Hey, Partner, You Have a Monkey on Your Back

August 13, 2014 Columnists , News Stories 1258 Views
Hey, Partner, You Have a Monkey on Your Back

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That said, it is not out of the ordinary for seats of power to be regarded with suspicion. Those who claim to understand the original intent of the Founders have argued that the free press in America was intended to check the tendency of persons entrusted with considerable power to become intoxicated thereby. George Washington argued that government was fire, and in the words of Libertarian Michael Badnarik, “Fire is such a necessary part of your survival that you’d create a special place for fire. It is called a fireplace. Government is necessary for our survival. We need government in order to survive. The Founding Fathers created a special place for government. It’s called the Constitution.”

Such notions of limited government are now laughed at as radical and extremist. Today, the news is replete with stories of government trouncing upon personal freedoms, not the least of which are freedom of speech, freedom of religion, and in some ways what is most essential, freedom of conscience. Political correctness dictates the face people must wear if they are to have a credible footing in society.

A proven way to force people into submission is that used to tame animals. The trainer merely defines himself as a source of easy food and shelter with the power to withhold acquired comforts as punishment for disobedience. It is therefore with horror that one views state-of-the-nation statistics, if they can find them. Back in 2012-2013, actuary John Boyle delivered presentations to opinion leaders in the southeastern states summarizing what he was able to find navigating the obfuscatory mazes of government data.

Reports typically lag two years and may still be incomplete due to outstanding accounts, but using the best data accessible, Boyle shared that in 2010 the US population was about 308,746,000. At that time, there were 22,650,000 government workers, 1,797,000 employed in the military, 12,339,000 collecting public employee retirement, 2,381,000 prisoners, and 14,825,000 drawing unemployment. A total of 108,134,000 were believed at that time to be dependent on tax dollars, compared to 115,705,000 persons working in the private sector.

At this point, it should be obvious that government has an appetite for destruction, but that was only the hors d’oeuvres. Boyle presented a spreadsheet citing its source as the “Fiscal Year 2014Budget of the US Government” itself. Receipts totaled $2,469,000,000,000, while mandatory programs like Social Security, Medicare, and Medicaid would use up $2,469,000,000,000. “Discretionary” programs, like day-to-day operations and national defense, would burn another $1,319,000,000,000. “If we shut down the entire Federal Government (including the entire military), we still would not have enough money to pay for the remaining [mandatory] costs of Government!” he exclaimed.

Thanks to the efforts of Boyle and others, “unfunded liabilities” is now a household term. But back in 2012, they were still accruing on the sly. From the cynical lens of eternal vigilance wary of power’s tendency to corrupt, unfunded liabilities are viewed as a tool for politicians to continue to make promises to constituents without getting taxpayers too bent out of shape. By offering retirement benefits, perpetual candidates could promise deliverable goods while sticking the bill to whoever replaced them as they climbed the political ladder.

Back to Boyle’s presentation, in 2011 unfunded liabilities promised by all levels of government in 2011 represented 41.7 percent of the country’s GDP. Amortizing the liabilities at a reasonable rate, the percentage was closer to 68.9. In that year, the national debt was running around $16,900,000,000,000. Adding unfunded liabilities, the debt looked more like $77,000,000,000,000. As this article is typed, the National Debt Clock reads $17,674,886,647,022.95.

These assessments made no mention of government’s off-budget activities. The term is not used here to refer to black military ops; rather, it is a category of expenses intentionally not disclosed on local, state, and federal budgets. In 1983, James T. Bennett and Thomas J. DiLorenzo wrote a jaw-dropping book, Underground Government: The Off-Budget Public Sector.

Bennett and DiLorenzo shined a light on the widespread practice of evading reforms from the tax revolts of the 1970s. Nelson Rockefeller was held up as the poster child for the machinations. The story is told how he set up pseudo-corporations to take on debt that government no longer could. They worked around requirements in place then that general obligation bonds be floated only with voter approval. As the beast continued to grow beyond reason, the state found itself pressed to create a mother of all OBE’s, the Project Finance Agency, which could float a new device, called a “moral obligation bond,” to pay off the bonds of the other OBE’s. Bennett and DiLorenzo explain, “The natural solution to the problem of bankruptcy caused by excessive borrowing was therefore even more borrowing.”

By the time Rockefeller had moved up and out of the governor’s mansion in New York, the state’s off-budget enterprises (OBE’s) had accumulated $13.3 billion in debt, which was approximately four times more than the debt guaranteed by the full faith and credit of the New York State taxpayers. Among the OBE’s was a horse-breeding venture.

Federal, state, and local government were all guilty of using OBE’s. Back in 1983, OBE’s dominated municipal bond markets. Thousands existed with no other purpose than to collect federal funds. Bennett and DiLorenzo frequently admitted they did not know the extent to which OBE’s were being created, because nobody was required to account for them. Some were even referred to as toy governments because they had neither address nor employees. Bennett and DiLorenzo expected any reforms to clean up OBE’s would only be met with more budgetary tomfoolery. Today, OBE’s persist, AMTRAK, the TVA, and the USPS being the most famous at the federal level.

OBE’s are referred to as, “districts, boards, authorities, agencies, commissions, corporations, or trusts.” It is not unusual for school districts and fire districts to still be sourced off county budgets, but Buncombe County at least discloses these special district dollars in its public budget discussions. The short-lived Culture and Recreation Authority claimed 3.5 cents off the county tax rate. One can’t help suspecting something insidious behind the water and airport authorities.

More recently, states have engaged in “Malice in Blunderland” exploits to sustain government as the private sector took a diet. Again, the measures keep beneficiaries of government welfare happy until some political successor gets caught holding the bag. In a 2011 article for City Journal, Steven Malanga exposed some current practices. “They have swiped revenues dedicated to maintaining roads or enhancing emergency medical systems; sold future lottery proceeds for cash today; grabbed unclaimed money in personal bank accounts; and redefined taxes as fees to get around constitutional limits on tax hikes.

North Carolina, like other states, has gotten creative about going into debt. In 2003, the General Assembly approved three instruments for floating bonds without voter support, but with higher interest rates: certificates of participation, lease purchase revenue bonds, and limited obligation bonds. In 2004, voters approved Amendment One, which allowed government to take out debt without their say and pay it off with future property taxes. Other states have proceeded more like the Keystone Cops. Malanga told of New York floating bonds to purchase a prison from itself and paying interest more than twenty years later. Other states launch early retirement programs, but end up paying out more in pensions plus temp fees for rehiring the retirees. In 2011, Illinois had $4.4 billion in bills it was ignoring; California just handed out IOU’s.

In 2008, aggregate state deficits were estimated at $300 billion. Stimulus, i.e., grants from the federal deficit, was expected to cover two-thirds of the problem. Today, local governments routinely pursue state and federal grants to help balance their budgets. A common practice is to get funds to hire more cops or firefighters, because the public would protest doing the same for bureaucrats; but the strings attached include the state shouldering the full cost of expansion after 3-5 years. The atrociously in-debt federal government further encourages local governments to stretch their seams a little more by paying for high-tech Homeland Security wizmo-gizmos like robots that can explore smoke-filled buildings, gas chromatography machines identify the brand of mayonnaise at a crime scene, and an eyebrow-raising bus, capable of transporting medical patients en masse.

In its Constitutional role, government does not need all this money. In a pure welfare state, government serves only as a tool for redistribution. Producing nothing, it adds nothing to the economy. Instead, it punishes successful enterprises by transferring resources that could have been reinvested to achieve superior outputs, to the less able. Quality goods and services are eroded as producers on the margin go out of business, either honestly wiped out while paying their taxes or enticed by the prospects of more leisure time on government subsidy. Government regulation is another means of depleting the productive sector as cronies and interest groups lobby for laws to cripple their adversaries with costs of compliance.

But America is as much a welfare state as it is a socialist state. The federal government also extends its tentacles into the productive sector as it plays untold funny money games with the too big to fail. The Fed prints infusions to keep cooperative financial institutions happy, while unwilling subjects, like BB&T’s former CEO John Allison, are threatened with new regulations that shall surely find them non-compliant. A string of illegal machinations delivered one-fifth of the economy in the form of the healthcare industry to government. And the Obama Administration still boasts its Auto Restructuring Initiative.

Meanwhile Governor Pat McCrory continues his predecessor’s practice of almost weekly announcing corporations that have decided to locate or expand in the state, thanks to a few cool millions in tax-funded One North Carolina grants. At the local level, there’s always a few million in the magic money stash for indigents like Linamar, General Electric, or anybody interested in turning Western North Carolina into a mecca for beer pilgrims. The inebriation is sure to help when the eggshell veneer atop the cavernous financial system starts to crack.

During the budget crunch years, local governments, all shorted from an era of overextension, sought partnerships in each others’ pockets. Too big for their britches, they also pursued public/private partnerships. Fifty years ago, alarms would sound for blurring the line that separated the greatest nation earth from the communist and socialist regimes its foreign aid was supporting. Regardless, Buncombe County Manager Wanda Greene explained in 2012 how the county would balance its budget by outsourcing to other recipients of federal aid. “We will contract with Land of Sky Regional Council of Governments to run JobLink and workforce development programs and to administer Mountain Mobility. We will contract with a private provider to provide daily Mountain Mobility services. Prenatal services are being transferred to Western North Carolina Community Health Services. Community Care of North Carolina will be providing Pregnancy Medical Home and Care Coordination for Children Services.”

Reinforcing the notion that nothing is sacred anymore, the separation of church and state has proven to be for convenience only. The City of Asheville has pursued partnering with churches for parking, and just last week the Buncombe County Commissioners mentioned partnering with churches for park land. One can only imagine the offense topless and weed-smoking first-amendment protesters will take to seeing a crucifix or a steeple or overhearing a sermon as they rally in the public space. Or will the IRS agents fidgeting in the pews already have put a lid on heartfelt worship.

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