Topic: Government and Politics

The “Culture of Spending” from the Mouths of Babes

Each semester, when I speak to Cato’s new employees and interns, I give them a quick discussion of some of the reasons that government tends to grow, such as the problem of concentrated benefits and diffuse costs and what James Payne called “the culture of spending.” In his book by that title, Payne noted:

The congressman lives in a special world, a curiously isolated world that is dominated by the advocates of government action. He is subjected to a broad chorus of persuasion that incessantly urges the virtues of spending programs. Year after year he hears how necessary government programs are.

Day after day, year after year, people come to the congressman’s office with stories about why some particular government program is needed – to help their grandfather, their brother-in-law, their community – and rarely if ever does a constituent fly to Washington to urge his congressman to vote against any particular one of the myriad programs that add up to his entire income tax bill.

The Washington Post has a great illustration of this problem in the Sunday paper. The little town of Owego, New York, was excited to hear that Lockheed Martin would build the new presidential helicopter – it’s called Marine One, though fortunately for Lockheed the government wanted 23 of them – at a plant in Owego. But as the price tag ballooned from $6.8 billion to $13 billion, even politicians began to see it as an unnecessary expense. The military canceled the program on June 1. Hundreds of jobs will be lost in Owego. And as the Post writes:

An 11-year-old Owego girl, whose parents are longtime Lockheed employees, recently hand-wrote a letter to Obama. It was published in the local newspaper and quickly became a voice for her shaken community.

“Lockheed is the main job source in Owego,” Hailey Bell, now 12, wrote. “If you shut down the program, my mom may lose her job and a lot of other people too… . Owego will be a ghost town. I’ve lived here my whole life and I love it here! Please really, really think it over.”

I’m sure she loves her parents and her town. And there’s no reason to expect Hailey to understand what $13 billion means to taxpaying Americans all over the country. But this is just the kind of story that members of Congress hear all the time: save my parents’ jobs, save my community, save our farms. And it all adds up to a $4 trillion federal budget with a $1.8 trillion deficit. (And by the way, if you Google “fiscal 2009 budget,” you will quickly find the Obama administration’s budget page, which somewhat oddly does not show the actual budget totals but does invite you to “Use the map below to learn more about how the President’s 2010 Budget is restoring long-term opportunity and prosperity in your state.”)

For a more, shall we say, adult view of what it means to direct federal dollars to particular areas, we might turn to an advertisement in the Durango, Colorado, Herald in 1987, which touted the Animas-La Plata dam and irrigation project  and made explicit the usual hidden calculations of those trying to get their hands on federal dollars:

Why we should support the Animas-La Plata Project: Because someone else is paying the tab! We get the water. We get the reservoir. They get the bill.

That’s the way they tell it back home, usually without putting it in writing. In public and in Washington, they say, “Without this dam, our little town will waste away. Only you can save us, Mr. Congressman.” And it’s bankrupting us.

Privatize the Post Office

Another day, another story on financial troubles at the federal government’s mail monopolist.  We don’t expect the government to make our blue jeans, transport fruits and veggies from the farm to the market, build computers and IPods, or manage the manufacturing of automobiles, so why must it continue to deliver first-class mail?  The quality of the USPS’s “services” has been a punchline in my family since I learned to walk.  But with technology rendering it’s clunky business model increasingly moot, Government Mail’s bottom line is looking uglier and uglier. It would cost me 44 cents to mail a letter to California, and it would cost me the same amount to mail that letter to the next town over.  What sense does that make?

As today’s editorial in the Washington Post leads off:

THE POST office may be the next too-big thing. If it continues on its present course, the U.S. Postal Service stands to post $6 billion to $12 billion in losses by the end of the fiscal year. By the end of the second quarter of fiscal 2009, it had racked up an operating loss of more than $2 billion, almost equal to its total losses last year. So far, the Postal Service has depended on loans from the Federal Financing Bank, a federal borrowing agency, to help make up the difference, but it is fast approaching its $15 billion credit limit. Something has to give.

Kudos to the Washington Post for proceeding to acknowledge that the rest of the western world has been trending toward privatization of it’s government mail monopolies for years.  My colleague Chris Edwards recently touched on the issue of privatizing the USPS as part of a larger piece on privatizing a plethora of federal operations:

The mammoth 685,000-person U.S. Postal Service is facing declining mail volume and rising costs. The way ahead is to privatize the USPS and repeal the company’s legal monopoly over first-class mail. Reforms in other countries show that there is no good reason for the current mail monopoly. Since 1998, New Zealand’s postal market has been open to private competition, with the result that postage rates have fallen and labor productivity at New Zealand Post has risen. Germany’s Deutsche Post was partly privatized in 2000, and the company has improved productivity and expanded into new businesses. Postal services have also been privatized or opened to competition in Belgium, Britain, Denmark, Finland, the Netherlands, and Sweden. Japan is moving ahead with postal service privatization, and the European Union is planning to open postal services to competition in all its 27 member nations.

Going Bankrupt Double-Quick

George W. Bush and the Republicans worked hard to ruin the U.S. government’s finances.  The Obama administration and the Democrats are doing an even better job of wrecking the Treasury.

Reports Bloomberg:

Treasuries headed for their second monthly loss, pushing 10-year yields up the most in almost six years, as President Barack Obama’s record borrowing spree overwhelmed Federal Reserve efforts to cap interest rates.

Notes, little changed today, also tumbled this week on speculation the worst of the economic recession is over. A private report today will show confidence among U.S. consumers gained in May for a third month, economists said. South Korea’s National Pension Service, the nation’s largest investor, plans to reduce the weighting of U.S. bonds in its holdings, the government said in a statement.

“It’s a disastrous market,” said Hideo Shimomura, who oversees $4 billion in non-yen bonds as chief fund investor at Mitsubishi UFJ Asset Management Co. in Tokyo, a unit of Japan’s largest bank. “I expected yields to rise but not this fast. We will see new highs in yields.”

The benchmark 10-year note yielded 3.61 percent at 6:29 a.m. in London, according to BGCantor Market Data. The 3.125 percent security due in May 2019 traded at a price of 95 30/32.

Ten-year rates rose about half a percentage point in May, extending an increase of 46 basis points in April. The two-month climb was the most since July and August of 2003. A basis point is 0.01 percentage point.

As borrowing costs rise, so will future deficits, requiring more borrowing, which will push up interest rates, hiking future deficits, requiring…

Just how are we going to finance trillions of dollars for health care reform while wrecking the economy with cap and trade?  And then there’s the $107 trillion in unfunded liabilities for Social Security and Medicare.

“It’s a Lot Easier to Promise to Change Washington Than It Is to Actually Change It”

The New York Times has an interesting story on President Obama’s continuing failure to follow through on his “Sunlight Before Signing” promise. On the campaign trail, he said he would post bills online for five days before signing them. Two dozen bills now have his signature, and only one has been posted for five days before signing.

The article (and accompanying video) fixes on a couple of reasons why the president might be excused from carrying out the promise. One is the technical difficulty of managing potentially hundreds of thousands of comments. The promise did not include a promise to publish comments, though – much less to read them (though it would be politically astute to appear to do so). In my view, the difficulty of administering a public comment system – which was not part of the promise – does not excuse the failure to post the bills Congress presents to the president for five days before he signs them.

A second excuse is that posting bills online would be ineffectual. Ellen Miller of the Sunlight Foundation is quoted saying, “There isn’t anybody in this town who doesn’t know that commenting after a bill has been passed is meaningless.”

I have done my level-best to illustrate how a five-day hold at the White House would have good effects on reducing earmarks, parochial amendments, and other shenanigans – such as congressional approval of bonuses to AIG executives.

Miller’s preferred approach – placing a similar hold on bills before they leave Congress – would have a similar effect – but nothing dramatically more open. Just as under a presidential hold, members of Congress and Senators would be more reticent to introduce potentially controversial amendments. Just as under a presidential hold, they would carefully avoid a blossoming of debate about their pet projects at the end of the legislative process. A congressional hold would change the upstream behavior of the politicians – just like a presidential hold would.

A presidential hold and a congressional hold are both good ideas, and they are not mutually exclusive. The presidential hold has a key advantage: The president has already promised it – to the cheers of American voters.

The New York Times story reports a small step toward meeting the actual terms of President Obama’s pledge:

“In order to continue providing the American people more transparency in government, once it is clear that a bill will be coming to the president’s desk, the White House will post the bill online,” said Nick Shapiro, a White House spokesman. “This will give the American people a greater ability to review the bill, often many more than five days before the president signs it into law.”

If this means posting links to bills on the Thomas legislative system from Whitehouse.gov, this is something the White House has done sporadically, and it would increase transparency by a small margin if it were regularized. The administration should establish a uniform URL where bills are posted so that every American can easily find every bill the president signs. But, in terms of fulfilling President Obama’s promise, “posting a link from WhiteHouse.gov to THOMAS of a conference report that is expected to pass doesn’t cut it.”

I think this is grudging progress toward implementation of President Obama’s “Sunlight Before Signing” promise. In the video, the author of the Times article has the best line illustrating why the White House deserves modest congratulations for taking this step: “It’s a lot easier to promise to change Washington than it is to actually change it.”

Uncle Sam a Generous Boss

Federal unions, government officials, and the Washington Post’s “Federal Diary” column frequently suggest that federal civilian workers are underpaid. They suffer from a large “pay gap” compared to private sector workers, or so the story goes.

But in the Post’s “Jobs” section yesterday, human resources specialist Lily Garcia argues that “Uncle Sam Is a Boss You Can Rely On.” For job seekers, Garcia points to the many advantages of federal work:

  • “Generous benefits, solid pay, and relative job security – a combination that is challenging to find in the private sector, even in the best of times.”
  • The “widest selection of health-care plans of any U.S. employer.”
  • “Liberal amounts of paid time off.”
  • Very lucrative retirement benefits.
  • Family-friendly policies such as “first priority and subsidies at a number of top-notch day-care facilities.”
  • “Federal employees are paid relatively well … [and] practically guaranteed periodic within-grade pay raises.”
  • Finally, “federal employees cannot be unceremoniously fired.” I’ve found that only about 1 in 5,000 federal civilian workers are fired each year due to poor performance. 

Is the lack of firing a result of the superb quality of the federal workforce and superior management practices? Hardly. Garcia notes that the downside of working for Uncle Sam is that the government “has its fair share of bullies, sycophants and incompetents who pick on employees, display favoritism, mismanage operations and find creative ways to manipulate the rules to their advantage.” I’d guess more than its fair share. Since federal workers are rarely fired, the ranks of non-performing managers and workers grows over time, contributing to the bureaucratic ineptitude we are all familiar with in the federal government.

To improve workforce efficiency, I’ve suggested privatizing as many federal activities as possible, include postal services, air traffic control, and passenger rail. To cut costs, I’ve suggested a federal wage freeze and a cut in federal benefits as part of a plan to reduce federal budget deficits.  

For more from Lily Garcia, see here. For more from me, see here.

The White House as Animal Farm

As George Orwell’s Animal Farm closes, the revolutionary pigs have been transformed into oppressive humans.  It took some time to occur on the Animal Farm.  It’s taken just a few months in the Obama White House.

Reports McClatchy Newspapers:

President Barack Obama is morphing into George W. Bush, as administration attorneys repeatedly adopt the executive-authority and national-security rationales that their Republican predecessors preferred.

In courtroom battles and freedom-of-information fights from Washington, D.C., to California, Obama’s legal arguments repeatedly mirror Bush’s: White House turf is to be protected, secrets must be retained and dire warnings are wielded as weapons.

“It’s putting up a veritable wall around the White House, and it’s so at odds with Obama’s campaign commitment to more open government,” said Anne Weismann, chief counsel for Citizens for Responsibility and Ethics in Washington, a legal watchdog group.

Certainly, some differences exist.

The Obama administration, for instance, has released documents on global warming from the Council on Environmental Quality that the Bush administration sought to suppress. Some questions, such as access to White House visitor logs, remain a work in progress.

On policies that are at the heart of presidential power and prerogatives, however, this administration’s legal arguments have blended into the other. The persistence can reflect everything from institutional momentum and a quest for continuity to the clout of career employees.

“There is no question that there are (durable) cultures and mindsets in agencies,” Weismann acknowledged.

Conservatives once opposed executive aggrandizement.  Then with George W. Bush in office, they embraced the idea of the presidency as a kind of elective monarchy.  With President Barack Obama now pushing the executive power grab, will conservatives rediscover their inner-Constitution and again join the barricades for liberty?

The Biggest Leeches Always Live

By proposing to eliminate the Federal Family Education Loan Program, President Obama has raised a pretty big ruckus in the relatively staid world of higher education policy. For the uninitiated, FFELP uses taxpayer dollars to essentially guarantee profits to participating financial institutions, and to keep student loans cheap and abundant. 

Since neither corporate welfare nor rampant tuition inflation are really good things, getting rid of this beast would be a welcome move. Unfortunately, the president wants to replace FFELP with direct-from-Washington lending and to plow the savings into Pell Grants, so there’ll be no savings for taxpayers and probably very little beneficial effect on college prices. 

As I wrote on NewMajority.com in May, no one should expect big lenders to get kicked off the federal gravy train:

[T]he Obama administration is saying they’d keep private companies as servicers of loans to maintain quality customer service. Of course, this could very well be worse than the status quo: It will likely keep at least the biggest current lenders (read: Sallie Mae) at the political trough, but Washington will be THE lender for all students.

Right I was! Or, at least, signs of my prescience keep getting brighter:  Despite Obama promising to go to war against an ”army” of lenders’ lobbyists, the U.S. Department of Education just awarded Sallie Mae and three other big lenders lucrative contracts to service federal loans. So while smaller leeches could very well be removed from their supply of taxpayer blood, the biggest will keep on sucking!