Washington politicians facing a year-end deadline to cut billions in agriculture spending are feuding over the future of food aid for the poor and crop subsidies for farmers.
There is, however, one area of agreement in the contentious negotiations: sugar.
Lawmakers decided to preserve the decades-old government safety net that boosts profits for a relatively small group of growers and has cost consumers billions through artificially high prices.
The special protection is a testament to the enduring Washington clout of one of the country’s wealthiest farming interests, including the politically connected Florida family that controls a substantial share of the world’s sugar market.
Sugar makers succeeded by gaining the support of a wildly divergent collection of lawmakers — rural and urban, tea party and liberal — who have little in common other than the presence of sugar operations in their states.
To make government work better for us, curb lobbyists
Saturday December 7, 2013 6:02 AM
Two-and-one-third centuries ago, the men who constructed the framework of this country built a very strong structure, one that was capable of being added on to or remodeled if the majority of the people agreed.
The structure they built was one in which the individual voters (men) hired others to present their opinions and ideas for all of our hired representatives to vote on and to either enact or toss into the trash.
Much has changed over the 237 years since it was first the law of the land, and many of the changes made were for the best. Freeing shanghaied citizens of other countries and granting women the right to vote were things that we should be very proud of — things that were enacted by our hired representatives.
Yet with all the good that our hired representatives have done, there is much that we need to be concerned about. Our hired people no longer represent the average person in the U.S. Today.
It’s not a Democrat thing or a Republican thing; they now represent those businesses and organizations that provide the money for them to be hired for another four or six years.
They have lost touch with what life is like for the other 317 million people who make up the United States today.
The government agencies that have been set up no longer are there for the good of the people. Most government agencies have become wary of the common person, and the relationships individuals have with government agencies usually are adversarial instead of helpful.
A very wise man and a family relative, retired U.S. District Judge William K. Thomas of Cleveland, once explained the role of government and the laws of the land as being in place to protect and serve the average person. That was only 30 years ago, but the role of government already was changing back then.
Our system of government, one built on citizens electing and paying for people to be their proxies in Columbus and in Washington D.C. and every small town in America, no longer is the structure our Founding Fathers conceived two centuries ago. People no longer trust any government agency, and probably for very good reason.
When the approval rating of our elected officials is around 10 percent, we need to change things back to what those wise men envisioned back in the infancy of our nation.
Strictly limit lobbyists’ contact with and influence on the people we hire to do our bidding. We need laws to be enacted that are representative of what the majority of the voters want. We also need to make voting easier and much more universal. The Internet could make it much easier for many people to vote and take part in deciding what the majority of the people want and desire. Many people would vote without getting dressed. It won’t happen though, because those 636 people who control everything that happens in this country would have less of our money to waste and more oversight by the people who truly own this country, the average person.
JOHN SHILLING Mount Sterling
Decades ago, I attended a national roll-out of the new EPA regs. About 500 companies were there. One Chicago based company complained that the new regs would not allow it to discharge Chicago tap water without first treating and filtering it. “How are we supposed to stay in business, the man asked.
We were all shocked at the response from the podium.
“You’re not!” “This country no longer needs manufacturing. You pollute, you use too much oil, and cause too much traffic because employees have to commute to your industrial centers.” Your pollution control devices just convert one type of pollution into another. It’s best that you close or leave the country.”
Then what will happen to our employees?
“Oh, the Federal government will offer re-training programs to prepare them for the new service based economy. Many will be able to provide world wide service right from their homes, thus eliminating the need for new freeways and infrastructure.”
We were shocked. But over the next few years, the aerospace company I represented saw its tax rates jump while other governments offered a 9.2% rate to relocate offshore. The EPA increased domestic regulations on materials we used and new labor relations laws were enacted — all designed to say “Go away”. To make sure we stayed away, a 38% repatriation tax was placed on any profits that we would try to invest back in this country.
The unintended consequences have become American job killers. As plants developed in emerging nations, so did a new middle class. These countries invested OUR money in their education systems. Now US companies can find engineers and technicians at the new plant sites. In fact, my last employer, a biotech company, had $9B offshore that it could not bring home, so it has expanded both its R&D and manufacturing operations offshore as well.
No politician can reverse this trend with election year promises. The only slim chance to reclaim manufacturing will require government to reinvent itself. And that’s not going to happen.
By Fareed Zakaria, Published: November 21
Washington is having one of its odd debates as to whether the Obama administration’s rollout of HealthCare.gov was worse than the Bush administration’s response to Hurricane Katrina. But whatever the answer, if there is one, the real story is that both are examples of a major, and depressing, trend: the declining competence of the federal government. Paul Volcker, former chairman of the Federal Reserve, has been saying for years that most Americans believe their government can no longer act effectively and that this erosion of competence, and hence confidence, is a profound problem.
“The federal service is suffering its greatest crisis since it was founded in the first moments of the republic,” scholar Paul Light writes in his book “ A Government Ill Executed.”
Over the past decade, the federal government has had several major challenges: Iraq, Afghanistan, a new homeland security system, Katrina and Obamacare. In almost every case, its performance has been plagued with mismanagement, massive cost overruns and long delays. This was not always so. In the 1940s, ’50s and ’60s, federal agencies were often lean, well managed and surprisingly effective. Paul Hoffman, the administrator of the Marshall Plan, pointed out that his monumental project came in on time and under budget.
Some federal agencies still maintain a culture of high performance, including NASA, the Centers for Disease Control and Prevention, the Federal Reserve System and the Defense Department’s research arm, DARPA. But they are now islands in a sea of mediocrity.
Why? For partly cultural and historical reasons. Americans have always been suspicious of government. Talented young people don’t dream of becoming great bureaucrats. The New Deal and World War II might have changed that for a while, but over the past 30 years, anti-government attitudes have risen substantially. Two national commissions on public service have detailed the dangers of having too few talented people go into government. The ever-increasing obstacles — disclosure forms, conflict-of-interest concerns, political vetting — dissuade and knock out good candidates.
The problem is bipartisan. On the right, too many people believe that their role in Washington is simply to attack, denigrate and defund the government. This relentless onslaught erodes public trust and robs federal agencies of any sense of mission and ambition. Continual budget cutbacks have limited the government’s ability to take on new challenges. There is no attempt at ambitious thinking and planning, whether in space or in infrastructure. Seemingly every agency is in cost-cutting and damage-control modes. The persistent politicized attacks — whether blocking the confirmation of hundreds of officials or investigating them at every turn — have helped create an atmosphere of caution and risk-aversion.
On the left, political agendas and wish lists have trumped a focus on excellence. The federal government has become a dumping ground for all kinds of objectives, such as staffing requirements, procurement rules and organizational structures. The rise of public-sector unions has made the workforce less flexible and less responsive. Stanford scholar Francis Fukuyama notes that half of all new entrants into the federal bureaucracy have been veterans, many of them disabled. It is admirable that the government wants to help veterans, and it should search for ways to expand opportunities for them, but it operates with so many requirements that merit and quality inevitably get downgraded in importance.
Light has outlined how, when Congress passes its mandates, new layers of management are usually created to enforce them. In a study of “frontline” government jobs that matter greatly to the public — revenue agents, air traffic controllers, park rangers — he found that employees had to report up through nine layers of official management and 16 layers of informal management. By Light’s calculation, the average federal employee now receives policy and budgetary guidance through nearly 60 layers of decision-makers.
Why not launch a bipartisan push for a thorough streamlining of the federal government? The focus should be on improving the administrative structure, creating easier ways for talented people to enter government, and providing the incentives for bureaucracies to work effectively.
Some worry that if government works too well, we’ll want more of it. Instead, they simply want to starve the beast. But so much of what government is doing badly cannot be outsourced, privatized or abolished. National security, after all, is the core province of the federal government. , If you add in private contract and grant jobs, about 15 million people are executing the laws, mandates and functions of the federal government. Perhaps that number can be trimmed. But surely the more urgent and important task is to make sure that they are working as effectively and efficiently as they possibly can.
In DC politics, it’s about status, turf, credit, looking good, 24×7 news cycle, and avoiding responsibility, in order to get re-elected.
White House officials caught out with lobbyists
The White House was accused of breaking its own transparency rules after it emerged that senior officials went to elaborate lengths to conceal back-channel discussions with lobbyists.
Jim Messina, left, is managing Obama’s re-election campaign Photo: AP
By Raf Sanchez, Washington
8:07PM BST 01 Aug 2012
Aides to President Barack Obama used personal email accounts to contact pharmaceutical companies and deliberately scheduled meetings in coffee shops away from the White House in order to skirt disclosure rules, according to a Congressional report on Wednesday.
Among the most damaging findings are emails from Jim Messina – the former White House deputy chief of staff who now manages the president’s re-election campaign – to a drugs lobbyist in the days before Mr Obama’s health care reforms passed Congress in 2010.
In an email from his personal account, Mr Messina promised “I will roll [Speaker of the House Nancy Pelosi] for the 4 billion” needed to fund expansion of health care coverage. Mr Messina also promised the lobbyist he would deal with a reporter who had been questioning the White House’s links with the pharmaceutical industry.
Pile of Bills Is Left Behind as Congress Goes to Campaign
The most boring junket ever
By Al Kamen, Published: August 2
The euro zone is in crisis! What to do?
Time for some Capitol Hill types to head over to talk to the finance ministers and central bank heads of what some call the PIIGS — Portugal, Ireland, Italy, Greece and Spain — Europe’s most troubled economies.
We know what you’re thinking. But Senate Budget Committee Chairman Kent Conrad (N.D.) insists: “No side trips. This is business.” The delegation will be moving quickly, he said, leaving Saturday and returning next Friday. About a country a day.
The delegation includes Sens. Patrick Leahy (D-Vt.), Thad Cochran (R-Miss.), Olympia Snowe (R-Maine) and Jeanne Shaheen (D-N.H.) and Rep. Dennis Cardoza (D-Calif.). Some spouses and staff members will be on board, along with Treasury’s deputy assistant secretary for Europe, Chris Smart.
There have been briefings from Treasury and CIA officials, Conrad said, and he’s meeting with Treasury Secretary Tim Geithner before taking off. The journey is important, Conrad said, because the euro zone’s economic crisis is “weakening our recovery.”
So, since Conrad and Snowe are both leaving the Senate in a few months, this isn’t what one wag called the “Retiree Junket” and another dubbed the “Swan Song Codel”?
No, Conrad said. “Important decisions will have to be made” on these issues before the end of the year.
Okay. But it’s still Europe on a miljet. No better way to travel.
Dysfunctional, read here:
Senate panel proposes $200B in tax breaks
WASHINGTON — The Senate’s tax-writing panel voted yesterday to renew dozens of tax breaks for businesses, even as the GOP-controlled House passed symbolic legislation to erase them and create a new tax code with lower rates and fewer special-interest tax breaks.
The $200 billion-plus package was approved by the Senate Finance Committee on a bipartisan 19-5 vote. It was anchored by a two-year provision to protect middle- and upper-income taxpayers from being hit by the alternative minimum tax, shielding them from higher levies originally meant to prevent the rich from escaping taxes altogether.
The bill likely will get lumped into a year-end debate in which lawmakers tackle the so-called fiscal cliff — a combination of the expiration of Bush-era tax cuts and $110 billion in automatic spending cuts to the Pentagon and domestic programs that, taken together, have the potential to drive the economy back into recession.
Special interests win in Senate panel’s attempt at tax reform
By Lori Montgomery, Published: August 2
It was supposed to be a first step toward tax reform. But as lawmakers tackled a list of 75 special-interest tax breaks, the special interests repeatedly won.
An accelerated write-off for owners of NASCAR tracks: That has to stay.
An economic development credit for a StarKist tuna cannery in American Samoa: That stays, too.
A rum-tax rebate for Puerto Rico and the U.S. Virgin Islands worth millions of dollars a year to one of the world’s largest distillers: Check.
A $2,500 credit for electric motorcycles and other low-speed vehicles: That stays. But “in the spirit of tax reform,” its sponsor, Sen. Ron Wyden (D-Ore.), said he agreed that electric golf carts would no longer be eligible.
When the dust settled Thursday, members of the Senate Finance Committee congratulated themselves for agreeing to jettison 20 of the perks, including a $5,000 credit for first-time home buyers in the District and a cash-incentive program for wind-energy projects that has been derided as benefiting foreign companies.
But their failure to weed out dozens more pet provisions clouded prospects for a far-reaching simplification of the nation’s tax laws advocated by President Obama, GOP challenger Mitt Romney and congressional leaders in both parties.
“The opening salvo of tax reform was little more than a whimper,” said Steve Ellis, vice president of the nonprofit watchdog group Taxpayers for Common Sense. “If this is as bold as they’re going to go, it doesn’t bode very well for fundamental reform.”
Rather than criticize themselves for not hacking through the layers of loopholes and tax favors, committee leaders noted that they had, for the first time in memory, refused to automatically renew them all. Thursday’s 19 to 5 vote not only reversed a decades-long trend, they said, it demonstrated a rare ability to work across party lines at a time when a protracted stalemate over taxes and spending threatens to throw the nation back into recession early next year.
“By doing this, we’ve come a long way toward functionality,” said Sen. Orrin G. Hatch (Utah), the panel’s senior Republican. “This is a major achievement. It certainly is not tax reform. But. . .it’s a step in the right direction.”
“I’m proud of what we’ve done as a committee,” added Finance Committee Chairman Max Baucus (D-Mont.). It’s “more than baby steps. This is not the first steps the baby’s taking. We’re walking.”
With Congress headed home for an August recess, the full Senate cannot vote on the measure until at least September. If approved, it would face an uncertain fate in the House, where the Ways and Means Committee is also reviewing the temporary tax breaks collectively known as “tax extenders” because Congress has not made them permanent.
The provisions are instead regularly renewed for a year or two “in the dark of night,” as Hatch put it, often as an amendment to must-pass bills. In 2008, for example, the Senate tacked them onto the Troubled Assets Relief Program bank-bailout legislation.
The extenders include many popular provisions, such as a credit for domestic research and development and a deduction for college tuition. The package approved Thursday also would protect millions of middle-class families from the alternative minimum tax through 2013, by far the most costly provision.
All told, the measure would add $143 billion to next year’s budget deficit, according to official estimates, with about $40 billion going to the special-interest breaks. Over 10 years, the cost would swell to $205 billion.
In a tentative deal reached late Tuesday, Baucus and Hatch agreed to wipe out more of the loopholes. But lawmakers in both parties appealed, and Baucus presented a rewrite Thursday morning that brought several back to life.
Lawmakers were by turns defiant and sheepish in defending favored provisions. The breaks, they said, are critical to home-state employers facing a tough economy. It would be easier to wipe them out, they said, as part of full-scale reform, when Congress can offer lower tax rates as a consolation prize.
“Big tax reform is where we need to look at all this stuff,” said Sen. Debbie Stabenow (D-Mich.), who joined Sen. Jon Kyl (R-Ariz.) in petitioning Baucus to preserve the break for NASCAR tracks.
For now, Stabenow said, the write-off for improving the tracks is “an economic development issue for Michigan,” where owners of the Michigan International Speedway west of Ann Arbor recently added 20 deluxe track-side camping spaces.
Sen. John Thune (R-S.D.) defended an array of energy incentives, including a wind-energy tax credit that Romney has targeted for elimination.
“The bigger game is going to be tax reform. This is just kind of the opening act,” he said. “I’ve made that pretty clear to folks in the industry” that when tax reform gets underway, “we’ll need to look at what we can do to start phasing these things out.”
Sen. Jeff Bingaman (D-N.M.), who has jurisdiction over U.S. territories as chairman of the Committee on Energy and Natural Resources, said he asked Baucus to save the credit for American Samoa, which has, in the past, subsidized a StarKist tuna cannery that employs more than half the island’s population.
“Samoans are U.S. citizens. This is U.S. territory,” Bingaman said. “We should not in a casual way take action that would dramatically and adversely affect their economy. If the next Congress thinks there are good and sufficient reasons for doing that, then that’s their business.”
Asked why the Samoan credit was preserved, Baucus said simply: “Jobs.”
Still, the scramble to preserve narrowly targeted perks left some steaming.
“Nobody wants to make the hard choices around here,” said Sen. Tom Coburn (Okla.), one of five Republicans who voted against the measure. Getting rid of 20 tax breaks is “better than nothing. But it ain’t anywhere close to where we need to be if we’re going to fix this country.”
“They’re good people,” he said of his Senate colleagues, “but I don’t get it.”
On the other hand:
The AIG success story
Inspector general criticizes Orleans judge for having 18 relatives on court’s payroll
Published: Tuesday, July 24, 2012, 5:00 PM Updated: Tuesday, July 24, 2012, 5:36 PM
By Bruce Eggler, The Times-Picayune
New Orleans Inspector General Ed Quatrevaux, left, said Municipal Court Judge Paul Sens build a dynasty at taxpayer expense.
Judge Paul Sens showed a preference for relatives and in-laws when it came to hiring employees for Municipal Court, building what Inspector General Ed Quatrevaux describes as a dynasty at taxpayer expense.
Judge Sens, who recently gave up his administrative role as chief judge, has had 18 family members on the court’s payroll in recent years. Mr. Quatrevaux pointed out the family ties in a letter to Judge Desiree Charbonnet, who now serves as the court’s chief judge.
That’s a lot of relatives, especially considering that the court has only 45 employees in all. Seven of Judge Sens’ relatives left the court before 2010 and four others have left since January 2010, but seven are still on the payroll.
The jobs were mostly full-time positions, paying as much as $99,500 a year. Mr. Quatrevaux said that 11 relatives were paid a collective $39,000 a month from January 2010 until now, a total cost of $1.2 million over the same period.
This rampant nepotism at the court is troubling, and Mr. Quatrevaux’s decision to refer the matter to the Judiciary Commission is appropriate.
The inspector general acknowledges that the commission might not find a violation of ethics codes. Only one of the employees was a member of Judge Sens’ immediate family — his son, Stephen Patrick Sens, who worked as a part-time office assistant in 2010-11.
The rest include nephews, nieces and cousins as well as nieces and nephews by marriage, sisters-in-law and the brother of a sister-in-law.
“The Commission will take whatever action it deems appropriate … but building a family dynasty at the expense of the taxpayers of New Orleans creates an appearance of abuse that undermines public confidence in the judiciary and our elected officials,” Mr. Quatrevaux wrote. He’s right.< /p>
This isn’t the first time Mr. Quatrevaux has criticized Judge Sens’ personnel choices. The judge hired Renee Gusman, wife of Orleans Parish Sheriff Marlin Gusman, to do drug counseling for a new Municipal Court program without advertising the position or considering any other candidate. At about the same time, Sheriff Gusman hired Ann Sens, the judge’s wife, to appraise properties in foreclosure.
The dual hirings gave the appearance of impropriety, Mr. Quatrevaux said, noting that Ms. Gusman’s “unique qualification for the contract appears to be her friendship” with Judge Sens.
Judge Sens’ hiring practices certainly look bad, and he should have realized that handing out jobs to relatives, in-laws and friends does give the appearance of impropriety. Municipal Court shouldn’t be the Sens family employment agency. Nor should it be the judge’s personal fiefdom.
Ex-Arlington Heights employees accused of stealing $260K
Prosecutor calls village ‘nothing more than a speed trap’
Hamilton County Prosecutor Joe Deters says Arlington Heights should be dissolved. / The Enquirer/Kimball Perry
3:30 PM, Jul. 31, 2012
As two former Arlington Heights employees were accused of stealing $260,000 in public money, Prosecutor Joe Deters called for the village to close its doors.
“The Village Council needs to seriously consider dissolving the Village of Arlington Heights,” Deters noted in a release announcing the indictments of Donna Covert and her daughter, Laura Jarvis.
“The Village seems to be nothing more than a speed trap with no checks or balances. Two of its employees were using it as their personal cookie jar. Consolidating with another political subdivision is long overdue.”
Covert, 53, of Reading, and her 33-year-old daughter each face 15 years in prison after a Hamilton County grand jury indicted them for unauthorized use of property and two counts each of theft in office and tampering with records.
Covert was the clerk and Jarvis the deputy clerk of Arlington Heights’ Mayor’s Court where speeding tickets and other smaller charges are handled.
Covert is the village’s former mayor’s secretary and former mayor’s Court Clerk. She was hired by the village in 1994. Prior to that, she was an Elmwood Place police officer.
Jarvis was hired in 1998.
Arlington Heights Police Chief Kenneth Harper said he was “stunned” by the amount of money that is missing and isn’t happy with Deter’s remarks.
“Our wonderful little village is doing just fine and, as far as I know, have no plans to merge with anyone anytime soon,” said Harper. He said the village “will not dissolve because of the dishonest actions of two individuals.”
Tuesday’s actions come after more than two years of investigations.
They began when Mayor Steve Surber hired Mike Keeling, an Assistant Hamilton County Prosecutor, to preside over the Mayor’s Court of the village that sits on Interstate 75 and is infamous for dispensing speeding tickets.
“It actually was the former police chief (Robert Lawson) who found money one time and (also) said there was money missing” from Mayor’s Court, Keeling said.
The village, with a population of 745, contacted Ohio’s Bureau of Criminal Identification and Investigation and asked it to investigate.
“They said there was some evidence of theft in office,” the mayor said. “We knew about that 2½ years ago.”
Jarvis resigned in 2009, saying she was taking another job elsewhere. She changed her mind but Surber said it was too late.
Covert resigned in March 2010, after the investigations started.
An audit for the years 2008-2009 was done by the Ohio Auditor’s office and it found several irregularities, noting there was sloppy bookkeeping for Mayor’s Court, that few bank deposits were made and there was no way to correctly track how much fine and ticket money was received or spent.
“(W)e were not able to satisfy ourselves as to whether all receipt transactions of the Mayor’s Court have been appropriately accounted for, recorded or appropriately deposited into the bank account of the court,” auditors noted.
The special audit requested by Surber is on-going, Auditor spokeswoman Brittany Elking said, and is “in the final stages” but with no release date.
Ohio is one of the few states using Mayor’s Courts. Last year, there were 318 such courts in Ohio.
They allow cities with a population higher than 100 which doesn’t have a municipal court to prosecute local laws and and Ohio traffic laws. That often means speeding and other moving violations are prosecuted in Mayor’s Courts so that jurisdiction can keep the fines for them.
Hamilton and Cuyahoga have the largest number of Mayor’s Courts in Ohio, each with more than 20. There are 23 Ohio counties that have no Mayor’s Courts.
It was billed as a futuristic solution to a gigantic state’s transport problems – but now it is seen as a white elephant. Guy Adams reports on a $68bn PR disaster
The bullet train to nowhere: California’s rail nightmare
It was billed as a futuristic solution to a gigantic state’s transport problems – but now it is seen as a white elephant. Guy Adams reports on a $68bn PR disaster
GUY ADAMS TUESDAY 24 JULY 2012
With its vast pool, leafy trees and spotless lawn, the garden of Jeff Taylor’s family home feels like a corner of Eden. “If you turn on the water and shut your eyes,” he says, pointing to an array of artificial streams and waterfalls, “it sounds like you’re up the road in Yosemite.”
But not for long. Clutching a slab of A4 paper, Mr Taylor, a professional landscape architect, waves at the horizon. “I spent almost 10 years building this place, with my own hands,” he says. “It’s my home. It’s irreplaceable. And all of it, every last bit, is about to be destroyed.”
Mr Taylor has the great misfortune to have created his suburban dream in a residential neighbourhood of Bakersfield, a medium-sized city in California’s Central Valley, which has been chosen as the starting point for one of the most ambitious – and controversial – engineering projects in America’s recent history.
In the next 12 months, ground is due to be broken on a project to link California’s major cities with an eco-friendly, state-of-the-art high-speed rail network, similar to Japan’s bullet trains or France’s TGV. And according to the architect’s plans Mr Taylor is holding, it’ll run straight through his back garden. “Half the neighbourhood will be gone,” he says. “We’ll be paid what they call ‘fair market value’ for our homes and left to fend for ourselves. Of course, most people round here are under water on mortgages and can’t get any more credit, so they won’t be able to afford a new house. Most will end up in apartments and some people will be ruined.”
Mr Taylor’s troubles began in 2008, when California’s voters approved plans to spend between $35bn and $40bn (£22bn and £25bn) on an 800-mile rail network linking San Diego, Los Angeles, San Francisco and Sacramento. Glossy PR brochures promised that space-age trains would cross the state at 220mph.
The plan would revolutionise infrastructure in a region that relies on clogged freeways and expensive planes, providing a major economic boost and creating (in the words of supporters) thousands of jobs in a modern reworking of FDR’s “new deal” – which helped lift America out of the Great Depression.
Then reality struck. It quickly emerged that the rail line would run through several earthquake zones and at least one major mountain range. Thousands of homes would be destroyed and construction further complicated by California’s highly strict environmental-protection laws and the myriad lawsuits they would no doubt spur.
Costs ballooned. In 2011, the High Speed Rail authority admitted that its proposed project would now cost more than $100bn and cover just 520 miles. It would no longer run to San Diego and Sacramento. This year, the authority changed its plans again: the network will now cost $68bn and cover a mere 480 miles. It will still connect Los Angeles with San Francisco, but will run in a circuitous loop – instead of a straight line – that heads inland via Bakersfield. And it won’t be completed until 2035.
Then there’s the small issue of money. Put bluntly, California doesn’t have any. In fact, its government is billions of dollars in debt. The rail network must therefore be financed by a mixture of federal grants, private investment and bonds. And the only major cash injection that has been forthcoming is $3.2bn from Washington, which can only be spent in the depressed Central Valley region.
It has therefore come to pass that the first step towards California’s swanky high-speed rail network will be a 130-mile section of stand-alone track, linking Bakersfield with a town just north of Fresno. This section will allegedly be completed in 2018 and cost $6bn: the $3.2bn federal grant plus $2.8bn of bond money authorised by the state Senate in a tight vote this month.Bakersfield has two claims to fame. Last year, Time magazine dubbed it the “most polluted city in America”, thanks to its surrounding oil fields and position downwind of San Francisco’s smoggy Bay Area. And in 2010, a Gallup poll revealed it to be the seventh “fattest” city in the nation, with 33.6 per cent of adult residents clinically obese. Meanwhile, Fresno was recently declared, in research of adult IQ rates carried out by The Daily Beast, to be the “dumbest” of the country’s 55 largest cities.
To cynical observers, the notion of spending billions of dollars to link a famously fat city to a famously stupid one raises one simple question: why? Critics have widely dubbed it the “bullet train to nowhere”.
California’s political elite doesn’t seem to care. Last week, Governor Jerry Brown threw a glamorous launch party in Los Angeles where he declared that “millions of people” would use the route. Unions say it will create thousands of jobs.
But public scepticism is growing, fast, shaped by a lobbying campaign by conservatives, who claim that spending tens of billions on a high-speed rail, when California faces a crisis in its public finances, represents the height of fiscal irresponsibility.
“Let’s say you have an old car,” says Girish Patel, a Bakersfield business leader who is one of the project’s noisiest critics. “The tyres are shot, it’s leaking oil. The engine’s out. The tail light’s shot. The front light isn’t working. And if you were to pull up into a repair shop and say, ‘Guys, I want a brand new stereo’. Would that make sense? Because that’s what California’s doing. It’s a frivolous luxury.”
Nimby-ish homeowners and entrepreneurs are littering the Central Valley with protest banners. “People round here are angry,” says Aaron Fukuda, who has a small farm outside Hanford. “Owning a home is part of the American Dream and for that to be taken away by the swipe of a pen… it’s not something you take lying down.”
Around 450 homes and 1,400 people will be displaced by the 130-mile route, along with around 400 businesses employing 2,500 workers.Their likely route of opposition is at the ballot box. In 2014, Mr Taylor and his allies are sponsoring a ballot measure to stop construction in its tracks. Latest polls suggest it has a decent chance of passing. “If we have anything to do with it,” Mr Taylor says, “The bullet train to nowhere is going exactly nowhere.”
Updated July 13, 2012, 6:45 p.m. ET
How Insider Politics Saved California’s Train to Nowhere
The high-speed rail line may never be built, but it will save a few Democratic seats.
By ALLYSIA FINLEY
Environmentalism may be religion to some on the left, but its high priests aren’t all pure and righteous. Consider the not-so-immaculate conception of California’s bullet train.
Last week, the state’s legislature authorized $4.7 billion in bonds to start construction on high-speed rail, which had been stalled in Sacramento for more than a decade due to logistical and political malfunctions. This train is now out of the station—though it’s almost certain to break down soon.
The project’s godfather is Democratic Congressman Jim Costa, who as a state senator in the 1990s wrote legislation creating California’s High-Speed Rail Authority and helped plan the 500-mile route between San Francisco and Anaheim. Before being elected to Congress (in 2004), he also authored a $10 billion state bond initiative to finance the project. Lawmakers in Sacramento postponed that initiative until 2008, fearing that California’s recurring budget crises would make it a hard sell.
But sell it they did. The rail authority promised voters that the train wouldn’t require a subsidy and that the feds and private sector would pick up most of the $33 billion tab. Expecting a free ride, voters leapt on board and approved the initiative in November 2008. Not long afterward, the authority raised the price to $43 billion.
Investors refused to plunk down money without a revenue guarantee—that is, a subsidy—from the state, which wasn’t forthcoming. California’s attorney general, whom we now call Gov. Jerry Brown, declined to investigate the bait-and-switch.
As soon as he took office, President Obama tried to help the state with $2.4 billion in stimulus money. A year and a half later—and two weeks before the 2010 midterm elections—the White House offered an additional $900 million, provided that the $3.3 billion sum be spent in the sparsely populated Central Valley. That is, in the congressional districts of Mr. Costa and fellow Blue Dog Democrat Dennis Cardoza, both of whom had provided critical votes for ObamaCare in March 2010 and were then in political peril.
The congressmen rode the subsidy train to re-election, flogging the 135,000 jobs that the construction would supposedly create in the Central Valley. To be sure, Mr. Costa denies trading his ObamaCare vote for high-speed rail money: “That’s not something I do,” he tells me. Besides, he says, the train “had already become unpopular by [the 2010 election],” so it couldn’t have accounted for his victory.
Actually, the train’s popularity didn’t plunge until 2011, when costs exploded to nearly $100 billion and the California Legislative Analyst’s Office (among others) warned that the first 130-mile segment would become a train to nowhere. Since congressional Republicans promised to zero out federal funding for high-speed rail, analysts noted, the state wouldn’t have enough money to electrify the tracks, let alone build out.
Meanwhile, many parties—farmers in the Central Valley and governments in the Valley’s Kings County and the tony liberal cities of Palo Alto, Menlo Park and Atherton—were suing the rail authority for not adequately addressing the train’s environmental impacts. Gov. Brown proposed shielding the train from such environmental lawsuits but abandoned the idea after the Sierra Club threw a tantrum.
The more people read and heard about the train, the more they disliked it. A string of Field and Los Angeles Times polls this year have shown that voters would block the train by a two-to-one margin if it were put up for a referendum. In 2008, 55% of voters approved the rail bond.
Souring public opinion started to give some Democratic legislators—particularly in the Bay Area and Los Angeles—cold feet. They threatened to waylay the train if their grievances weren’t addressed, chief among them that the rail authority and White House weren’t giving them their fair share. They wanted to milk the bullet train for whatever Democratic leaders thought their votes were worth.
But in Washington, Secretary of Transportation Ray LaHood had different plans. Two months ago, he threatened to claw back federal funding if Sacramento didn’t green-light construction before summer’s end. “We can’t wait,” he said. And why not? Because Republicans were threatening to claw back the money if they took the White House and Senate in November.
Mr. Brown used that threat to demand that legislators authorize $2.7 billion in state bonds before they adjourned this week. He sweetened the deal for Bay Area and L.A. legislators by adding $2 billion for regional rail projects. Included was $700 million to bail out—”modernize”—Silicon Valley’s insolvent Caltrain.
The governor rounded up just enough Democratic votes for passage. Four Democratic senators demurred, including Ventura County’s Fran Pavley, author of the state’s 2006 cap-and-trade law. She and two others faced tough re-election challenges.
The fourth nay vote came from Palo Alto’s Joe Simitian, who has sat on a high-speed rail subcommittee. He tells me he knew better since he “had ample opportunity to probe deeply” into the project. And other Democrats? “I’m sure they all felt fully informed,” he says unpersuasively.
“The whole thing was carefully staged to allow [dissenting Democrats like Mr. Simitian] to speak about their no votes just before their vote was taken. But Brown knew he had his 21 votes in his pocket,” says Bay Area economic analyst Bill Warren. Democrats gave their OK, he says, because they wanted money for local rail projects and construction jobs. “I doubt if any of them actually believe in their hearts that the rail system will ever be completed.”
Indeed, environmental lawsuits could block construction in the Central Valley or at least delay it for several years. The White House will no doubt send its regrets to Rep. Costa.
Regardless, the Bay Area and L.A. will likely get their pound of taxpayer flesh. Next year taxpayers will have to start paying interest on the rail bonds—about $380 million annually for the next 30 years—assuming investors bite. That’s nearly as much as the governor is proposing to cut from higher education if voters don’t approve his millionaires’ tax initiative in the fall.
This plundering of higher education should serve as a warning to voters who think that approving the millionaires’ tax will somehow save them from one day becoming sacrificial lambs on the government’s altar. Nothing is sacred.
Ms. Finley, a Californian who loves her state unconditionally, is assistant editor of OpinionJournal.com.
President’s policies a drag on economy
11:42 PM, Jul. 15, 2012
Senator Rob Portman endorses presidential candidate Mitt Romney as he introduces him at Meridian Bioscience, Inc. where he talked to employees and members of the press about jobs and the economy and what he would do as President, on Monday afternoon at the Newtown based company. / The Enquirer / Amanda Davidson
Rob Portman, a Terrace Park Republican, is the junior senator from Ohio and a possible vice presidential candidate.
This week, 13 million Americans won’t go to work – not because they’re on vacation, but because they can’t find jobs.
As a candidate, Barack Obama promised to put in place policies to get people back to work. In fact, in a speech exactly three years ago Saturday, he pledged he would “get this economy back on its feet,” saying about the economy, “Give it to me.”
Well, America did give him the ability to get the economy back on its feet. And three years later, as the president visits Cincinnati to ask for four more years, let’s have a look at the result.
Unemployment is over 8 percent, and has been for over three years, the longest period since the Great Depression. And it’s actually considerably higher than that because so many Americans are so discouraged, they’ve stopped looking for work.
Families in Ohio and around the country are earning less, and their homes are worth less.
We just learned American manufacturing actually declined last month for the first time in three years.
Consumer confidence this month dropped to its lowest point this year: These are troubling signs of a struggling economy where working families can’t get ahead.
It didn’t have to be this way.
Since President Obama was sworn in, we’ve known that the greatest challenge before us as a nation is an economy that’s just not producing enough jobs. But instead of focusing on growing jobs and reigniting our economy, President Obama focused on growing government. His approach has been more spending, more regulation, and higher taxes.
Under President Obama, government spending and borrowing have increased to levels we’ve never seen before. On his watch, the national debt has grown to a record $16 trillion – making it larger than our entire economy.
On Friday, The Enquirer reported that the deficit this year will once again be over $1 trillion, which means that all of President Obama’s budgets have resulted in trillion-dollar deficits. And his proposed budget for the next 10 years continues down this path, adding another $10 trillion of debt.
Recall that the president and his economic team promised that spending almost $1 trillion of taxpayer money in a so-called stimulus plan would get unemployment down to 5.6 percent by today. Instead, it’s 46 percent higher, meaning his policy was a failure by his own standards.
His unaffordable health care spending law will grow government by $2.6 trillion, and do something he promised he would never do: hit millions of middle-class Americans with a massive tax increase.
All these policies have made it harder, not easier, to create jobs in America.
And now, President Obama seems to be doubling down.
Today, instead of lifting the burden on job creators, the president has come to Cincinnati to once again call for a massive tax increase on nearly 1 million small businesses that employ tens of millions of Americans. President Obama says this tax hike is about fairness. Yet under his plan, many of these small businesses would pay higher tax rates than Fortune 500 companies. How fair is that?
The good news is there’s a better way forward.
The way to an American economic comeback, the way to help those out of work today find a paycheck, is to make it easier to create jobs by unleashing the power of the American worker and the American entrepreneurial spirit.
Let’s reform our complex, outdated tax code by eliminating loopholes, lowering rates, and rewarding hard work, innovation, investment and job creation.
Let’s lift the regulatory burdens that small businesses say are the single greatest threat from Washington today.
Let’s tap into the exciting potential of homegrown American energy – including shale oil and gas here in Ohio.
And let’s make the tough choices needed to prevent the record federal debt and deficits from smothering economic growth and job creation.
There’s no denying the challenges America faces today are real and serious. But I know we can solve them with the right policies and the right leadership.
For all our troubles, Americans are still the hardest-working, most innovative people on the face of the earth.
The government-knows-best approach of the past few years has given us the weakest economic recovery since the Great Depression. It’s time to turn things around and restore America’s greatness by harnessing the power of free people and free enterprise.
Thanks to hospitals’ heavy presence, Obamacare here to stay
Sunday July 15, 2012 7:42 AM
In 1995, of Ohio’s 25 biggest employers, just two were in the health-care business. Today, nine of the 25 biggest (and 28 of the 100 biggest) are in the health-care business, led off by hospitals.
So you can forget Republican campaign vows to repeal the Patient Protection and Affordable Care (“Obamacare”) Act, even if Republican asset-stripper Mitt Romney does reach the White House.
That’s because Obamacare (and Medicaid and private insurance) are all about who gets paid, and how: The hospital. The doctor. The drug company. You may think Obamacare is about “health.” It’s really about who picks up the check. And, thanks to corporate medicine, your medical chart might as well be a profit-and-loss statement.
Assume Romney did win. And Republicans captured the U.S. Senate. Obamacare (albeit, perhaps after some tweaks) would stay on the books. Otherwise, a huge chunk of America’s economy would be in jeopardy. (Those shrieks and curses you hear in the background? That’s just a cardiac workout for old Obama-haters riled by talk radio.)
One reason Ohio has great libraries is that General Assembly members of both parties (starting in the 1930s, with the first Bob Taft, “Mr. Republican”) made libraries a priority. And library trustees, who tend to be among an Ohio town’s prominent people, make sure libraries remain a priority.
The same goes for hospitals. It’s likely more Ohio hospital trustees are Republican than Democratic. But either way, hospital trustees tend to have money. And political connections. And pride in “their” hospital.
The Ohio Hospital Association, speaking through President Mike Abrams, said this about the Supreme Court’s decision: “While the ruling is expected to increase demand for medical care, Ohio’s hospitals are pleased it will allow nearly 1 million uninsured Ohioans to obtain better access to essential care in the most appropriate setting.”
Critics say Obamacare will squeeze prices sought by hospitals and other health-care companies. But Obamacare payments also will hammer down bad debt. And that’s crucial to hospitals’ credit-ratings, which determine borrowing costs.
That’s Angle One. Here’s Angle Two: Hospitals and allied health businesses are huge Ohio employers, led by the Cleveland Clinic system, with 39,300 employees, according to state Development Department data, and University Hospitals of Cleveland, with 21,000. MetroHealth has 6,400. In Greater Cleveland alone, that’s a total of almost 67,000 working Ohioans. (In mid-June, the entire state government had 54,681 employees, net of state universities.)
Ohio health-care payrolls are big everywhere. Ohio State’s Wexner Medical Center has 17,500 employees; Ohio Health (Riverside Methodist and affiliates) has 16,500; the Mount Carmel system, 9,000; and Nationwide Children’s, 7,900.
Dayton’s Premier Health Partners (Good Samaritan; Miami Valley; Upper Valley; Atrium) has 14,130 employees; Kettering Health Network (among its hospitals: Kettering; Grandview; Greene Memorial; Fort Hamilton), 9,200. Cincinnati-based Catholic Health Partners, which includes Springfield’s Community Mercy system, employs 31,300 Ohioans. Among Ohio’s top 100 employers are also Columbus-based Cardinal Health, the health-care-supply company, and the Ohio arm (Anthem-Community Mutual) of Indianapolis-based WellPoint, which holds a 37 percent share of Ohio’s health-insurance market.
Republican Gov. John Kasich and his anti-Obamacare point-person, Lt. Gov. Mary Taylor, of suburban Akron, head of the state Insurance Department, may or may not let Ohio Medicaid enrollment expand as much as the Obamacare law allows (but thanks to the Supreme Court, doesn’t require).
On the expansion front, partisans on both sides of that debate might consider two things. The first: Kasich and his team have been very, very good managers of Ohio’s Medicaid’s budget. The second: For any governor, saying no to big Ohio employers is very, very hard.
Thomas Suddes is a former legislative reporter with The Plain Dealer in Cleveland and writes from Ohio University.
Fertilizing the farmers
ByEditorial Board, Published: July15
THE UNITED STATES has the richest, most productive agricultural sector, and the best-fed population, in the world — perhaps in the history of the world.
Boosted by $136.3 billion in gross sales to other countries, U.S. net farm income hit a record $98.1 billion in 2011. A new Economist Intelligence Unit report, commissioned by DuPont, ranks the United States as the most “food-secure” nation on Earth, based on the affordability and quality of its food supply. The United States provides the equivalent of 3,748 calories per day for each of its roughly 314 million people. That is nearly 1,500 calories more than the minimum necessary for a healthy and active life.
To be sure, this abundance is not equally distributed, and some families struggle to pay their grocery bills, especially in today’s economy. But any notion that farming is a precarious, hardscrabble business, or that the American diet is vulnerable to supply disruptions, is absurd. Even the drought currently raging across much of the heartland augurs little more than a blip at the checkout counter months from now.
Yet those absurd notions still guide policy. Every five years, Congress drafts a farm bill as if U.S. agriculture were no more capable of surviving on its own than it was during the Great Depression — when most current farm programs began. The farm-state lawmakers, and the lobbyists who swarm around the farm bill like flies in a cow pasture, are at it again now.
The Senate has already passed a measure priced at $969 billion over the next decade. Senators congratulated themselves because this gargantuan figure reflects the elimination of some subsidies, which reduced projected spending by $23 billion. However, the bill includes a lush new subsidy, enhanced crop insurance, that could offset some of the promised savings — and leaves commodity producers hooked on taxpayer largess.
In the House, Speaker John Boehner (R-Ohio) is weighing the election-year political risks of proceeding with that chamber’s own near-trillion-dollar measure — and we can understand his hesitation. The Agriculture Committee has approved a bill that would save $35 billion over the next 10 years but also continues an array of ugly subsidies, price controls and production regulations. Among them is a “price loss coverage” program that would pay farmers if prices drop from their recent highs. The Congressional Budget Office (CBO) says that could cost $3 billion per year; economist Vincent Smith of the American Enterprise Institute says that the cost could spike to $16.5 billion under less optimistic economic assumptions.
Of course, “farm bill” is something of a misnomer, since the Supplemental Nutrition Assistance Program, commonly known as food stamps, accounts for about 80 percent of the measure’s annual cost. While the Senate measure trims food stamps by about $400 million per year, the House bill would cut four times as much, or roughly $1.65 billion per year; this accounts for much of its savings edge over the Senate bill.
No doubt food stamp eligibility needs modernization, as some Republican critics of the program suggest. But to slash a couple of million recipients from the rolls — the CBO’s estimate of the House bill’s impact — under current economic conditions strikes us as draconian. To do so while extending billions of dollars in taxpayer funding to rural businesses that should have been weaned off the federal teat long ago is grotesque.
Farmers’ safety net has become a moneybag
By Jennifer Bjorhus
(MINNEAPOLIS) STAR TRIBUNE Sunday July 15, 2012 10:24 AM
MINNEAPOLIS — One of the largest farm real-estate booms in decades could be getting a boost from an unsuspecting player: the U.S. Taxpayer.
The government foots the bill for a large chunk of the country’s enormous crop-insurance program, which essentially guarantees farmers a profit. That, in turn, removes a lot of the risk from large rent commitments or bidding big for land at auction.
While agricultural economists say they don’t think anyone has researched a connection among the program, farm rents and high land prices, some farmers and other observers say it exists.
Commodity prices are the flames under cropland values, which have reached levels not seen in a century, even adjusted for inflation. But as 48-year-old farmer Darwyn Bach sees it, crop insurance is “throwing a little gas on the fire.”
Designed as a safety net, crop insurance was meant to cushion farmers from the multitude of risks that farming is famous for, from hailstorms to floods. But now, about 80 percent of the country’s crop-insurance policies are revenue policies, protecting farmers not only from weather and yield losses, but also from drops in prices.
The insurance guarantees farmers a certain price for their corn, soybeans, sugar beets and more than 100 other crops, regardless of whether the weather is bad.
Nearly all farmers have it. It shifts revenue risk from the farmer to taxpayers, who share it with more than a dozen private insurance companies that work with the government. Farmers paid $4.2 billion for their premiums last year, while taxpayers shelled out $7.4 billion.
Iowa State University economist Michael Duffy said he thinks the larger factor in land values is that farmers have been generating record levels of income and therefore want to expand operations.
“It’s more of an indirect impact in my mind,” Duffy said of the crop insurance. “Does it have an effect? Yes. Has anybody measured it? No.”
The insurance program would be expanded under the five-year farm bill currently being debated in Congress to help make up for the elimination of direct subsidy payments to farmers.
The insurance payouts to farmers vary greatly year to year. In 2011 — a year that brought major floods, droughts and hurricanes — the program paid out a record $10.7 billion.
Bach, a hog and crop farmer near Montevideo, Minn., says that by eliminating a significant part of farming’s risk, the insurance is helping stoke land prices and driving up the rents.
Bach rents much of the 520 acres he farms, about half of which he grows corn on. He’ll pay $60 an acre to insure his corn this year — a one-time payment of $15,900.
The policy he bought guarantees him 85 percent of the sale price of his proven corn yield, or about $940 an acre, based on a price that’s been set, he said. It costs him about $480 an acre to grow the corn.
That’s a guaranteed profit of $460 an acre. Bach still has to pay rent out of that, but figures he’ll pocket about $200 an acre — an “exceptional” amount, he said.
For farmers who own their land, the guaranteed profit could be more like $460 an acre, he said. For a 1,000-acre operation, that’s a guaranteed $460,000.
“That’s ridiculous,” Bach said.
To Bach, the insurance affects farm rents the most. The rent on part of the land he farms doubled last year to $280 an acre, up from $140 in 2010. That’s because the owner got two higher offers from other farmers, he said.
Bach said that he agreed to the steep increase because he can afford it, and that crop insurance is a big part of that. “When you remove that risk factor, then you can be more aggressive in bidding for rent,” he said. “We don’t have any risk up to that guaranteed minimum. It’s basically guaranteeing a profit for us now.”
Bach said he has “mixed feelings” about the program. It removes risk, but he said it also contributes to farmers tearing up poorer land, or land that might be in conservation, and putting it into production. Plus, as he sees it, it puts beginning farmers at a disadvantage because they don’t have the crop history to establish the good coverage level that more-experienced farmers have.
Lawmakers targeted in inquiry
US attorney looking at Democrats who may have gained from Probation Dept. hiring
Report finds for-profit colleges serve shareholders over students
As of 2009, the report said, three-quarters of students in for-profit colleges attended institutions owned either by publicly traded companies or private equity firms. It said the schools excelled at recruiting students, but not necessarily at retaining them: More than half of students at for-profit schools who enrolled in the 2008-09 academic year left without a degree, the report found. Half of all non-finishers ended their studies within four months.
The findings are in line with concerns voiced last year when the Education Department imposed stricter rules on for-profit schools that benefit from federal student loans.
It’s D-Day for the Post Office
By JOE NOCERA
Published: July 30, 2012
Welcome to the week the United States Postal Service defaults on a major obligation. D-Day is Wednesday, Aug. 1, when the Postal Service is obligated, by statute, to make a $5.5 billion payment, money that is supposed to be put aside to “prefund” health benefits for future retirees. But, with less than $1 billion in the bank, the Postal Service announced on Monday that it would not be making the payment. It has a second payment, for $5.6 billion, due in September. Unless lightning strikes, it won’t be making that one either.
On the one hand, there is no doubt that part of the reason the post office is struggling is that its world has changed mightily. Everyone knows the story: the rise of e-mail, online bill paying, and so on, have cut deeply into Americans’ use of first class mail, which peaked in 2006. Last year, the Postal Service reported losses of more than $5 billion — even though Congress allowed it to defer its annual prefunding of retiree health benefits. With or without the prefunding, the post office was eventually headed toward a crisis.
On the other hand, that prefunding requirement is an absolute killer. It has cost the post office more than $20 billion since 2007 — a period during which its total losses amounted to $25.3 billion. Without that requirement, the post office would still likely be struggling, but it would have a lot more wiggle room — and a lot more cash. (Its pension obligations are also overfunded by around $11 billion.) Not since the debt crisis has there been such an avoidable fiscal mess.
It is a little startling when you first hear about the prefunding requirement. It seems to make no sense, and, as many have noted, it is something that is demanded of no other company or government agency. So why does it exist? It turns out to be one of those things that only Congress could cook up.
Since the 1970s, the Postal Service has been self-sufficient, generating money by selling stamps and offering services — and not dependent on the taxpayer. It is thus considered “off budget.” Yet part of its operations — including its health and retiree benefits — have continued to be part of the federal budget, and thus count against the federal deficit.
In 2002, it was discovered that the Postal Service was wildly overpaying its retirement obligations to the tune of $71 billion. Not surprisingly, it soon began advocating for ways to use some of that excess. One bill passed that did almost nothing to solve the problem. Later bills that would have fixed the problem, however, all ran into the same stumbling block: they would have ostensibly added to the deficit. And the Bush administration was adamant that it would veto any bill that wasn’t deficit-neutral.
Thus it was that a new fund was established in 2006 — for the prepayment of health benefits for future retirees, with the Postal Service agreeing to pay between $5.5 billion and $5.8 billion annually. The money simply goes into an escrow account, where it is invested in special issue Treasury securities. Thus does it somehow magically help with the deficit. Also, of course, no sooner did the bill become law than first class mail began to fall off the cliff. The prefunding requirement became a noose around the Postal Service’s neck.
Incapable of simply letting the Postal Service go free — imagine what that would do to the deficit! — Congress continues to micromanage it, offering various ways for it to cut costs and raise revenue. The Postal Service, for instance, wants to cut Saturday delivery to save money; a Senate bill passed in April defers that decision for two years. But at least the Senate bill offers some relief from the absurd prefunding of health benefits. It would also return some of the excess retirement funding.
The postal reform bill that has emerged from the Republican-led House of Representatives, however, does no such thing. Representative Darrell Issa, the chairman of the committee that oversees the Postal Service, talks fiercely about the need to lower labor costs, while describing the Senate bill as a “bailout.” What he is doing, of course, is using the fact that the Postal Service is going broke to impose a slash-and-burn approach — while ignoring the central reason the post office is running out of money: Congress itself. Meanwhile, the bill that emerged from Issa’s committee has never been brought to a vote on the House floor. Default notwithstanding, there won’t be a vote anytime soon. After all, the Congressional recess is right around the corner.
The post office insists that the default will not affect its ability to deliver the mail. Maybe not now. But several postal experts told me that at the rate things are going, it will be out of money sometime next year. Maybe then Congress will start taking seriously the crisis it created.
Why Americans hate their government