Tag: Government waste

Per Dollar Spent, OECD Subsidies May Be the Most Destructively Wasteful Part of the Federal Budget

I’m not a fan of international bureaucracies.

I’ve criticized the United Nations for wanting global taxes. I’ve condemned the International Monetary Fund for promoting bigger government. I’ve even excoriated the largely unknown Basel Committee on Banking Supervision for misguided regulations that contributed to the financial crisis.

But the worse international bureaucracy, at least when measured on a per-dollar-spent basis, has to be the Paris-based Organization for Economic Cooperation and Development.

OECD Headquarters: Living the good life at US expense

American taxpayers finance nearly one-fourth of the OECD’s budget, at a cost of more than $100 million per year, and in exchange we get a never-ending stream of bad policy recommendations.

This Center for Freedom and Prosperity study has all the gory details. The OECD bureaucrats (who get tax-free salaries, by the way) endorsed Obamacare, supported the failed stimulus, and are big advocates of a value-added tax for America.

What’s especially frustrating is that the OECD initially was designed to be a relatively innocuous bureaucracy that focused on statistics. Indeed, it was even viewed as a free-market counterpart to the Soviet Bloc’s Council for Mutual Economic Assistance.

My, how things change.

Perhaps the most odious example of bad OECD policy is the campaign against tax competition. Beginning during the 1990s, the OECD has attacked low-tax jurisdiction for the supposed crime of having good tax laws that attract jobs and capital from high-tax nations such as France and Greece.

So why did the OECD launch this project to prop up Europe’s welfare states?  The answer can be found in an excellent new study from Professor Andrew Morriss at the University of Alabama Law School and Lotta Moberg, a Ph.D student in economics at George Mason University.

It’s a publication designed for academic journals, but it avoids jargon and gibberish, so a regular person can read and understand how the OECD has morphed from a harmless (though presumably still wasteful) bureaucracy into a force for global statism. Here are some of the key findings in the study.

[T]his transition was in part the result of entrepreneurship by a group of OECD staff, who spotted an opportunity to expand their mission, bringing with it a concomitant increase in resources and prestige. They accomplished this by providing a framework for interests within a group of high tax states to create a cartel that would channel competition in tax policy away from areas where those states had a competitive disadvantage and toward areas in which they had a competitive advantage. …These states then sought to restrict tax competition, which in turn required them to create a means of delegitimizing such competition and by preventing each other from defecting from the cartel by lowering tax rates unilaterally. …The French … realized that single-country financial controls were unworkable within a global financial system.

In other words, the bureaucrats at the OECD and governments from decrepit welfare states like France both saw a benefit in creating a tax cartel.

This “OPEC for politicians” is grossly contrary to good tax policy, international comity, and national sovereignty. But those factors didn’t matter.

Unfortunately, it’s quite likely that we will see further schemes from the OECD and other international bureaucracies. The politicians have learned that transnational cartels increase their power.

[T]he evolution of the OECD from a facilitator of economic competition to a cartel enforcer represents something new in international organization behavior. …The cartelization of tax policy is an important effort to hold off the impact of the forces unleashed by competition on a more level playing field, but it is certainly not the only one. …If the opportunity is provided, it may be better from a politician’s point of view to form a cartel on taxation as a protection. With a cartel, there are fewer constraints on domestic policy, improving the politicians’ welfare by increasing the degrees of freedom available to satisfy domestic constituents and win re-election.

This video has more information on why the OECD is contrary to the interests of American taxpayers.

Needless to say, it is outrageous that the politicians in Washington are sending more than $100 million to Paris every year to subsidize this bureaucracy. For all intents and purposes, we are being coerced into paying for a bunch of European bureaucrats so they can then advocate even bigger government in the United States.

And those bureaucrats get tax-free salaries while pushing for higher taxes for the rest of us!

Can anyone think of a more destructive item in the federal budget, at least when measured on a per-dollar-spent basis? I can’t. That’s why I’ve been fighting the OECD for years, even to the point that the bureaucrats threatened to put me in a Mexican jail for the “crime” of standing in the public lobby of a public hotel.

Abolish the Department of Homeland Security

We’re ten years past 9/11, and over the last decade we’ve shed a number of our liberties and spent wildly to counter a terrorist threat that, as the recent model airplane plot demonstrated, isn’t existential. The bureaucratic legacy of 9/11, the Department of Homeland Security, has proven an unwieldy and pork-laden nightmare. It’s time to abolish it.

My recent policy analysis, Abolish the Department of Homeland Security, makes the case for doing so. To begin with, DHS is a management disaster by its very nature:

In creating Homeland Security, Congress lumped together 22 previously unconnected federal agencies under a new Cabinet secretary. That’s a problem, not a solution. And while members of Congress routinely clamor for consolidating Homeland Security oversight in one committee, that seems unlikely: 108 congressional committees and subcommittees oversee the department’s operations. If aggregating disparate fields of government made any sense in the first place, we long ago would have consolidated all Cabinet responsibilities under one person — the secretary of government.

Apart from the structural handicaps that DHS faces, the whole notion of “homeland security” is problematic. The “odiously Teutono/Soviet” concept trends us ever closer to a police state and is particularly prone to pork-barrel spending. As I said in my recent op-ed on the topic:

It allows politicians to wrap pork in red, white and blue in a way not possible with defense spending. Not every town can host a military installation or build warships, but every town has a police force that can use counterterrorism funds to combat gangs or a fire department that needs recruits or a new fire station.

Congress must reform its grant programs and end this wasteful spending. While we’re at it, let’s end federal funding for fusion centers, local- and state-organized intelligence cells that duplicate FBI efforts in counterterrorism and end up labeling nearly anyone who expresses political dissent as a potential terrorist, a point I made at this Capitol Hill Briefing. I’ll be speaking at another Capitol Hill Briefing with Jim Harper today on abolishing the Transportation Security Administration. More information available here.

The Solyndra Story Keeps Unfolding

Is the taxpayers’ lost $535 million in the green-energy company Solyndra just an unfortunate business failure, or is there something more scandalous involved? You should read every word of this front-page New York Times article. Sure, it says that “no evidence has emerged that political favoritism played a role in what administration officials assert were merit-based decisions.” But the story is full of smoking guns.

Here’s the opening:

President Obama’s visit to the Solyndra solar panel factory in California last year was choreographed down to the last detail—the 20-by-30-foot American flags, the corporate banners hung just so, the special lighting, even coffee and doughnuts for the Secret Service detail.

“It’s here that companies like Solyndra are leading the way toward a brighter and more prosperous future,” the president declared in May 2010 to the assembled workers and executives. The start-up business had received a $535 million federal loan guarantee, offered in part to reassert American dominance in solar technology while generating thousands of jobs.

But behind the pomp and pageantry, Solyndra was rotting inside, hemorrhaging cash so quickly that within weeks of Mr. Obama’s visit, the company canceled plans to offer shares to the public. Barely a year later, Solyndra has become one of the administration’s most costly fumbles after the company declared bankruptcy, laid off 1,100 workers and was raided by F.B.I. agents seeking evidence of possible fraud.

Solyndra’s two top officers are to appear Friday before a House investigative committee where, their lawyers say, they will assert their Fifth Amendment right against self-incrimination.

And there’s more:

[Solyndra’s] lobbyists corresponded frequently and met at least three times with an aide to a top White House official, Valerie B. Jarrett, to push for loans, tax breaks and other government assistance… Energy Department preliminary loan approvals—including the one for Solyndra—were granted at times before officials had completed mandatory evaluations of the financial and engineering viability of the projects.

…[T]he company spent nearly $1.8 million on Washington lobbyists, employing six firms with ties to members of Congress and officials of the Obama White House. None of the other three solar panel manufacturers that eventually got federal loan guarantees spent a dime on lobbyists… Solyndra’s loan guarantee was the highest of the four companies…

Five lobbyists employed by the McBee group eventually worked on Solyndra’s behalf, including Michael Sheehy, a former top aide to Representative Nancy Pelosi of California, the House Democratic leader. Solyndra has paid McBee Consulting $340,000 since 2009…

Solyndra and its lobbyists continued to provide assurances to the White House and the Energy Department, which still could have stopped the flow of federal money…

The story might well be read in conjunction with yesterday’s Washington Post story, which stressed “questionable spending by management almost as soon as a federal agency approved a $535 million government-backed loan for the start-up… ‘Because of that infusion of money, it made people sloppy.’”

What Hyman Roth Would Say about Government Waste

We often criticize a focus on government waste here at Cato. We point out that the real spending problem is the big-ticket programs, not “waste, fraud, and abuse.” But a series of recent stories in the Washington Post, several of them in Sunday’s paper, led me to write about government waste in today’s Britannica column. I followed up on my previous post about the scandal of the Alaska Native Corporation (SBA 8(a)) preference program:

Not much, even though it was hardly the first time that the problems with the Alaska Native Corporations program had been noted. There was a Senate hearing, with the reassuring title of “Promise Fulfilled: The Role of the SBA 8(a) Program in Enhancing Economic Development in Indian Country,” where “Alaska Natives and a Small Business Administration official defended federal contracting preferences for Indian and Native firms.” No critics were invited to the hearing. After all, “The purpose of the hearing is to allow the SBA, ANCS, NHOs, Indian tribes, shareholders and other stakeholders the opportunity to demonstrate the importance and legitimacy of the program to Native communities in fulfilling self-determination and self-sufficiency,” as 49-year senator Daniel Inouye (D-HI) and Alaska’s own Sen. Mark Begich wrote in a letter to whippersnapper senator Daniel Akaka (D-HI), who has served in Congress for only 34 of his 86 years and chairs the Senate Indian Affairs Committee.

And I noted:

And for those who like big government, I have to say: This is the business you have chosen. If you want the federal government to tax (and borrow) and transfer $3.6 trillion a year, if you want it to build housing for the poor and give special benefits to Alaska Natives, if you want it to supply Americans with health care and school lunches and retirement security and local bike paths, then you have to accept that such programs come with incentive problems, politicization, corruption, and waste. Maybe it’s worth the cost.

More details here.

GOP’s Pledge to America

The House Republicans’ release of its “Pledge to America” has been met with criticism from across the ideological spectrum. While excoriation from the left was inevitable, those who were hoping that the GOP would set out a detailed agenda for limiting government were also not satisfied.

The 48-page document contains more pictures of Republican members of Congress than it does evidence that the GOP is seriously prepared to cut spending. While the introductory commentary is designed to appeal to the tea party movement, the actual “plan” to return budgetary sanity to Washington is both timid and incomplete.

The following are some thoughts on the pledge’s “plan to stop out of control spending and reduce the size of government”:

  • The document immediately notes that the “lack of a credible plan” to tackle the mounting federal debt causes uncertainty for employers and investors. The problem is the GOP leadership doesn’t have a credible plan to address the debt, or at least this document doesn’t offer one.
  • It disingenuously promises to “cut government spending to pre-stimulus, pre-bailout levels” when in fact it only intends to do so for a small portion of the overall federal budget. The reduction would apply to discretionary, non-security spending, which only accounts for about 15 percent of total federal spending.
  • Not only does the GOP punt on the big-ticket programs like Social Security and Medicare, the document devotes an entire section to maintaining the interventionist foreign policy that is helping to bankrupt the country. The GOP doesn’t appear to understand that the American people are having an increasingly difficult time understanding why the government continues to take bricks out of our own economy in order to build nations around the globe.
  • The document says that the GOP will “root out government waste.” Waste goes with government the way peanut butter goes with jelly. Nancy Pelosi has made the same promise, which demonstrates the vacuous nature of the proposal.
  • The GOP says it will cut the operations budget of Congress. That’s fine, but the legislative branch’s budget is only about $5 billion.
  • Calling for an end to the federal government’s control of Fannie Mae and Freddie Mac is a good idea. But that’s an easy position. They should instead be calling for an end to the government’s entire disastrous role in subsidizing homeownership.
  • The document calls for a freeze in federal non-security hiring. One would have thought the GOP would at least address exorbitant federal civilian employee pay. Freezing (or reducing) federal employment would take care of itself by eliminating agencies and programs, which is something the document doesn’t lay out a plan to do.
  • The GOP proposes to continue holding weekly votes to cut spending via its YouCut initiative. It’s a fine idea, but most of the cuts offered for consideration thus far have been relatively insignificant. For example, one of the cuts being proposed this week would “reduce funding for the wild horse and burro program to previously projected levels.” Not only would this only save $280 million over ten years, the GOP couldn’t even find the nerve to call for its outright abolition.
  • One piece of good news is that the GOP explicitly calls for the repeal of Obamacare.

With the Democrats content to irresponsibly promise more free lunches in the face of an unsustainable fiscal situation, it would have been refreshing for the House Republicans to square with the American people. However, with this document the GOP largely fell back on limited government platitudes.

Washington Prospers While America Suffers

Unemployment in the heartland may be high and incomes may be stagnating in most of the nation, but Washington, DC, continues to be an oasis of prosperity as more of the nation’s resources get consumed by government. The latest evidence comes from the Washington Post, which reports on the federal government’s insatiable demand for more real estate.

Evidence of the federal government’s growing influence on Washington area commercial real estate is illustrated in big deals it is working on both sides of the table: auctioning a 127,000-square-foot Bethesda building previously occupied by the National Institutes of Health and moving to snatch up vast spaces in buildings on the private market that have been vacant for months. The General Services Administration is seeking to unload the 10-story building that the NIH vacated in 2002 when it consolidated offices into other buildings in Bethesda. The recommended opening bid for the online auction, which runs from April 30 to July 2, is $14 million. At the same time, federal leasing activity is expanding, according to Jones Lang LaSalle, the real estate firm representing the government. The government signed deals for 750,000 square feet of space in the District in the first quarter of 2010, compared with 670,000 square feet in the city for all of 2009.

It’s hard to pick out the most depressing part of the article. Signing leases for more space in the first quarter of 2010 than in all of 2009 might be at the top of the list. That is presumably a good (and discouraging) measure of the growth of government. But for those who enjoy reading about incompetence and inefficiency, the government’s eight-year (and counting) project to sell one office building may be at the top of the pile.

The GSA decided to sell the 46-year-old former NIH building at 7550 Wisconsin Ave. in Bethesda eight years ago. “We have a process we have to go through before we sell a building. We have to offer it to homeless housing, to local government,” said Bob Peck, commissioner for the GSA’s Public Buildings Service.

More discouraging factoids include a six-figure increase in the number of bureaucrats (just in the DC area), and the fact that the government is going to squander huge amounts of money on green renovations, which will require taxpayers to cough up lots of money for the contractors doing the work and for five-year leases (which probably means ten, knowing the sloth-like pace of government work) so the bureaucrats can be housed elsewhere during the work.

Expansion of the government’s role in the nation’s financial markets, increased defense spending and the new health-care law are driving its demand for more space. The government is expected to increase its Washington area payroll by as many as 100,000, according to Partnership for Public Service, a nonprofit group that helps the federal government find workers. “The government spent 2009 planning for the growth. We’re going to see the growth materialize in 2010,” said Scott Homa, research manager for Jones Lang LaSalle. The government also is overhauling many of its buildings, making them energy efficient. As a result, several agencies will need to lease space in the commercial market for five years or so during renovations.