Topic: Government and Politics

Montgomery County Socialism

For readers in or around the DC area, the Washington City Paper has a nice cover story on the draconian Department of Liquor Control in the People’s Republic of Montgomery County, Md. The DLC is a government agency that controls the supply and distribution of every drop of alcohol sold in MC.

The piece sketches out some of the nightmarish experiences that business owners in MC have to go through to procure otherwise widely-available wines, and how the county outrageously cranks up the prices and provides godawful service to the business owners. (For example, a bottle that sold for $240 at a shi-shi DC restaurant is available for MC restaurant owners to purchase from the county for $260. They’d then have to mark it up themselves, again, to make a profit.)

Finally, the author of the piece interviews the director of the DLC, George Griffin, and asks him, “What gives?”

Griffin then proceeds to reel off some impressive statistics on how control jurisdictions have lower rates of underage drinking and fewer alcohol-related traffic fatalities for people under 21 than open jurisdictions. (An independent study forwarded to me by the National Alcohol Beverage Control Association seems to confirm his stats.) But then Griffin pauses briefly and delivers a disarmingly direct kicker to his list of justifications for MoCo’s system: “And that’s in addition to the $22 million that we give the county in unrestricted funds.”

Since taking over the DLC in 2001, after disgraced director Howard L. Cook Jr. was forced to leave for misusing a county credit card (among other misdeeds), Griffin will be the first to admit the contradictory nature of his job. It’s both to promote the “moderation and responsible behavior in all phases of distribution and consumption”…and to make a buttload of money to dump into the county’s budget. In the last five and a half years alone, the DLC has transferred more than $100 million to the general fund.

It isn’t just fine wines, either. When I was in college, I worked at a Bethesda pizza place to pay the bills. I recall during one of our busiest seasons, we ran out of all draft pilsner beer — Bud, Bud Light, Miller Light, etc. We begged, pleaded, beseeched the county to bring us more. Business had gone into the toilet, with no beer to serve with the pizza. The response from the DLC? ”We’ll be there when we get there.” They got there about a week later.

Meanwhile, DC restaurant owners are laughing all the way to the bank:

Some drinkers are already laughing at the wine choices in MoCo. “Nobody can think of a single restaurant that’s in Montgomery County that has anything approaching a noteworthy wine list,” says Mark Slater, chef sommelier at Citronelle, who once co-owned a restaurant in the county. “I don’t know why the citizens of the county even let that stuff go on. It’s punitive.”

Get the whole sorry scoop here.

Unsurprising News from the Pentagon

The Washington Post reports yesterday on cost overruns for weapons procurement. “It is not unusual for weapons programs to go 20 to 50 percent over budget, the Government Accountability Office found.”

That’s for sure. As I’ve documented, it’s not unusual for weapons to more than double in cost. I’m talking about the F/A-22 Raptor, the V-22 Osprey, the CH-47F helicopter, the Patriot missile, and on and on. See here, and see the discussion in Downsizing the Federal Government.

The same pattern occurs in federal highway projects, energy projects, and many other government endeavors.

Part of the reason this occurs is that contractors and government officials have a quiet understanding that the initial cost numbers that are used to get projects launched should be low-balled. Both sides know that later on, after projects are underway, excuses can be found to raise the price tag. “The scope of work has expanded.” “We couldn’t have foreseen those additional problems.” “The mission requirements have changed.” “There are new regulatory requirements.”

It doesn’t really matter. Once the money is flowing to certain states and jobs are at stake, no member of Congress has an incentive to be frugal with taxpayer money. 

Not Overstated

Last year, Jagadeesh Gokhale and I estimated [pdf] that state and local governments were sitting on about $1.4 trillion of promised, but unfunded, health care costs for their workers.

The Economist kindly discussed our estimate in their November 18 issue, but noted: “Even if Messrs Edwards and Gokhale have overstated the problem …”

It turns out that we hugely understated the problem for at least one state. We had New Jersey down for $20 billion, but news from that state today indicates that taxpayers may get hit with a $78 billion tab for state worker health costs unless are reforms are made (or $8,500 for every resident of the state).

Some Perspective on the President’s Budget Request

The White House has been spinning reporters all day with the claim that the new budget holds non-defense spending down, and in some cases even cuts some domestic spending from 2006 budget levels. 

To test the claim, I’ve compiled below the proposed fiscal 2008 inflation-adjusted growth rates for spending in the non-defense Cabinet-level agencies compared to the 2006 budget:

Real Proposed Change in 2008 Non-Defense Cabinet-Level Agency Budget vs. 2006 Budget Level
   
Agriculture -9.2%
Commerce 5.9%
Education -40.2%
Energy 6.1%
Health and Human Services 8.5%
Housing and Urban Development -0.2%
Interior 10.8%
Justice -1.7%
Labor 15.6%
Transportation 6.3%
Treasury 7.7%
Veterans Affairs 13.8%
EPA -10.9%
Total
4.1%

All told, there are five agencies that receive a cut in real dollars: Agriculture, Education, HUD, Justice, and the Environmental Protection Agency. Yet even by the White House’s own numbers, all of these programs combined will still grow beyond the 2006 levels by 4 percentage points above inflation. 

Still, we need to wonder: What does this standard really tell us? 

Not much. The 2006 budget levels were already bloated after a six-year Republican spending spree. What’s actually interesting to see is how much these agencies would grow — after adjusting for inflation and assuming Congress rubber-stamps the president’s new budget — when compared to budget levels on the day Bush assumed office: 

Real Proposed Change in 2008 Non-Defense Cabinet-Level Agency Budget vs. 2001 Budget Level
   
Agriculture 8.0%
Commerce 16.8%
Education 36.2%
Energy 10.7%
Health and Human Services 35.6%
Housing and Urban Development 8.3%
Interior 12.0%
Justice 7.7%
Labor 8.8%
Transportation 12.4%
Treasury 11.7%
Veterans Affairs 52.7%
EPA -12.8%
Total
22.4%

To put it another way: Bush’s new budget still does next to nothing to strip away most of the massive budget increases in domestic programs he signed into law since 2001. It’s the fiscal equivalent of a recovering alcoholic patting himself on the back for merely drinking six beers a day instead of eight.

Why 2012?

I’ll chime in with a broader analysis of the new Bush budget later. For now, it’s worth noting one of the big questions it raises: What’s so special about 2012? 

That’s the year the president claims the budget can be balanced while simultaneously renewing the Bush tax cuts. It’s also three fiscal years after Bush leaves office.

What the president could have done is propose a plan to balance the budget in two years. Revenues are on the upswing, so it could be accomplished — assuming you cut spending, that is. 

For a president who is, according to insiders, interested in bequeathing a healthy Republican Party to the 2008 presidential candidate, it seems there would be great value in simultaneously handing them a balanced federal budget while also showing voters there is still some inkling of interest in smaller government within the party. And it would eliminate the Democrats’ ability to use the deficit bogeyman as a reason to kill the Bush tax cuts that expire in 2010. 

Instead, President Bush resorted to increasing spending in almost all categories — in some cases, like the Pentagon budget, massively. It’s not a budget that supporters of small government can really sink their teeth into. It is weak sauce indeed.    

I’m Restraining Spending, But…

Like most politicians, President Bush is addicted to new spending initiatives. His budget message is always: “We need to restrain spending — except for all the exciting new investments and programs enhancements I want.”

It’s more of the same in the president’s new 2008 federal budget. The president wants to get credit for proposing to balance the budget four years after he has left office, yet here is some of the language from the budget’s “Overview”:

  • “Increased funding to combat terrorism and protect the homeland…”
  • “Enhanced diplomatic efforts … with additional resources…”
  • “Increase funding for nuclear detection, more secure borders…”
  • “American Competitiveness Initiative to increase federal investment…”
  • “Significant new resources” for No Child Left Behind, including “more funding to high schools…”
  • “Increases [in] the Pell Grant maximum award…”
  • “Increases [in] Academic Competitiveness Grants…”
  • “Advanced Energy Initiative” to improve energy reliability and increase the use of alternative fuels…

The Budget Overview does provide some details on proposed spending restraint: “In the Budget, each program was closely reviewed to determine if it is among the Nation’s top priorities…. [F]ailure to meet these criteria resulted in proposed termination or reduction of 141 programs for a savings of $12 billion.”

Total federal outlays in 2007 will be $2.784 trillion. Thus, programs that are “top priorities” of the Bush administration account for 99.6 percent of all spending.

Will we ever get a president who wants to make serious cuts and doesn’t have a lengthy spending wish list to send to Congress?

Aqua Teen Overreaction Force?

Boston officials investigating this week’s marketing campaign gone awry should be sure to include themselves in the scrutiny, asking if they overreacted to the incident.

A In case you missed the story, Cartoon Network, a division of Time Warner’s Turner Broadcasting, recently launched a “guerrilla marketing campaign” to promote its new adult-audience cartoon Aqua Teen Hunger Force. As part of the campaign, the network hired New York marketing firm Interference Inc. to place notepad-sized, electronically lit signs of the show’s “mooninite” characters in unusual locations around urban areas.

The campaign received little notice in New York, Los Angeles, Chicago, Atlanta, Seattle, Portland, San Francisco, Philadelphia, and Austin, Texas. But in Boston, public officials treated the signs as a possible terrorist threat, closing bridges, subway stations, roadways, and even part of the Charles River while bomb squads removed the signs.

Once the nature of the signs became known, Boston mayor Thomas Menino issued a press release blasting the campaign:

It is outrageous, in a post-9/11 world, that a company would use this type of marketing scheme. I am prepared to take any and all legal action against Turner Broadcasting and its affiliates for any and all expenses incurred during the response to today’s incidents.

Estimates for those expenses have already topped $1 million.

Boston officials’ initial concern is understandable and appropriate. Seeing an out-of-place object containing batteries, circuitry, and glowing lights is unsettling in these times and it should be investigated. But at what point should Boston officials have realized that the signs posed no threat, and called off the bomb squads?

This raises an issue that we often discuss here at Cato, and that has become especially important in the post-9/11 era: should we be more concerned about Type-1 errors (false positives) or Type-2 errors (false negatives)?

Detection systems, whether mechanical (burglar alarms, ultrasounds) or human (analysts, emergency services workers) are rarely error-free. Often, we have to decide whether we want a very sensitive detection system that likely will detect any real problem but also subjects us to Type-1 errors, or else a less sensitive system that likely won’t give us many false alarms but may also miss a real problem.

Boston officials’ bomb-squad response to the mooninite signs is a perfect example of a Type-1 error produced by a highly sensitive detection system. I suspect that government officials would defend the high sensitivity, saying “it’s better to be safe than sorry.”

But Type-1 errors can end up making us feel very sorry. The current Iraq War can be considered a Type-1 error resulting from the Bush administration’s high sensitivity to the threat posed by Saddam Hussein’s regime.

Or consider the 2002 Beltway sniper attacks, during which local schools publicized that they were in “lockdown mode” and keeping schoolchildren indoors — that is, they went into “better safe than sorry” mode. The snipers later told police that the schools’ pronouncements enticed the snipers to try to kill a child, and they ultimately wounded a 13-year-old as he arrived at his Bowie, Md., middle school.

For an excellent discussion of why 9/11 should not lead us to be too accepting of Type-1 errors, read Ohio State University national security professor John Mueller’s article “A False Sense of Insecurity?