October 01, 2014

The Decline of U.S. Saving and Investment

Another opportunity to growl about economic indicators. For prior Growlings on the topic, see Growls search results.

The Tax Foundation's Alan Cole, an economist, posted a 'must read' Fiscal Fact (No. 439, October 2014) today, writing that because of the decline of U.S. saving and investment, the nation is "losing the future." Here is how Cole introduces the paper:

"A society provides for its future by accumulating both physical and financial assets with lasting value. The United States, one of the wealthiest countries in the world, has long been a forward-thinking country that builds for tomorrow through saving and investment.

"However, over the last fifty years, U.S. saving and investment have eroded substantially, and during the most recent financial crisis, they collapsed almost completely. At the national level, the U.S. is essentially treading water. Citizens are barely running enough household surplus to make up for government deficits, and businesses are barely investing enough new capital to make up for the depreciation of old capital.

"Saving gives us security, while investment gives us rising incomes through enhanced productivity. America could do well with a great deal more of both.

"Currently, the U.S. tax code places substantial burdens on saving and investment. As the world has globalized, other nations have made themselves more attractive destinations for investment by changing their tax codes. The United States would be wise to follow suit."

Here are the 'key findings' from the study:

  • "Saving and investment are necessary for a society to adequately provide for its future.
  • "Saving and investment have declined substantially as a percentage of GDP over the last 40 years, and have collapsed almost entirely since the financial crisis.
  • "American private saving barely keeps pace with total government deficits. On the whole, the country saves very little.
  • "American investment barely keeps pace with depreciation; U.S. private and public capital stock and infrastructure deteriorates almost as quickly as it can be repaired or replaced with new investment.
  • "The U.S., overall, does not save enough money to fund all of the worthwhile domestic investments and relies substantially on foreign investors to make up the difference.
  • "Tax reform could help the U.S. become a forward-looking economy that invests and saves at more prudent rates."

The entire 8-page study is worth reading in its entirety.

Below is a chart from the study showing the private sector saves while government borrows:

Cole includes two more charts which taxpayers should send to their favorite member of Congress. One shows the decline of both saving and investment. The other shows that foreigners own more American assets than Americans own foreign assets. In the first chart, however, note that although the decline started before the administration of President Reagan, both saving and investment had significant bumps upward during his administration. Remember the tax cuts during his administration?

Readers of Growls who are concerned that America is losing its future because of the decline of savings and investment are urged to contact their members of Congress. Information is available at Thomas (use left-hand column). Readers living in Virginia's Arlington County, should 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 Jim Moran (D) -- write to him or call (202) 225-4376

And, tell them ACTA sent you. More importantly, kudos to Alan Cole and the Tax Foundation! Be sure you have it bookmarked.

September 30, 2014

Economic Indicator Shows Local Region 'Treading Water'

Regular reader of Growls know we've been growling about economic indicators since everyone seems to cite only those which support their own views of the economy. For example, we growled on August 11, 2014 over President Obama's use of economic indicators to show the U.S. economy had improved since his election in 2008.

Then this weekend, President Obama was interviewed by CBS television's Steve Kroft on 60 Minutes,  Ed Morrissey of Hot Air summarizes a portion of the interview. Here's his lede:

"Another nugget from Barack Obama’s interview with 60 Minutes is making the rounds today, but it’s less surprising than one might think. Steve Kroft challenged the President to make a midterm pitch for his party, and Obama responded by insisting that the nation is better off today than it was six years ago. He acknowledged, though, that most people don’t “feel” it."

Here's a transcript of the interview provided by CBS.

Also, we growled on September 27, 2014 because of an analysis by the ranking member of the U.S. Senate's Budget Committee showing that "1 of 4 Americans in prime working years are not employed."

Consequently, we couldn't pass up the online report in the Arlington Sun Gazette yesterday, which showed "regional income treading water since end of recession." Here's much of their report:

"The metro area’s 2013 median household income of $90,149 was down from the inflation-adjusted $90,316 that households earned in 2010, the first year the region and the nation came out of recession.

"The new figures were reported by the U.S. Census Bureau, based on its American Community Survey.

"The report found that the median earnings for male full-time, year-round workers in the Washington metro area were $67,216 in 2013, with women trailing at $56,168.

"In the metro area, those living at or below the poverty line represented 8.5 percent of the total population, up slightly from the 8.4 percent reported in 2010. A total of 11.1 percent of children were living at or below poverty in 2013, up from 10.7 percent. In each case, the Census Bureau said the increases were not statistically significant.

"Across the region, 11.4 percent of the population did not have health insurance in 2013, down  from 12.3 percent in 2010. The percentage of residents with private health insurance (76.6 percent in 2013) was down slightly from 76.9 percent in 2010.

Readers of Growls who are concerned about the economy, jobs, and economic growth are urged to contact their members of Congress. Information is available at Thomas (use left-hand column). Readers living in Virginia's Arlington County, should 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 Jim Moran (D) -- write to him or call (202) 225-4376

And, tell them ACTA sent you.

September 29, 2014

GSA Travel Card Fraud Continues Despite Calls for Reform

In a Washington Examiner story posted today, Sarah Westwood reports that "GSA travel card fraud, abuse still a problem despite repeated reform calls."

According to Westwood:

"A General Services Administration watchdog said significant risks remain for fraud and abuse in the agency’s charge card program despite multiple calls for its reform in recent years.

"A report released Monday by the GSA's inspector general said the agency has yet to establish an effective system for providing explanations for questionable purchases by its employees and for cutting off the accounts of those who no longer work at the federal government's housekeeping agency."

And about those repeated calls for reform, Ms. Westwood reported a few examples:

"GSA travel spending came under fire in 2012 when a report revealed officials had charged hundreds of thousands of dollars in frivolous expenditures to their travel cards for a 2010 Las Vegas conference. Former GSA Regional Administrator Jeffrey Neely, who oversaw the conference, was indicted last week by a federal grand jury on multiple charges involving improper travel expenses.

"The GSA introduced the current charge card system, under which travel expenses are billed, in 1984 in order to streamline the government’s purchase process.

"While the charge card program is administered by the GSA, more than 350 federal entities use the system. Individual travel card users are technically liable for their own expenses while on official business, but they are routinely reimbursed by their departments and agencies.

"In March, the Washington Examiner reported postal service officials had used their travel cards to withdraw cash for gambling, pay themselves salary advances and even to let their children go bowling.

"But abuse of the travel card system isn’t limited to the post office or the GSA; reports have found evidence of such fraud across the federal government for years.

"In 2008, the Government Accountability Office released a report saying 41 percent of all government purchases made using travel cards could not be properly verified. Two years later, another GAO report found that 10 percent of cardholders made a “delinquent” purchase at least once.

"For example, a Treasury Department inspector general report found an office within the department shelled out more than $13,000 on a trip to Hawaii.

"In order to secure approval for the trip, officials lied to the Office of Public Affairs by saying Hawaii was the best location for an awards ceremony — not Minnesota or South Dakota, the other places under consideration — because their director already had speaking engagements on the books in Hawaii for the week of the ceremony. The report reveals this was not the case.

"Snippets of internal emails included in the report showed Treasury officials discussed the unfavorable “optics” of the Hawaii trip in the face of increased congressional scrutiny of travel spending before green-lighting the expense anyway."

If such fraud is occurring in federal agencies, and since those agencies are populated by employees living in and around the Washington, D.C. region, one could assume such activity is occurring in local governments in the Washington, D.C. region. 

Internal audits are designed to thwart the occurrence of fraudulent activity. An example of such an audit is this one conducted by the internal audit office of Fairfax County government of procurement cards. See also the four pages devoted to internal auditing in the FY 2014 Alexandria City's budget. However, if the organization's internal audit function is not adequately staffed, or even left unstaffed, or even if the function is staffed appropriately, but is not sufficiently independent, then taxpayers are not likely to learn if there is any fraudulent activity.

We've growled before about the need for a strong internal audit function on several occasions, most recently on August 4, 2014 when we learned that Arlington County reportely hired an internal auditor although to our knowledge, the auditor has not yet come onboard. We also note the Arlington County Board adopted the following guidance (in note #33 in its "guidance and notes") with the FY 2015 Adopted Budget:

"Internal Audit – The County Board fully supports the County Manager’s plans to enhance the County’s internal audit program and the expansion of the County’s ethics program, including the addition of an ethics and fraud hotline.  The enhanced audit function should follow best practices in auditing.  The Board directs the County Manager to provide an interim report by October 31, 2014, and an assessment of whether the audit function should be independent and to whom it should report by January 2015."

Growls readers interested in transparency and a strong internal audit function are urged to weigh-in with your opinions and thoughts to the Arlington County Board. And perhaps one day you may be able to read an audit report identifying whether any Arlington County procurement cards have been used fraudulently. You can e-mail the County Board by clicking-on the following hotlink, or just call:them:

  • Call the Board office at (703) 228-3130

And tell them ACTA sent you!

September 28, 2014

Feel Better Since the Bus Stop Cost Only $881,933?

Remember Arlington County's infamous $1 million, so-called 'SuperStop' bus stop that received worldwide notoriety in 2013? We last growled about this county boondoggle most recently on May 13, 2014 after the Washington Post's Patricia Sullivan reported the bus stop program's cost would be reduced by 40% with each of the the remaining 23 vanity bus stops costing between $362,000 and $579,000 each.

However, we also growled that the natives didn't seem to be buying what the county poohbahs were selling since an online poll at ARLnow.com had recorded 1,465 votes as of a few minutes ago with 78.77% (1,154 votes) still considering the bus stops too expensive.

Here's how ARLnow.com's Ethan Rothstein, on Wednesday, September 24 introduces a new chapter in the saga of the $1 million bus stop:

"The $1 million “super stop” at Columbia Pike and S. Walter Reed Drive – the exorbitant price tag for which became national news – was so expensive because of poor communication, an independent review found.

"The review, conducted by CliftonLarsonAllen, found that a “lack of clear communication between County and WMATA staff” and “poor execution of construction performance” were the main reasons the prototype took so long, and cost so much to build.

"That poor execution includes the bus stop not being built to what was designed, including glass panels being produced at the wrong size; curbs being built at the wrong height and having to be redone; and a four-year delay in getting approval from the Virginia Department of Transportation.

"According to the report, the initial budget of $2.15 million was supposed to cover three “super stops.” There was no communication between the county and WMATA over any change in the budget when plans for the two that were never built were ultimately scrapped. On Dec. 22, 2011, the county informed WMATA that it wanted to cease site work for the two other stops, called Dinwiddie West and Dinwiddie East."

The Arlington Sun Gazette report on Wednesday channeled the reporting from ARLnow.com.

Patricia Sullivan of the Washington Post included reporting on this county snafu in her Columbia Pike streetcar story, which we cited in our September 24, 2014 Growls.

Never fear, however. An Arlington County press release said the county is now managing the bus stop project, or as they call it, the "transit station project." Moreover, the press release said:

"Arlington County’s award-winning planning policies are transforming Columbia Pike into a more transit-oriented Main Street with more mixed-use development, more housing, better public spaces and more walkability. Central to these efforts is the County’s plan for increasing transit availability and options along the Pike."

Mr. Rothstein includes a curious comment by County Manager Barbara Donnellan in his story for ARLnow.com, writing:

"This project was an exception for Arlington,” Donnellan said. “We have a solid record of delivering large, complex projects in a timely, cost-effective manner… Unfortunately, work on the Walter Reed prototype began in 2007 at a time when WMATA was scaling back its capital improvement management program, and the project suffered as a result. Delivery was further complicated by the fact that several entities were involved. With the completion of this thorough review, we are confident that we are well positioned to effectively deliver the transit stations that the Pike needs, and continue to rebuild the Pike’s transportation infrastructure.”

The Manager's comment is especially curious to long-time Arlington County residents who may remember the bridge in Rosslyn that actually went nowhere. Remember the advice about "cutting once, but measuring twice?" Seems the two spans never connected. Unfortunately, the cost to Arlington taxpayers will never be known since the telltale documents were ordered sealed.

So that no one forgets this fiasco, High Beam Research, citing a Washington Post article, dated April 16, 1993, has this excerpt:

"The Arlington County Board voted last night to abandon plans to complete a trouble-plagued bridge in Rosslyn and to use the road instead for a park and theater.

"Under the plan, a developer will pay $500,000 to help complete the Loop Road Bridge structure, which has been unable to carry cars because of structural defects.

"The developer - owner of the Freedom Forum building at 1101 Wilson Blvd. - also agreed to create a privately maintained park atop the bridge, which crosses Wilson Boulevard near North Kent Street . . . ."

Even more curious, though, is that although the County Manager has admitted the initial SuperStop or bus stop "cost too much," and although the cost of the prototype has been adjusted down from $1 million to $881,933, the remaining 23 bus stops will still cost just over $539,100 each ($12.4 million divided by 23 bus stops). Call me old-fashioned, but spending an estimated $539,133 for a bus stop still "costs too much" to use the Manager's terminology. Or is this just another case of liberals redefining the English language?

Growls readers are urged to weigh-in with your opinions and thoughts about Arlington County's $12.4 million renamed transit station project. You can e-mail the County Board by clicking-on the following hotlink, or just call:them:

  • Call the Board office at (703) 228-3130

And tell them ACTA sent you!

September 27, 2014

More on Those Economic Indicators (GDP vs. Jobs)

Since everyone seems to use their own economic indicator of how well the economy is doing, we've started growling about them, going back at least as early as March 1, 2014, but also August 11, 2014 and September 5, 2014. (A search of Growls will find many others, however).

Yesterday, Forbes staffer Samantha Shart reported on the latest re-estimate of the U.S. GDP, writing:

"On Friday, the Bureau of Economic Analysis released its third estimate of real gross domestic product for the second quarter of 2014 — covering April, May and June of this year. The release showed output in the U.S. increasing at an annual rate of 4.6%. This is relative to the first quarter when real GDP declined a sharp 2.1%.

"The revision is up from BEA’s 4.2% second estimate released last month as well as its 4% advance estimate out in July . . . ."

But even the chairman of the President's Council of Economic Advisers recognized there is still much work to do, as the introduction to his blog entry took note yesterday:

"Today’s revision confirms that economic growth in the second quarter was strong, and other recent data suggest that this momentum has continued into the subsequent months. While these indicators demonstrate that the economy has come a long way in recovering from the Great Recession, there is more work to do to both boost growth and ensure that growth translates into greater financial security for working families. The President will continue to do everything in his power to support investments in job creation and encourage higher incomes for workers."

However, as Peggy Noonan pointed out in her op-ed in this weekend's Wall Street Journal ($-paywall), "What progress can be claimed in the economy is tentative, uneven, feels temporary. True unemployment is bad and people who have jobs feels stressed and hammered by costs."

Consequently, it was disconcerting to read an American Thinker item today by Rick Moran that said: "An eye-popping figure from the Republicans on the Senate Budget Committee; 23.2% of workers between the ages of 25-54 are unemployed or out of the labor force." Moran included the following excerpt from reporting by the Weekly Standard's Daniel Halper:

"There are 124.5 million Americans in their prime working years (ages 25–54). Nearly one-quarter of this group—28.9 million people, or 23.2 percent of the total—is not currently employed. They either became so discouraged that they left the labor force entirely, or they are in the labor force but unemployed. This group of non-employed individuals is more than 3.5 million larger than before the recession began in 2007," writes the Republican side of the Senate Budget Committee.

"Those attempting to minimize the startling figures about America’s vanishing workforce—workplace participation overall is near a four-decade low—will say an aging population is to blame. But in fact, while the workforce overall has shrunk nearly 10 million since 2009, the cohort of workers in the labor force ages 55 to 64 has actually increased over that same period, with many delaying retirement due to poor economic conditions.

"In fact, over two-thirds of all labor force dropouts since that time have been under the age of 55. These statistics illustrate that the problems in the American economy are deep, profound, and pervasive, afflicting the sector of the labor force that should be among the most productive."

Halper and Moran both use the following chart, which originated with staff of the U.S. Senate Budget Committee ranking member, Senator Jeff Sessions (R-Alabama):

As Peggy Noonan asserted about the economy, " Americans are less optimistic than they've ever been in the modern era, with right-track/wrong-track numbers upside down. Scandals, war, uncertain leadership—all this has yielded a sense the whole enterprise of the past six years just did not work."

Rick Moran's outlook is no better. He concludes by writing:

"One caveat to (the Weekly Standard/Budget Committee) report: As good paying jobs have disappeared, a lot of those productive workers have taken their talents and expertise and are working as independent contractors, consultants, or have started their own small businesses. Many of them had no choice, given the labor situation. But as bleak as those numbers appear to be, the future looks even more stark. It's hard to see where jobs paying wages that would allow workers to support their families in a middle class lifestyle are going to come from."

Is it any wonder that Americans question the reported unemployment rate -- the August unemployment rate was reported as 6.1%, as reported by the Washington Post? Rather, they sense the "true unemployment" rate is much higher.

September 26, 2014

CAGW Names September Porker of the Month

"Porker of the Month is a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers."

In a press release yesterday, Citizens Against Government Waste (CAGW) "named Centers for Medicare and Medicaid Services (CMS) Administrator Marilyn Tavenner its September Porker of the Month for CMS’s dismal record on financial accountability, coupled with the virtual dismantling of one of the federal government’s most effective improper payment recovery programs."

CAGW justified their selection by writing:

"A September 23, 2014 report by the Government Accountability Office (GAO), Congress’ nonpartisan watchdog agency, highlights CMS’s inability to properly account for $3.7 billion in expenditures associated with the implementation of the Affordable Care Act (ACA).  The GAO was unable to independently verify the reliability of the financial information provided by CMS due to a flawed recordkeeping system.  Medicare is plagued with the highest reported amounts of improper payments of any federal program, and the Medicare Trust Fund, already in the red and on track to reach insolvency by 2026, needs every penny it can get to continue meeting the needs of current beneficiaries.

"The GAO report comes on the heels of an August 29, 2014 CMS decision that offers acute care and critical access hospital providers an opportunity to settle all medical claims pending at the Administrative Law Judge (ALJ) level of appeals for 68 cents on the dollar.  These claims were previously rejected by recovery audit contractors (RACs) for being medically unnecessary, and they contribute significantly to Medicare’s dismal improper payment record.

"On July 8, 2014, the Council for Citizens Against Government Waste (CCAGW) sent a letter to members of the Senate Special Committee on Aging to clarify some common misconceptions about Medicare’s RAC program, a highly successful post-payment auditing tool used to reduce improper payments in Medicare. The letter reiterated the important role RACs play in identifying areas vulnerable to improper payments.  Figures released by CMS on September 1, 2014 revealed that RACs have returned more than $8.9 billion to the Medicare Trust Fund and more than $700 million to providers since 2009.

"In the statement released on Labor Day weekend, CMS encouraged hospitals to “make use of this administrative agreement mechanism to alleviate the administrative burden of current appeals on both the hospital and Medicare system.”  A December 13, 2013 CMS report found that RACs have an average accuracy rate of 95.2 percent, while only 7 percent of all RAC determinations are overturned on appeal.  CMS’ capitulation on the appeals process not only means potentially hundreds of millions, if not billions, of dollars in losses to taxpayers, but it also eviscerates a highly successful post-payment audit process.  Given these realities, the decision to appease disgruntled and non-compliant hospitals is not only egregious, but completely irresponsible.

“The GAO report underscores the imperative for CMS bureaucrats to work harder to prevent the hemorrhaging of taxpayer dollars.  That means developing and maintaining a rational recordkeeping system to track detailed financial information, as well as broadening the scope of the RAC program, one of the most successful tools to protect taxpayers and Medicare beneficiaries from rampant improper payments,” said CAGW President Tom Schatz.

Kudos to Citizens Against Government Waste for their continuing efforts to root out government waste, fraud and abuse.

September 25, 2014

Another Look at Arlington County Board's Streetcar Decision

Kenric Ward, Virginia Bureau Chief of Watchdog.org, reports the "Arlington streetcar moves amid rising costs, controversy" in a story today at the online Watchdog news source.

This post supplements yesterday's Growls about two items that were decided by the Arlington County Board at their Tuesday evening recessed meeting.

Following is how Ward begins his reporting:

"An opponent says it’s “a long way from being done,” but a controversial streetcar project with a ballooning $560 million price tag got another push from the Arlington County Board on Tuesday.

"Rolling over objections from Independent board member John Vihstadt and Democrat Libby Garvey, the panel voted 3-2 to award a $26 million contract to HDR Engineering, Inc., for streetcars to serve Columbia Pike and Crystal City.

“The board majority is playing that old quiz show game ‘Beat the Clock’ — trying to rush the signing of contracts and agreements before the streetcar’s low popularity sinks even further, and before the Nov. 4 county board election,” said Vihstadt, who was elected on a streetcar-skeptic platform earlier this year.

"Joe Warren, a member of the Arlington Transit Advisory Committee, called Tuesday’s action “outrageous,” and said he was surprised by the amount of funds authorized.

“The only amount that has been publicly revealed was about $8 million for design and engineering,” Warren told Watchdog.org.

"Vihstadt calls the 7.6-mile streetcar venture “a fiscal and transit albatross” that will clog streets and increase taxpayer debt, with guaranteed delays adding to the cost."

And much of that money will be used for what? Ward writes:

"According to the latest streetcar staff report, the engineering contract of $26,003,721 includes more than $5.3 million in “optional” tasks for public “outreach” materials and $2.7 million for “contingencies.”

Pray tell, what is public outreach? Sounds like they're going to use taxpayer dollars to convince taxpayers that taxpayers need the Columbia Pike streetcar. Do I have that about right?

Read the remaining details of Kenric Ward's report here.

Growls readers are urged to weigh-in with your opinions and thoughts about the $333 million streetcar project. Or $560 million according to this report. You can e-mail the County Board by clicking-on the following hotlink, or just call:them:

  • Call the Board office at (703) 228-3130

And tell them ACTA sent you!

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