Downsizing Blog

Here We Go Again

In the early 1990s, two Federal Reserve studies on mortgage lending were held up by proponents of interventionist government as proof that banks were discriminating against minorities. The government swung into action with lawsuits against allegedly discriminatory lenders, HUD started pressuring Fannie Mae and Freddie Mac to target the “underserved,” and the Community Reinvestment Act was enhanced to pressure lenders into lowering their lending standards. A decade later, the housing bubble, which was fueled by short-sighted government policies, burst and the financial well-being of many minority families crumbled along with it.

Stifling Innovation by Subsidizing It

In 2007, the Advanced Technology Vehicles Manufacturing Loan Program was created in the Department of Energy to support the development of advanced (i.e., “green”) technology vehicles. Last year Congress appropriated $7.5 billion to support a maximum of $25 billion in loans. So far, the subsidies have been dished out to Ford ($5.9 billion), Nissan ($1.6 billion), Tesla Motors ($465 million), and Fisker Automotive ($528 million).

Not So Intelligent Mail

In 2003, the U.S. Postal Service initiated the Intelligent Mail program, which would integrate thirty different barcode systems used by commercial mailers into a single system. Ideally, the new barcode system would improve efficiency, reduce costs, and improve timeliness of delivery. However, a new report from the Government Accountability Office details numerous problems with the program’s implementation that are all-too-common in government:

Food Stamp Use Soars and Stigma Fades

That’s the title of a piece in Saturday’s New York Times. That welfare usage is up in a recession isn’t surprising, but if the stigma is truly fading it’s not a positive development. As a Cato essay on food subsidies states, “The [food stamp] program contributes to long-term dependence on government and produces various social pathologies as side effects.” Disturbingly, the USDA official who oversees the program is pleased:

California Shows Need to Revive Federalism

The state of California recently received $60 million in U.S. Department of Labor stimulus funds to upgrade its 23 year-old unemployment benefits system. But according to the Associated Press, California is yet to spend $66 million it received from Labor in 2002 to upgrade its system. The price tag isn’t whopping by federal standards, but it is another reminder of the need to return to fiscal federalism.

Government Health Care Awash in Waste

Official estimates put the amount of improper payments in federal subsidy programs at about $100 billion a year, with Medicare and Medicaid accounting for more than half. The actual loss to taxpayers is probably much higher.

Federal Housing Subsidies are Insane

A New York Times report on the Federal Housing Administration’s subsidies for higher-priced real estate reveals the insanity of federal housing policies. The 2008 stimulus package signed by President Bush temporarily doubled the maximum loan the FHA insured to $729,750 on single-family homes. Coverage on multi-family units can exceed $1 million.

Justice Grants and Federalism

USA Today reports that “the Justice Department gave more than $77 million in stimulus funds this year to 200 police agencies because of their locations rather than economic or crime-fighting needs, department records show.” Why? Because a 1994 congressional provision requires that every state gets a slice of the local law enforcement funding, regardless of need or circumstances.

Air Traffic Control Troubles

A computer glitch in the Federal Aviation Administration’s national air traffic control system caused delays and cancelations last Thursday. A spokesperson for the air traffic control employees union called it a “nightmare.” Sen. Charles Schumer (D-NY) said the nation’s ATC system is “in shambles” and called for more “resources, manpower, and technology” for the FAA.

Cost Overruns: It's the Same in Britain

The Taxpayers’ Alliance has published a new study examining a sample of 240 government capital projects in Britain, including weapons systems, highway projects, computer upgrades, health care spending, and other items. The results mirror the serious cost overrun problems we have in the U.S. federal government.

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