My old boss, Sen. Tom Coburn (R-OK), has a report out this morning that identifies 100 “questionable” projects funded by the federal “stimulus” package. I’m not going to mention particular examples here. I’ll simply say that I hope the theme that readers of the Coburn report come away with is that the federal government should not fund state and local activities. The numerous examples in the Coburn report provide concrete evidence of this truth, and I wish the report would have spent more time in the introduction fleshing it out. Fortunately, my colleague Chris Edwards wrote an excellent policy analysis on the problems with federal subsidies to state and local government. Thus, I would encourage those interested to read the Coburn and Edwards reports together.
A month ago, President Obama issued a list of proposed spending cuts that I dismissed as “unserious” due to the fact that they were trivial when compared to his proposed spending and debt increases. Today, the House Republican leadership released a list of proposed spending cuts.
I’d love to say I’m impressed, but I can’t.
Both proposals indicate that neither side of the aisle grasps the severity of the country’s ugly fiscal situation, or at least has the guts to do anything concrete about it.
The GOP proposal claims savings of more than $375 billion over five years, the bulk of which ($317 billion) would come from holding non-defense discretionary spending increases to no more than inflation over the next five years.
First, it should be cut — period. Second, non-defense discretionary spending only amounts to about 17% of all the money the federal government spends in a year, so singling out this pot of money misses the bigger picture. At least, defense spending, which is almost entirely discretionary, should be included in any cap. But it has become an article of faith in the Republican Party that reining in defense spending is tantamount to putting a white flag in the Statue of Liberty’s hand.
Ohio lawmakers are hot under the collar about federal stimulus dollars possibly helping Georgia bid away one of its big employers. Here’s the Dayton Daily News:
NCR’s news release touting its decision to move jobs from Dayton to the Atlanta, Ga. suburbs includes one factoid that has Ohio lawmakers in a fury: The City of Columbus, Ga. plans to use federal stimulus dollars to buy a building and construct another to accommodate the 870 manufacturing jobs expected to come to the that Atlanta suburb. ‘The fact that economic stimulus dollars were used to move an Ohio company to Georgia at taxpayer expense is an outrage,’ said state Sen. Jon Husted.
Added U.S. Rep. Pat Tiberi, R-Columbus: “Federal stimulus money is being used to create winners and losers among workers in different states and that’s just not right; it’s dirty.”
All I can say to both parties is that’s what you get for building an imperial city on the Potomac and spending the last few decades destroying the constitutional principle of federalism. As I’ve described in this study, regional warfare over federal subsidies has escalated in recent years. It’s horribly wasteful, and it’s getting worse.
The head of the Office of Personnel Management claims that federal workers are underpaid compared to private sector workers by 20 percent, on average. Federal unions and other cheerleaders for the bureaucracy have been making similar claims for years.
Federal workers are not underpaid.
Now a Human Resources expert writing in The Washington Post backs up my claims. Lily Garcia writes:
The primary advantages of working for the federal government are generous benefits, solid pay, and relative job security, a combination that is challenging to find in the private sector, even in the best of times … In addition to these benefits, federal employees, contrary to popular belief, are paid relatively well.
One policy implication is that federal worker compensation would be a good place to look for budget savings to reduce the federal deficit. We could start with a two-year freeze on federal salaries to save about $20 billion. During a recession, private wages are not increasing, so why should federal wages?
The Federal Diary column in the Washington Post is a curious piece of newspaper real estate. Most newspaper columns are aimed at the broad general public, but this column is aimed directly at the few hundred thousand government workers in the DC region. The result is that it takes a very government- and union-centric view of the world. The fact that the federal civilian workforce costs taxpayers an enormous $300 billion or so every year is beside the point for the column.
In a briefing with reporters yesterday, the head of the Office of Personnel Management complained about a Lou Dobbs television bit that featured this data that I assembled from the Bureau of Economic Analysis. The Federal Diary columnist called me yesterday about the data, and I explained to him the shortcomings of the OPM claims that federal workers are underpaid.
Unfortunately, the Federal Diary today simply parrots the OPM’s claims, calling the Dobbs/Edwards/BEA data “misleading.” Yet this data clearly shows that federal compensation has taken off like a rocket this decade.
I watched the congressional conference committee on the budget yesterday on CSPAN, and it seemed like the final fall and sacking of Rome. Two of the remaining generals defending fiscal sanity, Reps. Paul Ryan and Jeb Hensarling, pled with the invading barbarians to limit their fiscal pillaging and warned that the Treasury was empty. But the barbarians, in the form of Rep. Rosa DeLauro and others, had visions of spreading the empire’s gold widely, and were not deterred by talk of damage to future generations.
The barbarians are inside the fiscal gate. The gate is the 60-vote margin usually required for big, new spending programs to pass in the Senate. Ryan and Hensarling were right that the Democrat budget plan could be a major turning point in the nation’s fiscal history. The “reconcilation” process approved by the Democrats lowers the bill passage margin in the Senate to a simple majority. The procedure was put in place in the 1970s to control spending and reduce budget deficits. But the Democrats may try to use that budget-restraint mechanism for the opposite — to pass a massive new health care subsidy program.
Ryan and Hensarling have proposed an alternate fiscal vision, but their troops have left the field, and they will need to rebuild their armies before they can put that vision in place.
President Obama focused on budget and economic issues in his press conference last night. One concern raised by reporters was that federal deficits were exploding and that Obama’s big spending plans would seem to make the problem worse.
Obama’s response was essentially that higher spending reduces the debt problem, which would strike most people as paradoxical to say the least:
Here’s what I do know: If we don’t tackle energy, if we don’t improve our education system, if we don’t drive down the costs of health care, if we’re not making serious investments in science and technology and our infrastructure, then we won’t grow [the economy by] 2.6 percent, we won’t grow 2.2 percent. We won’t grow. And so what we’ve said is, let’s make the investments that ensure that we meet our growth targets that put us on a pathway to growth as opposed to a situation in which we’re not making those investments and we still have trillion-dollar deficits.
First note that Obama’s budget would drive government health care costs up, not down. But aside from that technicality, the economics of Obama’s theory don’t make any sense.
The New York Times reports that the nation’s only privately financed commercial airport is set to open in Branson, Missouri.
Unlike government transportation projects such as the Big Dig, this private project has gone well so far: “‘I think it’s some kind of record,’ Jeff Bourk, executive director of the airport, said of the speed of the construction. ‘On other projects I’ve been involved in, there’s a lot more red tape.’”
On the broader issue of America’s airports, the Times notes:
Every one of the 552 airports providing commercial air service in the United States receives some kind of federal money, according to the Federal Aviation Administration, and these airports are owned by public entities, municipalities, transportation districts or airport authorities.
In airports, America embraces socialism, while free enterprise has taken hold abroad. Many major cities around the world have privatized their airports in recent decades, as I discuss here.
The growth in private airports faces a number of hurdles in America. One problem is that government airports receive federal, state, and local subsidies, which makes it hard for private companies to compete. Another problem is the tax-deductibility of state/local (”muni”) bonds, which gives government facilities a financing advantage over private projects.
Thomas Jefferson famously opined that “the natural progress of things is for liberty to yield and government to gain ground,” but Canada has bucked that gloomy forecast in recent years. As my co-authored op-ed in the Washington Post yesterday showed, Canada has:
- Cut government spending
- Cut government debt
- Balanced its budget consistently
- Pre-funded its version of Social Security to make it solvent
- Decentralized power within its federation of provinces
- Cut taxes, particularly corporate taxes
Meanwhile, the United States has headed in the opposite direction in each of these policy areas. Consider further that Canada has other economic policy advantages over the increasingly uncompetitive welfare state to its south:
Try as they might, supporters of big government spending cannot make federal programs work very well. The Department of Energy, for example, has been plagued by mismanagement, cost overruns, and scandals for decades.
Today, the Washington Post reports on the poor performance of DoE’s environmental clean-up programs. As I reviewed in the linked essay, these enormously costly programs have been plagued by mismanagement for at least 25 years. Last week, Lou Dobbs lambasted DOE’s National Ignition Facility in California for its huge cost overruns (Hat Tip: Harrison Moar).
I summarize these costly projects and other DoE boondoggles here. With bipartisan support for increases to energy subsidies, we can expect a raft of bipartisan boondoggles developing over coming months and years.