Squeals On Wheels

Recently, a small part of the Trump administration’s budget proposal generated a series of high-pitched squeals across the United States.  Said squeals which could mostly be found in such squeal-oriented places like Facebook, Twitter, and college campuses, where squeals propagate like hippies at a free lunch buffet, and where economic reality enjoys a permanent holiday.

And the root cause for the squealing?  A complete misunderstanding of the federal budget and how some non-profits are funded .  But the squeals of anguish were not rallies to the cause of federalism.  No.  Instead, they were cries of outrage that Trump was cutting the Meals on Wheels program.  A program that relies, so heavily, on government grants.

 

Oh, wait.  It doesn’t.  It’s 3% of their budget (page 18).

And…..it’s 3 percent.

As Reason has noted, the issue is much less about the individual programs that receive grants.  What Meals on Wheels does is a fantastic example of what local effort, and local control, can do to positively impact lives, and help people who need just a little bit of help, a meal, and even a wellness check, when no one is doing that for them.  It’s the vehicle that spends billions per year on administering and doling out dollars that is the source of the issue, and ultimately some level of corruption – the Community Development Block Grant Program.

What’s the result of lading a trough filled with pork in front of politicians eager to buy votes?  The quick appearance of dollar-guzzling politicians, seeing an opportunity to buy something (votes) with someone else’s money (yours and generations of unborn saddled with federal debt):

You don’t need to look far in the past to see this sort of corruption taking place. In June, the Department of Housing and Urban Development (HUD) sent a scathing letter to the Mayor of Honolulu Hawaii, calling on the city to return nearly $8 million in CDBG funds that it gave to Opportunities and Resources Inc. (ORI), a nonprofit redevelopment organization in central Oahu. The Aloha Gardens Wellness Center and Camp Pineapple 808 both were projects developed by ORI with federally issued CDBG money meant to serve elderly and disabled persons, but since completion, the projects haven’t exactly been used for their advertised purpose.

The HUD report claims ORI had been marketing the centers to the public as venues for weddings, parties, banquets, fundraisers, corporate retreats, conferences and family reunions. The city also lent ORI nearly $1.2 million in CDBG funds between 1989 and 1995, which it decided to forgive back in 2010. HUD found that this decision was made by city employees who were running for elected office while receiving campaign donations from ORI representatives.  The report states:

“ORI has maintained significant support over many years by the direct involvement of high ranking City and State officials…The direct involvement of the officials’ appears to have placed pressure on staff resulting in the City ignoring regulatory violations in favor of completing the project and satisfying ORI’s requests.”

In other words, the funding becomes the driving policy directive, not the service that the funding might itself provide.  The funding model subverts the local control because the dollars are critical to a political outcome, less so in addressing a local need.

Local control, and local accountability for dollars spent, should be the watchwords.  But because the federal government throws billions around, annually, in thousands of programs, it would be extremely difficult to say no to those funds if you’re sitting in a small municipal office, wondering how you’re going to affect some local change.  Which then creates the puppet strings that federal agencies, and ultimately politicians, use to buy votes, and influence voters.  Once the city or state becomes hooked on the federal dollars, they can no longer say no to them – and are adversely affected when funding for those programs becomes a political football.

The accretion of these programs, in the federal budget, is what has given rise to the outsized spending and record deficits seen during the last 8 years.  This growth isn’t directly attributable to one administration, but the Obama administration stomped down hard on entitlement spending, then tried to laughably claim that it reduced deficits – record deficits the administration itself had set in the years preceding its final year.

The result was a doubling of national debt in 8 years, a doubling of the debt that took over 200 years to first accumulate.  We have had 4 years of trillion-dollar deficits.  The first year the government started spending over a trillion dollars per year was 1987.  30 years later, we have deficits bigger than the total annual spend in 1987.  Today we’re borrowing more to fund an annual deficit than our total spend was 30 years ago.

I’m noticing a trend here.

 

Hey, what’s a trillion in borrowing, amongst friends?

The historical record doesn’t show any sign of slowing down in spending, which means a further erosion of local control, leave alone any kind of spending efficacy metric that would allow for decision-making regarding the growth or reduction of spending on a program.  Once a program is established, whether or not it’s doing something good or bad (if you can even quantify those outcomes), it will never, ever go away.  It’s too late now.

And any call to reduce spending is met with the squeals.  The self-agonized cries of those who believe, fervently, that it’s up to the federal government to fix local problems, address local needs, through taxation.  Which is, in a way, a tithe of the conscience – that one is off the hook to get off the couch on a Sunday to help someone else, because the government is doing it for them, through their income taxes.

Or, more to the point, through the taxes of those filthy, evil rich people.  The same people who pay 97% of all income taxes collected.  Which will never, ever be enough to pay for the programs that help politicians get elected, to grow the spending of government again next year.  When politicians have a credit card with a $1.5 trillion dollar limit on it, what’s their incentive to not spend more than we have?  For them, the downside to spending less is not getting re-elected.

Until those political incentives change, you’ll continue to see the growth in federal outlays, and a continuing reduction in incomes relative to that spending growth, as the weight of spending and borrowing drags the economy into a perpetually smaller cycle of growth.  It’s already happening.

Trump’s budget, while flawed (like every budget before his), is actually looking to address an issue around federalism, which is:  Why do you need a federal government to sink its controlling claws into a local effort to help those in need?  Why not just cut the check to your local charity of choice and avoid the federal middleman?

Why give more control to someone else over your own choices?  Hopefully the answer to that isn’t “Because then I don’t have to think about it”.

 

 

 

 

 

 

Leviathan Shrugged

pacific-rim-kaiju-otachi-more

Hmmm – I wonder what a boat filled with taxpayers tastes like?

As Americans set course on a journey that would net them two presidential candidates who are the least liked in what appears to be all of history, one or two or thirty things come to mind, regarding the general irrelevance of which party wins the presidency.  Let’s start at the top.

It does not matter who the next president is:  Federal spending will continue to grow faster than the pace of inflation, or population growth, GDP growth (even with federal spending as one of its components), or the growth of my 401k.  Just taking the last 25 years or so, what is reliably and consistently growing, so much so that if it were an investment option, people would be buying it like cakes that are really hot?

Spending.  Spending is king.

fed-spend-and-gdp

“But wait!” gasps the Keynesian.  “Federal spending is needed during recessions to jump-start the economy, and reduce unemployment”.

Sure – but those dollars spent come from somewhere, in the form of taxes and borrowing, and when that happens, those dollars aren’t available for capital spending, investment, savings, etc, all of which actually creates jobs in the private sector.  It doesn’t have the net effect of taking dollars from the private sector to spend them via the public sector, which gains nothing, other than votes for office and an increase in the debt and deficit.

Unemployment increases and decreases independent of expenditures - not because of them.

Unemployment increases and decreases independent of expenditures – not because of them.

The reality is that the unemployment rate is more closely tied to the dwindling labor force participation rate than it is to federal spending – which runs counter to the standard Democrat response to any kind of recession, consisting of mostly “let’s spend even more money than usual under the guise of helping”.

spend-unemp-and-lbr-force

Participation rate goes down at roughly the same pace as unemployment, independent of increases in federal spending.

In fact, if you go back to 2000, the labor force starts dropping dramatically when, exactly?  Let me check – ah, that’s right, as soon as Barack Obama assumed the presidency.  That drop in participation accounts for nearly all the unemployment reductions since the recession started.

Recovery 2009 never looked so good! Thanks Biden!

Recovery 2009 never looked so good! Thanks Biden!

But it does, of course, get worse.  If you look at unfilled job vacancies, going back to 2001 – we still have (slightly) fewer unfilled vacancies as of 2015 as we did in 2001 or so.  Yet federal spending doubled during that time.  If you use vacancies – jobs available – as a barometer of growth, we’ve doubled federal spending for no net gain in available jobs.

unfilled-gigs-and-spend

All of which is just another reason why the person occupying the White House can speak to different policies, preferences, and budget priorities, but every year, spending goes up.  The deficits, once deemed unpatriotic due to their size by Obama, yet doubled under his presidency, and the subsequent debt, are just choices being pushed onto future generations.

Or, better stated – a reduction of choices, for them.  Because they will be footing the bill for what we spend now, and they didn’t even get a chance to vote on the lesser of two evils, whoever you might end up choosing to vote for on Election Day.  The less they have to spend, the less free they are, to make their own choices.  We are choosing for them.

In other words, Leviathan, in the form of the federal government, doesn’t care who wins.  Leviathan will continue to feed off the labor of the citizens (those still working, anyway), and the borrowed future earnings of those not even born yet.  The only way to kill this beast is to starve it, and no modern president, or presidential candidate, seems interested in taking that one sane step forward.