Wednesday, December 18, 2013

The Coburn Wastebook--2013 Edition--and why no one cares

Every year, for the past four years anyway, Senator Tom Coburn  (a Republican from Oklahoma) compiles and releases a report he calls "Wastebook." Essentially, this report highlights one hundred examples of terribly wasteful spending by the Federal Government. Coburn pulls no punches, either. Party tags don't matter a whit in his report. He even points to specific acts of Congress and the Administration that contribute to or even directly create this waste.

Coburn's Wastebook tends to get very little fanfare upon its release. There are but a few stories on it. Right now, a Google news search of "Coburn" and "Wastebook" yields less than one hundred recent stories. A full Google search for the same--with no time limit--yields a measly 17,000 hits, many of which are just shares of the above news stories. Really, the Wastebook is practically ignored, much like the various efforts of Congresspersons like Senator Coburn and Senator Jeff Flake (R-Arizona) to curb waste and earmarks on an almost daily basis. But before going farther here, let's first take a hard look at this year's Wastebook.

The stories out there on the Wastebook cite some specifics from the report to provide a feel for the stuff Coburn is talking about--and I am going to do the same--but I encourage everyone to actually read the whole report, cover to cover. It's about 130 pages, minus the footnotes (Coburn has cites for everything). Why? Because the variety is significant; it's important to understand that this problem--government waste--is truly endemic and spans practically all government agencies as a matter of course.

Now that you're done reading, here are some of my favs:
16. Money-Losing Sugar Loans Leave Taxpayers With Bitter Taste–(USDA) $171.5 million

When Americans borrow money from banks, they are usually also required to pay them back with money. When U.S. sugar producers borrow money from the taxpayer, however, they can pay it back with sugar.

It’s all part of a convoluted, money-losing scheme to sweeten sugar producers’ bottom lines – known as the U.S. Sugar Program.

In 2013 alone, the government lost $171.5 million because sugar companies could not pay back the government for money it borrowed.

The 2008 Farm Bill created the Feedstock Flexibility Program (FFP) to increase the use of ethanol and biofuels. Under this program, the government is required, in times of surplus, to buy sugar from processors and to re-sell the sugar to ethanol plants. Since the 2012-2013 sugar harvest season is the first to yield a surplus, taxpayers are witnessing the program’s wastefulness for the first time. In August, the first use of the FFP, the USDA bought only 7,118 tons out of 100,000 tons of sugar offered for resale.

USDA then sold this sugar to an ethanol maker at a $2.7 million loss.

In its second purchase, USDA paid $65.9 million for 136,026 tons of sugar, and then sold it to ethanol makers for $12.6 million-a $53.3 million loss. Facing a global surplus of sugar for the foreseeable future, the Congressional Budget Office forecasted the FFP to cost taxpayers at least $239 million over the next ten years.
 
So how does the USDA end up with this surplus sugar to sell at a loss to ethanol makers? Because the USDA has lent over $1.2 billion to sugar processors in exchange for sugar in collateral. In a move to protect U.S. sugar processors from foreign competition, USDA disperses loans for price support to ensure that U.S. domestic sugar prices are higher than the global markets and that Big Sugar keeps bringing in big profits. In the 2012-2013 season, 20,000 sugar farmers received $1.7 billion in net gains.

Instead of repaying the USDA with cash from their profits, U.S. sugar processors and producers are actually defaulting on their loans and forfeiting the sugar they put up as collateral. American Crystal Sugar, the leading American sugar processor with 15.1% of the market, defaulted on its loan of $71.2 million, which is one-fifth of the government loans held by sugar processors who may also default. While defaulting on a loan has serious financial consequences for the American taxpayer, American Crystal’s President and CEO, David Berg, called it “beneficial to [American Crystal’s] financial health,” and “the way the sugar program is intended to work.”
 
American Crystal is not the only sugar processor not paying its bill to American taxpayers. Earlier in September 2013, USDA accepted 85,000 tons of sugar as payment for a loan due in August.234 Although USDA swapped the sugar for import credits, the government had to swallow the $34.6 million cost of the loan. As of September 30, 2013, 20 percent of the USDA loans, over $233 million, to U.S. sugar processors were outstanding.
Got that? Instead of paying back the loans--which these companies could easily do--they intentionally default on them, which allows them to "forfeit" their collateral: actual sugar. And the government accepts this collateral at a high value, then sells it for a huge loss, which of course means the collateral was intentionally hugely overvalued. It's crazy. And we--the taxpayers--are on the hook for all of it.

Next up:
25. Parking Center Stuck in Park–(DOT) $50 million

A child born in 1997—the same year the construction of the Paul S. Sarbanes Silver Spring Transit Center began—is now old enough to drive to and park at the center. That is if the parking center was actually completed and open to pedestrians.

In 1997, local officials in Montgomery County, Maryland announced plans to spend $20 million and build a transit hub in downtown Silver Spring, just outside Washington, D.C. The center was intended to allow easier pedestrian, vehicle and mass transit access to the DC Metro train system, Amtrak and the local commuter train, MARC. The original plans expected the transit center to open in 1998. Sixteen years later, the center remains shuttered and the costs have skyrocketed to more than $112 million. In March 2013, local officials requested an additional $7.5 million. Despite sixteen years in delays and cost increases approaching 500 percent, the federal government has provided 49 percent of the total funding to date.

Sometimes it costs a lot of money and takes a lot of time to build something great. It took one year and 45 days, for example, to complete New York’s Empire State Building for a cost of $41 million in 1931. Maryland’s Chesapeake Bay Bridge took 3 ½ years to complete in 1952, costing $45 million. But should it take more than 16 years and $120 million to complete a parking garage?

Construction of the transit center was completed in 2011, though it has sat vacant since. The latest round of delays and cost increases have been attributable to allegations that it was not built correctly, and may not even pass a basic safety test. Post-construction safety inspectors for Montgomery County found “concrete poured by private contractors [Foulger-Pratt] on the reinforcing bars on the top floor was not compliant with industry standards.” Another report released in March 2013 by a third-party, KCE Structural Engineers, found additional safety problems and said the structure may only last 12 years, rather than having “a minimum 50-year service life.”

Foulger-Pratt bitterly disputed the claims, but did say, “If there is an issue with safety here it is related to design. That’s the county’s issue, not ours.” On top of that, one of the firm’s principles noted, the project was “fraught with mismanagement” by the county.

By the end of April 2013, the cost of the structure had risen to $120 million, though it was still unclear when – or if – the transit center would open. The county and lead contractor attempted to find agreement on a path forward, though the project’s inspector had not yet signed off.
That's just scary-stupid. Fifty million down the drain. Sixteen years to build a parking garage that is still not ready to be used. And the people in charge in D.C. are just writing out checks without a care in the world. And why should they care? It's not there money they're wasting, is it?

And then there's this:
31. State Department “Buys Fans” to Increase Facebook “Likes”–(State) $630,000

Hoping to increase its reach with an international audience, the State Department spent $630,000 “buying fans” for its Facebook and Twitter accounts. The effort was undertaken by the department’s Bureau of International Information Programs (IIP), which is responsible for “sustained conversations with foreign audiences to build America’s reputation abroad.”

The fan-buying effort was an expensive flop. While the money was useful in generating thousands of “likes” on its Facebook pages – even generating 2.5 million fans – few people engaged with the department as a result. On each of its four Facebook pages, fewer than two percent even “liked” its photos and “[m]any postings had fewer than 100 comments or shares.” Typical of respondent’s remarks for agency photos were comments such as “so nice pic.”

Moreover, when Facebook changed the way it displays items in a user’s feed, starting in September 2012, the usefulness of the State Department’s investment plummeted. Under the changes, news items would no longer appear on a user’s page unless it was from a site they frequented. Since many of the State Department’s virtual “friends” hardly, if ever, engaged the department online the information it sent out would not be seen by its target audience.386 The only solution available was to “continually spend money on sponsored story ads.”
This is both lazy and stupid, as anyone with even a modicum of knowledge on how these types of things work can easily attest to. Buying "fans," "Google +1's," and "Twitter followers" is a common service that can be found on the internet. But by and large, these services do not create sustained involvement, at all. At best, they simply move pages, websites, and Twitter feeds up a few places in the pecking order. They're for obscure, new, or unknown sites, not well-known ones (like the U.S. State Department). And the end game here is what? Good PR? Ridiculous.

Finally, there is this one:
93. Confusing Earned Income Tax Credit Results in Billions in Improper Payments–(IRS) $11 billion 
In an audit conducted by the Treasury Department Inspector General for Tax Administration, the IRS paid up to $13.6 billion in false claims for EITC in 2012. The Inspector General found it “disturbing” that the IRS continues to give out more than $11 billion in improper EITC payments each year.

The EITC is a refundable tax credit available to the working poor in order to offset automatic Social Security withdrawals from their paychecks.

But due to the complexity of the law underlying the EITC, fraud, and the high turnover rate of those eligible for payments, the IRS is projected to make improper payments for up to 28 percent of the more than $55 billion in EITC payments.
 
Although Executive Order 13520 requires the IRS to establish annual targets for reducing improper payments and to report to auditors each quarter of any EITC payments over $5,000, the IRS has yet to be in compliance with the Executive Order. 
Therefore, the IRS will continue to violate the President’s order and erroneously dish out more money in improper payments than the entire budgets of the Environmental Protection Agency, Department of the Interior, and the Department of Labor.
What is there to say about this? Eleven billion dollars wrongly given out, year after year. And that's from a pool of money collected to fund the government. This money alone could offset most of the waste detailed in Coburn's Wastebook.

I've noted only a few items from Coburn's list. And his list is nowhere close to exhaustive. If we take it to be only a small portion of the whole, with regard to waste at the Federal level, it is simply mindboggling that so little is done about these things, so little attention is paid to them by the media and the general public. Why?

As I noted above, elected officials who go to D.C. intent on addressing and fixing these kinds of problems have hard time being heard, of gaining any traction, mostly because there is a distinct lack of partisanship in their efforts. Within agencies themselves, the problem is a lack of accountability coupled with a fear of losing budget monies. Bureaucrats--both in the public and private sectors--are habitually protective of their perceived "turf." And when it comes to spending money, the most important issue is not justifying how it is spent, but rather making sure they'll get to keep spending it.

As a result, those charged with oversight are prone to accept expense reports, initiatives, and the like as a matter of course, when they should be questioning these things as a matter of course. The EPA employee who pretended to be a CIA operative is actually evidence of this mindset, as well. All of this is largely because the monies being spent are not monies being earned. In a large corporation, the same sorts of things happen too, in those departments that have become significantly detached from the actual business model of the company, especially when the revenue stream appears to be almost unlimited.

To put this all another way, it's the sheer size of government and attendant bureaucracies that is the core of the problem. Leaner, smaller entities that are functionally aware of limits have less waste, this we know. Growth in size leads to growth in waste, but at a much greater ratio than one to one. The function might even be exponential (which is deeply ironic, when one considers the nonsensical belief in the "multiplier effect" that is common among proponents of big government).

Over time, the lack of a truly partisan angle here coupled with the fatalistic acceptance of government waste creates a perfect template for ignorance in the population at large. Thus, reports like Coburn's are either ignored or greeted with simple dismissal, based on the idea that "there's always going to be some waste." But that "some" has mushroomed and continues to mushroom because of these factors. It's very much a kind of positive feedback loop (which is again ironic, given where the climate change crowd tends to line up in all of this).

The question is, can the cycle be broken? Is there a way to break the template, overcome the ignorance and fatalism? Perhaps we can get the Federal Government to fund a study in this regard. Don't count on it, though.

Cheers, all.

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