Your Tax Dollars At Work

Was anyone really surprised late last month when the Washington Post reported that our federal government will spend $890,000 on literally -- there's that word again -- nothing? It seems that when federal agencies issue a grant, instead of simply writing a check to the grantee it first establishes a new account within a financial institution. The agency deposits the money into the account, and only then is the money available to the grantee, either in a lump sum or in a series of withdrawals, depending on the terms of the grant. If you were foolish enough to think that the government actually closes the account once the grant funds are depleted, you would be wrong. The bureaucrats are tied up doing other things. Instead, the empty account stays open, the financial institution continues to charge its account maintenance fee, and the government dutifully pays it, month after month. You read that right; our government pays account fees to maintain accounts with a zero balance, never to be replenished again. Where do you think the government gets the money to pay these account maintenance fees?

Exactly four days after the Post broke the news about the empty accounts, the Associated Press wrote a story about the disconnect between what the United States Army generals desire and what Congress decides to give them. The federal government plans to spend $436 million to manufacture upgraded versions of Abrams tanks, the seventy ton behemoths which, in their day, were powerful military weapons but which, in modern warfare, are looked upon as relics. Even the Army's Chief of Staff, General Ray Odierno, is on record saying that the military strategists would prefer that the money be spent on other types of resources which could be employed in combating today's non-traditional enemies. Apparently the Washington politicians believe that they know more than the generals about what our soldiers need. You don't suppose pork-barrel politics is rearing its ugly head here, do you? Where do you think the government gets the money to pay for these unwanted tanks?

If you don't think bad news come in threes, check this out. Two weeks ago the New York Times uncovered an ongoing policy whereby the CIA has covertly paid "tens of millions of dollars" to the office of Hamid Karzai, the venal President of Afghanistan. This has been going on at least since 2005, and maybe as far back as 2002. His former chief of staff, Khalil Roman, labelled it "ghost money," telling the Times that "it came in secret and it left in secret." Karzai has a reputation of running a corrupt regime, and the scoundrel unabashedly continues to thumb his nose at the country which is primarily responsible not only for his own position but for the freedom of his people from the yoke of the Taliban. You don't suppose any of the tens of millions of dollars ended up in the pockets of Karzai or his cronies, do you? Why was the delivery of CIA cash off the record, whereas conventional foreign aid expenditures are not? When the US finally withdraws our armed forces from Afghanistan, will the ghost money deliveries stop too, and if so, how will that affect the stability of that country? I am not the only one who thinks some of the money has gone to tribal warlords in return for their cooperation with the Afghan central government. When the bribery stops, one might predict that so will the cooperation. Where do you think the CIA gets the money to pay for these ghost bags of cash?

Why stop at three? In 2012, farmers in many parts of the US suffered through the worst drought in years. The federal government, through its taxpayer-subsidized national crop insurance program, paid out $12.7 billion in claims for lost corn and soybeans. No one who is thinking clearly believes that farmers should go without crop insurance, or that some subsidy from the federal government is unwarranted. But according to a recent study by the Environmental Working Group, a national advocacy group that studies health and environmental issues, the farmers were able to cash in on over $6.5 billion of insurance proceeds above and beyond what they should have been compensated. Some farmers realized incomes in excess of what they would have made had there been no drought. Citing a report by University of Iowa agricultural economist Bruce Babcock, the EWG pointed to a couple of factors that came into play, resulting in the largesse. For one, the farmers who benefitted the most had entered into price guarantee contracts which sheltered them from the effects of a poor yield. Second and more importantly, rather than buy merely what Babcock referred to as "plain Jane" crop insurance, the farmers used taxpayer-subsidized premiums for "Cadillac" crop coverage plans which insure against both poor yields and price drops. On May 2, 2013, Star Tribune reporter Jim Spencer quoted University of Minnesota ag economist Bill Lazarus as follows: Subsidizing the most generous [insurance] coverage at higher levels than basic coverage "doesn't make much sense." How did the federal government come up with the extra dough to pay insurance premiums resulting in the farmers receiving more than twice as much as what was needed to make them whole?

Apparently the state of Minnesota is following the federal government's lead when it comes to deciding how to use tax revenue. Earlier this month, the state Senate passed a bill that paves the way for illegal immigrants to receive in-state tuition and financial aid for college. The lead in Mark Brunswick's story which appeared on May 2 in the Star Tribune: "Minnesota would become one of the most generous states in the nation toward undocumented college students under a plan approved [May 1] by the state Senate." Silly me; I thought the state was in a deep hole, barely able to rub two nickels together. Doesn't the state currently owe millions of dollars ($860 million, to be exact) in deferred funding to the public schools, and isn't such deferment the reason for our state government being able to claim solvency? Do we not have roads and bridges in this state which are in disrepair due to lack of funding? Aren't legitimate non-profits and state agencies which help the poor unable to fulfill their mission, turning away citizens who need assistance? Some of our public schools have crowded more than forty students in a classroom. Programs like Early Childhood Development are being gutted. Maybe the state could use some of that dough earmarked for the undocumented to aid folks who are actual citizens. Fortunately for me, my own three kids are through with college, and the Bank of Dad has closed up shop. Yet I can't help but wonder what younger parents whose college-age kids receive no financial aid (other than loans which must be repaid) think about the Senate's actions. Not only are they sacrificing to put their own kids through school; they are paying for illegal immigrants' education too.

The Senate's vote is the latest in a relatively recent series of dubious decisions made by state decision makers. Two examples, both having to do with sports, come to mind. When the state legislature passed the stadium bill for the Vikings last year, it calculated that approximately $34 million could be expected to flow into the state coffers annually from electronic pull tabs in bars. Those funds would play an important role in the public subsidy contributed by the state to finance the construction. This year, after the electronic pull tabs have been in operation for several months, we learn after-the-fact that the now-expected annual "take" will only be in the neighborhood of $1.7 million, a far cry from the expected $34 million. How could the projections have been so far off? It turns out that the data relied upon by the finance committees of the legislature was provided by people in the gaming industry, or in other words, the entities which had the most to gain by the passage of the new law authorizing electronic pull tabs in the state. Have you ever met a car salesman who didn't think you needed a new car? I guess our fearless legislators have, or else they're extremely naive.

The second example was the decision by Gopher athletic director Norwood Teague to cave to football head coach Jerry Kill's request to pay $800,000 to North Carolina in return for canceling two future games against the very mediocre Tar Heels. Is the U's athletic department so flush with cash that they can burn that kind of money to chicken out of two games they should be playing to legitimize their otherwise pathetic out-of-conference schedule?  Kill wanted to replace North Carolina with a patsie. What really knocked me over was when Teague, just a few months removed from his North Carolina decision, decided to schedule the Gophers to play Texas Christian University twice. TCU's program is much more accomplished than NC's. My long range prediction is that the Gophs will lose both games to the Horned Frogs, whereas they could have won both meetings against the Heels. You have to wonder if the Gopher boosters believe that their hard earned money is in good hands with Norwood.

Arguably, this all ends up in the age-old debate. Does the government (and in my last example, a state institution) need more tax revenue, or might it just be possible to take a harder look at how existing revenues are spent? Are our government (and institution) leaders already making good use of the money they extract from us? If the answer is not "yes," how can jacking up taxes be justified? How can the taxpayers have confidence that their money will be used wisely? Before we throw new money after problems, let's ask our leaders to do a better job.