August 26, 2016

Peanuts, Politicians, and 'the Train Wreck of Farm Subsidies'

In today's Commentary section of The Washington Times, James Bovard says, The peanut program is trypical of the train wreck of farm subsidies." The lede paragraph to his comments about "politicians and peanut pilfering" says:

"The history of federal peanut policy is the perfect antidote to anyone who still believes that Congress could competently manage a lemonade stand. Federal spending for peanut subsidies will rise eight-fold between last year and next year — reaching almost a billion dollars and approaching the total value of the peanut harvest. This debacle is only the latest pratfall in a long history of horrendous federal mismanagement."

Bovard is "a libertarian author and lecturer whose political commentary targets examples of waste, failures, corruption, cronyism and abuses of power in government," according to Wikipedia.

Here is how he begins his explanation of why peanut subsidies are "the train wreck of farm subsidies:"

"The peanut program long combined the worst traits of feudalism and central economic planning. In 1949, to curtail subsidy outlays, Congress made it a federal crime to grow peanuts for fellow Americans without a federal license. The feds closed off the peanut industry, distributing licenses to existing farmers and prohibiting anyone else from entering the business.

"The federal government maintained draconian controls to prevent any unlicensed peanuts from entering Americans’ stomachs. The Washington Post noted in 1993, “USDA employees study aerial photographs to help identify farmers who are planting more than their allotted amount of peanuts. Violators are heavily fined. USDA also issues each farmer a card imbedded with a computer chip that lists his quota. The farmer must present that card before he can sell his peanuts at a buying point.”

"The peanut program was created to help save family farms. But the number of peanut farmers plunged by more than 75 percent after the licensing scheme began. The program also sharply decreased productivity since the licenses were long locked into the same area (peanuts are a soil depleting crop). Many farmers sold their licenses to investors. The program sharply inflated the cost of production because most farmers had to rent the license to raise their crop. The General Accounting Office estimated in 1993 that the program cost consumers more than half a billion dollars a year in higher prices.

"Strict controls on farmers were complimented by draconian import restrictions. Americans were long permitted to annually buy only 1.7 million pounds of foreign peanuts — roughly two foreign peanuts per year for each American citizen. That quota ended thanks to a 1990s-era trade agreement. Unfortunately, the Clinton administration placated U.S. peanut growers by slapping a 155 percent tariff on peanut butter imports — a sneak attack on the mainstay of freelance writers’ diets. The peanut program guaranteed American farmers prices that are roughly double world market levels, thereby forcing every person who bought a bag of Jumbo goobers to pay tribute to Congress’s favorites.

"Congress ended the peanut licensing scheme in 2002 with a $4 billion buyout that provided a windfall to license-holders. The largest “peanut buyout” payment went to the John Hancock Insurance Company, which collected $2 million. There was no more justification for “bailing out” peanut license holders than there was for compensating slaveowners after Lincoln’s Emancipation Proclamation but the payouts bred generosity that redounded on congressional candidates." (emphasis added)

Bovard isn't done explaining about this "train wreck of farm subsidies," however. Read the rest here.

Now the government, apparently, does not want to sully its image by providing subsidies to peanut farmer. Rather,  according to Wikipedia, there is a "peanut price support program," which Wikipedia described as follows:

"The 2002 farm bill (P.L. 107-171, Sec. 1301-1310) replaced the longtime (65-year) support program for peanuts with a framework identical in structure to the program for the so-called covered commodities (wheat, corn, grain sorghum, barley, oats, upland cotton, rice, soybeans, and other oilseeds). The three components of the Peanut Price Support Program are fixed direct payments (at $36/ton), counter-cyclical payments (based on a target price of $495/ton), and marketing assistance loans or loan deficiency payments (LDPs) (based on a loan rate of $355/ton). The peanut poundage quota and the two-tiered pricing features of the old program were repealed. Only historic peanut producers are eligible for the Direct and Counter-cyclical Program (DCP). All current production is eligible for marketing assistance loans and LDPs. Previous owners of peanut quota were compensated through a buy-out program at a rate of 55¢/lb. ($1,100/ton) over a 5-year period."(see original for links to source materials)

In a November 2015 op-ed at CNS News, Dan Mitchell writes that "Department of Agriculture's Soviet-style nonsense is a welfare scam," explaining:

"But the more I read about the bizarre handouts and subsidies showered on big agribusiness producers by the Department of Agriculture, the more I think there’s a very compelling argument that (the Department of Agriculture) should be at top of my list (of federal departments to close).

"Indeed, these giveaways are so disgusting and corrupt that not only should the department be abolished, but the headquarters should be razed and then the ground should be covered by a foot of salt to make sure nothing ever springs back to life.

"That’s a bit of hyperbole, I realize, but you’ll hopefully feel the same way after today. That’s because we’re going to look at a few examples of the bad results caused by government intervention.

"To get an idea of the Soviet-style nonsense of American agricultural programs, a Reuters report on the peanut programs reveals how subsidies and intervention are bad news for taxpayers and consumers. Here’s the big picture:

“A mountain of peanuts is piling up in the U.S. south, threatening to hand American taxpayers a near $2-billion bailout bill over the next three years, and leaving the government with a big chunk of the crop on its books. … experts say it is the unintended consequence of recent changes in farm policies that create incentives for farmers to keep adding to excess supply.”

"And here’s a description of the perverse and contradictory interventions that have been created in Washington.

“First, the U.S. Department of Agriculture (USDA) is paying farmers most of the difference between the “reference price” of $535 per ton (26.75 cents per lb) and market prices, now below $400 per ton. A Nov. 18 report to Congress estimates such payments this year for peanuts exceed those for corn and soybeans by more than $100 per acre. Secondly, government loan guarantees mean once prices fall below levels used to value their crops as collateral, farmers have an incentive to default on the loans and hand over the peanuts to the USDA rather than sell them to make the payments.”

"Gee, what a nice scam. Uncle Sam tells these farmers welfare recipients that they can take out loans and then not pay back the money if peanut prices aren’t at some arbitrary level decided by the commissars politicians and bureaucrats in Washington.

"In other words, assuming the peanut lobbyists have cleverly worked the system (and unfortunately they have), it’s a license to steal money from the general population by over-producing peanuts. And we’re talking a lot of peanuts.

“Through forfeitures, the USDA amassed 145,000 tons of peanuts from last year’s crop, its largest stockpile in at least nine years, according to data compiled by Reuters. … That stockpile is enough to satisfy the average annual consumption of over 20 million Americans – more than the population of Florida – and puts the administration in a bind. … As peanut carryover inventories are forecast to hit a record of 1.4 million tons by end-July 2016 and as loans begin to come due next summer, farmers are expected to fork over more peanuts to the USDA.”

"Moreover, because the perverse interaction of the various handouts, there’s no solution (other than … gasp! … allowing a free market to operate).

"Storing the peanuts in shellers’ and growers’ warehouses comes at a cost. Selling them could depress the market further and in turn would add to the price subsidy bill.”

And, in a January 2014 op-ed at CNS News, Adam Andrzejewski comments:

"The historic purpose of the farm bill was to "ensure a stable food supply" and "to preserve the family farm." But, when issuing our The Federal Transfer ReportTM- Farm Subsidies & The Big Dogs, OpenTheBooks.com found that some of the largest subsidies were received by government in fiscal years 2008-2011. Federal farm subsidies have grown to such an extent that Uncle Sam's smaller cousins -- who aren't traditional farmers, but smaller units of government -- are receiving millions."

He then cites examples of $8.5 million going to the Montana Department of Natural Resources and $3.7 million going to the Washington Department of Natural Resources. Even the "Grissom Municipal Airport, in Bedford, IN of Lawrence County, has received over $15,000 in subsidy in just three years."

Finally, let's look at two reports from Congress' General Accountability Office (GAO). First, from the 41-page report, "Considerations in Reducing Federal Premium Subsidies," (GAO-14-700. published August 8, 2014), we learn:

"The cost of the federal crop insurance program and farm sector income and wealth grew significantly from 2003 through 2012. The cost of crop insurance averaged $3.4 billion a year from fiscal years 2003 through 2007, but it increased to $8.4 billion a year for fiscal years 2008 through 2012. According to the U.S. Department of Agriculture's (USDA) Risk Management Agency (RMA), the agency that administers the crop insurance program, subsidies for crop insurance premiums accounted for $42.1 billion─or about 72 percent─of the $58.7 billion total program costs from 2003 through 2012. Revenue policies, the most frequently purchased crop insurance option, accounted for $30.9 billion of the total premium subsidy costs for 2003 through 2012. Crop insurance premium subsidy rates—the percentage of premiums paid by the government—are set by Congress and would require congressional action to be changed. For most policies, the rates range from 38 to 80 percent, depending on the policy type, coverage level chosen, and geographic diversity of crops insured. As premium subsidy costs increased, farm sector income and wealth indicators also increased. For example, for each year from 2003 through 2012, median farm household income exceeded median U.S. household income. Specifically, on average, median farm household income was $7,205, or 13.8 percent, greater each year than U.S. household income, in constant 2012 dollars. Farm sector income also grew from $73.8 billion in 2003 to $113.8 billion in 2012, in constant 2012 dollars. Farm real estate values, another measure of farm prosperity, increased by 72 percent from 2003 through 2012, in constant 2012 dollars, and farmers relied less on borrowed funds to finance their holdings.

"Reducing premium subsidies for revenue policies could potentially result in hundreds of millions of dollars in annual budgetary savings with limited costs to individual farmers . . . ."

In a second report -- 75 pages, this time -- on USDA farm programs in 2014, "Farmers Have Been Eligible for Multiple Programs and Further Efforts Could Help Prevent Duplicative Payments (GAO-14-428, published July 8, 2014), GAO found:

"From fiscal years 2008 through 2012, the U.S. Department of Agriculture (USDA) reported spending about $114 billion on 60 programs providing financial assistance to farmers, including about $28 billion in crop insurance subsidies. Those programs existed during the effective period of the Food, Conservation, and Energy Act of 2008 (2008 farm bill). Most were administered by the Farm Service Agency (FSA), Natural Resources Conservation Service (NRCS), and Risk Management Agency (RMA). The 2014 farm bill eliminated some programs covered by this report, including FSA's Direct Payments Program, and added or expanded other programs. Under the 2008 farm bill, farmers were eligible for multiple programs depending on the commodities they produce and other factors. Some of these programs were overlapping, meaning they have similar goals, engage in similar activities or strategies, or target similar beneficiaries. However, based on a review of the programs, GAO did not find sufficient evidence to conclude that these programs were duplicative, meaning that they engaged in the same activities or provided the same services to the same beneficiaries.

"Annually, USDA surveys individual farm costs and returns, including government payments. The survey among other things is aimed at estimating the farm sector's financial condition. The survey allows linking payments to farm characteristics, but it does not account for all payments in a given fiscal year. Based on these survey data, except crop insurance subsidies, most of the estimated 2.2 million farms reported receiving no program payments from 2008 through 2011, and about 37 percent (800,000) received a payment from at least one farm program. Farms receiving payments reported receiving $11,293 on average (median payment of $3,719) annually from various programs. Payments were higher if a farm received assistance from multiple farm programs—less than 1 percent of farms received payments of $57,899 on average (median payment of $27,412) annually from multiple programs. Larger farms or farms producing cash grains such as corn were more likely to receive payments from multiple programs than small farms or farms producing other crops. Larger farms also received more crop insurance premium subsidies than other farms.

"The three largest USDA programs that pay for crop losses are FSA's Noninsured Crop Disaster Assistance Program (NAP), FSA's Supplemental Revenue Assistance Payments (SURE) Program, and RMA's Federal Crop Insurance Program. SURE and NAP assist farmers with losses due to natural disasters. Crop insurance, the largest program covering losses, makes payments based on revenue and production losses. These programs have controls to help prevent duplicative payments; however, GAO asked FSA to conduct data matching to compare payment data for RMA's Adjusted Gross Revenue crop insurance policy and FSA's NAP from 2010 through 2012, and that effort, with RMA analyses, identified 13 duplicative payments that may amount to about $188,000. It is possible there were other duplicative payments made by NAP and other crop insurance policies, but USDA has not taken steps to compare or monitor these payments. Without monitoring by engaging in activities such as data matching, agencies will find it difficult to identify such payments. In addition, a 2013 FSA decision to allow farmers in six states to have coverage for forage under both NAP and a pilot RMA crop insurance policy could result in duplicative payments in the 2014 crop year. FSA officials said they estimated potential duplicative payments to be less than $10 million resulting from this decision. RMA and FSA officials told GAO that they had not developed a plan to prevent or recover duplicative payments that may result from FSA's decision."

For background information about the U.S. Department of Agriculture (USDA), which says USDA "will spend $154 billion in 2016, or $1,230 for every U.S. household," visit the Cato Institute's Downsizing the Federal Government project. Note, too, the three charts depicting how USDA spends taxpayer money.

Americans should be ashamed of the train wreck of farm subsidies designed by the Congress, not to mention the members of Congress who put it together.

So, take some time, and write to one of your Congressional representative to tell them your thoughts about the need for an agricultural bureaucracy such as the U.S. Department of Agriculture (USDA). Contact information is available at the Library of Congress' Congress.gov website. Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -- write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

August 25, 2016

Good News and Bad News for Virginia's Finances

First, the bad news. The Richmond Times-Dispatch's Michael Martz reported today that "Gov. Terry McAuliffe will announce a shortfall of roughly $1.5 billion in the two-year state budget to the General Assembly money committees on Friday, according to a source familiar with the revised revenue forecast." The Washington Post story is available here. Martz explains:

"The governor will reduce anticipated revenues by about $850 million in the current fiscal year in response to a shortfall of almost $270 million in the year that ended June 30 and increasing pessimism about growth in income and sales tax collections. He will reduce projected revenues in the second year by about $630 million.
The revised forecast, required under state law because last year’s shortfall exceeded 1 percent of major state revenues, substantially reduces projected growth rates for both withholding and non-withholding income taxes, as well as sales tax revenues, the source said.

"The size of the projected shortfall comes almost two weeks after McAuliffe consulted with state political and business leaders in a meeting that one legislator called “cautiously pessimistic” about Virginia’s economy, especially with the possibility of potential cuts in federal spending under budget sequestration in the budget’s second year.

"In the last fiscal year, total state general fund revenues grew about 1.7 percent, lagging well behind the forecast of 3.2 percent growth."

The Washington Post story by Laura Vozzella and Greg Schneider notes, "The (budget) shortfall would be among the biggest in state history. The worst was in 2010, when the General Assembly had to confront a $4.5 billion hole."

The good news comes from George Mason University's Mercatus Center, which recently released its 2016 edition of "Ranking the States by Fiscal Condition." Separate files are available for the entire report, map, research summary, and dataset. The state fiscal rankings were prepared by Eileen Norcross, a senior research fellow and director for the State and Local Policy Project at the Mercatus Center, and Olivia Gonzalez, a research assistant for the State and Local Policy Project.

We growled about the 2015 edition here, noting that "Virginia ranks #21 in Norcross' ranking of state fiscal conditions, just ahead of Colorado, Washington and Kansas, and just behind New Hampshire and Texas. Virginia ranked from 5th to 30th in the various categories used to compile the overall #21 ranking. These include:

  • Cash solvency -- 30th
  • Budget solvency -- 29th
  • Long-run solvency -- 27th
  • Service-level solvency -- 5th
  • Trust fund solvency -- 15th"

But in 2016 ranking, Virginia improved by two places relative to the other states, moving up to #19. Before writing about Virginia, however, here's the background on the fiscal rankings:

"A new study for the Mercatus Center at George Mason University ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, such as unfunded pen­sions and healthcare benefits. This 2016 edition updates the version the Mercatus Center pub­lished in 2015. Using the approach pioneered in 2015, the 2016 edition presents information from each state’s audited financial report in an easily accessible format, this time including Puerto Rico to provide a benchmark of poor fiscal performance.

"Growing long-term obligations for pensions and healthcare benefits continue to strain the finances of state governments, highlighting the fact that state policymakers must be vigilant to consider both the short-term and the long-term consequences of their decisions. Understanding how each state is performing in regard to a variety of fiscal indicators can help policymakers as they consider the consequences of policy decisions.

"The study also highlights some of the limits of the financial data reported by state governments. States release these data years after they are most relevant, and because the information is highly aggregated, analysts and the public have difficulty discerning the true fiscal position of any state."

Now to Virginia. The state's overall ranking increased two positions to #19. Here is Virginia's narrative summary:

"On the basis of its fiscal solvency in five separate categories, Virginia ranks 19th among the US states and Puerto Rico for its fiscal health. On a cash basis, Virginia has between 1.63 and 2.40 times the cash needed to cover short-term liabilities. Revenues exceed expenses by 3 percent, for a surplus of $151 per capita. Virginia’s net asset ratio of −0.005 indicates that the state has no assets remaining after meeting its debts. Total liabilities are 30 percent of total assets. Total debt is $6.86 billion. Unfunded pension liabilities are $87.66 billion, and other postemployment benefits (OPEB) are $5.19 billion. These three liabilities are equal to 24 percent of total state personal income."

And here are the five component categories:

  • Cash solvency -- 28th (up 2 from 2015)
  • Budget solvency -- 28th (up 1 from 2015)
  • Long-run solvency -- 26th (up 1 from 2015)
  • Service-level solvency -- 5th (same as 2015)
  • Trust fund solvency -- 14th (up 1 from 2015)

Kudos once again to the researchers for preparing and publishing their 2016 edition of the Ranking the States by Fiscal Condition.

Unfortunately, the Rankings do not explain what actions Virginia's governing management took to achieve improving its ranking from #21 to #19, but the improvement is worth nothing, however. Growls readers are urged to tell their members of the Virginia General Assembly to continue making sure that Virginia keeps improving its ranking. The following legislators represent Arlington County in the Virginia General Assembly: Senators (Adam Ebbin, Barbara Favola, or Janet Howell) and Delegates (Rip Sullivan, Patrick Hope, Alfonso Lopez, or Mark Levine). Contact information for members of the General Assembly can be found here  -- use one of the "quick links" to locate the senator and delegate who represent you.

And tell them ACTA sent you.

August 24, 2016

A Thought about America's Future

"For the U.S. to continue to triumph in spite of self-righteously suicidal and willfully blind policies in all manner of areas would be unique in the human experience —though the timing and duration of such a decline is hard to predict.

"History shows that coddling and appeasing our enemies will likely lead them to attack us. Our unsustainable debts will at some point come due. Commerce may very well come to a standstill if the state so wills it.

"We may be enjoying the residue of a past that has provided us with capital of all kinds that today is being largely consumed rather than grown, save for a technology sector that has been swiftly lawyering and lobbying up.

"And too, we may be enjoying material wealth at a time of declining spiritual health.

"What is amazing about humans for all of our folly is that save for the most apocalyptic of collapses, life will go on. Out of the ashes, a phoenix can rise. The choice, as always, is ours."

~ Benjamin Weingarten

Source: his August 23, 2016 colum, "Doom, Gloom, or Boom? Will the American Experiment Survive 2016??" posted at Conservative Review.

August 23, 2016

Massive Accounting Failure at HUD

Kathryn Watson of the Daily Caller News Foundation reported yesterday that "Department of Housing and Urban Development (HUD) officials have ignored 63 financial management recommendations from Congress’ investigative arm since 2012 and only half-heartedly followed many more, resulting in the $43 billion agency’s books to be all but useless." In addition, she wrote:

"Things have gotten so bad at HUD so rapidly, that auditors who found only one “material weakness” in the department’s accounting in 2012 found nine in 2015, according to a Government Accountability Office (GAO) report published Monday."

According to Auditing Standard No. 5, "A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis." In other words, says Investopedia, if unresolved, "a material misstatement could eventually occur in a company's financial statements, which would have a tangible effect on a company's valuation. For example, a $100 million overstatement in revenue would be a material misstatement for a company generating sales of $500 million annually." Government Finance Officers Association guidance is similar, and provided here.

Ms. Watson continued her reporting of what GAO found in their audit at HUD:

"The Department of Housing and Urban Development (HUD) has struggled to resolve persistent management challenges, in part because it has not consistently incorporated requirements and key practices identified by GAO to help ensure effective management into its operations,” GAO said. “In addition, HUD’s past remedial actions were not always effective because they were not sustained.”

“Turnover among senior leadership, shifting priorities, and resource constraints have contributed to HUD’s difficulties in implementing needed changes,” the report continued. “As a result, GAO and others continue to find deficiencies in numerous aspects of HUD’s operations.”

"The report — drawing from 15 years of GAO and HUD Office of Inspector General (IG) audits — particularly faulted HUD officials for failing to fix seven of eight financial accountability recommendations, and neglecting to dedicate staff members or policies to preventing waste, fraud and abuse.

"GAO’s concern for HUD’s financial state surrounded poor audits. Auditors found more “material weaknesses” with each passing year; the number jumped from one in fiscal year 2012 to nine in fiscal year 2015. HUD’s books, which auditors gave a “clean” opinion for 13 consecutive years until 2013, were in such bad shape in 2014 and 2015 that auditors couldn’t issue an opinion on them.

"GAO also criticized HUD for neglecting its oversight duties. The department “has not formalized key practices for program oversight and evaluation,” or “formally designated entities to manage fraud risk,” GAO said. HUD’s complicated structure, consisting of thousands of local housing authorities and contractors and dozens of programs, makes it ripe for waste and fraud, GAO said."

The U.S. General Accountability Office (GAO) in question is "Department of Housing and Urban Development: Actions Needed to Incorporate Key Practices into Management Functions and Program Oversight" (GAO 16-497). It was published July 20, 2016, and publicly released August 19. The full report is 148 pages, but a two-page summary is available.

The summary includes the following infographic that shows the extent to which HUD met requirements or was following key practices for management functions.

 

In all my years of reading GAO audit reports, I cannot recall reading of a more massive accounting failure in the government sector. In the private sector, its equivalent could be the Enron Corporation scandal, which also resulted in the "de facto dissolution of Arthur Andersen." At the time, Arthur Andersen was one of the five largest audit and accounting partnerships in the world, according to Wikipedia.

For background information about the Department of Housing and Urban Development, see the HUD write-up at the Cato Institute's DownsizingGovernment.org project.

Add in the "Pentagon Money Pit," which we growled about on August 20, 2016, not to mention others, including the IRS scandal -- currently at day number 1202 according to the Tax Prof Blog, and you have to wonder if anyone in the federal government has a clue.

To paraphrase Dave Lindorff at CounterPunch.org. it's incredible that virtually no mainstream reporter or editor in the United States has seen fit to report this story to the American public. So kudos to Katie Watson for reporting on the GAO audit of HUD.

So, take a few minutes, and write to one of your Congressional representative to tell them your thoughts about the need for appropriate financial accountability and control as well as information security. Contact information is available at the Library of Congress' Congress.gov website. Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -- write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

August 22, 2016

It Costs How Much to Protect Us from Climate Change?

In a story at CNS News today, Terry Jeffrey writes that a new climate change regulation will increase the cost of a tractor-trailer over $15,000.

Here is part of Jeffrey's report:

"The Environmental Protection Agency and the National Highway Traffic Safety Administration jointly issued a new regulation last week that is meant to help protect the world from "climate change" by limiting “greenhouse gas emissions” and improving fuel efficiency in medium- and heavy-duty vehicles operated in the United States.

"The 1,690-page regulation is approximately 700,000 words long.

"A “regulatory impact analysis” published by EPA and NHTSA estimates the regulation will add an average of as much as $13,749 to the cost of a tractor truck and $1,370 to a trailer, making some tractor-trailer combinations $15,119 more expensive in 2027 than they would be under current regulations.

"While admitting that the regulation will increase the cost of trucks and the other vehicles it effects, the administration argues that the owners of these vehicles will actually save money by using less fuel and that the regulation “will result in up to $230 billion in net benefits to society.”

"These “net benefits to society” include what the administration calls “health benefits” and “energy security benefits.”

"The new regulations cover a range of vehicles running from heavy-duty pickup trucks and passenger vans, through “vocational vehicles” (such as garbage trucks, emergency vehicles and school buses), to large cargo trucks such as tractor-trailers.

"In a co-authored blog published on the White House website, EPA Administrator Gina McCarthy and Transportation Secretary Anthony Foxx said the regulation is part of President Obama’s 'Climate Action Plan.'"

You can read the complete article here.

Last month, we growled that "a new energy efficiency regulation issued by the U.S. Department of Energy to regulate wine refrigerators will 'cost small businesses $12,500 each.'"

We've growled repeatedly about the need to reduce both the tax burden and the regulatory burden shouldered by Americans in order to get the economy growing. For example, on May 24, 2016, we growled that individuals and business were drowning in ever more red tape, citing the Heritage Foundation's latest report on the regulatory state. See also the May 9, 2016 Growls about economic growth. And on December 15, 2015, we growled that the Obama administration would set a new record in 2015 for adding regulations, citing a Washington Times article by Stephen Dinan and a study by the Competitive Enterprise Institute. Talk about the costs that will be passed on to consumers? They were a trickle when the regulatory state began, but they are drowning individuals and businesses in a tsunami.

As we suggested in several recent Growls -- June 16, 2014; August 16, 2014; and September 20, 2014 -- but use the search facility (scroll down in the right-hand column) for others, we remain skeptical of the science, and, consequently, view the climate change regulations as little more than a scheme to redistribute wealth.

So, take a few minutes, and write one of your Congressional representative to tell them your thoughts on the latest climate change regulations. Contact information is available at the Library of Congress' Congress.gov website. Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -- write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

August 21, 2016

Is Virginia Prepared for the Next Recession?

In a new study published earlier this year by George Mason University's Mercatus Center, Erick M. Elder, professor of economics at the University of Arkansas at Little Rock, looks at how prepared the 50 states are to weather the next recession. The study's key finding is:

"To understand how prepared a state is to handle revenue shortfalls during a recession, policymakers need to answer two key questions: What target level of savings would be an appropriate buffer for revenue declines, and what proportion of possible recessions could the state weather with its current level of savings?"

Professor Elder provides this background:

"When recessions strike, state governments must often contend with revenue shortfalls resulting from declines in overall economic activity. Because many states have balanced budget requirements, falling revenues often mean states must raise taxes, cut spending, or do both. Most states have rainy day funds to smooth state spending across business cycles and reduce the need for tax hikes or budget cuts during recessions. Even with historically high rainy day fund balances before the Great Recession, many states did not have enough saved to avoid cutting spending or increasing taxes in 2009 and 2010. The rapid exhaustion of rainy day funds during the Great Recession raises the question of how well states have prepared for the next recession.

"A new study for the Mercatus Center at George Mason University examines the current condition of state rainy day funds from across the United States. By comparing the balances of individual states’ rainy day funds as a percentage of their annual revenue with various levels of potential revenue shortfalls based on recession severity, the study finds that the vast majority of states have not saved enough to weather the average decline in revenue associated with the full range of potential recessions.

"Credit rating agencies and professional organizations for state policymakers have suggested that states should aim to save enough to cover between 5 percent and 16.7 percent of their annual spending or revenue, but this one-size-fits-all solution ignores variances in business cycle duration and severity among the states. This study accounts for differences among the states by using state-level public finance data and economic indicators to create potential distributions of savings goals for each state."

The following map is color-coded to show how each state is prepared to weather the next recession:

 

On my last eye exam, my ophthalmologist made no mention of color blindness; consequently, that puts Virginia in the unprepared category. Or as the study's author says, "Virginia could weather a mild recession, but not an average or severe recession."

A more complete description of how prepared Virginia is to weather a recession is here, and includes:

"Based on its business cycle characteristics, Virginia would need $1.15 billion to make it through a recession of average severity if the state decided to rely on its combined rainy day fund and general fund balances rather than cutting spending or raising tax rates. To weather a severe recession (at the 90th percentile of all possible economic contractions), Virginia would need funds that make up 17 percent of its revenue, or $3.08 billion. Using its current rainy day fund and general fund balances, the state is not prepared for the revenue shortfalls that would occur during a recession of average severity."

The author provides the following chart comparing Virginia's available cash and amounts needed to weather a hypothetical recession:

Incidentally, we look forward to completion of the analysis of Arlington County's financial reserves, which the Arlington County Board directed the County Manager to complete by October 1, 2016. It's item #22 on the Board's guidance and notes that accompanied the adopted FY 2017 budget, and we growled about it on May 7, 2016, specifically:

"Reserves: The County Manager will provide, no later than October 1, 2016, an analysis of the County’s various reserves and funding levels, including criteria for utilization of certain reserves, which will inform a possible update of the County’s financial and debt management policies."

Growls readers are urged to tell their members of the Virginia General Assembly to make sure that Virginia is prepared for the next recession. Ask them for the answers to the two key questions raised by the study's author in the key finding. The following legislators represent Arlington County in the Virginia General Assembly: Senators (Adam Ebbin, Barbara Favola, or Janet Howell) and Delegates (Rip Sullivan, Patrick Hope, Alfonso Lopez, or Mark Levine). Contact information for members of the General Assembly can be found here  -- use one of the "quick links" to locate the senator and delegate who represent you.

And tell them ACTA sent you.

August 20, 2016

Are Army Accountants Epic Failures?

The American' Thinker's Rick Moran blogged today that "Army accountants make trillions of dollars in illegal  entries," citing a Defense Department inspector general (IG) report and a Reuters story.

Here's the lede, according to Moran:

"Our army may be a superior war-fighting force, but when it comes to keeping track of where the taxpayer's money is going, they are epic failures.

"A report by the inspector general of the Defense Department reveals that accountants made trillions of dollars in illegal entries – sometimes just pulling numbers out of thin air – in order to show the books balancing."

Here are  few of the details, according to Scot Paltrow of Reuters yesterday:

"The United States Army’s finances are so jumbled it had to make trillions of dollars of improper accounting adjustments to create an illusion that its books are balanced.

"The Defense Department’s Inspector General, in a June report, said the Army made $2.8 trillion in wrongful adjustments to accounting entries in one quarter alone in 2015, and $6.5 trillion for the year. Yet the Army lacked receipts and invoices to support those numbers or simply made them up.

"As a result, the Army’s financial statements for 2015 were “materially misstated,” the report concluded. The “forced” adjustments rendered the statements useless because “DoD and Army managers could not rely on the data in their accounting systems when making management and resource decisions.”

"Disclosure of the Army’s manipulation of numbers is the latest example of the severe accounting problems plaguing the Defense Department for decades.

"The report affirms a 2013 Reuters series revealing how the Defense Department falsified accounting on a large scale as it scrambled to close its books. As a result, there has been no way to know how the Defense Department – far and away the biggest chunk of Congress’ annual budget – spends the public’s money.

"The new report focused on the Army’s General Fund, the bigger of its two main accounts, with assets of $282.6 billion in 2015. The Army lost or didn’t keep required data, and much of the data it had was inaccurate, the IG said.

"Where is the money going? Nobody knows,” said Franklin Spinney, a retired military analyst for the Pentagon and critic of Defense Department planning.

"The significance of the accounting problem goes beyond mere concern for balancing books, Spinney said. Both presidential candidates have called for increasing defense spending amid current global tension.

"An accurate accounting could reveal deeper problems in how the Defense Department spends its money. Its 2016 budget is $573 billion, more than half of the annual budget appropriated by Congress."

If you're wondering how you can have trillions of dollars in accounting adjustments when the entire Department of Defense's FY 2016 budget is $573 billion, Reuters provides this explanation:

"At first glance adjustments totaling trillions may seem impossible. The amounts dwarf the Defense Department’s entire budget. Making changes to one account also require making changes to multiple levels of sub-accounts, however. That created a domino effect where, essentially, falsifications kept falling down the line. In many instances this daisy-chain was repeated multiple times for the same accounting item."

Moran concludes his American Thinker blog post, writing:

"Congress has ordered an audit for next year, at which time we're likely to receive a shock regarding how much taxpayer money is wasted.  With so much accounting tomfoolery, it's likely that waste and even fraud total tens of billions of dollars.

"It's painful to contemplate where that money might be spent."

Seems like the Defense Finance and Accounting Services (DFAS) is little more than a government jobs program for accountants.

A summary of the Defense IG report in question seems to be the one entitled, Army General Fund Adjustments Not Adequately Documented or Supported (Project No. D2015-D000FL-0243.000), and includes a link to the complete report.

Take a few minutes to read Rick Moran's entire blog post. Better, read the Reuters story and/or the Defense IG audit report, and then take a few more minutes to write one of your Congressional representative to tell them your thoughts on the Army's accountant's slipshod accounting. Contact information is available at the Library of Congress' Congress.gov website. Taxpayers living in Virginia's Arlington County can contact:

  • Senator Mark Warner (D) -- write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response. And tell them ACTA sent you.

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Items in Growls are written by individual ACTA members and do not necessarily represent the views of the Arlington County Taxpayers Association, Inc. Please send comments about Growls to The Growl Meister