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Great Moments in Government Waste, the European Version
While American politicians are experts when it comes to squandering money, they may not be the world’s most profligate group of lawmakers. To be sure, American politicians sometimes give big piles of other people’s money to bail out Fannie Mae and Freddie Mac, but the politicians at the European Commission in Brussels engage in similar forms of corporate welfare with their Emissions Trading Scheme.
The overall burden of government is heavier in Europe, so that certainly suggests that there are greater opportunities to waste money, but what makes the European Commission special is that it is insulated from democratic accountability and there is no system of checks and balances. So even though the actual amount of money spent by Brussels is small compared to what is wasted by national governments in Europe, the outcomes are especially obscene. Here’s a story from the UK-based Daily Mail, reporting on a program (no joke) to fund activities such as basket weaving and siestas:
British taxpayers are helping to fund basket-weaving and slapstick acting workshops for young people across Europe. The projects, which include meetings about folk dancing and even a scheme to promote afternoon siestas, are part of an £800million EU programme to help people aged 13-30 ‘feel European’. …Another venture in Finland received thousands to support a coffee house which offered ‘everyone the chance to have a sleep for free’. It aimed to encourage afternoon naps to reduce stress. ‘Youth exchange participants’ also flocked to Macedonia last year for a meeting entitled Stories And Legends, receiving £18,000 to explore storytelling. …An EC spokesman said the projects were about exposing young people to other cultures and increasing their participation in society. He added: ‘I don’t see anything wrong with basket-weaving or music-making if it encourages young people to meet other Europeans and learn a new skill from another part of Europe.’
Readers may be thinking this is no big deal. After all, American politicians fund pork projects all the time. But here’s the clincher. The UK’s Daily Telegraph reports that the European Commission is subsidizing a ski trip for…drum roll, please… the children of European politicians, and that the subsidies even go to households with income equivalent to about $175,000:
Taxpayers will heavily subsidise a skiing holiday in the Italian Alps for the children of MEPs and European Parliament officials in February. …The eight-day skiing trip for 80 children aged between eight and 17 is timed to begin over the weekend of St Valentine’s Day, providing some romantic time off from parenting for officials. Costs, the holiday is priced at 920 euros (£822), are generously subsidised by the parliament’s budget. Households receive different levels of subsidy depending on their monthly income but even those on a income of over £108,000 get a discount. There is reduction of up to 52 per cent for officials earning £69,620 a year and an MEP, earning £86,000, is eligible for a subsidy of 45 per cent. …The children will enjoy full board in a three-star hotel in the beautiful village of Spiazzi. The trip includes “workshops” in a “multilingual environment” on the themes of “the mountain, its snow, its nature”. …The parliament’s spokesman declined to comment on the holiday.
Perhaps I’m not paying close enough attention, but I can’t think of anything the crowd in Washington has done that rivals this odious example of self-serving by lawmakers. Can anybody come up with an example that tops this?
Should Republicans Have Compromised to Produce a Less-Bad Healthcare Bill?
Writing for Forbes, Bruce Bartlett puts forth an interesting hypothesis that healthcare legislation could have been made better (hopefully he meant to write “less destructive”) if the GOP had been willing to compromise with Democrats:
Democrats desperately wanted a bipartisan bill and would have given a lot to get a few Republicans on board. This undoubtedly would have led to enactment of a better health bill than the one we are likely to get. But Republicans never put forward an alternative health proposal. Instead, they took the position that our current health system is perfect just as it is.
Bruce makes several compelling points in the article, especially when he notes that it will be virtually impossible to repeal a bad bill after 2010 or 2012, but there are good reasons to disagree with his analysis. First, he is wrong in stating that Republicans were united against any compromise. Several GOP senators spent months trying to negotiate something less objectionable, but those discussions were futile. Also, I’m not sure it’s correct to assert Republicans took a “the current system is perfect” position. They may not have offered a full alternative (they did have a few good reforms such as allowing the purchase of insurance across state lines), but their main message was that the Democrats were going to make the current system worse. Strikes me as a perfectly reasonable position, one that I imagine Bruce shares.
Let’s explore Bruce’s core hypothesis: Would compromise have generated a better bill? It’s possible, to be sure, but there are also several reasons why that approach may have backfired:
1. It’s not clear a policy of compromise would have produced a less-objectionable bill. Would Senate Democrats have made more concessions to Grassley and Snowe rather than Lieberman and Nelson (much less whether the “concessions” would have been good policy)? And even if Reid made some significant (and positive) concessions, is there any reason to think those reforms would have survived a conference committee with the House? Yet the compromising Republicans probably would have felt invested in the process and obliged to support the final bill — even if the conference committee produced something worse than the original Senate Democrat proposal.
The Real Healthcare “Chart of the Day”
Andrew Sullivan posted the following chart, which he found in National Geographic, and he noted, with considerable justification, that this was evidence of an insane and inefficient health care system in America.
The chart shows that America spends a lot more than other nations without a concomitant increase in life expectancy. Let’s set aside whether the right side of the chart is a bit misleading because American life-expectancy numbers are influenced by things that have nothing to do with the quality of the health care system, such as highway fatalities, homicides, and obesity, and focus on Andrew’s claim that Obama’s proposal will make things better because of its “cost-control measures.” Since the Administration’s own experts have predicted that Obama’s proposal will increase total health care spending, one can only wonder what he’s talking about. Does he actually think a new government entitlement program will lead to lower costs, when all the evidence suggests otherwise?
If he really wanted a chart that captures what’s wrong with America’s health care system, he should have gone to the Centers for Medicare and Medicaid Services’ national health expenditures data website and downloaded the figures showing how rampant third-party payment has resulted in consumers directly paying for less than 12 percent of health care costs. And when people are purchasing something with (what is perceived to be) other people’s money, it’s understandable that they don’t pay much attention to cost. My homemade chart does not compared to the one produced by National Geographic, but it does identify the real problem. Sadly, Obama’s plan (like Bush’s Medicare expansion, and everything else politicians have done for the past 50 years) will exacerbate the third-party payment problem and lead to even higher costs and more inefficiency.
Blank-Check Bailout for Fannie and Freddie Means Taxpayers Get a Lump of Coal from Obama
Even though politicians already have flushed $400 billion down the rathole, the Obama Administration has announced that it will now give unlimited amounts of our money to prop up Fannie Mae and Freddie Mac, the two government-created mortgage companies. While President Obama should be castigated for this decision, let’s not forget that this latest boondoggle is only possible because President Bush did not do the right thing and liquidate Fannie and Freddie when they collapsed last year. And, to add insult to injury, Obama’s pay czar played Santa Claus and announced that that a dozen top “executives” could divvy up $42 million of bonuses financed by you and me. Not a bad deal for a group of people that more properly should be classified as government bureaucrats. Here’s an excerpt from the Washington Post about the Administration’s latest punch in the gut for taxpayers:
The Obama administration pledged Thursday to provide unlimited financial assistance to mortgage giants Fannie Mae and Freddie Mac, an eleventh-hour move that allows the government to exceed the current $400 billion cap on emergency aid without seeking permission from a bailout-weary Congress. The Christmas Eve announcement by the Treasury Department means that it can continue to run the companies, which were seized last year, as arms of the government for the rest of President Obama’s current term. But even as the administration was making this open-ended financial commitment, Fannie Mae and Freddie Mac disclosed that they had received approval from their federal regulator to pay $42 million in Wall Street-style compensation packages to 12 top executives for 2009. The compensation packages, including up to $6 million each to Fannie Mae and Freddie Mac’s chief executives, come amid an ongoing public debate about lavish payments to executives at banks and other financial firms that have received taxpayer aid. But while many firms on Wall Street have repaid the assistance, there is no prospect that Fannie Mae and Freddie Mac will do so.
Merry Christmas from the IRS
Here are a few stories to bring holiday cheer for taxpayers. First, we have an Associated Press report that several hundred thousand federal bureaucrats have serious tax delinquencies. The Department of Housing and Urban Development always ranks high on the list of government entities that should be abolished, so it’s interesting to see that HUD bureaucrats are most likely to be dodging their taxes:
More than 276,000 federal employees and retirees owed back income taxes as of Sept. 30, 2008, according to data from the Internal Revenue Service. The $3.04 billion owed was up from $2.7 billion owed by federal employees and retirees in 2007. Among cabinet agencies, the Department of Housing and Urban Development had the highest delinquency rate, at just over 4 percent.
This rampant nonpayment is especially outrageous since federal bureaucrats “earn” twice as much compensation, on average, as those of us laboring in the productive sector of the economy. One might think they would go out of their way to comply since their bloated salaries come from tax collections. Speaking of outrage, the internal watchdogs at the Treasury have just published a report showing that it is almost impossible to verify eligibility for the special interest tax breaks in the so-called stimulus. As Investor’s Business Daily opines, this is an invitation to fraud:
A new report from the Treasury Department’s Inspector General for Tax Administration counts 56 tax provisions in the bill having a potential cost of $325 billion. Of those, 20 are tax breaks for individuals and 36 are for businesses. The problem, the Inspector General says, is the IRS can’t verify taxpayer eligibility “for the majority of Recovery Act tax benefits and credits.” For individual taxpayers, 13 of the 20 benefits and credits can’t be verified; for businesses, it’s 26 of 36. …To suggest, as Treasury does, that the biggest chunk of the $325 billion in stimulus package tax breaks can’t be adequately followed violates the pledges of openness and fairness made when the stimulus was passed last February. As the government-stimulus-oversight Web site, recovery.gov, notes, last year’s package “requires that taxpayer dollars spent under the Act be subject to unprecedented accountability.” We wouldn’t call being unable to verify upwards of two-thirds of the $325 billion handed out as “unprecedented accountability.” Sounds more like an invitation to fraud, all at the expense of the taxpayers.
To be fair, even a competent government agency might have trouble making a bad law work, and the $787 boondoggle was rushed through the legislative process with very little — if any — attention paid to anything other than funneling other people’s money to special interest groups. That being said, the IRS has trouble even with routine tasks. According to another IG report, the agency has a staggering 70 percent error rate in its processing of taxpayer identification numbers for individual taxpayers:
The Treasury Inspector General for Tax Administration (TIGTA) today publicly released its review of the IRS’s processing of applications for Individual Taxpayer Identification Numbers (ITINs). TIGTA reviewed a sample of ITIN applications and found that almost 70% contained significant errors and/or raised concerns that should have prevented the issuance of an ITIN. The IRS estimates that it has issued more than 14 million ITINs as of December 2008. ITINs are intended to provide tax identification numbers to resident and nonresident alien individuals who may have U.S. tax reporting or filing obligations but do not qualify for Social Security Numbers, which generally are only issued to U.S. citizens and individuals legally admitted to the U.S. …”The number of individual income tax returns filed using ITINs and reporting wage income has increased by 247 percent from 2001 to 2008,” commented J. Russell George, the Treasury Inspector General for Tax Administration. “If the IRS continues to issue ITINs without proper verification, the risk of fraudulently filed returns – along with fraudulently claimed refunds – will continue to rise,” added Inspector General George.
Just think how much fun it will be when the IRS is in charge of determining those of us who should get fined or jailed for noncompliance with government-run healthcare! No wonder so many taxpayers put a flat tax or national sales tax on their Christmas lists.
University of Michigan Study Confirms Link between Financial Bailout and Corruption
Since Senators engaged in open extortion and bribery to enact Reid’s government-run health care plan, it is hardly newsworthy that Washington is riddled with corruption. But the magnitude of sleaze is probably far greater than most people realize. There is a new study from a couple of academics at the University of Michigan, who found significant relationships between lobbying and bailout money, as well as a greater chance of getting bailouts depending on a bank’s ties with either the Federal Reserve or key members of Congress. Hopefully, people across America will draw the obvious conclusion and realize that big government is inherently corrupting, as discussed in this video. Reuters has the details on this latest example of big government and malfeasance:
U.S. banks that spent more money on lobbying were more likely to get government bailout money, according to a study released on Monday. Banks whose executives served on Federal Reserve boards were more likely to receive government bailout funds from the Troubled Asset Relief Program, according to the study from Ran Duchin and Denis Sosyura, professors at the University of Michigan’s Ross School of Business. Banks with headquarters in the district of a U.S. House of Representatives member who serves on a committee or subcommittee relating to TARP also received more funds. Political influence was most helpful for poorly performing banks, the study found. “Political connections play an important role in a firm’s access to capital,” Sosyura, a University of Michigan assistant professor of finance, said in a statement. Banks with an executive who sat on the board of a Federal Reserve Bank were 31 percent more likely to get bailouts through TARP’s Capital Purchase Program, the study showed. Banks with ties to a finance committee member were 26 percent more likely to get capital purchase program funds.
Last Minute Christmas Shopping?
This is the last week to buy presents, so for those of you who can’t find zhu zhu pets, here are a couple of options sure to bring a smile. The first option is a long-sleeved t-shirt honoring the Secretary of the Treasury.
If t-shirts are not high on the list for your friends and family, here’s something everyone can use. There are more than 70,000 pages of tax law and IRS regulation, and although there are not that many squares in this roll, all taxpayers will enjoy creating their own “performance art” with this gift (sadly, does not include a grant from the NEA).
Great Moments in Foreign Government
German politicians apparently have been hot on the trail of evil evaders who did not pay tax on coffee ordered over the Internet. To address this terrible crisis, the government spent 800,000 euro and tracked down 4000 dangerous criminals. Shockingly, a few cynics, including the folks at Reuters, are trying to diminish this triumph by pointing out that the government spent 30 times more than it collected:
Germany spent more than 30 times as much collecting taxes on coffee beans ordered online from abroad than it received in the tax revenues, the accounting office said on Tuesday. Some 4,000 Germans who bought coffee over the Internet from other EU countries but failed to pay the coffee tax have been charged between a few cents to 10 euros ($14.81) in taxes and fees, said Dieter Engels, head of Germany’s Federal Accounting Office. Tax collectors ended up with just 25,000 euros, way below the 800,000 euros in the costs of staff charged with collecting the payments, Engels said.
The Global Warming Shakedown
Pat Michaels and others are working heroically to save America from global central planning for purposes of combatting global warming (or climate change, or whatever they’re calling it now). But let’s also be thankful this holiday season for our Founding Fathers, who wisely created a system based on separation of powers. If the United States had a parliamentary system, there would be no hope of derailing some of the statist schemes being discusssed in DC, even if Pat worked 24 hours a day.
The secretary of state, for instance, is issuing pronouncements about putting American tapxayers on the chopping block to help finance $100 billion per year of new “climate change” foreign aid. This money can only be squandered, however, if the House and Senate agree to do so. That’s a real possibility, of course, but at least there’s some hope that common sense will prevail since the fiscal burden of government already is far too large.
Here’s a NY Daily News report on what’s happening in Copenhagen, including worrisome signs that politicians who don’t pay for their own travel are planning to make the rest of us pay more for ours:
The U.S. is prepared to work with other countries toward a goal of jointly mobilizing $100 billion a year by 2020 to address the climate change needs of developing countries,” Secretary of State Hillary Clinton said.
…While she would not disclose how much the U.S. would be contribution to the climate fund, Clinton said there would be a fair amount contributed to the pot that would be made available in 2020. The finances will reportedly be raised partially by taxing aviation and shipping, as proposed by the European Union.
Is Greece’s Fiscal Crisis Caused by too Much Spending or too Little Revenue?
It’s been a rough couple of weeks for Greece, which has been battered by rumors of government default. Interest rates have been climbing, as investors are nervous about state finances, and the country’s debt rating has been downgraded.
Not surprisingly, Greek politicians are dealing with the crisis in large part by further increasing the tax burden. One particularly horrible idea is a 90 percent tax on bank bonus payments. I don’t know if lawmakers in Athens have heard of the Laffer Curve, but they’re about to get a real-world lesson that will teach them how punitive tax rates lead to less revenue.
For those who wonder how Greece got into this mess, here’s a quick chart I put together, based on OECD fiscal data. Don’t be surprised if America has a similar chart in about 10 years.
The Problem Is Spending, not Deficits
Reckless spending increases under both Bush and Obama have resulted in unprecedented deficits. Congress will soon be forced to increase the nation’s debt limit by an astounding $1.8 trillion. Government borrowing has become such a big issue that some politicians are proposing a deficit reduction commission, which may mean they are like alcoholics trying for a self-imposed intervention.
But all this fretting about deficits and debt is misplaced. Government borrowing is a bad thing, of course, but this video explains that the real problem is excessive government spending.
Fixating on the deficit allows politicians to pull a bait and switch, since they can raise taxes, claim they are solving the problem, when all they are doing is replacing debt-financed spending with tax-financed spending. At best, that’s merely taking a different route to the wrong destination. The more likely result is that the tax increases will weaken the economy, further exacerbating America’s fiscal position.
Great Moments in Bureaucracy
The picture below, taken from a story in The Economist, shows that France, Germany, and Italy are among the nations with the most central bank employees (as a share of the population). In some sense, this is a dog-bites-man factoid. After all, is anyone surprised that Europe’s major welfare states have bloated public payrolls? But there’s more to this story. All three of these central banks ceased to have a monetary policy, starting back in 2002, when their nations adopted the euro. The mission is gone, but the bureaucracy lives on.
To be fair, the bureaucrats in these nations presumably are not sitting in quiet rooms playing minesweeper. Perhaps these central banks are responsible for other functions, such as financial regulation. Of course, given how governments around the world pursued policies that led to a financial crisis, perhaps all of us would be better off if bureaucrats did play computer games all day.
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