Abusing Federal Paid Leave

Compensation for federal civilian employees is more generous than private-sector workers. Federal workers receive better benefits than their non-governmental counterparts in particular, and generous paid leave benefits are one of the federal advantages. A new report from the Government Accountability Office (GAO) suggests that federal agencies are abusing this benefit.

The Washington Post summarizes the GAO findings regarding the number of workers who are being paid for staying home:

53,000 civilian employees were kept home for one to three months during the three fiscal years that ended in September 2013. About 4,000 were idled for three months to a year and several hundred for one to three years. This is the first time the government has calculated the scope and cost of administrative leave.

The Office of Personnel Management permits paid leave for many reasons including jury duty and snow days. But those types of absence do not require one to three months of time out of the office. Instead, it appears that agencies are shifting employees to paid leave for months at a time while dealing with performance issues:

Auditors found that supervisors used wide discretion in putting employees on leave, including for alleged violations of government rules and laws, whistleblowing, doubts about trust­worthiness, and disputes with colleagues or bosses. Some employees remain on paid leave while they challenge demotions and other punishments.

This practice varies from the private sector where paid leave is used infrequently. The Washington Post notes that in the private sector “an employee accused of wrongdoing either stays at the office and is reassigned or is suspended without pay,” generally within days to minimize costs.

All told, GAO estimates that federal employees collected $775 million in salary while on leave. Employees continue to receive other benefits as well. Time on leave counts towards pension and pay increase calculations, and employees continue to accrue vacation and sick days.

GAO acknowledges that this cost estimate understates the problem because it only includes three-fifths of the federal civilian workforce. Leave is not tracked for the remaining employees.

Abusive practices are not a new phenomenon. As early as 1958, the comptroller general found excessive use of leave and ruled that it should not be used for more than 24 hours for employees under investigation.

Senators Chuck Grassley of Iowa and Jon Tester of Montana are working on legislation to overhaul this practice. If passed, the legislation “would narrowly define the circumstances in which employees can be kept home” and “pay would be limited to a few days,” to match private-sector practices. Limiting this abusive practice would save millions in unnecessary expense.

TFSAs Spur Canada Savings Revolution

A tax reform is spurring a savings revolution in Canada. Amity Shlaes and I wrote about Canada’s Tax-Free Savings Accounts (TFSAs) in the Wall Street Journal in August. We think that such accounts would be a fantastic policy reform for America. They would simplify the taxation of savings, encourage families to save more, and spur stronger economic growth.

Toronto firm, Investor Economics, has released new data confirming the popularity of TFSAs. In just the past year, TFSA account assets increased 34 percent, and the number of accounts increased 16 percent. In June 2014, 13 million Canadians held $132 billion in TFSA assets. Given that the U.S. population is about 10 times that of Canada, it would be like 130 million Americans pouring $1.3 trillion into a new personal savings vehicle.

The chart shows the rapid growth of TFSAs since they were introduced in 2009:

 

  

There are 27.7 million Canadian adults, so about 47 percent of them own a TFSA, according to the data from Investor Economics. A 2013 survey by a bank found a similar figure of 48 percent. In just five years, TFSAs have become the most popular savings vehicle in Canada, outstripping the Canadian version of 401(k)s. TFSA growth is expected to continue, and the accounts may soon play a central role in virtually every family’s financial planning.

The American vehicle most similar to the TFSA is the Roth Individual Retirement Account (IRA). But Roths are far inferior, and thus just 16 percent of U.S. households own them. Indeed, just 38 percent of U.S. households hold any type of IRA, even though these accounts have been around a lot longer than TFSAs.

TFSAs are like supercharged Roth IRAs. Here are some of the key features: 

  • Individuals can deposit up to $5,500 after-tax each year. Annual contribution limits accumulate if you do not use them. So if you contribute $2,000 this year, you will be able to put away $9,000 next year ($3,500+$5,500).
  • All account earnings and withdrawals are tax-free.
  • Withdrawals can be made at any time for any reason with no penalties or taxes. That greatly simplifies the accounts and increases liquidity, both of which encourage added savings.
  • There are no income limits and no withdrawal requirements. All Canadian adults can contribute and withdraw at any time during their lives.
  • TFSAs can be opened at any bank branch or online. They can hold bank deposits, stocks, bonds, mutual funds, and other types of assets.
  • TFSAs are great for all types of saving, including saving to buy a home, a car, or to start a business, and saving for health expenses, unemployment, or retirement.    

Why are we letting Canadians have all the fun? Everyone agrees that Americans don’t save enough, so why don’t we kick-start a home-grown savings revolution with a U.S. version of TFSAs? Former Treasury official Ernest Christian has long championed similar accounts, which he and I call “Universal Savings Accounts (USAs). Canada has now run the real-world experiment on such accounts, and it has succeeded brilliantly.

TFSAs, or USAs, are a better way to handle savings in the tax code. Currently, many people are scared off by the complexity of U.S. savings vehicles and by the lack of liquidity in retirement accounts. TFSAs solve these problems. Members of Congress and presidential aspirants for 2016 who are interested in a popular, pro-growth, and pro-family reform to champion—this is what you are looking for. 

OMB Director Sets a Low Bar for Deficit Reform

Jonathan House reported [$] in the Wall Street Journal:

The U.S. government’s budget deficit narrowed in its 2014 fiscal year to its lowest level in six years, as an improving economy boosted tax revenues.

The annual deficit for fiscal year 2014 fell 29% to $483.35 billion, the Treasury Department said Wednesday… the lowest deficit since 2008. …

The 2014 deficit fell to 2.8% of the country’s gross domestic product, the broadest measure of economic output. This measure, preferred by economists because it offers greater context, was at its lowest level since the fiscal year ending Sept. 30, 2007.

“This is not only a reduction of the deficit, it’s also a return to fiscal normalcy,” said White House budget director Shaun Donovan.

The Obama administration’s definition of “fiscal normalcy” is a deficit just under half a trillion dollars, larger than in any year before 2009.

The national debt, which was about $5.7 trillion when George W. Bush entered office and $11 trillion when he turned the White House over to Barack Obama, is now at just a shade under $18 trillion. And the director of the Office of Management and Budget declares that a “return to fiscal normalcy.” Where is Warren Harding now that we need him? 

But hold on, there’s more: Donovan also noted that the federal government has abandoned its “harmful excessive budget austerity.” So we can expect more spending, and more deficits, and more debt, in the years to come.

Las Vegas Is Ripe For Ridesharing

The regulations that govern taxis in the Las Vegas area impose especially heavy restrictions on consumer choice and driver availability. Such an environment is ideal for rideshare companies, which provide consumers with more choice and drivers with more flexibility. Yet perhaps unsurprisingly, regulators and market incumbents in Sin City may prove to be among ridesharing companies’ most defensive and rigid opponents.

Taxi drivers in Las Vegas are not only restricted in regards to where they can pick up passengers, they are also restricted in how they pick up passengers. For instance, individuals are unable to hail Las Vegas cabs from the street. Cabs must be called and requested or found at designated areas.

The Nevada Taxicab Authority has a web page dedicated to describing the sixteen different taxi medallions available in the state.

The “North Las Vegas” medallion allows operators to drive 24 hours a day, seven days a week. Holders of this medallion “are permitted to stage on any taxicab stand North of Owens Avenue. They can then provide an on-call service within a five-mile radius of North Las Vegas. The southern border of North Las Vegas is Flamingo Road. Taxis with the “North Las Vegas” medallion may pick up passengers when directed to do so by a dispatcher; however the ride must originate north of Flamingo Road and cannot originate on Las Vegas Boulevard or Paradise Road (in the map below Owens Avenue is blue, Flamingo Road is green, and Las Vegas Boulevard and Paradise Road are highlighted in brown). 

“Providing that adequate service is maintained” in North Las Vegas, taxis with this medallion are permitted to provide service from ten specified locations, most of which are hotels.  

Accuracy of Macroeconomic Forecasts

One of my first professional jobs 25 years ago was with the economic forecasting firm DRI/McGraw-Hill. It was fun work, but I noticed that the firm’s gross domestic product forecasts with models hundreds of equations long were no better than simple forecasts based on the interest rate yield curve.

I’m sure that macroeconomic models have grown more sophisticated today, but they still can’t predict very well. Former chair of the Council of Economic Advisers, Edward Lazear, has a terrific piece today describing the inaccuracy of government forecasting models:

My analysis of 1999–2013 reveals that the [Congressional Budget Office]’s real GDP growth forecasts for the next year were off, on average, by 1.7 percentage points, either too high or low. Administration forecasts were similarly off by a slightly larger 1.8 percentage points on average, also too high or too low. Given that the average growth rate during this period was only 2.1%, errors of this magnitude are substantial.

Perhaps most damning: History is a better predictor of annual growth than government forecasts. Simply assuming that GDP growth will be 3.1% in each year—the average annual rate for the 30 years that precede the study period—results in an average forecast error of 1.5 percentage points.

Lazear’s article should be posted above the desk of every reporter and pundit writing about the macroeconomy. And it should be kept in mind by politicians, who often claim that such-and-such policy will create such-and-such number of jobs based on such models.

The lesson for federal budget policy should be one of prudence. We don’t know where the economy is headed, so policymakers should cut spending, zero out deficits, and start paying down debt now while we’re enjoying a run of sustained growth.

Backyard Birds Spreading as Climate Changes

Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”

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In a recent Global Science Report, we posted some good news coming out of California’s Sierra Nevada, where climate change (from whatever cause), has been partially responsible for a greening of the organo state. Technically, the biomass in the montane forests has been on the increase over the past several decades.

Turns out climate change is for the birds, too. Yes, little Eastern Bluebirds (which almost went extinct because of habitat damage)—raising their young in cute houses, awakening us with their melodious songs, providing free cat food, and selectively messing only on my car. What’s not to like? And who wouldn’t like more birds? And if you live in the Eastern United States, there is a climate-related increase in cat purring because global (actually, local/regional) warming is increasing the range of songbirds.

A new study appearing in the journal Global Change Biology, authored by Karine Princé and Benjamin Zuckerberg from the University of Wisconsin-Madison’s Department of Forest and Wildlife Ecology, finds that:

[A] shifting winter climate has provided an opportunity for smaller, southerly distributed species to colonize new regions and promote the formation of unique winter bird assemblages throughout eastern North America.

The operative word here is “colonize.” In other words, they are spreading out from their home range, not moving north in lockstep.

Updates on President Obama’s Immigration Enforcement Record

Last May I wrote a blog post about President Obama’s immigration enforcement record. In that post I made some assumptions about the percentage of all “interior removals” (that is, deportations of illegal immigrants who were living in the United States) for the years 2001—2007, because of a lack of data.

A recent report from the Migration Policy Institute (MPI) fills in those data gaps, except for the first two years of the Bush administration. Here are the updated data:

The total number of internal removals over the last six years of the Bush administration was about 475,000. From 2009 to 2013, the Obama administration removed just under 848,000 from the interior. Those numbers make for an incomplete comparison of the two administrations’ enforcement policies, but they paint an interesting picture.

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Source: MPI

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