Published: Wed, 28 Sep 2016 00:00:00 -0400
Last Build Date: Wed, 28 Sep 2016 21:17:43 -0400
Mon, 26 Sep 2016 12:00:00 -0400If you're looking for a silver lining on the mushroom cloud of Donald Trump's presidential campaign, consider the way it has exposed the phoniness of certain commonplace pieties. Last week, in comments about getting other countries to pay for safe zones in Syria, Trump boasted of using other people's money: "It's called OPM. I do that all the time in business. It's called other people's money. There's nothing like doing things with other people's money." The comment rocketed around the news-osphere, and quickly became part of a Clinton campaign ad, in no small part because he made it the same day it was reported that he used money from his charitable foundation to settle lawsuits against him. But it also got plenty of traction because it reinforces the dominant (and correct) narrative about Trump: that he's an unscrupulous, chiseling swindler. People of good character put their own money where their mouths are. Really? Somebody better tell Washington, then. In the nation's capital, spending OPM is S.O.P.—to the tune of trillions of dollars every year. It's the chief political pursuit, in fact. Most of the arm-twisting in D.C. gets done for the purpose of taking a nickel from one person's pocket to put in somebody else's. A great deal of that happens through social-welfare programs. Granted, the recipients usually spend the money on food, medical care, shelter, and other necessities—and the desire to keep people from dying in the streets is a noble one. But that doesn't change the fact that social-welfare programs cannot exist without a constant, huge supply of OPM. And many people think it's a national sin that the supply isn't even bigger. The same holds true for a vast array of federal programs—from Amtrak to the National Institutes of Health to the Voice of America. That's how most government programs and policies work: Somebody comes up with a bright idea, and then decides it is so worthy everyone else should be forced to pay for it. Modern presidential campaigns are largely built around this: Candidates appeal to the voters by promising things to Smith—rural broadband! Universal pre-K! Free college! A giant border wall!—that Jones will have to pay for. Of course, Washington can't afford to pay for everything directly. Hence much effort also is expended finding indirect ways to use OPM. These are nearly limitless. Should low-skilled workers be paid more? Support candidates like Hillary Clinton, who will raise the minimum wage. Do we need to bring back American manufacturing? Support candidates like Trump, who threatens to impose huge tariffs on Chinese imports. Should employees get paid family leave? Support either Clinton or Trump, since they both promise to make companies provide it. Some people will benefit. Others will get stuck with the bills. A few days before Trump made his "other people's money" comment, The Washington Post ran an exposé on "How Donald Trump Retooled His Charity to Spend Other People's Money." Rather than use his own personal funds for worthy causes, Trump convinced others to donate money to his foundation—money he then passes out, often leaving the impression it had come from him. "Trump," the article grimly reports, "had found a way to give away somebody else's money and claim the credit for himself." Imagine! This is exactly what politicians do all the time. "Congressman Storpingoiter Proud to Announce $15 Million Federal Housing Grant for District," goes the typical press release. Often there will be a little ceremony so local officials can stand around and applaud the congressman. That Storpingoiter sure is a swell guy, bringing home other people's money like that. Isn't he? The story on Trump's charity is full of sentences that apply just as well to elected officials. "Nearly all of its money comes from people other than Trump," it notes. "Trump then takes that money and generally does with it as he pleases. In many cases, he passes it on to other charities, which often are under the impression that it is Trump's own money." Gee, who does that remind you of? When Trump take[...]
Sat, 17 Sep 2016 09:30:00 -0400Cincinnati's long-time-coming and controversial streetcar line officially launched last Friday, and it's already been plagued by problems and bad omens. First, a car was nonoperational on opening day. Then, a bomb threat forced the line's shutdown. And this week, the streetcar manager demanded an extra $20,000 from the city if it wants more than two cars to run during Cincy's huge annual Oktoberfest festival this weekend. That running extra cars during extra-busy periods should prove an issue is especially damning for the streetcar, which is opposed by Cincinnati's mayor (along with much of the local business community) and was panned by Ohio Gov. John Kasich. If the streetcar is ever to be profitable, or at least cover its own operating costs, it should be on one of the rare nights of the year when Cincinnati residents are actually flocking en masse downtown. But apparently even this is too much to ask. During most times, it's unclear who exactly the streecar—which covers a scant 3.6 square-mile portion of downtown—is meant to serve. The 18-stop route now connects areas where downtown residents and employees can either easily walk or bus or have little reason to travel between, and where visitors from the suburbs (who will already have to drive in) can find ample parking. The route was initially supposed to expand uphill toward the University of Cincinnati campus, but that plan was scrapped after Kasich pulled state funding. With the original route, Cincinnati had originally estimated a building and prep cost of $110 million. The project was to be completed in three years. Nine years later, the ultimately much smaller route wound up costing the city $148 million, of which around $45 million came in the form of grants from the federal government. Going forward, Cincinnati will pay the Southwest Ohio Regional Transit Authority (SORTA) a base rate of $4.2 million per year to manage the streetcar, which is operated and maintained by French company Transdev. Ramping up service during special events will cost extra—something city officials were surprised to learn earlier this week, when SORTA demanded an additional $20,000 to operate five cars, instead of the usual two, during Oktoberfest this weekend. SORTA said its contract stipulated that it would run extra cars during special events as needed but that the city must also pay extra in such situations. City Council members said this had not been their understanding. On Wednesday, City Manager Harry Black announced that a compromise had been reached that would not incur "any additional cost to taxpayers." But it still involves SORTA getting extra funds from the city to run an additional two (but not all five) cars this weekend. The city plans to give SORTA $7,000 in money that was leftover from its streetcar-opening budget. Advertising Vehicles, the company that sold ads on and in the streetcars, will make up any operating expenses not covered by the city money or this weekend's ticket revenue. Cincinnati Mayor John Cranley said the city still believes that SORTA is contractually obligated to run extra cars on busy weekends, but it will work out this issue at a future time. SORTA, a taxpayer-funded state agency whichalso runs Hamilton County and Cincinnati bus systems, is facing financial issues independent of the streetcar. The agency projects a $1.3 million budget shortfall this year, amid declines in bus ridership and fare revenue, and has begun firing staff and postponing projects in preparation. So far, SORTA's management of the streetcar isn't inspiring much confidence in its ability to manage this public-transit option any better. Other problems faced by the streetcar in its first week include credit-card machines not working at some ticket kiosks; a fight over where to put the SORTA sticker logos on cars; and passenger-count sensors failing, leaving SORTA to merely estimate the number of opening-weekend riders. Cincinnati officials have offered little in the way of estimated economic impact from the streetcar, which is officially call[...]
Thu, 08 Sep 2016 17:31:00 -0400Before the Great Aleppo Gaffe (GAG) this morning on MSNBC's Morning Joe, Libertarian Party presidential candidate Gary Johnson must have thought this was going to be a pretty fine day for his campaign. In fact, he's got an op-ed in The Washington Post that makes an unusual and pretty convincing case that he and his running mate, former Massachusetts Gov. Bill Weld, are exactly what the country needs to break free of the partisan-spending stupor. While gridlock can be a good thing—do we really want the government to be super-active?—the plain fact is that 70 percent of federal spending is already on autopilot. So-called mandatory spending on Social Security, Medicare, Medicaid, and more, along with interest on the national debt, happens whether Congress lifts a finger or not. Since 1970, the share of automatic spending has risen from 39 percent of the federal budget to 68 percent. According to the Peter G. Peterson Foundation, which advocates for less spending, by 2046, mandatory spending and interest on the debt will crack 80 percent of the federal budget. What the hell is going on? Back in 1970, Medicare and Medicaid had yet to kick into high gear and Social Security spending was still fairly restrained. Since then, as especially in the 21st century, Congress and president after president (that is, George W. Bush and Barack Obama) have seen fit to push more and more spending into the "mandatory" category because then they don't have to take responsibility for it. The beneficiaries of entitlements, especially seniors, are big voters and aren't complaining. Younger Americans (generously defined as anyone younger than myself) are slow to call foul on olds who, we are constantly told, are just one means-testing law away from eating cat food and paying a billion dollars for basic medical care. But we're rapidly approaching a point where virtually all spending is already spoken for. If and when interest rates rise toward their historical average, the squeeze will be even tighter. Johnson's Post op-ed addresses this budget problem directly. "Elected officials in Washington cannot even agree on a real budget — and haven't for years. That's their most straightforward responsibility," he writes. The first priority of the Johnson-Weld administration will be submitting to Congress a balanced budget. As governors, we held true to promising that taxes would go down, not up. We'll end up cutting spending by roughly 20 percent in order to match it to current tax receipts. My default is to question federal spending and to require every year that each agency justify its budget anew. As governor, I vetoed more than 750 bills, often special-interest payoffs, and I won't hesitate to veto such bills from Congress. That said, Bill and I are reasonable and realistic executives. We will accomplish the free-market, fiscally conservative agenda of limiting government and increasing trade, while pursuing long-overdue immigration and criminal-justice reform. More here. Johnson argues that precisely because he is outside of either the Republican or Democratic Parties that he will be in a better position to pull people to the table and hammer out legislation that shrinks the size, scope, and spending of government. That's not because he is a deal-maker a la Donald Trump. It's because, he notes, a plurality of Americans (38 percent, according to Gallup's most recent survey) consider themselves independent and want "a common-sense approach that combines fiscal discipline with social inclusion." The former two-term governor of New Mexico's op-ed is well worth reading. So is his actual comments on Syria, which have been almost totally lost in the gotcha-ism of Johnson's GAG. Where Hillary Clinton has a clear record of pushing for military intervention—she voted for the Iraq War and was slow to acknowledge it was failing and she was one of the chief voices in the Obama administration pushing for bombing Libya, among other things—and Donald Trump talks about "bombing the shit out" of ISIS, [...]
Thu, 01 Sep 2016 12:00:00 -0400Americans subsidize the lifestyles of former presidents, because otherwise it would be embarrassing to find George W. Bush taking your order at Wendy's. It's all authorized by Former Presidents Act passed in 1958. These days, the life of an ex-president is filled with so very many profitable speaking opportunities and consulting gigs that it's absurd to think the Act is still necessary. Nevertheless, it's there, and despite raking in millions after leaving office, the Clintons have been using it to subsidize salaries and purchases that appeared to benefit the Clinton Foundation. Did the foundation need taxpayer money? Obviously not. But it was all legal for the Clintons to ask for it, and so we have an example of behavior that's likely going to turn out to be completely "permissible," and that's part of what makes it so loathsome. Politico got the records from the General Services Administration (GSA) through the Freedom of Information Act to determine the Clintons used the Act to subsidize the incomes of some of their staff, even while paying them six-figure salaries through the Clinton Foundation. Politico determined that the Clintons have requested $16 million through the Act since 2001, more than any other living president. Politico notes that individual staffers didn't get huge sums—about $10,000 annually each out of an annual pool of less than $100,000—but getting that federal salary also gave them access to federal benefits: The key reason for adding staffers to the GSA payroll, according to two people familiar with the Clintons' staffing arrangements, was that each employee became eligible for full federal employee benefits, including health and life insurance and pensions. The two people familiar with Bill Clinton's staffing said the employees on his GSA payroll almost never received benefits from either the Clinton Foundation or the [Clinton Executive Services Corporation]. As one of the guys at Reason who covers the various pension crises across the country, this is a reminder that while the actual annual payout under the Act is utterly inconsequential when compared to total federal spending, we should be worried about the long-term financial commitments that go on long beyond what taxpayers realize. Yes, this is a drop in the bucket. But the bucket is already full and spilling over. What makes this information all so very Clintionian (besides the remarkable amounts of money involved) is the challenge the GSA faced when deciding whether to approve expenditures. A lot of time and effort went in trying to determine whether the money requested was Bill Cinton's personal staff and work or for the Clinton Foundation and the overlap between the various roles of people within the Clintons' orbits. As Politico notes, some of the staff paid by the GSA worked for both the Clintons personally (which is what the Act is supposed to be for) and the Clinton Foundation (which it is not). These staffers often had very high salaries (close to $200,000 a year in one case) while getting the federal subsidies. And yes, money from the GSA was also apparently used to help pay for IT equipment, including servers, though Politico uncovered that in at least one case the GSA declined to pay for a server, determining that it was meant for the Clinton Foundation. Except that a Clinton aide told Politico that actually the GSA did purchase the server, after all, according to their own records. In a perfect distillation of the controversies surrounding the Clintons, it's not clear what's actually true. Returning to the metaphor of drops in buckets, in other circumstances and for other political figures, this probably wouldn't add up to much. It's so much inside baseball, and there's really no smoking gun. But "It's so much inside baseball, and there's really no smoking gun," is the unofficial motto of Hillary Clinton's campaign and response to criticism at this point. It all looks terrible, given the lack of trust by voters in Clinton, but it all appears [...]
Tue, 30 Aug 2016 12:50:00 -0400
(image) Congress will be returning to session next week after Labor Day with a busy agenda that nobody actually wants to deal with because this year's elections seem so crazy.
At the top of mind of small-government conservatives (and obviously libertarians) is the intense pressure to pass a spending bill to keep the government in operation. The omnibus spending bill approved last December funds the government to the end of September. So they've got to pass something.
Several activist groups that support reducing the size of government and lowering taxes are putting forward an organized effort to try to discourage Congress from kicking the can down the road to December's lame duck session and then pushing through a last-minute, post-election, must-pass spending bill influenced by members of Congress who are on their way out the door and don't have to worry about accountability. (We're looking at you, Sen. Harry Reid.)
Some of the groups involved—like Americans for Prosperity, FreedomWorks, and Americans for Task Reform—are heavy-hitters in small-government and Tea Party activism. They, and several dozen other organizations, are calling on Congress to avoid a last-minute push to fund government all the way through 2017 and quietly include all sorts of cronyist regulations that benefit certain influential parties that lobby the government. In a teleconference with the media this morning, participants noted efforts to re-establish the loan authority of the cronyist Export-Import Bank as a concern. In a letter, the groups note how last year's last-minute, must-pass omnibus spending bill turned out:
Congress already considered the matter of expiring tax provisions a little under a year ago. The $680 billion package signed into law last December made some of these items permanent and allowed more than two dozen others to expire at the end of 2015, laying the groundwork for comprehensive tax reform. Included in the nearly $20 billion in tax provisions that are set to expire are provisions pertaining to small-scale wind power, geothermal heat pumps, race horses, film production—provisions that distort our tax laws and narrowly benefit favored industries over the rest of the tax base. These provisions were made temporary for a reason. It makes no sense to come back just one year later and selectively extend certain provisions in a lame duck.
Reason noted some of the secret stuff buried in that Omnibus legislation earlier in our April issue (not all of it was bad—but it was certainly not transparent). In a press call this morning, representatives from three of the groups involved in this push said they're specifically focused on making sure spending legislation is not approved at the last minute, and only spending and tax-related legislation. They're going to stay focused on that goal and not other types of bills that could get pushed through in December. That may matter in the event that heavily negotiated criminal justice and sentencing reforms finally make it through Congress before the end of the year.
But clearly something does need to be passed in order to prevent a government shutdown. What some Republicans are pushing for is a continuing resolution to fund the government through March of next year. That would put the new president and a new Congress into place. Read more about the push behind that six-month plan here.
Tue, 09 Aug 2016 15:50:00 -0400
(image) The federal government is projected to run a deficit of $534 billion in fiscal year 2016, and that's supposed to be a good thing. President Obama boasts that he's seen "deficits cut by two-thirds,"—because in 2009, the deficit topped $1.4 trillion. By comparison, it was $458 billion in 2008.
"There are 1011 stars in the galaxy," physicist Richard Feynman said more than thirty years ago. "That used to be a huge number. But it's only a hundred billion. It's less than the national deficit! We used to call them astronomical numbers. Now we should call them economical numbers."
The federal government used to run deficits largely only during wartime and financial crises, although that changed after World War II. In recent times, the only balanced budgets were from 1998 to 2001, under Bill Clinton and a Republican Congress, and the federal government went right back to deficit spending when Republicans took control of Congress and the White House under George W. Bush.
Balanced budgets used to, at the very least, be an issue that got exposure during the election cycle. Not so this time. In the dozen or so primary debates I watched this season, I don't think I heard a balanced budget come up once in a substantive way.
The Republican party platform calls for a Balanced Budget constitutional amendment, but such an amendment would be even more difficult to pass than anything resembling a balanced budget. That makes it more of a rhetoical flourish than a serious policy goal. The Republican presidential nominee, Donald Trump, meanwhile, rarely talks about balancing budgets. His idea for reducing the national debt (to which annual deficits contribute) is negotiating for the federal government's creditors to accept less. When it comes to spending, he says the Democratic nominee, Hillary Clinton, doesn't go far enough—Trump's response to her $275 billion infrastructure spending plan was promising he would spend twice as much.
There is a candidate who is expected to be on the ballot in all 50 states who has made reducing spending a cornerstone of his campaign—Libertarian nominee Gary Johnson, who has repeatedly said he'd be open to any proposal to cut spending that came out of Congress. His fiscal record as two-term governor of New Mexico (where the state constitution mandates a balanced budget) isn't good enough for some "Never Trump Republicans," who appear more interested in fighting more battles in the culture war and fighting more real wars than getting behind the only candidate taking trillion-plus dollar government spending seriously.
Tue, 02 Aug 2016 13:35:00 -0400The criticism at the Democratic National Convention last week directed toward Donald Trump had at least one significant flaw: They acted as though he had no policy plans at all, though in reality several of his economic proposals mimic what we hear from Democrats themselves. His anti-trade positions, his desire to punish companies that leave the United States, and his desire to use federal infrastructure spending as a jobs program all mimic things said by Democrats and even Hillary Clinton herself. But Trump is a particularly special candidate in that he simply cannot allow anybody else to offer something that in his mind is better or bolder than what he's offering. So in an interview this morning, knowing that Clinton has proposed a $275 billion infrastructure spending plan over five years, Trump told Fox Business News that he would "at least" double that amount of spending. So that would be at least $550 billion in spending. Remember that the big stimulus money spent under President Barack Obama's administration totaled $833 billion. At the exact same time (in the same interview, no less), Trump says he's going to implement "the biggest tax decrease." This is crazy nonsense, and he says that he'll pay for his plan with a "fund" where people would "invest." One big problem here (among many big problems) is that Trump, like Democrats, are focusing on infrastructure projects as a job program instead of a program narrowly focused on fixing the actual infrastructure—those bridges Trump says he is worried about. A focus on jobs indicates a desire to spread money around using infrastructure needs as a justification, not a purpose. As Peter Suderman noted in a Reason magazine cover story in 2013, the emphasis on using infrastructure spending as a "stimulus" rather than a plan to fix actual defined problems resulted in things like spending millions of dollars on toilets in national parks and ultimately a lack of evidence that it actually improved our economic situation. Nobody wants to be an "investor" in such a program because everybody wants to be the beneficiary. This is a program where people want to receive the money, not pay into it. If Trump (or Clinton, for that matter) needs a better example, check out California's high-speed rail plans. This is a pure example of a program that has been designed to spread around money, not meet actual infrastructure needs of the Golden State. That it's passing through the central area of California instead of zipping between the urban centers of San Francisco and Los Angeles is a blatant payoff to make sure various labor groups get work and get their share of the pot (and for the local politicians to get credit and votes for bringing home some bacon). As such, particularly given the unlikelihood of the train ever operating at a break-even point, let alone a profit, they are unable to draw in private investors. People realize all the money is in building the train, not running it. So is the potential for both Trump's and Clinton's infrastructure plans. If the goal is to spread around money, there will be plenty of hands out, but actual infrastructure needs become subservient to who has the most power and influence over the spending process. China, which Obama himself once praised for its infrastructure spending, has instead become a massive example of how government spending for the sake of creating the appearance of growth leads to cronyism, corruption, and eventually actual threats to public safety from shoddy outcomes. China spends big on infrastructure, and yet its bridges are still collapsing. And let's not pretend that there hasn't been a constant drumbeat of jobs-focused infrastructure spending throughout Obama's administration, even beyond the initial stimulus. Matt Welch documented Obama frequently calling for more infrastructure spending as a jobs program, despite little evidence that this spending actual stimulat[...]
Fri, 22 Jul 2016 00:00:00 -0400
(image) Donald Trump's nomination acceptance speech tonight called for lowering taxes. He didn't say which taxes or how much or anything concrete at all, because that's just not how Trump rolls. He said "reducing taxes will cause new companies and new jobs to come running back to our country." He also called for reducing regulations that cost the economy $2 trillion a year. Sounds great, right?
And then two paragraphs later we get this "solution" to get Americans working:
This new wealth will improve the quality of life for all Americans – We will build the roads, highways, bridges, tunnels, airports, and the railways of tomorrow. This, in turn, will create millions more jobs.
The railways of tomorrow? Yes, if you weren't aware, Trump is a fan of government pork projects, including high-speed rail. His position appears to essentially be based entirely on envy: He complained to The Guardian that China has high-speed trains and America doesn't. That doesn't actually mean America needs these trains. They are huge money sinks that pass money along to connected cronyist interests and labor groups, and there's little to show that these trains would actually serve as economic engines.
In fact, evidence shows the exact opposite. As Matt Welch recently noted, California has been warned that a high-speed rail would require continued government subsidies and they've known this all along, despite telling the public it would be profitable. The Reason Foundation has been warning about this all along.
This is not to say there aren't infrastructure development needs, but approaching it as a jobs program, the way Trump is here, is designed to create tons and tons of pork projects, with various interest groups jockeying for a hunk. This is essentially the opposite of Trump's claims that he's going to fight against special interests and the "rigged system."
But I suspect that might be okay to many Trump supporters, particularly the unemployed ones. Elsewhere in his speech he bluntly acknowledged that he knew how to use "the system" and that's why he could be the candidate to "fix" it. While he says it's to make government more "fair," it's very clear that even under Trump, his idea of fairness would benefit certain groups of Americans over others.
And as we've seen in California, those who benefit from this pork are also going to see the costs bloat beyond what we've been sold. Taxpayers approved $10 billion to get the train started, but it's going to cost $68 billion at the minimum and nobody wants to invest in it. It's a boondoggle designed shovel money to connected people (as evidenced by the fact that it drifts into the middle of the state for no other reason other than to increase the length of it and the number of people who get to work on it).
And Gov. Jerry Brown, who loves this horrible train plan, loves these infrastructure plans the same way Trump does. Brown also envies how China has previously propped up its economy with corrupt infrastructure projects that blow money to create empty malls and ghost towns. It's Keynesian economics at its most hollow and wasteful.
Mon, 20 Jun 2016 11:38:00 -0400
(image) While Hillary Clinton has effectively clinched the nomination, Bernie Sanders remains the race. There are no more primaries or caucuses scheduled between now and the Democratic convention in Philadelphia in August. Even if super delegates from those states Bernie Sanders won switched their allegiance to him from Hillary Clinton he would not have enough delegates to win. Barring an event that incapacitates Clinton or disqualifies her from the nomination, Sanders doesn't have a chance. Someone waiting in the wings in case of worst case scenario isn't really a candidate anymore.
But he's still wasting taxpayer money. The Washington Post reports that while Sanders is no longer actively campaigning, his campaign remains active because he has not "suspended" it, and thus Sanders continues to receive up to $38,000 a day in secret service protection. Sanders has about as much chance of being the Democratic nominee as Ted Cruz has of being the Republican nominee. And given that Trump is more likely to precipitate a worst case scenario unprompted than Clinton, Sanders may have less of a chance even than Cruz, who is no longer receiving secret service protection, does.
The federal government burns through a billion dollars approximately every 150 minutes. The money spent on Sanders is chump change, but the additional money Sanders and his ideology demands the government take from the "rich" above the $6.66 million a minute the feds currently spend isn't.
Sanders made a big point in his campaign over the say he and his followers should have in how other people spend their money. Rather than being theft from the taxpayer, they view taxation as theft from the state. Sanders has rued the idea that there are so many choices of products like deodorant and sneakers in this country. "You don't necessarily need a choice of 23 underarm spray deodorants or of 18 different pairs of sneakers when children are hungry in this country," he said last May, displaying a stunning level of economic ignorance about the basic principles of increased consumer choices leading to increased prosperity.
Sanders' statement was highly dubious. What's not dubious is that Sanders, who is no longer actively campaigning for president and who has not particularly been the target of death threats, doesn't need to have $38,000 a day of taxpayers' money spent on him for secret service protection, irrespective of how many children are hungry in America.
Sanders' campaign manager says he Sanders could endorse Hillary before the convention but declined to explain the difference between endorsing another candidate and dropping out.
Wed, 01 Jun 2016 09:04:00 -0400A recently published deposition from a top tax official provides more evidence that the Obama administration not only acted illegally when deciding to pay Obamacare subsidies to insurers—but that they did so knowing full well that the move was not justified. First, some backstory: Two weeks ago, a federal appeals court ruled that the Obama administration had illegally paid insurers billions in subsidies under Obamacare. The law’s cost-sharing subsidies (which provided an added benefit for people between 100 and 250 percent of the poverty line, are separate from the subsidies that offset the price of insurance premiums) were authorized under the law, but not appropriated by Congress. Indeed, in 2014, the Obama administration submitted an appropriations request to Congress, but Congress declined the request. The White House went ahead and started paying insurers anyway. The payments amount to about $7 billion this year, and will tally about $130 billion over the next decade. (Payments will continue while the case is appealed.) The White House contends that its decision to pay insurers was appropriate, and that these sorts of disagreements are typical, especially with a law as poorly drafted as Obamacare. Republicans in the House, who sued the administration over the funding, argues that the administration knew the move was illegal—that it violated the constitutional separation of powers under which the executive branch can only spend money specifically appropriated by Congress—and went ahead with it anyway. There’s now some very strong evidence that the House’s argument is right—and that the IRS warned the administration that they had no authority to make the payments. In a sworn deposition earlier this month, David Fisher, the Chief Risk Officer to the Internal Revenue Service (IRS), told the House Ways & Means Committee that in a January 2014 meeting with administration officials, he raised some “concern about these payments.” Specifically, he couldn’t find any clear and direct support for the administration’s decision to make the payments. In the deposition, Fisher explained that he told administration officials that “there was no clear reference in the section regarding the cost-sharing reduction payments to the Internal Revenue Code in the Affordable Care Act” and that the “cost-sharing reduction payments are not linked to the Internal Revenue Code, as far as I could tell, directly anywhere.” That lack of a clear link, Fisher said, was unprecedented, and thus would be difficult to defend in the event of an audit. As Josh Blackman noted in an extensive report on the deposition last week, Fisher was, for all practical purposes, warning the administration that there was no valid appropriation. He was warning, in short, that it was illegal. The administration, however, disagreed. And in that January 2014 meeting, administration officials showed him a memo explaining why. Yet as Carl Hulse of The New York Times notes in a column on Fisher’s testimony, the administration’s presentation of its rationale was rather unusual. Fisher and several other IRS officials who had reservations about paying the subsidies, including his superior, were brought to a room in the Old Executive Office Building, where they were shown an OMB memo explaining the administration’s position. But they were not allowed to make copies of the memo to take with them. They were not even allowed to take notes on the memo. Fisher says that the IRS staffers present were given no reason why they couldn’t keep the memo. Instead, “it was simply stated.” As Fisher, a 10-year veteran of multiple government agencies and administrations, said, this was not at all common. He couldn’t recall a single other similar occurrence. The whole meeting, in other words, came a[...]
Mon, 23 May 2016 12:12:00 -0400
Puerto Rico has defaulted on its public debt, which is about equal to its GDP. There are many reasons for why the U.S. commonwealth can't pay its bills these days and first and foremost is that the island's public sector is swollen beyond health with public-sector jobs and benefits.
But part of the reason is that the cost of living is artificially made more expensive due to it being part of the United States. Not only does that mean Puerto Rico has to follow a whole host of labor regulations, including a minimum wage set for wealther areas, but it has to put up with abominations such as the federal Jones Act, which "which requires shippers to use costly U.S. flagged ships that result in Puerto Rican consumers paying artificially higher prices for goods."
As Reason columnist Veronique de Rugy and her Mercatus Center colleague Tad DeHaven write in USA Today, Puerto Rico is screwed:
Puerto Rico’s debt obligations have reached $72 billion (roughly equal to the size of its entire economy), and thanks to lavish benefits given to government employees over the decades, it faces more than $40 billion in unfunded liabilities. The island defaulted on $400 million in debt service payments at the beginning of May, and the prospects of it making good on another $1.9 billion in early July look bleak unless it works out agreements with creditors or the federal government gets directly involved.
They note that whatever debt relief package gets passed, it will likely tighten controls over the island's economy and strengthen Washington's hand. De Rugy and DeHaven argue that it's time to rethink Puerto Rico status as a U.S. commonwealth, for its health and that of the United States:
Over 100 years [after the Spanish-American War, which brought Puerto Rico under American control] the United States’ federal government finds itself with a virtual military empire that, when all related costs like veterans’ benefits are factored in, soaks taxpayers close to $800 billion a year. That’s a lot of money to effectively subsidize the defense needs of wealthy allies and exert control over foreign populations for the ostensible purpose of “spreading democracy.” And not coincidentally, the tentacles of the federal government can be found in virtually every aspect of our lives. After all, federal involvement in everything from education to the federal highway system has been justified on dubious “national security” grounds.
So, while raising the question of Puerto Rican independence might seem quaint, its prominent place in the news is at least an occasion to recognize that big government abroad and big government at home are two sides of the same coin. Relinquishing control of Puerto Rico would be a significant step toward a badly needed downsizing of the federal government.
Back in 2012, Matt Welch interviewed then-Gov. Luis Fortuno, whose spending cuts had helped to prevent Puerto Rico from becoming "America's Greece." After taking a hatchet to the state workforce, Fortuno was voted out of office and, well, here we are.
Take a look below or read this conversation between Welch and Fortuno.
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Sun, 22 May 2016 06:00:00 -0400That fact that the war on terror has been expensive will surprise no one. Since 2001, the U.S. government has laid out mind-boggling sums to keep the homeland safe from violent extremists. There was the $30 billion raise for the FBI that didn't see 9/11 coming and $70 billion for the bureaucrats who have consistently failed to keep our airports safe. Add in more than $200 billion for a new Cabinet-level department to coordinate all of this activity and half a trillion for mass surveillance, plus the incredible costs of a decade and a half of military action abroad, and the total comes to a whopping $4 trillion. Where did all that money go? FBI: $30+ BillionDespite the FBI’s failure to predict what was coming on 9/11, that agency’s budget has more than tripled since 2001. Has all the extra spending at least reaped positive returns in the form of stopping future violent incidents? Much to the contrary, there is evidence that the bureau has manufactured more terrorists via its entrapment operations than any foreign entity could have hoped to recruit inside the United States. The FBI, which pockets $5 billion a year for its counterterrorism programs, has profited mightily from ginning up bogus plots that generate lurid headlines. For instance, a September 28, 2011, FBI press release trumpeted the arrest of Rezwan Ferdaus, a U.S. citizen, on charges that he planned to use “large remote controlled aircraft filled with C-4 plastic explosives” to “destroy the Pentagon and U.S. Capitol.” The culprit, a 26-year-old Bangladeshi American suffering from seizures and being treated for severe depression, had been bankrolled and enticed to embrace a scheme he almost certainly wouldn’t have considered on his own. As a 2014 report by Human Rights Watch and Columbia University Law School’s Human Rights Institute noted, “Multiple studies have found that nearly 50 percent of the federal counterterrorism convictions since September 11, 2001, resulted from informant-based cases.” That doesn’t sound so bad until you realize the informants’ job in many of these instances was to trick otherwise innocent people into signing on to illegal plots of the government’s own invention. In one case, a judge concluded that the government “came up with the crime, provided the means, and removed all relevant obstacles” in order to make a “terrorist” out of a man “whose buffoonery is positively Shakespearean in scope.” Trevor Aaronson, author of The Terror Factory: Inside the FBI’s Manufactured War on Terrorism, estimates that only about 1 percent of the 500 people charged with international terrorism offenses in the decade after 9/11 were bona fide threats. Thirty times as many were induced by the FBI to behave in ways that prompted their arrest. A 2011 report by the New York University School of Law Center for Human Rights and Global Justice examined several high-profile cases and found that “the government’s informants introduced and aggressively pushed ideas about violent jihad and, moreover, actually encouraged the defendants to believe it was their duty to take action against the United States.” Ohio State University professor John Mueller, co-author of Chasing Ghosts: The Policing of Terrorism, observes that no terrorist entity within the U.S. was able “to detonate even a simple bomb” in the decade after 9/11. Aspiring terrorists even “have difficulty putting together bombs,” he says. “At the  Boston marathon, two bombs went off and killed three people in a crowded area. So they finally actually got a bomb to go off but it wasn’t exactly terribly lethal.” Almost all the bombs involved in terrorist plots in the U.S. have been FBI-built duds—like most of the prospective terrorists. Security ex[...]
Mon, 16 May 2016 14:38:00 -0400Venezuela is on the verge of both economic and social collapse, and the Bolivarian socialist government headed by President Nicolás Maduro is lashing out at any everyone from "whingeing" factory owners (who lack the raw materials they need to produce anything of value) to the U.S. government, who he accused of formenting a coup when he extended the nation's state of emergency last Friday. The style of socialism introduced to the oil-rich country by Maduro's predecessor, the late Hugo Chavez, was credited by Salon's David Sirota with creating an economic miracle as recently as 2013. But the disaster currently unfolding is more than just a failure of socialism. Venezuela has been spending a fortune on unnecessary and ridiculous expenditures for years. That is, when government officials haven't been (allegedly) stealing billions in oil profits and pocketing the cash outright. Despite sitting on the world's largest oil reserves and having nationalized oil production, Venezuela spends $45 million a year on Pastor Maldonado — an undistinguished Formula One race car driver with a predilection for crashing a lot — who essentially serves as a walking billboard for the country's oil company. Wasting taxpayer money on sponsoring a loser athlete is bad enough, but what could possibly be the justification for spending that kind of cash to advertise the national oil company, which by definition has no competition? The waste and graft surrounding sports doesn't end with Maldonado. Formula Freak reports that following Chavez's death in 2013, "Alejandra Benitez, the Venezuelan minister of sports, found that her falsified signature had moved over 65 million in sporting-fund dollars to places in which it did not belong." In 2007, as part of Chavez's ambition to "combat American cultural hegemony," he forked over nearly $18 million for "scripts, production costs, wardrobe, lighting, transport, makeup and the creation of the whole creative and administrative platform" of a prospective Danny Glover-helmed film project about a Haitian slave revolt. The film never went into production. Pro-free market types enjoyed a good laugh when the country's largest beer company ceased production last month, as a direct result of a lack of access to foreign currency and a domestic currency now more useful as toilet paper than legal tender, but the situation in Venezuela grows more tragic by the day. Though supermarket shelves are pretty much empty these days, for the past two years the government has been fingerprinting shoppers to prevent "hoarding," which itself was also made illegal. As could be completely expected by such scarcity of basic items needed to live, much less live in any semblance of comfort, Bolivarian socialism has spawned a thriving black market. "In a system that mirrors the rationing implemented across communist countries last century," Andrew Rosati writes in Bloomberg, "Venezuelans are allotted certain days of the week that they can purchase goods deemed most essential by the government." The hole in the marketplace is now filled by entrepreneurs known as bachaqueros, who in turn "have developed their own ecosystem, rules and regulations." Though Maduro would classify any unauthorized transaction as emblematic of the "economic war" he imagines himself fighting, the economic realities his movement has created have led to "Doctors and accountants moonlight[ing] as cooks at restaurants" and everyday survival the only matter of concern to the populace. Electricity has been rationed and the workweek has been cut to two days. The government, never known for its tolerance for dissent dating [...]
Thu, 12 May 2016 12:55:00 -0400A series of federal raids were conducted around the village of Kiryas Joel in upstate New York, Forward reports. Accounts on social media suggest participation in the raids by the FBI, the Bureau of Alcohol, Firearms, Tobacco and Explosives (ATF) and the Sullivan County district attorney's office. Neither the FBI nor the U.S. attorney's office provided Forward with a comment, but the Jewish media outlet suggested the raids may have to do with a couple of ongoing controversies in Kiryas Joel—a video of an ultra-Orthodox principal kissing a boy that is being investigated by local authorities (the school defends his actions), and/or a scandal involving alleged misuse of federal e-Rate funds by Orthodox institutions in Kiryas Joel and elsewhere in upstate New York as well as Williamsburg, Brooklyn. The e-Rate scandal has already led to federal raids in Kiryas Joel and elsewhere in New York. The federal e-Rate program offers money to libraries to purchase servers as well as to subsidize the cost of phone and internet access. The definition of a library and what kind of institutions qualify is determined at the state and local level. In New York, the determinations are made by local library associations. Most require the institutions have a librarian with a master's degree. The Metropolitan New York Library Council (METRO) offers "collegial" level membership for libraries that don't meet all the qualifications. Such institutions then qualify for e-Rate funding and, as Forward reported in 2013, some Orthodox institutions joined METRO to qualify for funding, and then allegedly received far more than would be necessary for the institutions given their small size. Many of the institutions were Satmar Hasidic—Forward reports that one of the community's two top religious leaders had decreed that Satmar children who had internet at home could not attend Satmar schools, thus spurring growth in internet cafes as well as the library-like institutions under scrutiny. Congress passed legislation to set up E-rate in 1996. It's funded by "universal" fees on phone and internet bills, and the program spends $2.25 billion a year on subsidies. The program has been plagued with fraud and waste almost from the beginning, including a previous multi-million dollar fraud in New York in 2002. The amounts involved in Kiryas Joel are in the six-figure range. That means that if today's raids are associated with the e-Rate scandal, the cost of the probes and raids could easily surpass the amount of money involved in the fraud. Fraud prevention easily leads to more waste. In the meantime, internet access has expanded since the 1990s largely thanks to private enterprise and the lack of onerous regulation. Local government efforts at managing and meddling with internet access are often disasters, with local governments also choking broadband competition and impeding internet access that way as well. E-rate is a program that's long outlived its usefulness, if it even had any in the first place. The plug should have pulled after the first multi-million dollar fraud—there are more efficient ways to improve internet access, with the near ubiquity of internet access in the U.S. today serving as evidence of that in action.[...]
Fri, 06 May 2016 12:00:00 -0400Puerto Rico has now firmly established itself as America's analogue to Greece. To get back to fiscal sanity, Puerto Rico is going to need some combination of debt forgiveness, political reform, and privatization. Congress may be in a position to help, but it will have to face down powerful special interests to do so. After missing relatively small bond payments last August and this January, Puerto Rico's public sector defaulted on at least $367 million of principal due May 1. As a consolation, investors did receive $9 million in interest from the defaulting entity, Puerto Rico's Government Development Bank. The fact that Puerto Rico even has a Government Development Bank should raise an eyebrow. State-owned banks are not a major feature of the mainland US economy, perhaps because failures of state banks contributed to a number of state bond defaults in the 1840s. Since the US didn't take over Puerto Rico until 1898, the island was not around to learn that lesson. The GDB is one of over fifty public corporations dominating Puerto Rico's economy. Others control the island's electricity, water, and sewer services. Public corporations date back to the 1940s and largely owe their existence to the efforts of Rexford Tugwell. "Red Rex" was a Columbia University economist who was sold on the virtues of the Soviet way when he visited Stalin's Russia in 1927. He went on to play a leading role in implementing Roosevelt's New Deal. In 1941, FDR appointed Tugwell as Puerto Rico's governor, where he applied a similar state-led economic model. While much of the New Deal was unwound on the mainland, Puerto Rico's public corporations persisted on the strength of borrowed funds. Puerto Rico's 1917 congressionally-imposed constitution limited Puerto Rico's central government and municipal debt to 7 percent of assessed property values. It also mandated a balanced budget. These limits did not apply to public corporation debt, and these entities started borrowing liberally. A new constitution ratified in 1952 as amended in 1961 relaxed constitutional limits on Puerto Rico central government and municipal borrowing. A major cause of this relaxation was a mistranslation of balanced budget language in the 1952 constitution. While the English version instructs the legislature to balance revenues and expenditures, the Spanish translation of revenues was closer to "resources". The Puerto Rico government interpreted "resources" broadly, even including bond proceeds. It thus became possible to "balance" the budget with borrowed funds. By the early 1980s, public sector debt had reached 82 percent of GNP—not far below today's level of about 100 percent. Puerto Rico muddled along with high debt levels until recently, when a long-lasting recession, out-migration, a string of unbalanced budgets, and loss of bond market access triggered the current crisis. So what now? Detroit, San Bernardino, Stockton, and Vallejo were able to reduce their debt burdens by using Chapter 9 of the federal bankruptcy code. But that option is not available in Puerto Rico. The Commonwealth passed its own version of Chapter 9 in 2014, but its implementation has been held up by litigation which recently advanced to the Supreme Court. Puerto Rico then asked Congress to extend Chapter 9 to the island, but House and Senate bills making this change went nowhere in 2015. Now that Puerto Rico's crisis has deepened, House Republican leadership and the Obama Treasury Department have reached a broad agreement on what needs to be done. The plan, embodied in HR 4900, combines a new legal process for debt restructuring with a federal oversight board to help Puerto Rico balance its budget. Oversight boards are unde[...]