Tag Archives: spending

Wasted Money and the VA

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Only this time, it’s not the VA’s fault.

Veterans Administration hospitals have spent at least $420 million on solar panels and windmills while vets wait months—or even lay dying—to see a doctor.

In total, VA hospitals reported 23 deaths due to 76 instances of delayed care, an April 2014 VA fact sheet said. Then on June 5, Acting Veteran Affairs Secretary Sloan Gibson revealed that at least 18 Phoenix patients died while waiting for treatment on a secret list kept off the books. It is not clear if that number is in addition to the 23 deaths reported earlier.

In truth, though, this failure, appalling as it is, isn’t the VA’s fault. This failure relates to the color of money: money appropriated for this purpose (physical plant improvements, for instance) cannot be redirected for that purpose (an HR move toward increasing numbers and availability of medical personnel, say) by the VA (in this case); such a redirection requires a change to the specific budget law that appropriated the two sets of funds.

The fault here lies in the misallocation of those $420 million—and that’s in the hands, ultimately, of Congress (both parties’ worth), even if “informed” by “environmentalists” and the VA management who assembled the original budget request.

“Green” Energy Loans Have Consequences

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Fisker Automotive—the US electric car company that failed to repay roughly $139 million in federal loans [out of an original loan total of $192 million] before going bankrupt—is now owned by a Chinese company eager to unleash its cut-rate acquisition on the American auto industry.

The company’s assets were acquired earlier this year by China’s biggest auto parts supplier, Wanxiang Group, for $149.2 million in a US bankruptcy auction.

And

Wanxiang acquired A123 Systems [Fisker’s battery supplier] in a 2012 bankruptcy sale, after the company failed to repay millions to the same federal loan program that helped Fisker.

And

[Wanxiang] plans to produce the vehicles in Finland

Despite that wonderful record—which includes two failures in its five loans before the program was suspended—DoE intends to restart the Advanced Technology Vehicles Manufacturing Loan Program that was responsible for those losses. But it’s all good:

The department said it revised the application processes for the Advanced Technology Vehicles Manufacturing Loan Program to speed up reviews, and is reaching out to manufacturers of auto parts and components to participate.

Yet this will allow for even more slip-shod DoE “vetting.” And now they’re actively pushing more loans? See here for how well suited the Federal government is for managing business programs.

And never mind that the Obama administration’s DoE “green” energy loan program is such a success that that American electric car company that defaulted (some might say welched) on a DoE energy loan is now a People’s Republic of China electric car company.

Sort of like the bailout of a couple of failed American car companies was so successful that one of them is now an Italian car company.

Spending on Education

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…and education results turn out to be wholly independent of each other—that is, spending more and more hasn’t produced better and better outcomes for our students—it hasn’t had any effect at all.  It’s been a waste of our tax dollars.  This is clearly indicated by Cato Institute‘s Andrew Coulson’s report State Education Trends: Academic Performance and Spending over the Past 40 Years.  What Coulson found is illustrated by this statement early in the report:

The state-by-state results of this investigation are reported in the subsections that follow, but the overall picture can be summarized in a single value: 0.075. That is the correlation between the spending and academic performance changes of the past 40 years, for all 50 states.

At the risk of lecturing to the choir, correlations run from 0.0 to 1.0 with 1.0 being perfect correlation—every bit of the effect being looked into is, in some sense, “explained” by the correlates.  0.0 means that there is no correlation at all, there is no connection between the two correlates at all.  In this case, 0.0 would mean there is no connection whatsoever between spending on education and educational outcomes.  That correlation of 0.075 isn’t materially different from 0.0.

This graph should drive the point home:

Notice that: spending goes up and up and up, and employment (teachers and administrators) goes up and up.  Enrollment—the number of students reached—stays flat.  The performance of that static number of students…stays flat.  As a nation (keep in mind, this is state-level spending; this study didn’t get to Federal spending, which would only add to the amounts wasted, for reasons that become obvious below), we’re spending more and more per student, we’re spending more and more per unit of student performance, and we’re not impacting that performance.  This failure has been going on for nearly 45 years, too—more than two generations of kids.  Our kids’ kids aren’t even benefitting from this government spending.

What was that about doing the same thing over and over while expecting different results?

Here are a couple of graphs for specific states, one relatively blue and one relatively red, that further illustrate the point:

And

Again, spending is up, and performance, now assessed by SAT scores, is unaffected.

Of course, there are naysayers about these results.  New Mexico Voices for Children, for instance, had this to say:

The Cato report assumes that education money is spent the same way it was in the 1960s and ’70s.  In fact, schools have been mandated to provide many more services—special education, after-school programs, computer sciences, etc—and today’s classrooms require much more technology than they did in the days of the mimeograph.

All true.  And all with no effect on those reading, math, science, or SAT scores.

Others insist that, since the number of students taking the SAT has more than doubled in the last 25-30 years, those scores would, of course, flatten out.  But this beef ignores the fact that Coulson provided such demographic adjustments (and others, based on race, socioeconomic status, and so on), and the results didn’t change.

The bottom line is that, at best, spending money (especially increasing amounts) on technology for tech’s sake, on after-school programs to provide extra time away from home for the kids, etc is a waste.  Spending money on increasing numbers of personnel to run these programs, or to supervise the additional personnel, even on more teachers per “classroom” has no effect.

We need to get back to basics, and focus spending on these subjects: reading, writing, arithmetic—the classic three Rs—and add to the mix, throughout K-12, American history/civics and budgeting/finance/economics, and teach these only.  Full stop.

Anything extra should come at the expense of the local community that wants the extra, not at the expense of other communities in a state, or in the nation.

 

h/t Watchdog.org

The Ryan Budget Proposal

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House Budget Committee Chairman Paul Ryan (R, WI) has laid out the Republican budget proposal for the decade beginning FY2015.

It begins by balancing the Federal budget over those 10 years, a measure of fiscal responsibility to which the present crop of Democrats don’t even pretend—vis., the Democrat-controlled Senate’s refusal even to produce a budget their first four years of the Obama administration, and which refusal they’ve renewed in the current year, insisting that they don’t need to bring up a budget anymore.

It repeals Obamacare, with that act’s enormous deficit-increasing costs.

It increases Defense spending, contra Democrat—White House—desires.  Plussing up our military is an especially glaring need in this day of a resurgent Russia routinely invading and occupying parts of its neighbors—Georgia and Ukraine come to mind—and an equally aggressive, if more subtly so, People’s Republic of China and its territorial grabs of the East and South China Seas.

It renews the Republican proposal to give “premium subsidies” to senior citizens enrolling in Medicare beginning in 2024—folks today who are not older than 56—and letting them shop for their own insurance in a free(r) market, rather than being dragooned in to Medicare.  Even so, Medicare would be one of their choices, and guaranteed to be no more than second least expensive.  Democrats deride this as a voucher system and object to it.  Aside from the fact that Democrats object to voucher systems in any form, I have to wonder why Democrats object so vociferously to older Americans making up their own minds, without the oversight of Democrat Betters.

It walks away from past practice of projecting budget effects into the future under the assumption that today’s conditions won’t change over the period being projected, including the premise that the economy won’t respond to spending changes by the Federal government—a static analysis—and makes use, instead, of the more realistic assumption that the economy does, in fact, respond to such inputs—dynamic analysis.

This is an outline that should be pursued, and Democrats who insist on continuing their profligate spending instead de-elected.

False Premises

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Bill Gates had a thought on how to help workers, especially low-skilled workers facing automation.  However, he’s operating from a number of false premises.

I think tax structures will have to move away from taxing payroll.  …  Software substitution—whether it’s for drivers or waiters, nurses…it’s progressing.  And that’s going to force us to rethink how these tax structures work in order to maximize employment given that capitalism in general over time will create more inequality, and technology over time will reduce demand for jobs, particularly at the lower end of the skill set.  …  Twenty years from now, labor demand for lots of skill sets will be substantially lower, and I don’t think people have that in their mental model.  …  Economists would have said a progressive consumption tax is a better construct at any point in history.  But what I am saying is that it’s even more important as we go forward because…I want to distort in the favor of labor.  …  When people say we should raise the minimum wage—I know some economists disagree—but I worry about what that does to job creation.  The idea that through the Earned Income Tax Credit you would end up with a certain minimum wage that you would receive, that I understand better than intentionally dampening demand in the part of the labor spectrum that I’m most worried about.

The first, and prior, false premise is that taxes should be used to achieve social engineering goals—whether government’s or any others’.  No.  Taxes are for funding the government so it can carry out the tasks for which we’ve hired it.  Our Constitution lays out the sole purposes of spending at the Federal level: paying our nation’s debt, funding our national defense, and the general welfare—which is explicitly enumerated in the 18 Clauses of Article I, Section 8.  Nowhere in there is spending for social engineering listed.  Taxes, then, can only be used to raise funds for those three spending purposes, and not for social engineering.

Gates’ second false premise is that a free market is somehow a zero sum game.  In a free market economy, two men freely arrive at terms of an exchange (e.g., a good for an amount of labor, either of those for an amount of money, etc) and make the exchange.  After that exchange, both men are better off than they were before it, since each man now has something of value to him that he didn’t have before—and that thing did not cost him more than it was worth to him, with the possibility that each man got slightly more than he paid as evidenced by his willingness (now hypothetically) to have paid slightly more than he actually did.  Plainly, a free market economy is a positive sum game.

His third false premise is that “technology over time will reduce demand for jobs.”  Like technology reduced employment when car manufacturing replaced horse buggy manufacturing.  Like Henry Ford’s assembly line technology reduced manufacturing employment.  Like computers have reduced employment.  Again, no.  Technology over time changes the kinds of jobs that have value, but it doesn’t reduce the number of jobs available.

His fourth false premise is that government subsidy (minimum wage or EITC or anything else) somehow makes labor less costly—at least to the employers.  Again, no.  Whether those labor subsidies are paid for by taxes or by borrowing, they’re paid for by taxes: all government borrowing does is shift the taxes onto later generations (and without their being in a position impudently to protest the matter).  Those taxes come out of the citizenry’s pockets, and (under present tax structures) out of the revenues earned by businesses.  Costs to the citizens and to the businesses thus are increased, and they’re increased by an excess amount derived from the difference between the actual value of the man’s labor and the subsidized price paid him for that labor.  Ultimately, too, that excess amount works through the economy in the form of higher prices—inflation—and the man is no better off in the end than he was at the pre-subsidy start.

Finally, there’s the matter of wealth/income inequality about which Gates worries.  Bill Gates, however, is the modern poster boy for that sort of inequality.  That inequality, though, is neither good, nor bad; it just is, like money generally.  It’s a tool, and like any tool, it can be used for good or ill, or it can be left on the shelf to rust.

Gates, in fact, has been enormously generous with his wealth, far more so than any of the rest of us could be, and to a degree that is utterly impossible without the enormous (unequal) wealth that Gates has and the enormously unequal income he earns with which to accumulate that wealth.  As have been the Carnegies, the Rockefellers, et al., of our capitalist nation.

I’ll leave off the mechanics of a “progressive consumption tax” and the inevitably byzantine nature of the sales tax code developed to implement this.  I’d be curious to see how Gates would implement such a thing: a customer in WalMart, at the cash register imputing (in some verifiable manner) his income, and the cash register calculating his sales tax accordingly (oh, wait—there’s that technology putting a cashier out of a job…)?

We all get sales tax refunds on 16 April according to our incomes and the amount of sales taxes we paid through the year?  How will the man living in the region of the Federal Poverty Guideline live on his sales tax-reduced income before he gets his refund?

 

h/t AEIdeas