Tag: Government waste

Why We Shouldn’t Expand Government

Fareed Zakaria’s new column is titled (at least on the Washington Post website) “Why Americans Hate Their Government” or (in the paper) “Why We Hate our Government.” But some of the points he makes might better be seen as reasons not to keep on expanding a government that has grown beyond its competence.

Washington is having one of its odd debates as to whether the Obama administration’s rollout of HealthCare.gov was worse than the Bush administration’s response to Hurricane Katrina. But whatever the answer, if there is one, the real story is that both are examples of a major, and depressing, trend: the declining competence of the federal government. Paul Volcker, former chairman of the Federal Reserve, has been saying for years that most Americans believe their government can no longer act effectively and that this erosion of competence, and hence confidence, is a profound problem.

“The federal service is suffering its greatest crisis since it was founded in the first moments of the republic,” scholar Paul Light writes in his book “A Government Ill Executed.”

Over the past decade, the federal government has had several major challenges: Iraq, Afghanistan, a new homeland security system, Katrina and Obamacare. In almost every case, its performance has been plagued with mismanagement, massive cost overruns and long delays.

Zakaria argues that this was not always the case: “In the 1940s, ’50s and ’60s, federal agencies were often lean, well managed and surprisingly effective.” Maybe so, depending on your metric. But of course in those decades the federal government had not yet undertaken cradle-to-grave responsibilities. Maybe the lesson is that if you want competent government, you should limit it to manageable tasks.

On the other hand,

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.

In that case, this is the business you have chosen.

Concentrated Benefits and Diffuse Costs, Local Airports Edition

Rep. Tom McClintock tells David Fahrenthold of the Washington Post what economists mean by “concentrated benefits and diffuse costs”:

This Congress has also indulged in the habit of letting “temporary” giveaways become effectively permanent. A prime example is the Essential Air Service, a $240 million program that subsidizes flights to 161 small airports.

It was supposed to die in 1988. It didn’t.

Congress has renewed the program, again and again. Now it subsidizes flights to places such as tiny Glendive, Mont., where the government pays for a 19-seat aircraft to visit twice a day.

On average, two people get on each day. The subsidy works out to $836 for each of their tickets.

“If we can’t cut this, we can’t cut anything,” said Rep. Tom McClintock (R-Calif.), who sponsored an attempt to kill the program last summer.

They can’t cut this.

McClintock’s amendment lost by 74 votes. Then he tried again this summer. And lost. Many members explained their “no” votes by saying they were unwilling to sacrifice the subsidies to airports in their districts. “It’s that old problem of concentrated benefits with diffuse costs. The benefits are lavished on a few select communities, and the costs are diffused across the entire tax base,” McClintock said afterward. The beneficiaries, he said, are the only ones who care enough to fight.

Please, Just Build Him a Statue

David Fahrentold reports in the Washington Post:

[P]ork, the habit of using taxpayer money for a legislator’s pet cause…. appears to be stronger even than death.

That’s clear from the story of the Robert C. Byrd Highway, a decades-old road project in West Virginia that had received earmarked funds for years from Sen. Robert C. Byrd (D-W.Va.), the longest-serving senator in history, who died in 2010.

The highway has been maligned as a wasteful road to nowhere. But, now, it has outlived earmarks. It has even outlived Byrd.

This year, with continued support from Sen. John D. Rockefeller IV (D-W.Va.) the highway got $40 million in federal money. It will need about that much every year, state officials say, until it’s finished in 2035.

The Federal Government’s “Rural” Industrial Complex

David Fahrenthold has another excellent article on waste in government in Sunday’s Washington Post. This time he finds a truly comic example of waste, duplication, and confusion:

[T]he U.S. government has at least 15 official definitions of the word “rural,” two of which apply only to Puerto Rico and parts of Hawaii.

All of these definitions matter; they’re used by various agencies to parcel out $37 billion-plus in federal money for “rural development.” And each one is different….

There are 11 definitions of “rural” in use within the U.S. Department of Agriculture alone.

It’s laughable. But the real question is, Why does the federal government even need to define “rural”? Well, of course the answer comes back to the real purpose of our modern tax-and-transfer state: The definitions define who gets the subsidies.

Every year, there are billions available to fund projects in rural communities. Money for housing. Community centers. Sewer plants. Broadband connections.

In a sidebar to the story, we get some details. The Census Bureau has one definition of “rural” so it can tell us how many Americans live in rural areas. Here are the purposes of the other 14 definitions:

Used for a variety of loan and grant programs, all meant to foster rural development…for loans and grants for “community facilities” in rural areas… for aid for water and waste-disposal systems… for aid for improvements in telecommunications systems…by farm-credit associations making housing loans… for certain lending programs for rural community development…to determine areas served by Office of Rural Health…by the National Rural Development Partnership…for grants to rural institutions of higher education…to determine what areas of Hawaii are eligible for rural-aid programs…to determine what areas of Puerto Rico are eligible for rural-aid programs…by various rural development loan and grant programs.

So let’s see. People in rural areas pay federal taxes. People in urban areas pay federal taxes. All that money goes to Washington – where a great deal of it stays – and then some of it is used to provide programs and services in rural and urban areas. Maybe both rural and urban Americans would be better off keeping their money at home and paying for whatever services they think are actually worth the cost. And then the federal government wouldn’t have to pay handsome salaries to well-educated people to form task forces to determine 15 different definitions of “rural.” And states, cities, and rural areas wouldn’t have to hire expensive lobbyists to get a piece of that federal pie.

Great Moments in Government Waste: University Edition

Last year, officials at the Univerity of New Hampshire complained bitterly about legislative budget cuts. UNH President Mark Huddleson, who earns more than three times the salary of New Hamphire’s governor at over $330,000 a year, called the cuts “a devastating and historic loss of $31 million,” which is just under six percent of UNH’s $583.5 operating budget. The wailing and gnashing of teeth made the recent revelation that UNH was paying a New York City marketing firm between $91,400 and $108,200 to redesign the school’s logo particularly surprising.

UNH's current logo

University officials felt that the school’s current logo, which features a clock tower from a building on campus, was not competitive enough in the 21st century so they paid the NYC firm to produce three proposed logos. Apparently this is what $100,000 gets you:

Proposed UNH logos

Unsurprisingly, a number of students and alumni are not happy with any of the proposed designs and some created a Facebook page to organize the opposition:

The Facebook page — UNH Students Against the Change of the Thompson Hall Logo — was created May 13 and had 572 likes as of Tuesday evening. Not all posts are supportive of Thompson Hall, but most are critical of the three finalists proposed by the design team.

“I think that a bunch of first graders could have come up with better designs! These are awful!” wrote Julie Glover, a 1983 UNH graduate.

Scotty Arsenault said the university should hire a local artist. “You’re paying a ridiculous amount for insultingly mediocre designs. Don’t limit yourselves to this shield/crest concept,” he wrote.

Grant Bosse, the editor of New Hampshire Watchdog (and my former colleague at the Josiah Bartlett Center), responded by creating a public Facebook page to crowdsource a new logo. Within 24 hours, there are already several submissions that at least as good as the $100,000 logos, including these:

Crowdsourced UNH logo designs

Not only is crowdsourcing free, it’s likely to create a better logo from an involved community that is clearly more invested in the product.

Federal Spending Has Always Been Wasteful

A new article by Ivan Eland describes how wars have stimulated growth in the American welfare state. I was interested in his discussion regarding the overexpansion of pensions following the Civil War:

In 1879, the Arrears Act caused many veterans, who hadn’t realized they were disabled until the government offered $1,000 or more for finding aches and injuries, to flood the Bureau of Pensions with claims.  Although, according to its commissioner, the bureau was the largest executive bureau in the world, it had few means to detect fraudulent claims, which were rampant. During election years between 1878 and 1899, Republicans used the bureau to dole out pensions rapidly and heavily in key electoral states.

In 1890, a quarter century after the Civil War ended, pension eligibility expanded to include any soldier who had served 90 days or more during the war and was unable to do manual labor—whether or not he was injured during the conflict, or even whether he had seen combat. Similarly, widows of soldiers serving in the war for 90 days or more got pensions, regardless of whether their husbands had died in the conflict.”

Republicans supported lavish pensions to groups in their political constituency (Union veterans) to justify continued high tariff walls to protect Northern industries, which were among the most influential supporters in their political coalition. The interests of such industrialists coincided with those of pensioner lobbies and the bureaucratic empire of the Bureau of Pensions to widen the program over time.

Politically driven overspending and waste is nothing new in Washington. In the 19th Century, there was tons of waste in federal agencies such as the Army Corps of Engineers. The Bureau of Indian Affairs (BIA) was also a very troubled agency:

Fraud, corruption, and bribes were common in the BIA during some periods in the 19th century. One reason was because local BIA officials had substantial discretionary control over cash, goods, trading licenses, and other items handed out by the agency. In the years following the Civil War, “Indian rings” of government agents and contractors colluded to steal funds and supplies from taxpayers and the tribes. The New York Times railed against the “dishonesty which pervades the whole Bureau.” And the newspaper argued that “the condition of the Indian service is simply shameful. It has long been notorious that rascally agents and contractors have connived to cheat the Indians. … It now appears that a ring has long existed in the Indian Bureau at Washington for the express purpose of covering up these frauds and facilitating others.

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.