees generally work “at will,” which means they can be fired without reason (this is one of the reasons the United States is near the top in the World Bank’s Doing Business ranking. In government, by contrast, slackers, trouble makers, and other undesirable employees are shielded from this discipline. And that results in cases (such as the example discussed above) that are bad for taxpayers and bad for government. I don’t know if this means that unions should be prohibited (as even President Franklin Roosevelt believed), but surely one lesson to be learned is that there needs to be a much tougher approach when contract negotiations take place.

P.S. Let’s shift to a different topic. I’ve written many times about the gap between intentions and results in government. It’s very common to see politicians vote for laws that (at least in some cases) they think will help people, but they fail to recognize the indirect or second-order effects of government intervention.

Now we have another example. Almost all politicians will agree that it’s a good idea to prohibit child labor in poor nations. But what if poor families don’t have any better options? Could it be that government intervention will hurt the people who are supposed to be helped?

According to the World Bank (not normally a hotbed of libertarian thought), the answer is yes.

The study explores the law that increased the minimum employment age from 14 to 16 in Brazil in 1998, and uncovers its impact on time allocated to schooling and work in the short term and on school attainment and labor market outcomes in the long term. The analysis uses cross-sectional data from 1998 to 2014… The estimates show that the ban reduced the incidence of boys in paid work activities by 4 percentage points or 27 percent. …The study follows the same cohort affected by the ban over the years, and finds that the short-term effects persisted until 2003 when the boys turned 18. The study pooled data from 2007 to 2014 to check whether the ban affected individuals’ stock of human capital and labor market outcomes. The estimates suggest that the ban did not have long-term effects for the whole cohort, but found some indication that it did negatively affect the log earnings of individuals at the lower tail of the earnings distribution.

So the bottom line is that lower-skilled workers missed a chance to earn money when they were young and they then suffered income losses over time as well.

Bastiat certainly wouldn’t be surprised by this outcome. And if the lower-skilled workers understood how they were hurt, I’m sure that they wouldn’t feel very grateful to politicians for their “compassion.”

P.P.S. This reminds me of the “sweatshop” controversy. The left wants to ban factory work in the developing world because they don’t understand or appreciate that such jobs are a great opportunity when nations are at a certain stage of development.

P.P.P.S. This isn’t the first time that the World Bank has produced good research. In 2014, the bureaucrats released a good study showing how high tax rates facilitate corruption. And in 2012, they issued a study explaining how large public sectors undermine prosperity.

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As a public finance economist, I normally focus on big-picture issues such as the economically debilitating effect of excessive government spending and punitive taxation.

But as a human being, what irks me most about big government is the way that insiders use the system to enrich themselves. I don’t like it when politicians, bureaucrats, lobbyists, contractors, cronies, and other well-connected interest groups funnel money to themselves at the expense of ordinary people.

Especially when taxpayers pay twice. They have less take-home income because of higher tax burdens and over time their pre-tax income doesn’t grow as fast because a bloated public sector reduces growth.

In other words, a lose-lose situation for regular folks.

But it’s a win-win situation for insiders. Consider, for instance, this exposé in the Daily Caller about a bureaucrat who double-dipped by getting a big paycheck from Uncle Sam an interior designer while also getting outside contracts as – you guessed it – an interior designer.

A fashionista from Beverly Hills, Calif., collected millions in interior design contracts from federal agencies by claiming to be “disadvantaged,” while simultaneously working at the Department of Veterans Affairs (VA) sending work to design companies. Ronda C. Jackson was a no-show at her VA job, colleagues said. Records show she instead spent her time running a design company that got $7 million in contracts from the VA and other government agencies since 2008, reselling them marked-up goods like five-seat tables for $17,000.

Here are some of the sordid details.

Jackson worked as a full-time federal employee at the Los Angeles VA center in fiscal years 2010 and 2011, which ran from Oct. 1, 2009 to Sept. 30, 2011. Pay records show she worked as a GS-12 level interior designer and made $80,000 each year. Colleagues said they never saw Jackson in the office. …In fiscal years 2008 through 2010, the company had $222,000 in contracts with the VA, federal records show. …she was being paid as a full-time employee for almost a whole year while also working on a contract for the same agency and at the same hospital and for the same type of work. Her job as an employee was to buy furniture for the VA, and her job as a contractor included selling it.

Wow, sort of reminds me of the bureaucrat from the National Weather Service who created a contractor position for himself.

But Ms. Jackson took it to the next level, getting a paycheck and being a contractor at the same time. How did she get away with all this?

Well, her boss set a good example of how to waste money and bilk the system.

Robert Benkeser, a high-level manager in charge of facilities, was told that Jackson appeared to have a no-show employment arrangement, but did nothing. Benkeser is the same manager who was in charge of an official vehicle fleet from which 30 of 88 cars disappeared. He fired the employee who exposed the missing cars as well as the fact that government credit cards from the same unit appeared to have been used fraudulently. Benkeser received only “counseling” for the misconduct.

Gee, I wonder if he was one of the VA bureaucrats who got a big bonuses after the agency put veterans on secret waiting lists?

But what makes Ms. Jackson special is the way she doubly double-dipped.

That’s an odd way of describing something, but somehow appropriate because she got herself classified as “disadvantaged” so that she could get contracts without the usual competitive bidding process.

A 2009 contract, in which records from USASpending.gov classify the company as HUBZone while listing its Beverly Hills address, says she was paid $72,000 for outfitting the Federal Aviation Administration with “framed artwork for CMEL guest room and main building [and] conference rooms.” The company subsequently moved to Los Angeles. Jackson charged $70,000 for an unspecified “21 [inch] freestanding unit” and $17,000 for a five-person outdoor table. Ninety-eight percent of the nearly $7 million in contracting dollars awarded to Jackson’s company came without the government weighing her offer against those of other companies.

So instead of paying twice as much as something would cost in the private sector, which is typical for government, her no-bid scams probably resulted in taxpayers paying four times as much as necessary. So she was a bureaucrat, a contractor, and disadvantaged, which we can consider a form of triple-dipping.

As the old saying goes, nice “work” if you can get it.

There’s no question that Ms. Jackson has “earned” her way into the Bureaucrat Hall of Fame. Congratulations, Ronda!

By the way, the article raises a bigger issue.

Jackson’s case underscores questions about VA’s army of 167 full-time interior designers. Nearly every VA hospital in the country has one or more.

I can understand why it might be acceptable to have one interior designer (assuming the VA stays in the business of running hospitals, which obviously shouldn’t be the case), but why 167 of them?

Oh, it’s government and we need to remember what Milton Friedman said about “other people’s money.” Forget that I even asked such a silly question.

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Back in 2013, I got very upset when I learned that senior bureaucrats at the IRS awarded themselves big bonuses, notwithstanding the fact that the agency was deeply tarnished by scandal because of its efforts to help Obama’s reelection campaign.

That’s when I decided to put forth my “First Theorem of Government,” which simply states that the public sector is a racket for the benefit of a ruling class comprised of bureaucrats, interests groups, cronies, and other insiders.

They have figured out how to line their pockets and live very comfortable lives at the expense of people in the economy’s productive sector.

The same thing is true on the other side of the Atlantic Ocean. The U.K.-based Daily Mail reports that senior bureaucrats in the country’s government-run healthcare system get lavish taxpayer-financed pension.

Hundreds of NHS managers have amassed million-pound pension pots while presiding over the worst financial crisis in the history of the health service… As patients face crippling delays for treatment, A&E closures and overcrowded wards, bureaucrats have quietly been building up huge taxpayer-funded pensions. They will be handed tax-free six-figure lump sums on retirement, and annual payouts from the age of 60 of at least £55,000 – guaranteed for life.

Here are some of the details, all of which must be especially aggravating for the mistreated patients who suffer because of substandard care from the government.

Nearly 300 directors on NHS trust boards have accrued pension pots valued at £1million or more; At least 36 are sitting on pots in excess of £1.5million – with three topping a staggering £2 million; The NHS pays a staggering 14.3 per cent on top of employees’ salary towards their pension – almost five times the average of 3 per cent paid in the private sector; …About 500 earn more than the Prime Minister – after Health Secretary Jeremy Hunt ordered them to ‘show restraint’ on executive pay. …the scheme every year pays retired staff £10 billion more than it takes in. That black hole has to be filled by the taxpayer. The subsidies enable NHS executives – including managers, human resources bosses and directors of ‘corporate administration’ – to build up vast pensions, at minimal personal expense.

Here’s the bureaucrat with the biggest pile of loot from taxpayers.

The biggest single beneficiary is Professor Tricia Hart, who retired as chief executive of South Tees Hospitals NHS Foundation Trust in January with a £2.6 million pension. That figure entitled her to a lump sum of at least £335,000 on retirement, plus an inflation-proof annual pension of £110-115,000. …at least four HR directors have amassed million-pound pensions.

By the way, I have nothing against people accumulating big nest eggs. Even if they work for the government.

My objection, as discussed in yesterday’s column about state and local bureaucrats in America, is when bureaucrats have special taxpayer-financed deals.

Especially, as we see all too often in the U.K., when taxpayers don’t even get good healthcare in exchange for the lavish salaries and benefits.

Almost four million people are now waiting for cataract surgery, hip and knee replacements and other routine operations. The number of people forced to wait more than four hours in A&E has doubled in two years. And wards are full of elderly people who cannot be discharged – because there are no care home places for them.

A spin doctor tried to rationalize and justify the cozy scheme for bureaucrats.

…a spokesman for NHS Pensions stressed that…The amounts individuals accrued were a result of the ‘rules and regulations’ of the NHS scheme. ‘What people get paid is a matter for NHS trusts,’ he added.

I’m amused by the assertion that the lavish pensions are the result of simply following the “rules and regulations.” That’s precisely the point. Government insiders write the rules and regulations and they inevitably produce systems that are very good for them and not so good for taxpayers.

I’m also amused (and when I write “amused,” I actually mean “irritated” or “appalled”) at the claim that compensation levels are “a matter for NHS trusts”. If the spin doctor was talking about a private company, I would agree. As I’ve argued before, pay levels in private companies should be determined by managers and stockholders.

But we’re talking in this case about pay levels in a government bureaucracy. And notwithstanding the elitist attitude of some government officials, taxpayers have every right to get outraged when they learn that their money is being squandered on excessive pay and gold-plated benefits.

It’s a problem all over the world.

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I’ve written (some would say excessively) about the fact that America has too many bureaucrats and that they’re paid too much.

That’s true in Washington. That’s true at the state level. And it’s true for local governments.

But since I’m a big believer in beating a dead horse, let’s revisit this issue. We’ll narrow our focus today and look solely at the issue of retirement benefits for state and local bureaucrats.

Why? Because, as explained by Andrew Biggs of the American Enterprise Institute, the unfunded liability for these schemes has mushroomed into a giant $5 trillion problem.

If the Actuarial Standards Board enacts recommendations from its Pension Task Force, actuarial valuations for state and local government pensions will report unfunded liabilities of over $5 trillion and funding ratios of just 39 percent. The public pensions industry will hate it, but those figures are the best available measures of the costs of public employee retirement plans. …That $5.2 trillion is the number most economists would think is most relevant to considering the costs of public sector pensions. …The simple reality is that public pension underfunding is a significant problem that can only really be addressed by increasing contributions or by lower pension benefits, choices that pretty much everyone involved in the pension world would prefer to avoid.

You won’t be surprised to learn that some states are more irresponsible than others.

CNBC reports that Nebraska is the most prudent and Alaska is the worst (politicians can’t resist squandering oil revenue). Several blue states rank poorly (think Illinois, Connecticut, California, and New Jersey), but there also are red states (such as Louisiana and Kentucky) that have made very foolish promises.

In Nebraska, for example, the pension liability amounts to about $386 per person, the lowest in the nation. That compares with Alaska ($19,394 per person: the highest in the country), Illinois ($15,158 per person) and Connecticut ($14,769). The average pension shortfall in 2014 amounted to $4,383.

The Wall Street Journal has an interactive table that allows readers to see which states have the biggest shortfall.

Meanwhile, Governing has an interactive map showing which states have the biggest gaps.

In other words, state and local bureaucrats have been promised a lot of money when they retire.

Much more money than is available.

And when you add Social Security benefits to the mix, as Andrew Biggs has calculated, you wind up having lots of bureaucrats enjoying very lavish levels of retirement income.

I tabulated the pension benefits paid to full-career “regular” state government employees (meaning, non-public safety) retiring in 2012. For states in which public employees participated in Social Security, I estimated the Social Security benefit the retiree would be eligible to receive. And finally, I compared total retirement benefits to the worker’s earnings immediately preceding retirement. …Mississippi paying the lowest replacement rate of 54% of final earnings. …West Virginia paid the most generous benefits, equal to 115% of final earnings, followed by New Mexico (113%), Oregon (105%), California (102%) and, yes, conservative Texas (101%).

Here’s a map that accompanied the article.

But maybe big numbers, maps and tables are too abstract.

To give some examples of how this is leading to a fiscal crisis, consider these recent news reports.

A story from the Las Vegas Review-Journal:

Nevadans should brace for reduced services, higher taxes or both — the necessary consequence of the Public Employee Retirement System of Nevada (PERS) having badly missed its investment target last year…PERS has now missed its target over the past five, 10, 15, 20 and 25 years — suggesting that another taxpayer-rate hike is on its way. Remarkably, this shortfall has occurred even though markets have nearly tripled from their 2009 lows, and currently sit at or near all-time highs. Nevada’s soaring pension costs — ranked third-highest in the nation at 9.8 percent of own-source revenue, according to 2013 data from the Public Plans Database — aren’t just due to overly optimistic investment assumptions, however. Another factor is the extraordinarily generous nature of the benefits.

A column from the Orange County Register:

…in the world of public sector pensions – among the biggest institutional investors in global markets – politicians…pretend they can count on big investment returns every year, while disregarding warning signs, mounting debts and increasingly unsustainable pension systems. We’re seeing the latest pension fund returns come in, and almost uniformly, it was a terrible year for states – and thus taxpayers. The California Public Employees’ Retirement System, the largest U.S. public pension fund, logged a paltry annual return of 0.6 percent. …CalPERS is currently only 76 percent funded, a figure that will inevitably drop given the latest weak returns.

A report from the Portland Tribune:

Oregon’s major business groups want lawmakers to start dealing with rising public pension costs as early as the session that opens Feb. 1. Although those costs start to kick in with the 2017-19 budget cycle — 18 months away — advocates say it’s not too early to whittle down an unfunded liability projected at $18 billion over the next few decades. …projected increases in contributions to PERS, which covers about 95 percent of Oregon’s public workers, will eat deeply into what they can spend over the next several two-year budget cycles. Cheri Helt, co-chair of the Bend-La Pine School Board, says pension costs will jump from the current 16 percent of payroll to 20 percent in 2017-19, and to 25 percent in the cycle afterward. …Jamie Moffitt, vice president and chief financial officer for the University of Oregon, says rising pension costs will eat up 40 percent — about 2 percentage points — of the 5.5 percent average annual increase in tuition.

An editorial about New Jersey in the Wall Street Journal:

New Jersey’s Senate president is in a Brando-like fight with government unions that he says are trying to extort or bribe legislators into doing their bidding. …At issue is the woefully underfunded state pension system. The teachers union wants to put a measure on the November ballot to amend the state constitution to require quarterly state pension payments of increasing amounts. …government unions have so much political sway over politicians that they often call the shots on their own pensions and benefits. …New Jersey’s public pensions are underfunded to the tune of $82 billion. Thomas Healey of the state’s bipartisan Pension and Health Benefit Study Commission notes that pensions and health care now eat up 11% of New Jersey’s budget, and without reform this will grow to 28% by 2025. …The pension commission has proposed reforms—including a shift to a hybrid retirement plan that includes features more akin to a 401(k)—but unions have blocked them. They now want voters to rewrite the state constitution so pension reform would be all but impossible.

A column about the corrupt system in Illinois:

Illinois’s government, says [Gov.] Rauner, “is run for the benefit of its employees.” Increasingly, it is run for their benefit when they retire. Pension promises [are] unfunded by at least $113 billion… The government is so thoroughly unionized (22 unions represent almost all government employees), that “I can’t,” Rauner says, “turn on a light switch without permission.” He exaggerates, somewhat, but the process of trying to fire someone is a career, not an option. …high-tax Illinois will continue bleeding population and businesses, but with one contented cohort — the Democratic political class, for whom the system is working quite well.

The crux of the problem is that most state and local governments have “defined-benefit” plans for bureaucrats, which means that taxpayers are on the hook to provide retiring bureaucrats a specific amount of benefits (not just retirement income, but other goodies such as health care) based on formulas that count years in the workforce, highest salary levels, and other factors. That may not sound totally unreasonable, but politicians realize they can buy votes by cutting deals with government unions and providing retirement benefits that are extremely generous, especially compared to what’s available for workers in the private sector.

But that’s simply one part of the problem. The other part of the problem is the employers with defined-benefit plans (usually referred to as “DB plans”) are supposed to set aside money in investment funds so that there’s a growing pool of assets that can be used to pay for the lavish benefits promised to the bureaucracy. But as we’ve already learned, politicians often are reluctant to take this step. They like committing lots of future money to bureaucrats, but when putting together annual budgets, they generally can buy more votes by allocating money to things like schools and roads rather than depositing money into a pension fund.

So the net result is that there’s a big unfunded liability, meaning that the amount that politicians have promised to give bureaucrats is larger than what’s set aside in the pension funds. And to make matters worse, the pension funds usually have dodgy accounting (they assume the investments will earn more money than is realistic). Which is why the actual shortfall is about $5.2 trillion, as noted above.

Given this ticking time bomb, some of you may be wondering why the title says there’s a libertarian quandary. Surely the answer is to cauterize this fiscal wound with immediate cuts and to avoid an even bigger long-run disaster by shifting newly hired bureaucrats to a defined-contribution system such as IRAs or 401(k)s. This type of reform automatically eliminates any liability for taxpayers since retirement benefits for bureaucrats would be solely a function of contributions to retirement accounts and the investment performance of those funds (most state and local bureaucrats also are part of the Social Security system).

Yes, that is the answer, but the quandary (to add to my collection) is whether the federal government should force, or even encourage, this type of reform. Don’t state and local governments, after all, have the right to make stupid decisions?

Writing for the Wall Street Journal, Ed Bachrach argues that Uncle Sam should limit these suicidal policies.

The pensions of states and local governments are, collectively, trillions of dollars in the hole. This debt is crippling budgets and will dump an enormous burden on future generations. Yet state and local politicians have proven that they cannot, or will not, solve the problem. The federal government ought to step in. But how? Instead of bailing out these pensions, Congress should pass a law allowing states and local governments to reduce promised benefits—something that is now illegal under some states’ statutes or constitutions. …Many pensions allow retirement at age 55; states and local governments could mandate that benefits cannot be drawn until age 65. Payments could be capped at 150% of the median income in the local jurisdiction. Automatic cost-of-living increases that now exceed expected inflation could instead be tied to increases in the median income. …Local governments must also be required to terminate their defined-benefit plans. These should be replaced with defined-contribution plans, like 401(k)s or 403(b)s… Rep. Devin Nunes (R., Calif.) proposed withholding federal aid to government entities that don’t accurately report pension funding. That would be a step forward but would not solve the problem of underfunding.

I obviously agree that there should be no bailouts, but I’m still not convinced that Washington should mandate good policy by state and local governments.

Federalism means the freedom to adopt good policy…but also the leeway to commit fiscal suicide.

Though Andrew Biggs points out that the part about accurate reporting certainly sounds reasonable.

Congress has a tremendous opportunity to require state and local government employee pension plans to accurately disclose their multi-trillion dollar unfunded liabilities. …For years, economists and government agencies like the Congressional Budget Office have called for so-called “fair market valuation,” which both more accurately calculates the value of public pension liabilities and accurately tells those plans that taking more investment risk doesn’t make their plans cheaper. …there’s legislative language already written: Rep. Devin Nunes’s Public Employee Pension Transparency Act (PEPTA), which has a number of Congressional co-sponsors including House Speaker Paul Ryan, would require state and local plans to accurately disclose their liabilities using fair market valuation. The federal government would respect state and local rights by not forcing any changes to how pensions are funded, but Nunes’s plan would require that state and local governments to tell the public – including people thinking of purchasing municipal bonds – how much they really owe to their pensions.

P.S. By the way, advocates of limited government don’t experience many victories, but there actually was a very good reform of the pension system for federal bureaucrats during the Reagan years. Yes, federal bureaucrats are still over-compensated, but it’s not nearly as bad as it used to be. Yet another example of how Reaganomics was a success.

P.P.S. Shifting to bad news (or laughable news), the hacks in California tried to argue that lavish pensions for bureaucrats boost the economy. Andrew Biggs does a great job of debunking this nonsense.

The California Public Employee Retirement System (CalPERS) issued a report in July claiming that its benefit payments to retired government employees in 2013-2014 “supported 104,974 jobs throughout California and generated more than $15.6 billion in additional economic output.” …To reduce pension benefits for public employees, the study implies, would harm the overall California economy. …This study is nothing short of propaganda that wouldn’t get a passing grade in a freshman economics course. …the CalPERS study lacks one important component, called “counting both sides of the equation.” It needs to count economic costs as well as economic benefits. …CalPERS doesn’t create money out of thin air. Every single dollar of CalPERS benefits comes from a dollar that taxpayers or government employees contributed to the program or from the interest earned on those contributions.

Sounds like the bureaucrats at CalPERS should be working for the Congressional Budget Office.

P.P.P.S. The focus of this column is on the inherent instability of defined-benefit pension plans for bureaucrats, but let’s not lose sight of the fact that the underlying issue is that bureaucrats are ripping off taxpayers. Here are some blurbs from a Reason report by Eric Boehm on how this scam works in California.

If public service truly is a sacrifice, then join me in shedding a tear for the 20,900 public workers in California who pulled down more than $100,000 in retirement benefits during 2015. …Leading the way for 2015 was Michael Johnson. The former Solano County administrator received a $388,407 pension last year. …Rounding out the top three are Stephen Maguin, a former Los Angeles County Sanitation District general manager who pulled down $340,811 in 2015 and Joaquin Fuster, a former UCLA professor who got a pension worth $338,412 last year. …Curtis Bowden, a former member of the California Highway Patrol…retired all the way back in 1947, which means he’s been collecting pension checks for 68 years, after working just 5.3 years for the state. He got $24,800 from CalPERS in 2015.

Wow, I’m not sure what’s more impressive, Getting an annual pension of nearly $400K after being a country bureaucrat or working for just a bit over five years and getting 68 years worth of retirement checks?

Seems like both of them should be part of the Bureaucrat Hall of Fame.

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My biggest complaint about government employees is that they work for bureaucracies that shouldn’t exist. As far as I’m concerned, they may be the most wonderful, conscientious, and hard-working people in the world, but we shouldn’t have a Department of Housing and Urban Development or a Department of Agriculture, so these folks – by definition – are getting dramatically overpaid (i.e., anything about $0).

My second main complaint is that bureaucrats are overpaid relative to their counterparts in the private sector. About twice as much when you include the value of both wages and benefits.

The unions representing bureaucrats sometimes try to argue that this isn’t true, but I always point out the data on voluntary quit rates, which are much higher in the private sector compared to government. Needless to say, this is because folks who get cushy government jobs know they’ve won the employment lottery and have very little desire to switch to the private sector (where, as Dan Aykroyd explained in Ghostbusters, “they expect results”).

A third complaint is that politicians can’t resist catering to the unions that represent government employees, which means not only excessive compensation but also absurdly inefficient rules designed to protect loafers, scroungers, and con artists in the bureaucracy.

Let’s review the example of Queon Jackson. As reported by the Boston Globe, he’s pocketed a lot of money while doing absolutely nothing.

A former acting headmaster in Boston, placed on paid leave more than three years ago amid an investigation into credit card fraud, collected $375,000 in pay during his absence.

In the private sector, employment often is a tenuous situation. You can be fired “at will,” which means for just about any reason.

But unions strike deals with compliant politicians (from the perspective of elected officials, bureaucrats are a special interest group with lots of voters and lots of campaign cash) to provide so-called employment-protection rules for government employees.

And these rules make it very difficult and very expensive to deal with bad bureaucrats.

And it seems that Mr. Jackson meets that definition.

Jackson’s case reflects the thorny issues school systems face when union-protected employees are under federal investigations that drag on for months or years without charges being filed. Jackson, who was classified as an assistant director at the time of his paid leave, is a member of the school system’s union for midlevel school administrators, and the school system would have had to establish just cause to fire him. Thomas Scott, the executive director of the Massachusetts Association of School Superintendents, said…The choice…comes down to this: Either put the person in a low-profile desk job and face a potential public backlash, or fire the employee and run the risk of a lawsuit.

Here’s why Jackson got in trouble.

The school system originally placed Jackson on leave in February 2013, after learning the Secret Service was investigating him for an alleged role in fraudulently obtaining credit and then not paying the bills. But Jackson had contended that he was victimized by someone who stole his identity in an attempt to buy a car.

Though he already had a shady background when he first entered the bureaucracy.

In 2000, a few months before the district hired Jackson as a teacher, he admitted to sufficient facts for a finding of guilty in a drug case and a domestic abuse case that required him to take an anger-management course. That type of plea is commonly used by defendants to avoid a criminal record. …Jackson, who was a state social worker at the time, was charged with possession with intent to distribute counterfeit drugs.

Returning to the current situation, it’s not clear from the story, but I gather investigators from the Secret Service didn’t have enough evidence to nail Jackson, so the school system had no choice but to not only keep him on the payroll, but also to give him a new position.

Now Queon Jackson…is back. …The school system quietly cleared Jackson to return to work on May 9 and gave him a desk job at the agency’s headquarters and the title “special assistant.” The move ended a paid leave of three years and three months, during which he did no work for the school system. …He is receiving an annual salary of about $120,000, equivalent to what he made as a school administrator.

Though he apparently hasn’t been a model employee since his return.

Jackson has been accumulating many absences over the last two months, missing at least 16 days, including seven without pay, according to a Globe review of payroll records. The tally doesn’t include time he took off in mid-July.

Oh, by the way, Jackson is just one of many bureaucrats who get this strange form of paid vacation.

Boston’s school system currently has 34 employees on paid leave.

I shudder to think what the nationwide number looks like, but apparently there are tens of thousand federal bureaucrats getting paid leave. You can see a couple of strange examples by clicking here and here.

The bottom line is that Mr. Jackson isn’t special. Lots of bureaucrats get to scam the system because union contracts protect dodgy employees. So he doesn’t merit membership in the Bureaucrat Hall of Fame, but it’s still outrageous that taxpayers in the productive sector pay extra tax to subsidize this nonsense.

If you like humor about overpaid government employees (and you’re paying for it, so you may as well get some enjoyment), here’s a great top-10 list from Letterman and here’s a cartoon about the relationship of bureaucrats and taxpayers. Looking through my archives, I also found a joke about an Indian training for a government job, a slide show on how bureaucracies operate, a cartoon strip on bureaucratic incentives, a story on what would happen if Noah tried to build an Ark today, and these two posters. There’s also a good one-liner from Craig Ferguson, along with this political cartoons from  Henry Payne.

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In 2014, I was outraged that more than 80 percent of senior bureaucrats at the Veterans Administration were awarded bonuses, even though this is the bloated bureaucracy that caused the death of many veterans by putting them on secret waiting lists. This, I argued, was a perfect example (in a bad way) of federal bureaucracy in action.

In 2015, I put together a version about bureaucracy in action at the local level, noting that the number of firefighters has climbed by 50 percent since 1980, even though the number of fires has declined by more than 50 percent during the same period.

This year, let’s look at the overseas edition of bureaucracy in action. Our story comes from Italy, where there’s been a government shutdown. Though only in the town of Boscotrecase. And not because of an Obamacare-style budget fight, but rather because a bunch of the local bureaucrats got arrested for routinely skipping work.

The mayor of a small town outside Naples had to shut down most municipal offices after police arrested 23 of his staff in the latest revelations of absenteeism in Italy’s public sector. Staff were filmed clocking in and then leaving to go about their personal business or using multiple swipe cards to register absent colleagues, police said, in scenes that have become familiar after numerous similar scandals. A police video showed one man trying to tamper with a security camera and then putting a cardboard box over his head to hide his identity before swiping two cards. Police arrested around half of all employees in the town hall offices of Boscotrecase following a weeks-long investigation that they said revealed 200 cases of absenteeism involving 30 people. …four major town hall departments had been closed on Tuesday due to a lack of staff. Those arrested, accused of fraud against the state, included the head of the local traffic police and the head of the town’s accounting department. The workers, whose arrest comes amid a government crackdown against absenteeism, have been suspended from work for between six and 12 months and risk eventual dismissal.

What I want to know, of course, is whether the bureaucrats were suspended with pay or without pay.

If it’s the former (which would be my guess), how will their lives be any different? They’ll be goofing off at home while getting overpaid!

No wonder Italy is in a death spiral.

P.S. The Bureaucrat Hall of Fame is comprised of specific government employees who have perfected the art of slacking (such as the Italian doctor who legally worked only 15 days in a nine-year period). That being said, I’m tempted to give adjunct membership to the entire local government of Boscotrecase.

P.P.S. Switching topics, the unpalatable choice between Donald Trump and Hillary Clinton does have a silver lining. It’s generated this clever make-believe announcement from the British Monarch.

To the citizens of the United States of America from Her Sovereign Majesty Queen Elizabeth II:

In light of your failure to nominate competent candidates for President of the USA and thus to govern yourselves, we hereby give notice of the revocation of your independence, effective immediately.

Her Sovereign Majesty Queen Elizabeth II will resume monarchical duties over all states, commonwealths, and territories (except North Dakota, which she does not fancy). Your new Prime Minister, Theresa May, will appoint a Governor for America without the need for further elections. Congress and the Senate will be disbanded. A questionnaire may be circulated next year to determine whether any of you noticed.

To aid in the transition to a British Crown dependency, the following rules are introduced with immediate effect:

1. The letter ‘U’ will be reinstated in words such as ‘colour,’ ‘favour,’ ‘labour’ and ‘neighbour.’ Likewise, you will learn to spell ‘doughnut’ without skipping half the letters, and the suffix ‘-ize’ will be replaced by the suffix ‘-ise.’ Generally, you will be expected to raise your vocabulary to acceptable levels. (look up ‘vocabulary’).
2. Using the same twenty-seven words interspersed with filler noises such as ”like’ and ‘you know’ is an unacceptable and inefficient form of communication. There is no such thing as U.S. English. We will let Microsoft know on your behalf. The Microsoft spell-checker will be adjusted to take into account the reinstated letter ‘u” and the elimination of ‘-ize.’
3. July 4th will no longer be celebrated as a holiday.
4. You will learn to resolve personal issues without using lawyers, psychics or therapists. The fact that you need so many lawyers and therapists shows that you’re not quite ready to be independent. If you can’t sort things out without suing someone or speaking to a therapist, then you’re not ready to be a sovereign nation.
5. Therefore, you will no longer be allowed to own or carry anything more dangerous than a vegetable peeler. Although a permit will be required if you wish to carry a vegetable peeler in public.
6. All intersections will be replaced with roundabouts, and you will start driving on the left side with immediate effect. At the same time, you will go metric with immediate effect and without the benefit of conversion tables. Both roundabouts and metrication will help you understand the British sense of humour.
7. The former USA will adopt UK prices on petrol (which you have been calling gasoline) of roughly $10/US gallon. Get used to it.
8. You will learn to make real chips. Those things you call French fries are not real chips, and those things you insist on calling potato chips are properly called crisps. Real chips are thick cut, fried in animal fat, and dressed not with catsup but with vinegar.
9. The cold, tasteless stuff you insist on calling beer is not actually beer at all. Henceforth, only proper British Bitter will be referred to as beer, and European brews of known and accepted provenance will be referred to as Lager. South African beer is also acceptable, as they are pound for pound the greatest sporting nation on earth and it can only be due to the beer. They are also part of the British Commonwealth – see what it did for them. American brands will be referred to as Near-Frozen Gnat’s Urine, so that all can be sold without risk of further confusion.
10. Hollywood will be required occasionally to cast English actors as good guys. Hollywood will also be required to cast English actors to play English characters. Watching Andie MacDowell attempt English dialect in Four Weddings and a Funeral was an experience akin to having one’s ears removed with a cheese grater.
11. You will cease playing American football. There is only one kind of proper football; you call it soccer.
Those of you brave enough will, in time, be allowed to play rugby (which has some similarities to American football, but does not involve stopping for a rest every twenty seconds or wearing full kevlar body armour like a bunch of nancies).
12. Further, you will stop playing baseball. It is not reasonable to host an event called the World Series for a game which is not played outside of America. Since only 2.1% of you are aware there is a world beyond your borders, your error is understandable. You will learn cricket, and we will let you face the South Africans first to take the sting out of their deliveries.
13. You must tell us who killed JFK. It’s been driving us mad.
14. An inland revenue agent (i.e. tax collector) from Her Majesty’s Government will be with you shortly to ensure the acquisition of all monies due (backdated to 1776).
15. Daily Tea Time begins promptly at 4 p.m. with proper cups, with saucers, and never mugs, with high quality biscuits (cookies) and cakes; plus strawberries (with cream) when in season.

Reasonably clever. Reminds me of the somewhat un-PC humor a British friend sent me on how different countries respond to terrorism.

By the way, I’m not sure the part about needing a permit to carry a vegetable peeler is a joke. After all, we’re talking about the country where you need an ID to buy a teaspoon.

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