Everything The Government Does Is A Form Of Advocacy For Its Own Expansion

From Washington comes the scandal du jour, this time that the IRS has targeted "conservative" groups, particularly those using the words "tea party" or "patriots" in their name, for special scrutiny, audits, and other harassment.  In March 2012, following complaints from such groups, the head of the IRS denied to Congress that such things were occurring.   On Friday May 10 Lois Lerner, head of the IRS tax-exempt-organizations division, admitted that it had occurred, and apologized for the conduct, calling it "absolutely inappropriate," but attributing it to low level workers.  Then over the weekend it came out that an upcoming report by the Inspector General of the Treasury Department was going to disclose  that higher ups knew that such targeting was going on as early as June 2011, nine months before the denial to Congress.  Today at a news conference, President Obama decided it was time to deflect the attention elsewhere, and went on record calling the conduct "outrageous."

Is someone about to uncover the directive from the Obama White House to begin a campaign of tax audits of political enemies and opponents?  I doubt it.   This doesn't come from a particular directive.  This comes from the general overall no-need-to-mention-it-specifically directive, which is that the purpose of government is to always and everywhere advocate for its own protection and expansion.  Mickey Kaus at the Daily Caller calls it:

[Y]ou don’t need direct White House involvement to politicize the IRS, at least for Democrats.  The underlings know what to do! The idea that they are apolitical professionals was always a myth.

Kaus titles his post "Memories," and helpfully lists, with the aid of a Judicial Watch filing, many of the entities and people revealed to have been subject to IRS audits during the Clinton years:

The National Rifle Association, The Heritage Foundation, The National Review, The American Spectator, Freedom Alliance, National Center for Public Policy Research, American Policy Center, American Cause, Citizens Against Government Waste, Citizens for Honest Government, Progress and Freedom Foundation, Concerned Women for America and the San Diego Chapter of Christian Coalition.

And don't forget this list of instantly-recognizable Clinton-era names:

Clinton paramours Gennifer Flowers and Liz Ward Gracen, sexual assault accusers Paula Jones and Juanita Broaddrick, and fired White House Travel Office Director Billy Dale.

How do you justify engaging in this sort of behavior if you are an IRS functionary?  Easy.  You have the Democratic world view that government spending helps people and more government spending helps people more.  If a group is advocating more government spending to help the old, or the poor, or the homeless, or the children, then obviously that is a charitable purpose.  But a group advocating cutting government spending or shrinking the government?  Obviously that's political!  No tax-exempt treatment for that.  Although many press reports have described the IRS targets as being "conservative" groups, it was actually not just any conservative groups.  For example, groups that support "law and order," or that oppose abortion, are often referred to as conservative.  But those organizations were not the targets of these audits (as least as so far revealed).  Instead, the particular targets of these audits were groups whose main purpose is to advocate for decrease of government spending and shrinkage of the government.

Kaus also links to David Brooks speaking on NPR last fall, just before the election, attempting to defend BLS bureaucrats who had just put out jobs numbers that were extremely helpful in the president's re-election efforts.  Brooks' take:

They're numbers geeks. They do their jobs. They go home. They're not that political. And I guarantee you the people in the BLS are totally committed to the numbers. If somebody tried to introduce politics in their work, there would be mass resignations and there would be a lot of calls to reporters at various institutions saying this is happening. So I guarantee you, I feel very strongly it's not happening.

He's probably narrowly right, but at the same time unbelievably naive.  Sure the bureaucrats who compile the numbers view themselves as "apolitical," with "apolitical" meaning going along with the universal consensus of Washington that government spending helps people and cutting it harms people.  The problem with the government numbers on virtually everything is not that they are fraudulently compiled within their defined parameters; the problem is that the parameters have been designed such that the numbers will inevitably be useful in the never-ending campaign for bigger government.  Thus GDP statistics are designed so that government spending is defined to increase the economy and cuts to government spending are defined to shrink the economy, even though that is a fallacy; and the poverty rate is designed so that it can never go down; and accounting for social Security and Medicare liabilities is designed to conceal the magnitude of those liabilities from the taxpayers; and so forth.  The numbers may well be accurately compiled within their definitions, but the definitions are inherently deceptive and frankly, the people who compile them know that full well.

The Welfare State Aggressively Advertises To Expand Itself

The phrase often used to describe the welfare state is the "safety net," a term with connotations of small numbers of people otherwise in grave danger of harm.  Then we find out that the number of people on food stamps (aka SNAP) has close to doubled over the last four years and now is around 48 million, costing close to $80 billion per year.  How did it get so big so fast, and is the term "safety net" really a fair description of its current status?

Over at the Washington Post a guy named Eli Saslow appears to be undertaking a project to report on the implications of the food stamp explosion in the real world.  On March 16 he had a big report on food stamps in Woonsocket, Rhode Island; and on April  23 another big report from Florida.

Saslow clearly comes at this with a view that all food stamps are good and more food stamps are better.  Still, there's a lot to be learned from reading his articles.

First, I found them by a Google search of "food stamps Washington Post."  I guess that determines what ads you get.  At the top of my version of the Rhode Island article we have:

Government Assisted Phone

Get a Free Phone & Monthly Plan.  See if You Qualify for One Today!

www.assurancewireless.com

And then down at the bottom of page 1:

Apply For SSI/Disability

Get SSI & Social Security Benefits Free Consults & Help With Your App

Apply.SSDisabilityApplication.com

Click that last link and you go not to a government site, but rather to the site of a firm called Myler Disability, "Social Security Disability Advocates."

Also, many more such ads scattered through these multi-page articles.

But let's look at the articles themselves.  In Florida we follow around a woman named Dillie Nerios, employed by "a local food bank that is funded in part by the state" of Florida.  Her job: to recruit "at least" 150 seniors each month onto the food stamp rolls.  Is it working?  "Nowhere had the SNAP program grown as it has in Florida, where enrollment had risen from 1.45 million people in 2008 to 3.35 million last year."

To help enroll more seniors, the government has published an outreach guide that blends compassion with sales techniques, generating some protests in Congress. The guide teaches recruiters how to “overcome the word ‘no,’ ” suggesting answers for likely hesitations.

Nerios spends a lot of time with a couple named Lonnie, 60, and wife Celeste, who seem to have lost most of their savings in a failed business venture a couple of years ago.  They are eligible for food stamps, but clearly reluctant to take them.  Dillie tries everything to get them signed up.  Saslow meanwhile tries everything to get your sympathy for the effort, including describing the small mobile home where L&C live, and Lonnie's lack of success in getting jobs in the last few years.  Then, even as he's trying to pull on your heartstrings, Saslow basically gives away the game:

They decorated the walls of the mobile home with memories of a different life: photos of Lonnie in his old New Jersey police officer uniform, or in Germany for a manufacturing job that paid $25 an hour, or on vacation in their old pop-up camper.

An "old New Jersey police officer uniform"?  You mean this poor, poor guy has one of those New Jersey police pensions?  For anybody who follows any news at all, New Jersey police pensions have to be one of the biggest scandals out there.  In this article we never learn how big Lonnie's pension is, or whether he is one of the notorious New Jersey "double dippers."  But hey Eli, an article trying to drum up sympathy for the poor condition of a retired New Jersey policeman who must be entitled to a pension, and doesn't even mention the pension or how big it is?  This is really preposterous!  By the way, Lonnie and Celeste also have five grown working kids.  Any chance that one of them could pitch in before the parents become wards of the taxpayers?

You are probably asking, how can Lonnie and Celeste even be eligible for food stamps if he has one of those New Jersey police pensions?  The answer is that most pensions are not counted for food stamp eligibility.  Again, we can't know the details if Eli won't ask the most basic questions here.  Oh, and by the way, equity value of home (unlimited in amount) is also not counted in food stamp eligibility, and same for value of a first car (this one varies some state by state).  Don't let being a millionaire slow you down!

The articles are also completely permeated with the economic fallacy that passing around free money is a good thing for the economy.   As in, for example, "food-stamp enrollment has become a means of economic growth, bringing almost $6 billion each year into the state.  The money helps to sustain communities, grocery stores and food producers."  So I guess the government should just pay everyone to sit around and do nothing -- that will make us all rich! 

I appreciate the Washington Post at least shining something of a light on what is going on out there.  But really, in its worldview and total acceptance of the most ridiculous economic fallacies, this series is an embarrassment.

UPDATE:  Thinking about this post since I wrote it yesterday, my question is, is it possible that Lonnie came away from his tour as a NJ policeman with no pension?  I don't think so.  Saslow is trying to pull on our heartstrings.  If Lonnie had no pension, there is no way that he would have omitted that fact.  And there is much in the article to indicate that Lonnie must have some source of income, since he clearly spends money (fixing up his mobile home, for example) and Saslow emphasizes repeatedly that all jobs have fallen through.  No, Lonnie has a pension -- and NJ police pensions are known to be some of the most lucrative -- and Saslow is intentionally omitting that fact to deceive the readers.  Not good.

Infinite Credit Card Update: The Obama Budget

Our President has now proposed a budget for the upcoming fiscal year.  It's a few months late, but I guess that's better than just blowing off the job completely, as the Senate has done for the past few years.

To read reports from the President's cheerleaders in the press, the big news is his proposal to use a somewhat modified index for adjusting Social Security payments for inflation, otherwise known as "chained CPI."  That's supposed to save about $340 billion over the next ten years, hugely back-weighted to the later years of course. That would be maybe a 3 - 4% savings on the cash-basis deficit, if you think the cash-basis deficit is a meaningful figure.

But just to see if they're at all serious about their job, let's look at a few other programs running on autopilot on the infinite credit card.

Student loans:  Now over $1 trillion, essentially all guaranteed by the Federal government in an off-balance sheet item not reported as part of the debt.  Any problem there?  If you follow this at all, you've probably seen delinquency rates of between 5 and 10%.  Well, in late February 2013 the New York Fed held a briefing on the latest status of the student loan situation.  This link will take you to a full deck of the power point slides.  At page 11 we learn that  the delinquency rate has gone from about 9% as of 2004 to 17% as of the most recent data in 2012.  Oh, but wait -- on page 12 we learn that some 44% of the student loans are not in "repayment status," either because the student is still in school or has some kind of deferment.  The 17% "delinquent" is of all student loans.  What percent is that of the remaining 56% who are supposed to be repaying?  The answer is that over 30% of the student loans in "repayment status" are delinquent.   And rising rapidly.  They will be very lucky to get back half of the trillion dollars of student loans.  Meanwhile, they continue to make more of them, and the trillion is growing rapidly.  And the students who will be defaulting on the half trillion or so face a future of personal financial disaster.  Nothing I can find in the President's budget to address this.  Hey, it's off balance sheet!

PBGC.  How exactly the Federal government thought it was a good idea to guarantee all private defined benefit pensions, I will never understand.  Where is that now?  An article here from the website "Top 1000 Funds" about a year ago (April 13, 2012) says that the "funding shortfall" of those top funds was $1.415 trillion..  That of course comes from their official reports.  You can believe the number if you want, but I have strong reason to suspect that they are valuing their liabilities using wishful thinking discount rates of 7 and 8%, some even higher.  Suppose you used a more realistic 5%, or even 4%.  You would need lots of terabytes of data to do an exact calculation, but a back-of-the-envelope estimate tells me that the real "shortfall" (all guaranteed by the PBGC) is in the $5 trillion range.  Anything in the President's Budget to deal with this?  Yes!  Deep in the Budget at page 127 it says that they propose "to give the PBGC Board the authority to adjust premiums . . . ."; and then they credit themselves with a $25 billion deficit reduction for that over 10 years.  Nothing to it!  In reality defined benefit plans are in a death spiral, and the PBGC with them.  From Walter Russell Meade today:  "If these estimates are accurate, the PBGC itself could run out of money within 15 years, and much sooner if two particularly large troubled funds become insolvent."  Well, in the great tradition of politicians everywhere, Obama will be gone.

Food Stamps.  This is the program that has nearly doubled from 26 million to 48 million recipients in four years of Obama, and now runs at close to $80 billion per year.  Is that just going to double again in the next four years, or are there going to be some efforts to bring it under a semblance of control?  Other than a two-word reference to "program integrity," I don't find anything meaningful about trying to bring it under control.  At page 61 of the Budget, we find that we will now provide what appears to be an additional $7.6 billion in "discretionary nutrition programs" including for the WIC programs for "women, infants and children."  My bet is on continued explosion.

Disability.  A few days ago I noted that this program has about doubled under Obama and now runs at about $124 billion per year.  Since then I have seen several articles pointing out that the true cost of the disability program needs to include the fact that disability recipients become entitled to Medicare coverage after two years, even though they are under 65.  That adds another $80 billion, so the actual cost of the disability program is now over $200 billion per year.  And growing like a weed.  Anything in the Obama Budget to bring that under control?  Nothing that I can find.

And I haven't even started to look at the numbers for Medicare, Medicaid, and Obamacare.  The overall impression is that they think that handing out the free money is a good thing.  Deficits are projected to decrease somewhat because the explosion of commitments is way underestimated and then covered over by decreases in defense spending.   But I seriously doubt that it will be possible to continue to hide the problems for the full four years. 

More Competition For The Worst Economics Writer In America

Regular reader Barry F, following up on Sunday's post here, sends in an additional nomination for the august title of Worst Economics Writer In America.  The nominee is Matthew Yglesias, head business and economics correspondent for the online magazine Slate.  To support the nomination, Barry links to Yglesias's April 1 post at Slate entitled "Print Money.  Mail Everybody a Check."

This is indeed a worthy nomination.  Yglesias, both at this post and throughout his writing, shows a spectacular lack of understanding of literally everything about what makes an economy work, and can be consistently counted on to advocate the most destructive possible policy in any given situation.  But Krugman is a very tough competitor.  No sooner had Barry made his nomination than Krugman put up his own April Fools Day lollapalooza, "Lessons From a Comeback," proving that this coveted crown cannot be so easily dislodged.

In his April 1 post, Yglesias picks up on Ben Bernanke's suggestion a few years ago that a central bank as a last resort could drop cash out of helicopters.  Instead, Yglesias says, the central bank should "mail checks" directly to American families.  And he then proceeds to list, with an apparent straight face, the many advantages of this proposal, such as:

it makes the budget deficit go down rather than up

Children in a Native American tribe that got revenue from a new casino had much better mental health than children whose families didn’t get the unexpected bonus

It’s also really fast

And so forth.  Might this kind of program undermine the structure of incentives that made the economy happen in the first place?  Not part of Mr. Yglesias's concerns.

I know what you are thinking:  this was an April Fools gag, not to be taken seriously.  Yes, this article is so stupid that that hypothesis must be considered.  However, Slate helpfully provides a listing of recent posts by Mr. Yglesias that firmly establishes his credentials among the very worst of economics writers, including, for example, a defense of new PM Shinzo Abe's plans for another round of "stimulus" in Japan (will they never notice that 25 years of "stimulus" in Japan has led to 25 years of stagnation?), the contention that a modest reduction in destructive poverty trap housing subsidies is "Sequestration's Unkindest Cut," endless advocacy of higher taxes, and on and on.  No, the April Fools joke theory will not fly.  This guy has fallen for every economics fallacy and then some.

But as I say, Krugman is one very tough competitor.  "Lessons From a Comeback" is about the supposed comeback of California from its recent financial crisis.  Mr. Krugman is prepared to declare that California is back, even before any results of its recent round of major tax increases have even been reported:

Unemployment in California remains high, but it’s coming down — and there’s a projected budget surplus, in part because the implosion of the state’s Republican Party finally gave Democrats a big enough political advantage to push through some desperately needed tax increases. Far from presiding over a Greek-style crisis, Gov. Jerry Brown is proclaiming a comeback.

OK, in Japan they've been "proclaiming" a comeback for 25 years.  You'd think these guys might have the prudence to wait for even one quarter's data to come in, but that's not their style.  But then we come to my favorite part:

Needless to say, the usual suspects are still predicting doom — this time from the very tax hikes that are closing the budget gap, which they say will cause millionaires and businesses to flee the state. Well, maybe — but serious studies have found very little evidence either that tax hikes cause lots of wealthy people to move or that state taxes have any significant impact on growth.

I don't know if I qualify as one of Mr. Krugman's "usual suspects," or what exactly he means by "doom."  But I know what I am predicting.  I am not predicting immediate default or that the whole population of California picks up and leaves tomorrow.  I am predicting long term gradual relative decline.  I am predicting the same thing for California that New York City experienced in the 1970s, when it allowed its combined state and city income tax rate to exceed 18% when New Jersey and Connecticut had no income tax.  During that decade the City lost 1 million of its population, the Bronx was burning, Stamford and Jersey City were booming, and a new corporation announced the departure of its headquarters on about a weekly basis.  California's taxes today aren't that wildly out of line, so it won't be that bad, but it will be a significant gradual relative decline.  Not unlike what New York is experiencing right now relative to Texas and Florida.  Sure, some new businesses open, new buildings go up, areas are gentrifying.  It's just that incomes and populations are going up far faster in Texas and Florida.

And what exactly are those "serious studies" Krugman refers to that find "very little evidence" that state taxes have any significant impact on growth.  Has New York's experience in the 70s just gone down the memory hole?  Can they look out the window and see what is happening to New York and Illinois versus Texas and Florida.  I say Krugman keeps his crown!

There Is Nothing Like Going On "Disability"

Back in December 2012 I wrote a post titled "Who Could Be Against Disability Pensions?" pointing out the sad truth that the New York disability pension programs are riddled with unbelievable levels of fraud:  for example, 75% of New York City firemen retiring with supposed "disabilities"; 97% of Long Island Rail Road workers retiring with supposed "disabilities."  It seems that the temptations of a free check every month for life without having to do anything are just too great for many people.  The post concluded, 

I wonder if it's actually possible to have a government-run program for disability payments without having it explode because of endemic fraud.

Now comes along Chana Joffe-Walt at NPR (of all places) to write what promises to be a four-part series on the Social Security disability program.  Here is the first part.

Please read the whole thing.  Literally every line is a warning of how badly wrong good intentions can go.  

The concept behind Social Security disability is that if you are sufficiently disabled that you are unable to do productive work of any sort, you are an appropriate candidate for the safety net, in the form of "disability" payments, to sustain you at a minimum level for the rest of your life.  At first consideration, almost no one would disagree with the concept.  But the designers of the program seem to have given almost no thought to the problems that perverse incentives can cause.   

The result is a program that sucks people in, and from which almost no one escapes.  The number of beneficiaries continues to explode in good times and bad.  Rolls have about doubled during the Obama administration, increasing by some 5.4 million people over the past 4 years according to Investors Business Daily.

Let's consider a few examples of perverse incentives and how they play out.  It turns out that the costs of welfare (now known as TANF) are shared between state and Federal governments; but SSDI is all on the Federal dime.  So states can save a buck by transferring people from TANF to SSDI.  How does that play out?  From NPR:

PCG is a private company that states pay to comb their welfare rolls and move as many people as possible onto disability. "What we're offering is to work to identify those folks who have the highest likelihood of meeting disability criteria," Pat Coakley, who runs PCG's Social Security Advocacy Management team, told me.  The company has an office in eastern Washington state that's basically a call center, full of headsetted women in cubicles who make calls all day long to potentially disabled Americans, trying to help them discover and document their disabilities:  "The high blood pressure, how long have you been taking medications for that?" one PCG employee asked over the phone the day I visited the company. "Can you think of anything else that's been bothering you and disabling you and preventing you from working?"

Of course, welfare/TANF has time limits, but disability is a lifetime entitlement where nobody so much as checks up on you once you qualify.  It's the ultimate poverty trap.

Then there's the story of Charles Binder, SSDI attorney extraordinaire, whose firm in 2012 represented some 30,000 clients and earned some $68.7 million (!) in fees, in each case seeking SSDI benefits.  How much of an effort does the government put up to be sure that those seeking benefits are actually "disabled" in the sense commonly understood?  The answer is, when a claimant seeks a hearing to get benefits, the government does not even put on a defense, no matter how poor the claimant's case:

Who is defending the government's decision to deny disability?  Nobody.  "You might imagine a courtroom where on one side there's the claimant and on the other side there's a government attorney who is saying, 'We need to protect the public interest and your client is not sufficiently deserving,'" the economist David Autor says. "Actually, it doesn't work like that. There is no government lawyer on the other side of the room."

So what are the things that qualify you as "disabled" and entitled to a monthly check for life?  Of course, they are largely subjective things that depend almost entirely on the claimant's word and cannot be objectively verified.  Number 1, at 33.8% of cases in 2011, is "back pain and other musculoskeletal problems."  Number 2 at 19.2% is "mental illness, developmental disability, etc."

The incentives of this program are as thoroughly perverse as it is possible to imagine.  Absolutely no one involved with the system has any incentive to keep costs under control; rather, everyone has every incentive to milk the program for every cent possible.  Once on disability, virtually no one leaves -- the departure rate is barely 1%. Everyone involved -- the consultants like PCG, the lawyers like Binder, the states, the administrative law judges, and most of all the beneficiaries -- make lots of free Federal money.  If you're curious, the annual cost of the program is currently running about $124 billion, according to Bloomberg here.  Real money.  Another 4 years of Obama are likely to add at least another 5 million to the rolls.

The answer to my question, unfortunately, is that it is not possible to have a government-run disability program without having it explode with an epidemic of fraud.