When Will Congress Get Serious?

In case you have been deluding yourself into thinking that Congress may be getting even a little serious in its stewardship of taxpayer money, you need to follow two bills currently making their way through the legislative sausage grinder. 

We start with a Senate bill, co-sponsored by Menendez (D) of New Jersey and Isakson (R) of Georgia to modify the National Flood Insurance Program (NFIP).  That bill has passed the Senate today by a bipartisan vote of 67-32.   NFIP is the program by which the federal government provides subsidized insurance for homeowners in flood zones, most notably on or near the beach.  And who own homes on and near the beach?  In many cases the richest of the rich.  That is why federal subsidies to oceanfront homeowners have been proposed by the Manhattan Contrarian as one of only two nominations for "worst possible public policy."  To get an idea who benefits from these things, get a look at Billy Joel's oceanfront estate located at Sagaponack, New York.

NFIP has been around since at least the 60s, and everybody who thought about it knew it was way underpriced, but somehow the big storms missed most of the valuable property until after 2000.  Then came the likes Katrina, Rita, and Wilma in 2005, and suddenly NFIP was completely broke and in debt around $20 billion to the Treasury.  In an article here from April 2013 in Property Casualty 360, R.J. Lehmann of the R Street Institute estimates that the hole will be more like $30 billion by the time all the claims from Sandy (2012) are paid.

In 2012 Congress pretended it was going to get tough by passing something called the Biggert-Waters Reform Act, which supposedly was going to gradually phase in "full-risk rates" for properties in the program.  Here is the government's website on Biggert-Waters.  They say that rates for non-primary residences were going to increase 25% per year until "full-risk rates" were achieved.  Now that's tough!  Of course, primary residences were exempted completely so long as they had been built before the area was designated a flood zone.  After all, you wouldn't want to treat those rich homeowners like grown-ups, would you?

Well, in 2013 the first round of the premium increases started to kick in, and Congress may be crumbling like a stale cookie.   According to an article in the New York Times online today: 

[O]ver the past year, millions of coastal property owners were hit with flood insurance rate increases that sent their premiums soaring up to five or 10 times the previous amounts. As their insurance bills soared and their property values plummeted, homeowners begged lawmakers to block or delay the Biggert-Waters provisions.

And here's the quote from the official Senator of the Plutocracy:

“When this bill passes the House, millions of homeowners across America will breathe a sigh of relief,” said Senator Charles E. Schumer, Democrat of New York.

According to the Times article, the basic idea of the Senate bill is to delay the premium increases otherwise coming from Biggert-Waters.

What's really funny is how policy, if really bad enough, can make strange bedfellows out of people who otherwise can't agree on anything.  For example, according to this article in Insurance Journal, the Obama White House and OMB are actually opposing the Senate bill:

The OMB said the Administration’s preference is that Congress retain the Biggert-Waters Flood Insurance Reform Act because delaying the reforms would add to the $24 billion deficit of the National Flood Insurance Program (NFIP). It urged Congress to find a way instead to target relief to “economically distressed policyholders.”

That actually sounds pretty good, although might I be so impolite as to ask exactly how "economically stressed" someone might be when they own a second home at the beach?  Meanwhile, others noted as opposing this monstrosity are various environmental groups.  Remember, even a stopped clock is right twice a day.

The (maybe) good news is that the prospects for this bill in the House are not that great, and there are actually some serious opponents.  To me, this is a litmus test for the Republicans:  If they can't stop this one, what's the point?

And to illustrate that further, we have another bill working its way through Congress, and this one has just passed the Republican-controlled House.  The vote was 251-166, also bipartisan.  It's the $100 billion per year Farm Bill.  According to this from the EPA, only about 1.5 million people in the U.S. have farming as their principal occupation -- so this is about $67,000 for each of them per year.

Yes, it's a big goody-bag with handouts for everybody who took the time and effort to stick their hand out.  Followers of farm bills know that the game is to combine into one bill vast handouts for farmers and their attendants, to get the rural states, with the food stamp program, to get the urban states.  We'll just pass out money to everybody and nobody has to pay!

Fox News has the story on the Farm Bill here, and it couldn't be more disheartening.   There are lists of examples of the goodies for everybody, like:

[A] boost in money for crop insurance popular in the Midwest; higher rice and peanut subsidies for Southern farmers; and renewal of federal land payments for Western states. 

So has there been any effort at all by anyone to get spending under control?  How about those heartless conservatives?

Some House conservatives were not happy with the new bill. They originally wanted to dial back food stamp spending by $4 billion a year; the new bill cuts $800 million a year -- which represents about 1 percent of the $80 billion-a-year program. 

So the food stamp program has more than doubled over the past 5 years, from spending $37.6 billion in 2008 to $79.6 billion in 2013, and the heartless conservatives want to try for a big 5% cut back to around $76 billion.  And what has been achieved is all of 1%.  And even that is just the removal of a single item of transparent fraud, namely a practice of some states of giving some people who don't need it a small heating subsidy which in turn automatically qualifies them for food stamps even though they do not meet income and asset criteria.  Frankly, this is pathetic.

More Examples Of Our Fundamentally Fraudulent Government In Action

A recurring theme here is that the most important data put out by the federal government are all fundamentally fraudulent in ways intended to deceive the public into supporting ongoing increase in the size and power of the government.   Examples from past posts include accounting for the size of GDP by including all government purchases at 100 cents on the dollar; measurement of the so-called "poverty" rate excluding close to $1 trillion annually in in-kind distributions; and reporting of the government debt and deficit on a cash rather than accrual basis to conceal the blow up and impending collapse of the social security/Medicare/Medicaid ponzi scheme.

Well, recent news has three more good examples of fundamental government fraud practiced on the people.  And these three examples are not little ones either -- they are all massive, systematic efforts to support huge programs of government growth.  I'll lay them out briefly here and develop them further in future posts.

First up, we have the data reported by the Census Bureau on income of retirees.  That data is then taken up by the Social Security Administration for purposes of its "Income of the Aged" data, which are then widely cited as showing that many over age 65 have low income, or are even in "poverty" by official definitions.  Here is an SSA chart on number of the aged in various categories deemed to be in "poverty" by this methodology.   Headline quote in bold:

High proportions of nonmarried and minority persons aged 65 or older are poor or near poor.

Sylvester Schieber and Andrew Biggs expose the fraud in an op-ed in the Wall Street Journal on January 23 titled "Retirees Aren't Headed for the Poor House."   Turns out that the Census Bureau (as usual)  just systematical fails to count most of the important information in order to drive up the "poverty" numbers.

The CPS measures the sources and amounts of income received by American households, including income from retirement plans. The Census Bureau's definition of income, however, includes only payments made on a regular, periodic basis. So monthly benefits paid from a defined benefit pension or an annuity are counted as income, while as-needed withdrawals from 401(k)s or IRAs are not.

Result:  The data "that ostensibly documents how poorly pensions and individual retirement plans provide retirement income ignores at least 60% of the income being delivered to retirees."  Of course, based on the fraudulent data, we have Senators like Tom Harkin and Elizabeth Warren currently demanding large increases in benefit payments from the soon-to-be-bankrupt social security system.

Next up, we have the black hole of Obamacare.  There we are gradually finding out about a fundamental structure intentionally designed to conceal impending collapse from the voters until after the 2016 presidential election.  Betsy McCaughey has the story in the New York Post of January 27:

Section 1342 of the Affordable Care Act forces taxpayers to make insurers whole for most of the losses they incur selling policies on the ObamaCare exchanges through 2016. The bailout is meant to hide the full failure of the president’s signature health law until after the next presidential election.

McCaughey goes on to describe unsuccessful efforts to get HHS to give any kind of numbers on what this bailout is expected to cost the taxpayers.  Oh, and by the way, Moody's just "downgraded its outlook for the entire health insurance industry from stable to negative, blaming ObamaCare."  That sounds like risky territory for Moody's to be treading in, given the recent $5 billion government lawsuit against S&P that S&P (very justifiably in my view) attributes to revenge for S&P's downgrade of U.S. sovereign debt.

And I've saved the most important one for last.  If there's one thing we all think we know, it's that the earth "is warming."  Why do we know it?  Because of government temperature records, all kept by global warming activist zealots in places like NASA and NOAA.  But a small number of dogged, volunteer researchers combing through data archives have been reporting that the older data has been systematically altered, particularly to make earlier years cooler and, to some degree, later years warmer.  In the process the government has removed from its records the earlier versions of the data; but the researchers have located archived versions of the earlier data in other locations.  This fraud, of course, supports the attempted and ongoing multi-trillion dollar takeover by the government of the energy business and the suppression of the fossil fuel business.

Most on top of this systematic data tampering has been a guy who blogs under the name Steven Goddard at Real Science.  (I understand the name to be a pseudonym.)  In a post here from December 21, 2013 Goddard compares the trend of reported U.S. temperatures from GISS (a part of NASA) as recorded in versions of the records from 1999, 2001, 2012, and 2013.   Over 14 years, a clear negative trend of 1930 to present turns into a positive trend.  In another post from January 8, 2014, Goddard graphs NASA/NOAA alterations to the data that manufacture cooling of earlier-year (particularly pre-1960)  temperatures and thereby make the present appear warmer. 

Several skeptics of the government data have been attempting to get explanations from the government by means of FOIA requests.  They have been met with nothing but stonewalling to date.  This is a gigantic story that you probably have heard little about, but it is not going to go away.

Argentina And Venezuela Face The Music

I have written many times about the world leaders in the game of bad economic policy, Argentina and Venezuela.  For example, as to Argentina see here and here; as to Venezuela, see here and here.

The list of bad policies practiced by these countries is almost too long to list: massive government overspending; currency controls, featuring "official" exchange rates, special rates for friends of the government and extensive black markets; nationalizations of major companies, where the former owners may or may not get paid; outright theft of private pension funds; and all kinds of government handouts to favored constituencies.

Late last week, both Argentina and Venezuela suffered sudden violent economic shocks in the world financial markets.  Their currencies are dropping like stones.  According to the Wall Street Journal here, the Argentine peso slid 15% just last week.  In Venezuela the currency has been plummeting for months and inflation seems to be running at at least 50% per year.

So you may be wondering, to what does the New York Times attribute the crisis in these countries?  Nathaniel Popper reports on the front page of Saturday's print edition:

The ascent of developing countries over the last decade has been fueled by two global trends: the steady rise of China and the willingness of the Federal Reserve to stimulate the economy.  Now, with both trends starting to retreat, investors have been heading for the exits in markets as far removed as Buenos Aires, Istanbul and Beijing, with effects spilling over into the rest of the world.

Right.  In a lengthy article about the battering underway in third world markets including Argentina, not a mention of government overspending, of exchange controls, of expropriations, of crony capitalism, of defaults on debt.  It's all caused by the slowing down of the "stimulus" of the U.S. Federal Reserve!  Some things you just can't make up. 

Income Inequality And The Politics Of Envy

Readers outside New York may find amusing the current back-and-forth between our mayor and governor over the politics of income inequality. 

New Mayor de Blasio upon his election called income inequality "the defining challenge of our time."   His number one proposal to fix it is to institute a universal pre-K education program, to be funded with a tax increase on "the rich," otherwise known as taxable incomes above $500,000.  Now, am I the only one to whom it seems like universal pre-K is an extremely odd way of addressing income inequality?  Even assuming that the pre-K education transforms large numbers of beneficiaries from non-earners to middle-class earners, that will only happen at a minimum about 20 years from now, and even if existing term limits are lifted, de Blasio will never last that long.  So there's literally no possibility of this program leading to any improvement in the income inequality statistics during his tenure.  Meanwhile, since the program is to be "universal," many of the beneficiaries will not be poor at all.  And at the top end, since taxes don't count in the measures of income inequality, the additional taxes on the high earners won't have any effect either.

But put all that aside.  A few days ago in his state budget proposal, Governor Cuomo comes out and says that he has found the money at the state level to fund the pre-K program without need for the tax increase, and by the way his program for the state is tax cuts (although not to marginal income tax rates) rather than increases.  At this point, you might think that de Blasio would declare victory and go home.  Wrong!  As reported by the New York Post today, de Blasio promptly made a speech pressing forward in his campaign for the tax increase, putting it in these terms:

I think of it in terms of following through on a commitment I made to the people of New York City, that they ratified with great energy and with a huge majority, that they want this to happen and believe this is the right way forward.

So his real "commitment . . . to the people of New York City" is not so much to reduced income inequality, or even to pre-K education, as it is to punish those evil 1 percenters for their apparent success.  It's the politics of envy.  He did make some noises about a more reliable income stream, but that could only be because he remains unaware of the crowding out that is about to occur in his budget from exploding pension and employee health care costs.

Of course, there are actually lots of ways to make more than $500,000 in a year without having it come in a form subject to those premium income tax rates.  For two good examples, we could look to none other than de Blasio himself and also his progressive firebrand City Council speaker Melissa Mark-Viverito.

In de Blasio's case, Crain's New York Business reports here on January 17 that new property assessment figures out from the City show that de Blasio's Brooklyn townhouse increased in value by $725,000 since 2006, of which $225,000 came in the last year alone.  No taxable income there!  I'm not saying there's anything illegitimate about that.  But when the day comes that Bill decides to sell that house, he will likely find himself in the hated one percent by virtue of a capital gain that has built up over many years.  More than a few of the one percent get there by the route of a one time sale of a long-held asset, more often than not a home.  Here is an article that tries to get a handle on how this and other such factors distort the income inequality statistics.

And then, as an even better example of how to get rich as a connected insider by means of income that doesn't count, we have Ms. Mark-Viverito.  Her dad was a well-off hospital executive down in Puerto Rico.  At a time when he had died but his multi-million dollar estate had not been disbursed, MMV was working for an advocacy group called Aspira at a salary of $50,000.  She then applied for a townhouse in Harlem being constructed under one of those "affordable housing" programs for "middle income" people.  According to the Post here, these particular houses were made available to people in the income range of $30,000 to $70,000, and theoretically cost $240,000 (but the government subsidized the loan).  Today, City records show that the house is worth $1.2 million.  She also has a tenant in the house, although rental income has not showed up on her disclosure form when running for office.  Has she reported the income to the IRS and New York State taxing authorities?  Anyway, as you can see, if you have the right connections, you don't really need to have taxable income to become rich in New York.  To me this is just another demonstration of why government subsidized "affordable" housing in Manhattan is about the worst possible public policy.  By the way, the recently-retired State Senator from our high-end Greenwich Village/Chelsea district also lived in publicly-subsidized "middle income" housing.

If you want to get a taste of how far the politics of envy can go, you might enjoy this article from Michael Totten, currently reporting on a trip around the rural parts of Cuba.  Even though nobody but the police in Cuba is armed, there are police checkpoints everywhere.  Why?  To be sure that nobody (except of course the connected elite) can have more than anybody else:

Police officers pull over cars and search the trunk for meat, lobsters, and shrimp. They also search passenger bags on city busses in Havana. Dissident blogger Yoani Sanchez wrote about it sarcastically in her book, Havana Real. “Buses are stopped in the middle of the street and bags inspected to see if we are carrying some cheese, a lobster, or some dangerous shrimp hidden among our personal belongings.”

If they find a side of beef in the trunk, so I’m told, you’ll go to prison for five years if you tell the police where you got it and ten years if you don’t.

No one is allowed to have lobsters in Cuba. You can’t buy them in stores, and they sure as hell aren’t available on anyone’s ration card. They’re strictly reserved for tourist restaurants owned by the state.

Well, they can all be poor together.  So can we, if we let ourselves succumb to the politics of envy.

Do Government Handouts Necessarily "Help" The Recipients?

For purposes of running a personal life, a very simple rule of thumb is that more money is always better than less.  But does it follow that government handouts always "help" the recipients and therefore that more government handouts to the poor are always better than less?  

At the extreme, I would say it is obvious that a society where government handouts are the main source of income to most people can't work.  Essentially, that's where Rome found itself in the declining days of the empire.  Today, it's North Korea.    

But here's the problem.   There is near unanimous support for some kind of a basic "safety net" for those in genuine need; but there is no agreement on the boundaries of a legitimate "safety net."   Put a "safety net" in place, and the next thing you find is that government programs once in place have an inexorable dynamic of endless expansion.   Government programs also have fierce defenders who will never let go of whatever level of spending has been achieved so far.  Thus, there's an upward ratchet toward an unsustainable position.

An excellent book addressing these issues is Never Enough by William Voegeli.  He makes the point that liberal/statist supporters of government handout programs to alleviate poverty will never specify the level at which the programs have achieved their goals and should stop growing.  So no matter how much in the way of government handouts exists today, there will be advocates for yet more as helping those at the lower end of the income distribution.  I would add that fraudulent government income statistics -- particularly the ridiculous failure to count hundreds of billions of dollars of annual in kind distributions in the measure of "income" --  play a big role in the advocacy for more distributions even as the existing level ought to be far more than enough to eradicate poverty by any legitimate definition.

Examples are everywhere of advocacy for maintaining or increasing government distributions without acknowledgement of the growth dynamic of the programs or of any need for limits.  To take a couple of examples from the last week, on Monday January 13 we have Paul Krugman in the New York Times with a column headlined "Enemies Of The Poor."  Sample quote:

It's not much of an exaggeration to say that right now Republicans are doing all they can to hurt the poor, and they would have inflicted vast additional harm if they had won the 2012 election.

The "harm" to the poor consists of attempts to rein in government spending, with the main programs mentioned being Obamacare, food stamps and Medicaid.  Or in the Wall Street Journal of January 14, we have Alan Blinder with a very similar column headlined "How Government Wages War on the Poor."   Sample quote:

That brief shining moment [Clinton's second term] was followed by the presidency of George W. Bush, who took the country back to Reaganomics: huge tax cuts for the rich, exploding budget deficits and numerous efforts to trim social programs. . . .  Today, President Obama wants to get the federal government back on the side of the poor. 

Blinder seems to be focusing mostly on unemployment insurance extensions and the minimum wage.  

Neither Krugman nor Blinder, nor any of their many co-advocates, ever mentions actual numbers of the growth of distribution programs, or ever suggests the point at which they would agree that the distributions are adequate.  For example, here are government numbers for the food stamp program.  In 2000 (that's Blinder's "brief shining moment") there were 17.2 million recipients of food stamps and the total cost of the program was $17.05 billion.  In 2008, after what Blinder calls Bush's "numerous efforts to trim social programs" (note: can't say I really noticed those; in fact government spending on social programs exploded under Bush) the number of recipients was 28.2 million and the total cost was $37.6 billion.  The 2013 figures, after five years of Obama, are 47.6 million recipients and total cost of $79.6 billion.

So what are the right numbers for food stamps?  If Blinder actually believes that Clinton's second term was the "brief shining moment" of social programs for the poor, should we go back to 17 million or so recipients?  Or maybe 48 million recipients is still not enough.  So should there be 70 million, or 100 million?  Can we agree that limited resources have something to do with the discussion?  And is maintaining the independence of the people from the government a value of any significance? 

Or consider Medicaid spending.  That was $209.6 billion in the "bright shining moment" of 2000; $333.2 billion in FY 2007 after two terms of the harsh, harsh Bush cuts; and $415.1 billion in FY 2012.  It's now set to explode under Obamacare.  Again, will Krugman, Blinder, or any of their confreres please enlighten us with what they think is the appropriate level?  Or should this program as well grow at a rate far faster than the economy for the indefinite future until it engulfs the entire economy?

And then there's the question of whether the rapid expansion of the number of recipients of the handouts is good for the recipients themselves.  Here's a quote you may be familiar with:

Dependence upon relief induces a spiritual and moral disintegration fundamentally destructive to the national fibre.  To dole out relief in this way is to administer a narcotic, a subtle destroyer of the human spirit.

That's from Franklin Roosevelt's 1935 State of the Union address.

My view would be that the idea behind the safety net should be to minimize it.  Those administering the programs should be commissioned at all times to be on the lookout for those who don't really need the assistance, and trying to figure out ways to get them back to independence.  Instead today, we have government at all levels aggressively promoting dependency and seeking to grow its programs in any way it can.  I would say that that's the real "war on the poor."    

de Blasio: Review Of The First Two Weeks

Frequently noted traits of new Mayor Bill de Blasio are that he gets a lot of sleep and is always very late for everything.   Those may actually be good things, given that probably the best we can hope for from this guy is that he just never does much.  And indeed, the first two weeks of his term have seen remarkably little in the way of actual actions coming out of the mayor's office.  So far, so good.

But can it last?  All indications are negative.

In the area of actual activity from the mayor himself, he showed up today in Queens to give a speech occasioned by the death of an 8-year-old boy hit by a truck.  That was clearly an appropriate activity for the mayor, but being who he is, de Blasio used the moment as usual to demonstrate his complete detachment from reality.  Here's the money quote:

The goal is literally to reduce fatalities on our roadways to zero. That is our singular focus.

Put that one into the same category as eliminating income inequality, making apartments in Manhattan "affordable," and keeping every single broke hospital open indefinitely.   And in typical bad politician fashion, he was completely prepared to use the tragic moment of this boy's death to advance a cynical government-growth initiative, in this case more speed and red light cameras for the city.  ("We're going to fight for the home rule right to install speed cameras and red light cameras . . . .")  Those have been repeatedly shown around the country to be ways to enhance government revenue with no, or even negative, effect on safety.

So far there's been no actual mayoral action on the charter school front, but the talk is ratcheting up to a level such that it's hard to believe that action will not soon come.   Today's Daily News carries a report that makes clear that de Blasio's big pre-K initiative is at least in part about helping his friends in the teachers' union by crowding non-union charter schools out of existing Department of Education real estate.  Here is the Daily News's quote from new schools chancellor Carmen Farina:

I think right now we need space for our own [public school] kids; you're going to have a large pre-K initiative. Where are we going to put some of those kids?

Meanwhile the Daily News also quotes a spokesperson for the Alliance for Quality Education, on the subject of whether de Blasio will hobble the charter schools by squeezing them out of their space, as saying:

"The mayor made it very clear," said Zakiyah Ansari, advocacy director for the Alliance for Quality Education and a member of de Blasio's transition committee. "It's about equity; it's about fairness."

For those who haven't heard of it, AQE is a teachers' union-backed front group that always manages to advocate for the union position by saying it's about "equity" and "fairness."  In fact, the teachers union position is actually about some combination of more money, less work, less accountability, and less competition for unionized teachers, and the kids be damned.  No surprise, then, that Ansari is on de Blasio's transition committee.

In the category of things de Blasio has talked about endlessly but that are not specifically his turf, we have the minimum wage.  Crain's New York Business reports today that a "coalition of leading liberal groups" (they identify the Working Families Party and the SEIU) is starting a push to have the state legislature give authority to raise the minimum to localities.  Presumably that will be the precursor to a push for a minimum wage increase in the City, which would be likely to sail through the City Council and de Blasio.  Hey, guys, if you believe it works to reduce poverty or income inequality, why not raise the minimum wage to $1000 per hour?

For those actually interested in the economics of the minimum wage,  economist David Henderson has some useful data at the econlib blog (relying in part on a study from Sabia and Burkhauser).   One thing that few people realize about the minimum wage is that very few of the workers who earn it live in households categorized as "poor" by the "poverty" data.  The reason is that they are second and third earners in households that may well be quite well-off.   Here is some of the Sabia/Burkhauser data:

• Only 11.3 percent of workers who would gain from the increase live in households officially defined as poor.
• A whopping 63.2 percent of workers who would gain were second or even third earners living in households with incomes equal to twice the poverty line or more.
• Some 42.3 percent of workers who would gain were second or even third earners who live in households that have incomes equal to three times the poverty line or more.

Then, of course, there are the people who lose their jobs when the minimum wage rises, and turn into zero earners.  Sabia/Burkhauser use estimates of 468,000 to 1.4 million fewer jobs (nationwide) if the minimum wage goes up by $2 per hour.  Combine the two phenomena of few minimum wage workers living in poverty to begin with and of minimum wage increases adding new people to poverty by zeroing out their income, and you are left not even knowing whether an increase in the minimum wage will increase or decrease measured poverty or income inequality.   But get ready for minority-youth unemployment rates in the range of 40-50%.

Meanwhile, how is de Blasio doing at delivering basic city services?  You would think that two weeks is not enough for things to start falling apart.  But there is a very odd phenomenon going on around our Manhattan neighborhood: nobody is picking up the discarded Christmas trees.  The drill here to get rid of a Christmas tree has been that you just put it out on the sidewalk, and (at least during the Bloomberg years) the Sanitation Department comes around every couple of days and picks up the trees to take them away for mulching.  This year suddenly nobody is picking up the trees, and hundreds of them have accumulated on the streets of our neighborhood over the past couple of weeks.  Somehow this seems ominous.