The Government Shutdown Brings Out A Flood Of Economic Nonsense

Does a brief shutdown of the government, and an accompanying minor reduction in government spending, help or hurt the economy?  I start from the proposition that all wealth is created by the private sector while much government spending is wasted; and from the observation that the countries with the lowest government spending as a percent of gdp (Singapore, Switzerland) have the most successful economies, while those with the highest government spending as a percent of gdp (Cuba, North Korea) have the least successful economies. To improve an economy's performance, cut government spending!

But the government shutdown has brought out a flood of ludicrous economic nonsense somehow attributing the economy's ongoing poor performance to the shutdown and accompanying slight reduction in government spending.  Most of the nonsense falls into the categories of either fake Keynesianism or the uncritical acceptance of the fraudulent government gdp methodology that counts all government spending as a 100 cents on the dollar increase in gdp. 

Just a few examples to prove I'm not making this up.  The New York Times graces us with a long analysis piece on October 18 titled "Shutdown to Cost U.S. Billions, Analysts Say, While Eroding Confidence."   What analysts exactly?  How about IHS Global Insights:

“The three weeks of government shutdown will cost the economy $3.1 billion in gross domestic product from lost government services,” estimated Paul Edelstein and Doug Handler of IHS Global Insight, an economic research firm. “There will also be some impact from lost private-sector jobs tied to the shutdown, as well as a loss of consumer and business confidence resulting from the debt-ceiling showdown.”

The $3.1 billion is just total acceptance of the idea that reducing government spending reduces gdp dollar-for-dollar -- not really a fallacy so much as a fraud.   I guess government spending can never be reduced then!  But the $3 bil is so paltry.  S&P promptly upped the ante to $24 billion, according to this from Business Insider on October 16, quoting an S&P press release:

We believe that to date, the shutdown has shaved at least 0.6% off of annualized fourth-quarter 2013 GDP growth, or taken $24 billion out of the economy. However, the closer we get to breaching the debt ceiling, the higher we expect the economic impact to be.

Funny that they don't have any comparable number for how much damage Obamacare is doing to the economy.  Perhaps trying to curry favor with the administration to get out from under that $5 billion lawsuit?

Bloomberg Business Week gives us two articles in October attributing the continuing economic stall to the shutdown and spending cuts.  On October 7 we have "Republicans Are No Longer the Party of Business," containing this gem: 

Over the past several years the series of budget crises engineered by Republicans to extract concessions from Democrats has damaged economic growth by reducing spending and increasing uncertainty. 

Or try this, from BBW on October 21's "The Tea Party's Pyrrhic Victory":

Fiscal policy is probably subtracting 1.5 percentage points from the economy’s growth rate in 2013, taking into account this year’s spending cuts and higher taxes, estimates Zandi of Moody’s Analytics.

It's the old "austerity" fallacy, mixing a benefit to the economy - spending cuts - with a detriment - tax increases.  And this is before we even get to the screamers like Media Matters or Think Progress.  Or Krugman -- I can't even read him any more.

I just hope no one here is reading this stuff and thinking that because these people have credentials they must know what they are talking about.

UPDATE, October 25:  Don't know how I missed it before, but the classic of this genre is the op-ed by Steven Ratner in the New York Times on October 23, "The Biggest Economy Killer: Our Government." 

[T]he sharp decline in the budget deficit, from $1.4 trillion in 2009 to $642 billion in the 2013 fiscal year that ended Sept. 30, has braked the economy at a time when it was already improving only slowly, as Tuesday’s jobs report demonstrated.  According to estimates by the Congressional Budget Office, the pullback in spending by Washington — it declined in 2013 for an extraordinary second year in a row — together with higher taxes will cause the economy to grow by 1.5 percentage points less this year than it would have if the deficit had remained constant.

For those who don't know him, Ratner is known variously as the New York Times' favorite investment banker and as Obama's one-time "car czar."  Those kind of credentials do not make one immune from falling for preposterous fallacies.  Can somebody please tell this guy, and the other guys, that counting government spending at 100 percent in the gdp is a scam?

When Will The Young Figure Out They Are Getting Taken?

The government shutdown is over for the moment, and lots of pundits are chortling about how badly the Republicans, and particularly those who fought to defund Obamacare, got "beaten."  For example, check out Timothy Noah at MSNBC here:   

[W]hat the GOP’s right flank is experiencing right now, in government and the court of political opinion, is failure.

Well, you can look at this politics thing as a series of skirmishes where what counts is who "won" and who "lost" the latest skirmish; or you can look at it as trying to come up with the right system to enhance the wealth and happiness of the people.   Looked at from the second perspective, what exactly has been "lost" or "won"?  Every last government program has been defended until some time early next year, entitlements continue merrily on their unsustainable growth path, the cash basis deficit is almost $1 trillion and the accrual-basis deficit is more like $5+ trillion, and Obamacare is now launched.   All of this amounts to a Ponzi scheme where the benefits owed to the old are accelerating and the new entrants -- the young -- have to pay more and more the longer it continues, with little prospect that the scheme can survive long enough for today's young ever to get their due.

And yet.  What age cohort gave Barack Obama and the Democrats the largest share of the vote in the 2012 election?  That would be the 18 - 29 cohort, which according to the Huffington Post here went 60 - 36 for Obama.  These would be the people who already have to pay for Social Security and Medicare for the baby boom generation, who are bearing the lion's share of the now over $1 trillion in student loan debt, non-dischargeable in bankruptcy, and who are about to get hit with Obamacare.  Why are these people voting overwhelmingly for the defenders of the Ponzi scheme status quo?  Hello?  

The weekend edition of the Wall Street Journal has an interview with Stanley Druckenmiller, one of the most successful hedge fund entrepreneurs of the last several decades, who is currently on a tour of college campuses giving talks on the subject of the generational theft.   Druckenmiller's theme to his young audiences is that they can't possibly come out ahead in this game.  Among other things, he points out to them that proposals to fund increasing benefits by raising income tax rates on "the rich" will fail to catch people like himself and others in the baby boom generation who have already made their money; instead, such higher tax rates will catch those now young as they move up the income ladder, making it harder and harder for them to keep up with their debts, let alone get ahead. 

And into this mix, throw Obamacare.  Here again, almost all of the reporting is about who gains or loses from the problem of the day.  But a longer view says that today's website problems are far less important that the attempt at yet another huge chunk of generational theft from the young to the old.  Have the twentysomethings really been fooled into believing that you can add tens of millions of people to the ranks of those with access to healthcare, not add any doctors, hospitals, or other health providers to the system, and everyone's healthcare costs will go down?  People, the whole idea here is that twentysomethings are to be forced to pay double or triple or quadruple the fair cost of health insurance so that the money can be transferred to others who are older and less healthy. 

I have previously reported on the huge efforts ($684 million in spending) of the federal and state governments to promote Obamacare, particularly to the young for whom it is a terrible deal.  See The U.S. Government Embarks On The Most Massive Fraud In World History, September 2, 2013.    Kyle Smith in today's New York Post takes it a step further, revealing a grant to the USC Annenberg Norman Lear Center  to get Hollywood to work Obamacare propaganda into television shows and movies. 

There are two ways for the Ponzi scheme to end -- by crashing, or by the young people figuring out that this can't work for them and voting for politicians who support fundamental reform to the entitlement state.  I actually have some optimism that the sticker shock of Obamacare is going to be the thing that will finally start waking these twentysomethings up.   

Bill de Blasio: How Bad Is This Guy?

Democrats like to call the Republicans the Stupid Party, and lord knows I find plenty to disagree about with plenty of Republicans.  But now we have as the Democratic candidate for mayor in New York one Bill de Blasio, a standard-issue Leftist of the most doctrinaire and uncritical strain.  Let's go over a few issues that might serve as a proxy for his IQ. 

It is by now widely known that as a young "idealist" in the 80s de Blasio went to Nicaragua to work with the Sandinistas.  When initially questioned about this he described his work as bringing food for the poor.  This was 1988 -- nine years after the Sandinistas had seized power and only one year before the fall of the Berlin Wall.  Was it possible by that point not to realize that this was a Soviet-backed thugocracy?  Here's a New York Times article from September 22 that, charitably described, does not exactly back up de Blasio's description of his Nicaraguan adventure as a mission of mercy to the poor: 

Mr. de Blasio became an ardent supporter of the Nicaraguan revolutionaries. He helped raise funds for the Sandinistas in New York and subscribed to the party’s newspaper, Barricada, or Barricade. When he was asked at a meeting in 1990 about his goals for society, he said he was an advocate of “democratic socialism.”       

Then, of course, de Blasio honeymooned in Cuba in 1994.  This is now three years after the collapse of the Soviet Union.  Asked on a radio program a couple of weeks ago to justify that one, his answer was:

I also think it’s well known that there’s some good things that happened — for example, in health care.

OK, he's dumb enough to be completely taken in by Cuba's Potemkin health care charade, even now, 22 years after Communism fell apart.   

Enough of the ancient history; how about de Blasio's current campaign proposals for New York?    First up is "universal pre-K," supposedly to be paid for by yet higher income tax rates on the highest earners.  The proposed budget is about $500 million per year, and by the way it's only for about half the kids, so not really "universal" at all.  What is the evidence that this would be money well spent?  As those who follow this subject at all know, the federal Head Start program has been around for five decades, and there have been five decades of efforts to show that it actually has any measurable effect, at least after a couple of years.  Red Jahncke of the Townsend Group summarizes the latest information in yesterday's Wall Street Journal:

[T]hat $8 billion-a-year program [Head Start] has been found to be ineffective in educational terms by most research. That includes the “Head Start Impact Study,” a multiyear study conducted by the Department of Health and Human Services during the Bush and Obama administrations. Released in December 2012, the study found “no significant impacts” in education—in the short or long term.

Well, the pre-K program might be effective in one respect, which is having the City hire an additional few thousand teachers union members to contribute to de Blasio campaigns.

The next de Blasio signature issue is "affordable housing. "  Just a couple of weeks ago I nominated "affordable housing", particularly in Manhattan, as the worst possible public policy.   This one is really pretty objective: even if you believe that any and all government handouts "help" the recipients, it can easily be demonstrated so-called "affordable housing" programs cost far more money to "help" far fewer people than obvious alternatives. 

The "crisis of income inequality"?  de Blasio has not yet figured out that the government statistics he relies on to think there is such a crisis are rigged in excluding nearly a trillion dollars of in-kind handouts from the calculations.  And then he proposes to cure the inequality by yet more in-kind handouts, which then will not be counted in measuring income inequality and will leave us spending yet more money and having achieved nothing by our own measures.  Is this anything other than excruciatingly dumb? 

Finally, two things strike me as far and away the most important issues facing New York City.  First is the shocking overspending on K-12 education for shockingly inferior results.  According to the latest Census Bureau data (for 2011) reported at the Huffington Post here, New York has the highest per student in the country at $19,076 per student, compared to the U.S. average of $10,560.  And half the states are below the average, with Utah at only $6,212.  This is a $10 billion overspending item in the $70 billion annual New York City budget.  I haven't seen de Blasio mention it.   Ditto for pensions, where New York City allows police and fire workers to retire in their 40s, teachers, transit workers, sanitation and others in their 50s, and then guarantees lavish retirements of 30 to 50 years.  These are completely unsustainable promises, already costing $8 billion per year in the current budget, and set to double over the next several years.  Again, I can't find any place where de Blasio mentions it.

So yes, this guy is bad, and also dumb.  Oh, by the way, he's up 47 points over his opponent Joe Lhota in the latest Real Clear Politics average of polls.   Hey, this is New York.

National Political Polarization And The Boundaries Of Legitimate Debate

With Congress deadlocked and the government "shut down" now for several weeks, the latest fashion is lamenting the terrible partisan divide that has the country so terribly polarized.    According to a July 2013 survey from the Pew Research Center here, partisan polarization in Congress and among the public is the greatest it has ever been in the U.S.  "From immigration reform to food stamps to student loans, it almost seems as if congressional Republicans and Democrats inhabit different worlds."  And they don't even mention Obamacare!

Why can't we all just get along here?  How could Congress be so irresponsible as to fail to come to a deal to run the government? -- isn't that their number one job?

Here's the problem.  There really are two views of the proper role of the federal government, and they are not compatible.  One view, exemplified by the Democrats, is that the proper role of the central government is to solve all the personal problems of the people and to remove all downside risk of human existence.  The other view, far less well-exemplified by the Republicans, is that the government does not have the ability (let along the constitutional authority) to solve all human problems, is way too big, and needs to shrink.

Is there actually an appropriate compromise between those two views?  On the one hand, we have Nancy Pelosi and those like-minded with her, who would gladly see the government double in size, and then double again.  On the other hand, you have myself, who thinks that the government needs to shrink substantially.  Until recently the Republicans were not actually pushing for shrinkage, but rather, most of the time, for sort of holding the line.  For decades this led to a  "compromise" between these two sides that the government always grows, generally somewhat faster than GDP, although less fast than its most extreme advocates would like.   And the result was that an already too-big government became gradually bigger and bigger as a part of our economy and of our lives.  Here is a chart of post-war federal spending as a percent of GDP, going from about 16% in 1947 to almost 26% in 2009-11.  (It was well under 10% before the New Deal.)      

View fullsize

But now we have some substantial voices for actual shrinkage entering the debate -- for example, the TEA Party and some Senators like Cruz and Paul.  For literally my whole life, the boundaries of civilized discussion of the role of government have been defined by a relatively narrow band between growth and more growth -- Should we grow spending by 5% this year, or 10%?  OK, we'll compromise at 7.34958%.  Done!  But what's the compromise between the side wanting 20% growth and the side wanting big shrinkage of, say, at least 20%?  Not so easy.  If you think the government needs to shrink, and by a lot, the idea of a "compromise" at 7+% growth is just fundamentally not OK.  

The whole idea of shrinkage poses an existential threat to those living well off the government, most notably its senior bureaucrats and hangers on in and around DC.  They're not going down easily.  The main effort at the moment seems to be to rule the whole idea of shrinkage -- that any program can be reduced by even a dollar, let alone eliminated -- as off limits of legitimate discussion.  Thus the favorite epithet of the DC establishment is that the Republicans are "extremists" for holding out for the idea that the government should be funded by anything other than one gigantic continuing resolution that continues every single program and of course most notably Obamacare.  See for example E.J. Dionne of the Washington Post here.  Or how about this from Nancy Pelosi on September 23:   

But for many of them, I call them legislative arsonists. They're there to burn down what we should be building up in terms of investments in education and scientific research and all that it is that makes our country great and competitive.

And those are the polite ones.  Other terms applied to anyone seeking to shrink any government program by even a few percent include "repugnant," "repulsive," "cruel," "devastating," "disastrous," "mean," and plenty more, as I noted in my post about food stamps a few days ago.

Well, the problem is that the government needs to shrink.   Food stamps just grew from $40 billion per year to $80 billion in 5 years of supposed economic recovery on Obama's watch.  Recruiters comb the country looking for new people to enroll.  Home equity and retirement accounts in unlimited amounts will not disqualify you.  Does anyone really think this can continue?  Medicare and Medicaid have grown at approximately 8% compound annual growth rates since inception in the 60s.  If not fundamentally restructured, they will swallow the whole economy at some point during the 21st century.  The cash-basis federal deficit is around $900 billion this year, but the far-more-honest accrual basis deficit would be more like $5 - 10 trillion.  You can try for a while to keep the forces of shrinkage at bay by calling them names, but in the end, it's only a question of when it happens, not whether. 

I say we should establish new boundaries of legitimate debate.  To count as civilized, you must propose shrinking the federal government by at least 20%, and proposals for shrinking up to 50% are perfectly reasonable.  So you think the government should grow??????  That's "extremist," "irresponsible," "arsonist," "repulsive," or whatever other name you want to come up with. 

The "Respected" Met Council And Sheldon Silver

In reading about the Rapfogel embezzlement scandal at the Metropolitan Council on Jewish Poverty,  you can't get through an article without the author somewhere mentioning how "respected" the Met Council was here in New York.  The Daily News here on August 15 calls the Met Council "one of New York's once-most-respected charities."  The New York Times on September 15, commenting on the failure of government "oversight" to catch this long-running scam, says "There was little reason to wonder about the integrity of Met Council, a respected 40-year-old organization."  And even the Post on September 25 describes Rapfogel as "head of the well-respected Metropolitan Council on Jewish Poverty."

This is just another difference between me and almost everyone else here in New York.  The Manhattan conventional ignorance is a complete sucker for anything that sells itself as doing "good," without applying even a hint of critical thinking.  Long before it was caught in the current scandal, I thought that so-called "anti-poverty" non-profits like the Met Council and its ilk were bad, even despicable. 

The Met Council fundamentally is and always was an entrenchment scam for politicians, with any help to the poor as a secondary by-product at best.  What kind of legitimate "anti-poverty" organization takes $90+ million of annual taxpayer anti-poverty funding and never raises a single person out of poverty?  A legitimate anti-poverty organization would have as its number one goal to move its clientele to middle class independence as rapidly as possible and shrink itself gradually out of existence. 

Not these guys.  Absolutely the last thing they want is for the "poverty" population to shrink.  Then the funding would go down!  The basic idea is in kind handouts of one sort or another.  As readers here know, those do not count at all in the official measures of "poverty" and therefore will never remove anyone from the rolls.  Look at their list of programs here:  "providing quality housing," "providing clothing, furniture, and help with home repairs," "assisting seniors with essential living tasks," "helping families recover from domestic violence," "enrolling New Yorkers in low and no-cost health care and food stamps," etc., etc.   There is no risk at all that these kind of things will decrease the poverty count by a single soul.   

And it's not just that the in kind handouts don't count in the definition of "poverty"; they also function as a trap that keeps people from moving themselves up the real income ladder.  Things like Medicaid, food stamps and public housing have eligibility criteria that you had better not cross by succeeding on your own.

Nobody who actually wanted to end or reduce poverty would ever design a so-called "anti-poverty" agency in this way.  But while this kind of program may not be very good for the poor, it is perfect for politicians bent on perpetuating the power of themselves and their colleagues.   The programs create a permanent class of handout-dependent people who know that if the out party ever gets in, the funding could well go away.  And that's only the beginning.  Lots of people work for these agencies.  They are reliable advocates for continuing and increasing their funding, and for the election of the politicians who promise to do that.  They also can be counted on to rally their friends and supporters to fight for continuation of their funding.  Here on the Met Council web site is the section where they urge readers and supporters to "Advocate against budget cuts."  "2000 frail homebound New Yorkers are at risk" "778 households Utilities turned off Unable to pay rent Nowhere to turn"  etc., etc.  Oh, is that advocacy paid for by the $90+ million of annual taxpayer funding for the organization?

And then there's the very best part:  political contributions to fund campaigns.  The allegation in the AG complaint against Rapfogel is that, as the Times describes it, he "conspire[d] with someone at the insurance brokerage . . . to pad the charity's insurance payments by several hundred thousand dollars a year. . . .  Mr. Rapfogel . . . pocketed some of the money and was involved in getting the rest to politicians who supply the government grants to the nonprofit organization. . . ."     

Now, even though Rapfogel's wife has been Sheldon Silver's chief of staff for decades while this was going on, I don't have any reason to believe that Silver knew the details of the mechanism by which Rapfogel stole taxpayer money and funneled it back into the political campaigns of Silver and his friends.  But here's what I do know.  I know that Sheldon Silver is a very competent man, and does his main job well.  His main job is perpetuating the large majority in the New York Assembly of Democrats, particularly Democrats loyal to himself.  And if he is to do that job at all competently, he must keep very, very close track of the flow of political money to himself and his supporters.  He must know in great detail which of the taxpayer-funded non-profits in the state come through with big contributions for his machine from their executives, their employees and their boards, and he must have that information in his head when he is influencing which of them get more and less money from the taxpayers in the coming year.  And he must see the Bill Rapfogels of the world regularly at political and social events, and he must let them know how much he really, really appreciates their contributions to help get his candidates elected, as well as their efforts to get additional contributions from the employees of the organization.  If he doesn't do these things, he's incompetent; and he is definitely not incompetent. 

A reader yesterday asked me if I thought there was any hope for cleaning up the current situation, such as through the state Moreland Act (ethics) commission appointed by the governor.  The short version of my answer is, there will be hope for cleaning this up when organizations like the Met Council are no longer "respected" in polite New York society.  We have a long way to go.  

How It Works In New York

Many people are starting to notice that, no matter how much politicians overspend the people's money and how corrupt they are, it seems to be just about impossible to vote them out and get a new bunch that is meaningfully different.   Why?  A big part of the answer is the use of public moneys in the corrupt processes of government expansion and entrenchment.

There is little systematic reporting on these processes in the media.  But here in New York, a series of corruption cases has exposed a widely-used M.O. that seems to represent the current state of the art.  The latest case has revealed corruption at a whole new level and brought it to the doorstep of the kingpin of New York State politics, Speaker of the Assembly Sheldon Silver. 

Here's the basic New York M.O.:  Start a non-profit organization ostensibly dedicated to alleviating "poverty" among your constituents.  The public is bamboozled by fake federal statistics into thinking there are lots of people in physical-deprivation poverty, and generally supports public spending to alleviate the poverty.  The State Legislature and City Council spend public money, purportedly to alleviate poverty, by handing out large grants to dozens of non-profits in the scam "anti-poverty" biz, many of them closely associated with various state legislators and city councilpeople.  So you get your non-profit on the list.  Not one of these non-profits has ever actually removed a single person from "poverty" as measured by the federal statistics, because the services they provide are all in-kind and therefore don't count toward the official federal poverty measure.  But these non-profits are political gold.  At the minimum you have lots of employees who can be your campaign workers when that season rolls around, but that's only the beginning.  Next, you can put on the payroll your wife, girlfriend, and/or lots of relatives, not to mention yourself -- remember, state legislature and city council are part-time jobs.   Best of all, you can divert a good piece of your state or city  funding back into political contributions to your campaign to ensure that no competition against you can ever get traction.  And finally, you have no concern that your non-profit might actually cure the "poverty" and put itself out of business because none of its efforts count in the fraudulent official measure of "poverty."  Get a bigger appropriation next year!  You are fixed for life!

And if you start following this stuff, you realize that one after the other the Feds (rarely the state AG or DAs) arrest the state pols and time after time it's some variation of the same story.  To take some that have been in the news within the past year or so:

Pedro Espada was a State Senator from the Bronx, even serving briefly as Majority Leader.  He had a non-profit called Soundview Health Clinic that was the subject of repeated allegations of corruption.  According to this Wikipedia article, in 2000 he was tried, but acquitted, for diverting taxpayer funds from Soundview to fund his political campaigns; although he was acquitted, four other employees were convicted.  Subsequently, multiple state and federal investigations dogged him. In 2010, Andrew Cuomo, then state AG, accused Espada in a civil suit of allegedly diverting some $14 million from Soundview for personal expenses.  A 2010 private civil lawsuit accused him of diverting $1.35 million from Soundview to hire "Espada Management Company" to provide janitorial services to the Soundview facilities.  Ultimately Espada was convicted 2012 on a 2010 federal indictment  for embezzling money from Soundview (yes, Soundview also got Federal money).

In July 2012 Larry Seabrook, a Bronx City Councilman (and formerly State Assemblyman and State Senator) was convicted after being charged with diverting more than $2 million of public funds between 2002 and 2009 for personal purposes through non-profits.  According to the New York Post, the non-profits included a "job training program and a group aimed at bringing diversity to the FDNY."

In early 2013 State Senator Shirley Huntley of Queens pleaded guilty to diverting $85,000 to herself from a taxpayer-funded non-profit called the Young Leaders Institute in Laurelton.  I know what you're thinking -- Small time!  Yes, but don't assume that was the extent of the corruption.  At Huntley's sentencing in May where she got a very light sentence of a year and a day from Eastern District Judge Jack Weinstein, it emerged that she had been wearing a wire for some time to assist the FBI.  So more indictments may well be coming!

Then there's the case of long-time State Assemblyman Vito Lopez of Brooklyn.  Lopez's non-profit power base was something called Ridgewood Bushwick Senior Citizens Council, recipient of over $13 million of government money in 2011.  According to this article from the Daily News in August 2012, "with Lopez, there was always talk of one investigation or another, [u]sually [having] to do with the Ridgewood Bushwick Senior Citizens Council."   Among the more obvious eyebrow-raising aspects of RBSCC was that Lopez's "girlfriend, Angela Battaglia, was earning $343,000" a year working there, while his campaign treasurer was paid $782,000.  However, before any of the investigations actually caught up with Lopez, he found himself accused in a sexual harassment scandal, lost the support of powerful speaker Sheldon Silver (who stripped him of his chairmanships), and resigned from the Assembly in May.  And then he immediately ran for a City Council seat from the same area of Brooklyn, which he lost in a primary in September.  Hard to say if the investigations will continue with him gone from the political scene.

But all this is just the prelude to the Big One.   On September 24 one William Rapfogel was arrested on corruption charges, this time by state (AG) prosecutors (!).  Rapfogel had been head of something called the Metropolitan Council on Jewish Poverty -- yes, it's precisely one of those completely cynical so-called "anti-poverty" agencies that provides in kind services and therefore never actually gets anyone out of officially-measured "poverty."  (Don't believe me?  Check out their list of programs on their website here.)  But this is no small-time operation.  According to the New York Post today, it has recently been the recipient of some $90 million annually of taxpayer funding.  Oh, and did I mention that Rapfogel's wife Judy is long-time chief of staff to Assembly Speaker Sheldon Silver?    So it comes as no surprise that the "Met Council" was one of Silver's favorite non-profits for the direction of state funds.  (From the Speaker's perspective, what's not to like about being able to claim that he is spending a lot of money to "help" people in "poverty" without any risk that the number of people in official poverty might go down and undermine the spending machine?)   According to this article at Newsday (unfortunately behind pay wall), none other than Judy Rapfogel was the regular representative of the Speaker at the legislative meetings where state "anti-poverty" funds were whacked up among the various competing non-profits.  But don't worry, when the Met Council came up, she didn't speak, although it was known that the Met Council was one of Silver's favorite non-profits.  (And, of course, Silver has the power to strip Assemblymen of committee chairmanships that carry extra pay.)       

Some great alleged details of the Rapfogel story are in the allegations of the Criminal Complaint.  The basic idea is the the Met Council paid inflated insurance premiums (with taxpayer money), and then the insurance companies kicked the money back to Rapfogel, much of it as cash in envelopes.  The Complaint alleges that some $400,000 in cash was recovered by prosecutors from the Rapfogel's homes, and that the total amount stolen was "in excess of $5,000,000."

But the best part is the allegations about how Rapfogel then turned the kickbacks into political donations in small amounts from so-called straw donors.   According to unnamed confidential sources cited in the Complaint, Rapfogel would divert money from the kickbacks to reimburse individuals who made small political contributions, particularly to candidates for city office.  Why in small amounts?  For those who don't know, New York City matches donations up to $175 per candidate per election on a 6-1 ratio.  And thus, if divided into pieces of $175 and under, can $1 million of taxpayer funding for an "anti-poverty" program turn into $6 million of political contributions to keep your friends in power.

Well, how exactly are challengers supposed to compete effectively with an incumbent-entrenchment system at that level of uber-corruption?  But don't worry -- so far at least, Judy Rapfogel is saying that she knew nothing about this.  I guess that means that Silver didn't either.  Yup.  It's just how it works in New York.