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Government Spending

All articles with the "Government Spending" tag.

Published: Mon, 27 Feb 2017 00:00:00 -0500

Last Build Date: Mon, 27 Feb 2017 15:01:41 -0500


Federal Infrastructure Spending Is a Bad Deal

Thu, 09 Feb 2017 06:00:00 -0500

In his first address as president-elect, Donald Trump repeated his campaign promise to invest in America's infrastructure. "We are going to fix our inner cities and rebuild our highways, bridges, tunnels, airports, schools, hospitals," he said. "We're going to rebuild our infrastructure, which will become, by the way, second to none. And we will put millions of our people to work as we rebuild it." His plan is for the federal government to entice private investors with $137 billion in tax credits. The idea is that this will unleash up to $1 trillion worth of infrastructure investment over 10 years, spur economic growth, and create countless American jobs. Politicians' love affair with infrastructure spending isn't new. Hillary Clinton, Bernie Sanders, Barack Obama, George W. Bush, and many before them have paid their respects to the idea. Economists have long recognized that roads, bridges, airports, and canals are the conduits through which goods are exchanged, and as such, infrastructure can play a productive role in economic growth. But not all infrastructure spending is equal. Ample literature shows, in fact, that it's a particularly bad vehicle for stimulus and does not, in practice, boost short-term jobs or economic growth. To work that way, government spending would have to be used quickly to put the unemployed to work on shovel-ready projects. But as Obama discovered in 2009 when he tried to spend $47 billion from the American Recovery and Reinvestment Act on infrastructure, there aren't that many shovel-ready projects lying around. And since job seekers rarely have the skills needed to start building a bridge or highway right away, employers are forced to poach workers from their existing jobs. Publicly funded infrastructure projects often aren't good investments in the long term, either. Most spending orchestrated by the federal government suffers from terrible incentives that lead to malinvestment—resources wasted in inefficient ways and on low-priority efforts. Projects get approved for political reasons and are either totally unnecessary or harmed by cost overruns and corruption. For example, we know that infrastructure investment produces the highest returns when it supports already-expanding cities and regions. Yet politicians' tendency is to spend in declining areas, where dollars can't help as many people, such as Detroit and Cleveland. Government statistics show that our infrastructure isn't actually crumbling. While conditions vary from state to state, the most recent data on highway quality (from 2012) classify 80 percent of urban highways as either good or acceptable. For rural highways, the figure is almost 97 percent. Meanwhile, the quality of bridges has improved as well. In 2004, 5.7 percent of bridges were classed as structurally deficient, meaning that the bridge isn't unsafe but that it could suffer from a reduction in its load-carrying activities. By 2014 that number had declined to 4.2 percent. Still, our infrastructure could use some work. Recently, in a debate at the Aspen Ideas Festival with former National Economic Council Director Lawrence Summers, the economist Robert Barro noted that he was "glad that Larry and I can agree that fixing potholes is the most productive activity in government." Unfortunately, the political process is biased against dull but valuable projects, such as basic road maintenance, and biased in favor of flashy or grandiose projects, such as high-speed rail, the Big Dig, and the Bridge to Nowhere. The process also systematically overestimates the benefits and underestimates the price of infrastructure projects. On the bright side, Trump wants to address the "mountain of red tape" that slows down construction projects. His plan would link spending to reforms that "streamline permitting and approvals, improve the project delivery system, and cut wasteful spending on boondoggles." He shouldn't stop there. A new report by Michael Sargent at the Heritage Foundation encourages the president-elect to reduce the federal role in highway construction and mass transit. I [...]

Trump’s Sanctuary City Funding Threat Protects Police Money

Wed, 25 Jan 2017 16:50:00 -0500

(image) Today President Donald Trump made good on his threat to go after "sanctuary cities" (cities that decline to investigate the immigration statuses of people within their jurisdiction) by going after their federal funds. He signed an executive order today attempting to implement a policy denying federal grants for any of these 200 estimated sanctuary cities if they refuse to assist the federal government in investigating immigration statuses.

One problem that was brought up in November after Trump's election: Law enforcement agencies and unions didn't support this mechanism of intimidating cities. It wasn't that they cared so much about the civil liberties. They were not going to support anything that prevented any sort of gravy train from rolling into their police stations. Law enforcement agencies are prime recipients of federal grants.

Trump, having run on a hard core law-and-order, stop-and-frisk, civil-rights-are-for-wusses campaign, was not interested in angering these guys. So his executive order today explicitly exempts grants "deemed necessary for law enforcement purposes."

Trump is also calling for the administration to publicize, on a weekly basis, a list of crimes committed by aliens "and any jurisdiction that ignored or otherwise failed to honor any detainers with respect to such aliens." One assumes these must be aliens the federal government detain or arrest after sanctuary city interactions. Otherwise there's a bit of a logic flaw in trying to highlight criminals who are illegal immigrants operating in cities that refuse to check their immigration status and report that information to the feds.

In any event, this executive action seems designed to maintain the loyalty of law enforcement agencies to Trump. Read the sanctuary cities section of the order below, check the full executive orders being signed today here, and check out this defense of sanctuary cities as a tool to encourage immigrants to cooperate with law enforcement to solve crime and keep communities safer:


Will Donald Trump Cut Public Broadcasting Loose, Or Will He Decide He's the Man to Make It Great Again?

Mon, 23 Jan 2017 17:25:00 -0500

The press is aflutter with talk that the Corporation for Public Broadcasting may be headed for the chopping block. More specifically, The Hill informs us that Trump staffers have been "discussing" the "privatization" of the CPB. In other words, we don't actually know what's happening. "Discussing" means the administration hasn't settled on a plan; "privatization" could take many forms. Nor do we know how any particular proposal will play out politically. Usually I roll my eyes during these debates, knowing that for all the apocalyptic rhetoric they inspire they have invariably ended with the CPB still in the budget. Occasionally it gets a funding cut, but even those tend to be erased within a few years. But as you may have noticed, our new president is unpredictable. Given all the allegedly impossible things that have happened lately, you can't just assume past will be prologue, even if the forces that have kept the CPB alive in the past are still at work. That said: The forces that have kept the CPB alive in the past are quite definitely still at work. Back in 2011, when congressional Republicans were threatening to cut off NPR's money because it had fired Juan Williams, I offered a brief tour through the history of the We're Going To Defund Public Broadcasting show. The Williams spat, I wrote, was a more exciting hook for the drama than the one Richard Nixon used in 1971, when presidential pique at the Eastern liberals who dominated PBS spurred him to propose a "return to localism" that would have kneecapped the crowd in charge of the system. On the other hand, it doesn't have the cloak-and-dagger spirit that the State Department flunky Otto Reich brought to the play in 1985, right after Ronald Reagan's reelection, when he met with NPR staffers in a smoky little room and warned them that the White House thought they were "Moscow on the Potomac." Nor is it as colorful as the 1993 spectacle starring Bob Dole and David Horowitz, who attacked the radical Pacifica network rather than NPR, providing an opportunity to quote a much weirder series of statements than anything in the Juan Williams kerfuffle. ("We didn't have Satan before the white man. So the white man is Satan himself.") And the exclusive focus on NPR this time around means the stakes don't feel as high as they did in 1994, when Speaker-elect Gingrich started musing that he might "zero out" the entire public broadcasting budget. A decade later, a House subcommittee heightened the dramatic tension by voting to eliminate federal support for the Corporation for Public Broadcasting (CPB) altogether. That element of danger was a suspenseful touch. While there are Republicans who honestly think the government shouldn't be in the business of subsidizing public broadcasters, there are more Republicans—or, at least, more powerful Republicans—who just think the government should be subsidizing a slightly different group of public broadcasters. As I wrote in 2011, "The system was still standing after Nixon made his threats, but all save one of the programs he found objectionable went off the air. After the Gingrich-era battle ended, the Republican pundits Fred Barnes, Peggy Noonan, and Ben Wattenberg all landed gigs at PBS—and following an initial cut, the CPB's budget crept back upward. The funding fight under George W. Bush took place against the backdrop of a conservative CPB chief crusading for a more right-friendly PBS and NPR." (*) These exercises may not cut public broadcasters loose, but they do whip them into line. Needless to say, it would be completely in character for Trump to try a trick like that. (Sample scenario: He ruminates about funding cuts, PBS adds a MAGA voice or two to its lineup, and then the president declares public television a great American institution.) On the other hand, it would also be in character for Trump to endorse a privatization plan as a painless concession to the more free-market wing of the Republican coalition. It's doubtful, after all, that he has strong personal view[...]

The Problem With Block Grants

Mon, 23 Jan 2017 16:00:00 -0500

Obscured amid the controversy over crowd size and the women's march that followed was the substantive policy at the heart of President Trump's inaugural address. That came in the language about "we are transferring power from Washington, D.C., and giving it back to you, the people," and is being followed up with a reported congressional initiative to turn Medicaid, the federal healthcare program for the poor, into "block grants to the states." States already exercise substantial discretion over Medicaid. Even the name of the program varies from state to state—Medi-Cal in California, DenaliCare in Alaska, MassHealth in Massachusetts, TennCare in Tennessee. The states already put some money into funding the programs. And it may be that the proposed changes are an improvement over the current system. Local control puts decisionmakers closer to end-users, shortening the distance that information needs to travel, and making it easier to adjust programs to local circumstances. There's a back-story here. Republicans have loved the idea of "block grants to the states" since at least the 1990s, when the Newt Gingrich-led Congress reformed the welfare program known as Aid to Families With Dependent Children. Before that (and some would say, even to this day), the question of which decisions got made in Washington, and which in state capitals, had become unfortunately clouded by racism, as the Southern states refused to comply with their obligations under the Constitution. But amid the present push to devolve power to state and local governments, it's worth remembering that there are some drawbacks, too. First of all, "block grant to the states" still often gives the politicians in Washington and their lobbyist hangers-on ample opportunity to play a role in directing the cash flow. There are almost always conditions imposed on how the money can be used, and there's almost always a formula involved in how the money is allocated. Both the conditions and the formula allow room for an awful lot of Washington-based mischief making and influence peddling. At the state level, meanwhile, the "block grant" provides an opportunity for government spending unconnected to the act of revenue-raising. It's practically free money, so the state and local officials want to spend—they use words like "capture"—as much of it as possible. Even worse, while state and local laws usually mandate balanced budgets, the federal government can rack up plenty of debt, so the block-grant mechanism is a way for state and local politicians to circumvent their own budget constraints. The overall effect is to encourage government spending that wouldn't otherwise happen. One way to understand this is to do a thought experiment. The next time some Republican politician starts talking about turning a federal program into "block grants to the states," ask: What would happen if instead of turning it into "block grants to the states," the politicians just flat-out eliminated the program, and cut taxes and borrowing by the amount that had been spent? Perhaps some state or local governments would restart the program at the state or local level, or provide the service on their own, with some new revenue stream. Perhaps some other state or local governments would choose not to provide the service. Perhaps the for-profit or nonprofit private sector would provide solutions to whatever need had been met by the federal government program. If the service or program were important enough, perhaps individuals or businesses would choose to move to a state, city, or town where the service was being provided. One might object that there are some rights or services so basic that one's ability to access them shouldn't depend on where one lives—they should be guaranteed to all Americans. The "rights" part of that is what some of our Constitution is about. And the idea that, say, your Social Security retirement benefits would depend on what state you live in runs counter to 21st Century America, which[...]

Trump Brings Back Ban on Funds for Groups That Promote Abortion, While Congress Reconsiders Global Anti-Prostitution Pledge

Mon, 23 Jan 2017 15:00:00 -0500

On his first Monday in office, Donald Trump signed executive orders instituting a hiring freeze for all federal government positions outside the military and reinstating a ban on international aid going to nonprofits that provide abortions or promote information on them, regardless of what other services they offer. The contentious abortion rule represents a back and forth that's been taking place under Republican and Democratic administrations since the 1980s. Known as the "Mexico City Policy," it was instituted under President Ronald Reagan, reversed by Bill Clinton, restored by George W. Bush, and again reversed by Barack Obama. Not to be confused with the 1973 Helms Amendment, which bans groups from using U.S. government funds directly for abortion services abroad, the Mexico City Policy targets broader conduct, requiring that "as a condition of their receipt of federal funds," groups must agree to "neither perform nor actively promote abortion as a method of family planning in other nations." A diverse group of more than 100 public health, women's issues, and civil liberties organizations have already issued a statement opposing the return of the Mexico City Policy, which they refer to as "the global gag rule." "The global gag rule ... interferes with the doctor-patient relationship by restricting medical information healthcare providers may offer, limits free speech by prohibiting local citizens from participating in public policy debates, and impedes women's access to family planning by cutting off funding for many of the most experienced health care providers who chose to prioritize quality reproductive-health services and counseling over funding that restricts care and censors information," it says. Groups endorsing the statement include the American Civil Liberties Union, the American Congress of Obstetricians and Gynecologists, Amnesty International USA, the National Organization for Women, the Alliance to End Slavery & Trafficking, the Unitarian Universalist Women's Federation, the International Medical Corps, New York University's Global Justice Clinic,and Human Rights Campaign. The Mexico City Policy is one of several federal aid conditions that have been contingent on controversial social issues. Since 2003, the U.S. has banned groups that get grants to fight HIV/AIDs and/or human trafficking from supporting the decriminalization of prostitution. Referred to as the anti-prostitution pledge, the policy was proposed for anti-HIV groups as part of Bush's "Emergency Plan for AIDs Relief," passed by Congress in May 2003 as the "United States Leadership against HIV/AIDS, Tuberculosis, and Malaria Act." It stipulated that no grant money could be used "to promote or advocate the legalization or practice of prostitution or sex trafficking" nor to "provide assistance to any group or organization that does not have a policy explicitly opposing prostitution and sex trafficking." The anti-prostitution pledge was also part of the bipartisan 2003 reauthorization of the Trafficking Victims Protection Act (TVPA), which stated that no federal money "may be used to promote, support, or advocate the legalization or practice of prostitution" and no funds "may be used to implement any program" by an organization that "has not stated in either a grant application, a grant agreement, or both, that it does not promote, support, or advocate the legalization or practice of prostitution." Many public-health and human-rights groups opposed these policies on the grounds that decriminalizing prostitution is often supported as a means to stop the spread of sexually-transmitted infections and sex trafficking by force, fraud, or coercion. The pledge was initially applied only to foreign nonprofits, but in 2005 the Bush administration began applying it to U.S. groups, too. In 2013, the U.S. Supreme Court ruled that the part of the pledge requiring anti-HIV/AIDs groups to explicitly denounce prostitution was unconstitutional as it vi[...]

Even the Feds are Warning that California's Bullet Train Is a Disaster in the Making

Sun, 15 Jan 2017 13:30:00 -0500

Just days after California Gov. Jerry Brown warned that the state was slipping back into deficit spending ($1.6 billion by next summer), the Los Angeles Times got its hands on a confidential internal report from the Federal Railroad Administration that points the fingers right back at the governor when it comes to wasteful spending. Even the feds believe the state is drastically understating the costs of it's massive high-speed rail project, approved by voters years ago but with only a small portion of the project funded. Just the first leg of the $70 billion project could cost billions more than budgeted, $10 billion instead of $6.4 billion. And the project is already way behind schedule. The report predicts the first stretch of track (in the center of the state) won't be completed until 2024, seven years behind schedule. The California High-Speed Rail Authority (CHSRA) has responded by complaining that this risk analysis contains merely "hypotheticals" (though the CHRSA's chief executive called them "estimates and projections" in the Times story, which is slightly different). On Facebook CHSRA dismissed the story as "misleading" and instead invited readers to look at two government reports that praise the government spending money on infrastructure. One of them, they say, calls the train project one of the "top proposed infrastructure projects of major economic significance." Hilariously, the report they want us to read instead says right in the beginning that "all project costs and benefits are based on assumptions and methodologies established by the authors." Meaning that any praise of the benefits of building the train are also based on estimates and projections (as they have been all along—remarkably foolish projections of demand and ridership). Beyond that, the CHRSA's message is simply yelling "JOBS!" as loudly as possible, pointing out that all this spending is putting people to work and noting as some sort of evidence that Fresno unemployment dropped from 18 percent in 2011 to 9 percent in 2016. That's not a terribly compelling argument because the unemployment rate has dropped in similar numbers all across California, even in areas that aren't building a massive government boondoggle. Why should we believe those folks wouldn't be working on something else if they weren't working on this stupid train? It's a truly frustrating issue, because we see very little evidence that this train can pay for itself after its built and will require subsidies in order to keep operating (despite their insistence otherwise). So the actual consequence of creating all these jobs is that all these people are spending billions of tax dollars to build something that is going to continue to cost money after the construction is done. Using the "Broken Windows" economic fallacy metaphor, it's like the government hiring the people to break the windows and then offering a subsidy for the cost to reglaze them. What would this money be doing in California if it weren't tied up in this train? Reason editors current and former, Matt Welch and Virginia Postrel, took note in June how the people involved in this train project and in the media knew full well what a boondoggle it was and promoted it anyway. The Reason Foundation has been warning for years that this was going to happen. And irony of ironies, Californians seem to hate that Donald Trump was elected president, but Trump loves exactly these kinds of terrible infrastructure boondoggles and is on the record complaining about the fact that China has high-speed rail and we don't. God help us all, but Trump could be the president Brown and the state's powerful labor interests need to keep the dollars rolling in for this mess. At some point we may be grateful Trump is so thin-skinned if he shuts down federal spending requests for the train because of the silly secession movement gaining attention after his election. As a reminder, the train project also[...]

Runaway Deficits Forever

Thu, 12 Jan 2017 00:01:00 -0500

Upon becoming House speaker in 1995, Newt Gingrich decided it was crucial to adopt a plan to eliminate the federal deficit. In a meeting of House Republicans, Budget Committee Chairman John Kasich balked: "Where is it in stone that we have to balance the budget in seven years?" Gingrich had a quick answer: "Let's put it to a vote. Who wants to put it in stone?" Everyone but Kasich voted yes. The Republicans had made a commitment they would have to keep. Contrast that show of determination with the vote last week by Senate Republicans for a budget resolution that projects an increase in the public debt of $9 trillion over the next decade. The supporters said that for arcane reasons involving budget rules and the repeal of Obamacare, the resolution is needed. But in practice, they insisted, they don't intend to allow such a flood of red ink. Maybe not. But the fiscal responsibility upheld by Gingrich and company—which led to a balanced budget not in 2002 but in 1999—is not visible on either side of the aisle today. Between 2009 and 2015, the deficit shrank from $1.4 trillion to $438 billion—but last year, it rose, and the Congressional Budget Office expects it to balloon to $1 trillion by 2024. Nor is the incoming president likely to accept serious budget discipline as President Bill Clinton did. On the contrary, Donald Trump will probably cause a lot of congressional Republicans to stop worrying and learn to love the deficit. House Republicans have a plan to balance the budget by 2026, but the details are lacking. Not only that but they will have to contend with the next president. The Tax Policy Center in Washington reported in October that his proposals would add $7.2 trillion to the government debt over the next decade—comparable to what has been piled up in the past eight years. There are other alarming signs. Trump's border wall with Mexico will cost $8 billion by his calculation and double or triple that by other estimates. He claims Mexico will pay for it. But he and Congress aren't prepared to wait for him to get the money. They plan to start construction now and send Mexico the bill. This is the equivalent of taking out a loan that you plan to pay off with the lottery ticket you just bought. In the best (and least plausible) case, we'll have to wait awhile for the Mexican treasury to cut the check—"a year or a year and a half," Trump blithely estimated at his news conference Wednesday. In the worst case—which happens to be the one President Enrique Pena Nieto has embraced—we won't get a single peso and American taxpayers will eat the expense. Scrapping the Affordable Care Act, it turns out, would be a fiscal loser overall because of the taxes it imposed and the Medicare savings it implemented. The bipartisan Committee for a Responsible Federal Budget recently reported that a full repeal would add between $150 billion and $350 billion to the debt over the next 10 years. Under a fiscally responsible approach, the CRFB advised, "savings from repealing parts of the ACA must be large enough to not only finance repeal of any of ACA's offsets, but also to pay for whatever 'replace' legislation is put forward. This is not an easy task, and it will likely require policymakers to retain or replace the majority of ACA's health and revenue offsets." But Congress and the president-elect appear to have every intention of torching the ACA now and fighting the budget fire later. Reducing taxes while pledging to cut spending eventually is a familiar tactic, and it functions reliably to enlarge budget problems rather than solve them. The ongoing retirement of the baby-boom generation puts great pressure on the budget, as it has to cover more and more retirement checks and Medicare bills. Another looming strain is the interest on the debt, which has been pleasantly manageable because interest rates have been so low. But they are bound to rise in the coming [...]

Challenge Grant Time in the Reason Webathon! Because We Still Treat Presidential Politics as if (Bad) Ideas Matter

Wed, 30 Nov 2016 07:40:00 -0500

We are here on the second day of Reason's annual Webathon, in which we ask you, the people who fight in the comments over which staffer to fire first, to nonetheless throw some tax-deductible money our way so that we can bring you even more in journalism and commentary defending and extending Free Minds and Free Markets. Please donate right the Fletch now to get us closer to our $250,000 goal! As of around 7:30 this morning, 151 of you generous human-bots had gifted us around $23,000, or 9.2% of the goal at the halfway point of the first quarter of the Webathon. Now, while we treasure each and every dollar and Bitcoin and Bubble-world Sandersback, we're basically still at our own 10-yard line (and even then with a generous spot!), at a time when we really should be around, oh, the 13. WE NEED A TOUCHDOWN, IS WHAT I AM SAYING….Oh wait, what are those footsteps I hear coming from the runway leading from the locker room, clanking closer and closer, a modern-day Tom Jarrett here to inhabit our mortal bodies and finally lead my Youngblood-era L.A. Rams to the Super Bowl? Why it's a $25,000 CHALLENGE GRANT! That's right, ladies and gents and less classifiable creatures, the beloved Reason donor (and Trustee) Kerry Welsh (no relation) and his even lovelier wife, Helen Welsh, have announced a $25,000 challenge grant here to kick off Day Two. What does such magick mean for us non-math majors? That the next $25,000 in donations, IF AND WHEN IT COMES, will be literally doubled. It's like a government-spending multiplier, only not totally fake! So why double your giving pleasure? Today, in singing for my supper, I'm going to jump head-first into a hornet's nest of a coverage category: politics (ducks away from flying shoe). Like all zero-sum scrums, politics is intrinsically divisive, including/especially amongst quarrelsome libertarians. And like all taxation-based entities, government is inherently confiscatory and brutish. This is why Reason magazine has spent 48-plus years on this earth trying to roll back the influence of both factors in our lives, while celebrating the wonders conjured far from their grasp. As Katherine Mangu-Ward put it in her very first (and very great!) column as editor in chief, it's "Trump vs. Clinton vs. Everything Good." We cover politics for two main reasons, and from two main angles: 1) As an act of defense against policies that that harm human liberty and flourishing, and 2) as an attempt to smuggle into the very diverting (particularly this year!) yet largely calorie-free National Conversation about politics some ideas that help us out with Task #1. Because even if any given political competition isn't necessarily determined by the quality of policy proposals, the discussion generated by campaigns does end up translating into government action—maybe in the future, with different politicians, in far-flung jurisdictions. The collective exertion of power always affects the lives of individual humans, and, well, you know which side we're on. Here's how such a 1-2 approach works in practice. Remember when Hillary Clinton was having her heels nipped repeatedly by the unlikely longshot Bernie Sanders, whom some libertarians were going a bit wobbly for (which our work directly helped talk them out of)? At the zenith of the Democratic competition our mag published a special package on the cantankerous Vermont democratic socialist that delved into his past and his popularity, concluding in sadness more than anger that what was animating his would-be revolution and sending shivers down Clinton's pantsuit wasn't the promising civil liberties/foreign policy part of his issue-set, but rather his genuinely terrible economic policies. Look around you at any blue state or big, progressive city, and you will see these Bernieite Fights for $15 playing out all around you. In like 340 cities just yesterday, for example. So reno[...]

Drain the Swamp!

Wed, 30 Nov 2016 00:30:00 -0500

President-elect Trump says he's uniquely qualified to "drain the swamp" in Washington, D.C. He can do it, he said at one debate, because as a businessman, he understands American cronyism. "With Hillary Clinton, I said, 'Be at my wedding,' and she came to my wedding. You know why? She had no choice because I gave." He said that's why he gives money to politicians from both parties. "When they call, I give. And when I need something from them two years later, three years later, I call them. They are there for me!" That's crony capitalism. Ideally, laws are applied equally; no one gets a special break because he gives money. But today's complex government allows the politically connected to corrupt... most everything. Even parts of the government swamp designed to protect consumers, like Dodd-Frank banking rules, get corrupted. Banks watch little changes in rules far more closely than you ever will. Then they exploit them. Bank lobbyists make money off complex laws like Dodd-Frank. They fight tooth and nail to keep them, not abolish them. Congress recently almost got rid of one obvious example of crony capitalism, the Export-Import Bank. To encourage exports of American products, bureaucrats give loans to Boeing and other big companies. Some principled Republicans tried to eliminate this corporate welfare, but Ex-Im loans were voted back in during the final hours of budget negotiations. Government programs almost never die. Businesses in cozy relationships with government don't die either. Jeff Deist, president of the free-market Mises Institute, says when the housing bubble burst, banks should have been allowed to fail and put through "the bankruptcy and liquidation process." Investors would have lost big, but that's OK, says Deist. "That's the difference between free-market capitalism and state capitalism. With state capitalism, there are upsides for the parties involved—but no downsides." In the swamp, no one but taxpayers pays for their mistakes. Politicians routinely promise to change this culture, but once they get to D.C., they lose interest, says Trump. "They go to Washington, something happens—they become weak... I promise this is not going to happen to me." I want to believe him. But even if he were an utterly principled man—and I await evidence of that—it's tough to constantly say "no" to people. When you're in Congress, people ask you for money all day. "I need a grant for my charity—we do so much good!" "My business needs a subsidy/protective tariff—we employ so many people—in your state!" So it goes, week after week. Few people bother to go to Washington to ask for spending cuts. Even though America is heading toward bankruptcy, 90 percent of congressional testimony comes from people who want more stuff. Politicians' cronies get more stuff. Solyndra got half a billion dollars from President Obama. The company went bankrupt, which shouldn't be a surprise. Government has no way of knowing which ideas will succeed. But it's well worth it for companies to invest in lobbyists and fixers who dive into the swamp to extract subsidies. For taxpayers? Not so much. While the benefits to lobbyists are concentrated, taxpayer costs are diffuse. Solyndra cost each of us a couple bucks. Will you go to Washington to pester your congressman about that? Probably not. I want to believe Trump when he says he'll "drain the swamp." But it's easier to believe Thomas Jefferson who, with greater eloquence, said, "It's the natural progress of things for government to gain ground, and liberty to yield." Draining the swamp would mean not just taking freebies away from corporations—or needy citizens—but eliminating complex handouts like Obamacare. Candidate Trump said he would repeal Obamacare. Will he? He's already backed off of that promise, saying he likes two parts of the law—the most expensive parts[...]

Trump's Infrastructure Illusions

Thu, 17 Nov 2016 00:01:00 -0500

"We've got shovel-ready projects all across the country. And governors and mayors are pleading to fund it. The minute we can get those investments to the state level, jobs are going to be created." — President-elect Barack Obama, December 2008 "There's no such thing as shovel-ready projects." — President Obama, September 2010 Boosting federal investment in infrastructure has never had so many enthusiasts. During the presidential campaign, it was the rare chorus that Donald Trump, Hillary Clinton and Bernie Sanders could all join in singing. House Democratic leader Nancy Pelosi says she's eager to work with Trump on it. Her GOP counterpart, Kevin McCarthy, expects Republicans to cooperate with their president. Both the AFL-CIO and the U.S. Chamber of Commerce are in favor. And why not? Not only will we get more modern facilities, we are told, but the gusher of money will invigorate the economy and create lots of blue-collar jobs. But such investments don't always work out the way they're supposed to. Pouring funds into highways, bridges, airports, dams and other projects is easy. Spending money wisely is hard. What beckons on the horizon, as Obama discovered after getting his $840 billion stimulus in 2009, often turns out to be a mirage. There are several reasons for deep skepticism about this whole proposed endeavor. One is that the federal government has a lousy record of investing for the maximum payoff. Harvard economist Edward Glaeser has noted that the transportation funding in Obama's package "was twice as generous, on a per-capita basis, to the ten least dense states than it was to the ten densest states, even though higher-density areas need more expensive infrastructure." Remember that "bridge to nowhere" that Alaska Gov. Sarah Palin bragged about stopping? It was part of a federal highway bill. When Washington lavishes money on transportation, it typically puts politics above economic merit. There are doubtless many infrastructure fixes that could be done with more spending. But why should the federal government assume responsibility for them? The majority serve mostly local needs and can be financed by the beneficiaries. Mayors and governors are less accountable when such projects are financed by taxpayers who live elsewhere. People in Los Angeles, Houston and Pittsburgh know better than anyone else what the local priorities are. If taxpayers in those places aren't willing to shore up the bridges or resurface the roads they use every day, it's a signal the money shouldn't be spent. In the 1960s, notes economist Lee Ohanian of the Hoover Institution, capital outlays made up 20 percent of California's state budget. Today they're 3 percent. Nor will infrastructure spending yield a harvest of new jobs. A study by the Congressional Budget Office calculated that the 2009 stimulus, of which infrastructure was only a part, created no more than 200,000 jobs by 2014—out of the 9 million the economy added during that period. Andrew Garin, a Ph.D. candidate in economics at Harvard, studied the results of the 2009 package and detected "little to no county-level impact of highway spending on local employment outcomes reported by employers. There appears to be no effect on local highway-construction, employment, overall construction employment, or total private-sector employment." The prospect of a blue-collar boom is a feat of imagination. Out-of-work coal miners and autoworkers don't necessarily have the skills contractors need to expand airports or replace bridges. The unemployment rate for construction workers is just 5.7 percent, which means a lot of those hired for public projects would be taken away from private ones. What about the claim that a massive infrastructure program will be a 5-Year Energy shot for the economy? Standard economic theory says that such an effort [...]

The Pentagon Accounts for More Than Half of the Federal Government’s $1 Billion PR Budget

Mon, 10 Oct 2016 10:30:00 -0400

Selling foreign interventions and stoking the fires of patriotism isn't always easy work, but the federal government thinks someone has to do it. That someone—or, rather, those someones—are the employees and contractors of the Department of Defense's public relations machine, easily the largest and most expensive PR operation within the United States government. A new report from the Government Accountability Office reveals that the federal government spends more than $1 billion annually on public relations and advertising—that includes everything from press releases and safety bulletins to television ads for Obamacare, direct mailers about the importance of getting flu shots and endless streams of tweets and Facebook posts intended to connect the average American with their government. Every department and agency in the government does it, but no one does it as much as the Department of Defense. The Pentagon accounted for 60 percent of all public relations spending between 2006 and 2015, the GAO found, and it employs about 40 percent of the more than 5,000 public relations workers in the federal government. For context: there are only 4,500 employees in the U.S. Department of Education. "It is crucial to know how much is spent across the federal government on public relations activities and which federal agencies are spending the most," said U.S. Sen. Mike Enzi, R-Wyoming, who chairs the Senate Committee on the Budget and requested the study from the GAO, in a statement. No other department comes close to what the Pentagon spends. The second highest average over the 10 year period examined by the GAO belongs to the Department of Health and Human Services (which is responsible for some of those cringe-worthy pro-Obamacare ads). While HHS has spent an average of $116 million annually between 2006 and 2015, the Department of Defense spent more than $626 million annually. In every year during that 10 year period, the Department of Defense spent more money on public relations than all other departments of the federal government combined. In some years—like 2008 when the Pentagon spent $868 million on public relations—it accounted for more than two-thirds of all taxpayer-funded advertising in the federal government. To be fair, the Department of Defense's PR team has a tough job. They have to sell the American public on the value of foreign military interventions (something most Americans generally oppose) and have to spin the bombings of hospitals and the droning of innocent civilians at wedding parties as being in the best interest of America's defense—or at least as something other than war crimes. Reason sent inquiries to the Pentagon's press office seeking an explanation for why the Department of Defense requires a public relations budget that is so much larger than other parts of the government, and asking how the department measures the success of its public relations efforts. We have not received a response, but we will update this article to include it if we do. The GAO report gives the overview, but it doesn't get into the details of how the Pentagon spends all that money. For example, the report does not make clear whether the Pentagon's history of spending taxpayer money on patriotic displays at professional sporting events was included in the annual public relations budget, though it seems reasonable to assume that it would be. The Pentagon spent more than $53 million over four years on marketing and advertising contracts with professional sports teams for pro-military displays during NFL games, NASCAR races and hundreds of other sporting events, according to a report released last year by U.S. Sens. Jeff Flake, R-Arizona, and John McCain, R-Arizona. "Americans deserve the ability to assume that tributes for our men and women in m[...]

Spending Other People's Money Makes Trump a Perfect Fit for Washington

Mon, 26 Sep 2016 12:00:00 -0400

If 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 al[...]

Cincinnati Streetcar Is Exactly the Spectacular Shitshow Everyone Expected It To Be

Sat, 17 Sep 2016 09:30:00 -0400

Cincinnati'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 [...]

Regardless of Aleppo, Gary Johnson Is Only Candidate Talking Spending Cuts and Foreign-Policy Restraint

Thu, 08 Sep 2016 17:31:00 -0400

Before 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 h[...]

New Donor to Clinton Foundation Revealed: It’s You.

Thu, 01 Sep 2016 12:00:00 -0400

Americans 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 insid[...]