The Most Tragic Comedy of All Time

You hear the President’s State of the Union address, and you wonder what it all means. You hear the cacophony of new voices from the already-overheated Democratic primary campaigns, and it adds even more to your confusion.

You ask yourself: Is there no place I can go to figure out what’s REALLY going on in Washington? Is there no organization I can talk to that won’t twist and spin the facts till I’m dizzy?

Actually there are several such organizations. And in a moment, I’ll take you on a virtual tour of Washington to visit two of them.

Like me, they’re non-partisan and analytical. But watch out! What they say may shock you.

A PORK ODYSSEY

Our first stop is 1301 Connecticut Avenue, a couple of blocks south of Dupont Circle.

“What is this place?” you ask.

“Have you heard of the Grace Commission?”

“Sure.”

“Good. Then you’ll probably recall that they were directed by President Reagan to ‘work like tireless bloodhounds to root out government inefficiency and waste of tax dollars.’ You’ll also remember how they came up with thousands of recommendations (2,478 to be exact!) which COULD have saved taxpayers a whopping $424.4 billion — IF only they had been implemented. The group we’re visiting now — the Citizens Against Government Waste — is the direct descendant of the Grace Commission.”

We’re ushered into the office of the group’s spokesperson, and the man tells us he’s been with the group for 16 years. He also tells us proudly that he has two daughters, and from his demeanor, you can sense that his only agenda is to help make this a better country for them and their future children.

You ask him what he thinks about the budget.

“Hah!” he says with a chuckle. “It’s funny. But it’s no joke.”

“What do you mean?”

“The Senate is facing a $500 billion deficit, right? So the only civilized course of action would be to freeze funding at 2003 levels with a continuing resolution that’s free of pork barrel spending, right?” (1)

“Is that what they’re doing?”

“Are you kidding? They’re doing exactly the opposite!”

On the man’s desk is a report by one of the leading conservative think tanks in America, the Heritage Foundation. Out of the corner of his eye, he glances at the report, and so do you. Then, to punctuate his argument, he suddenly picks it up and waves it briefly in the air. The foundation doesn’t make any claim to being non-partisan, but their data is still very useful.

“Over the last three years,” he explains, “discretionary spending has grown by 31.5 percent. Federal spending grew on average by 7.6 percent in each of the last two years, more than double the 3.4 percent average annual growth in earlier years.”

“That bad?”

“No, worse! Now, in its latest release, the Heritage Foundation is projecting that the omnibus appropriations bill will set the stage for discretionary spending to increase by NINE percent in 2004, rather than the 3 percent figure commonly cited by members of Congress.” (2)

“Why the discrepancy?”

“Because the members are tracking what they THOUGHT they were going to be spending — not what they actually spent. Last year, the actual discretionary outlays were $824 billion. This year, the CBO says they’re going to be over $899.5 billion. That’s an increase of a whopping 9%!” (3)

You raise your hand in protest. “But all this spending is mostly because of the war on terrorism and Iraq, right?”

“Wrong!” he retorts. “Since 9/11, less than half of all new spending was related to national defense. Meanwhile, wild spending increases of recent years are affecting nearly every federal program. With all this going on, the last thing the government needs is another infusion of money borrowed from our children and grandchildren.” (4)

You’re stunned. “Geez. $899.5 billion in new discretionary spending? But where the heck is all this money going?”

In response, our host pulls out their “Congressional Pig Book” for fiscal 2001, spreading open the pages in front of us. “This book lists 6,333 pork-barrel projects, a 46 percent increase over 2000,” he declares nonchalantly.

You fall back into your chair, while he paraphrases the book’s introduction. “Remember the movie ‘2001: A Space Odyssey’?” he asks. “Remember the apes clawing at the mysterious monolith at the beginning of the movie? That’s the appropriators in Congress when they saw the mountain of money created by the huge budget surpluses a few years ago. They clawed at the mountain and grabbed so many of the taxpayers’ dollars that they created a new epic, ‘2001: A Pork Odyssey.’ I repeat: There were 6,333 pork-barrel projects in 2001!”

“But how in the world did they get away with passing all that garbage?”

“Easy. Some bills were brought to the floor on a limited basis. At other times, members had less than 24 hours between the bill’s release from committee and the final vote.”

“You mean they slipped it through while no one was looking, behind closed doors?”

He nods affirmatively.

“But that was in 2001. What about 2003?” you ask.

“Much worse. When Congress passed the 2003 Omnibus Appropriations Bill on February 13, 2003, the country was staring at a $300 billion budget deficit, right? And it was preparing for military action overseas, right?”

“So?”

“So with all that going on, you’d expect they would have slowed down on the pork. Instead, members of Congress loaded the bill up with thousands of pork-barrel projects ranging from the National Peanut Festival in Alabama to the National Cowgirl Museum and Hall of Fame in Texas.” (5)

You decide to play the devil’s advocate. “But,” you ask, “isn’t this just the way our government is always run — a fact of life we have to live with in a country as large as ours? Hasn’t it always been this way since time immemorial?”

Our host shakes his head. “Back during World War II and the Korean War,” he explains, “Congress cut non-defense discretionary spending. They figured that was the only fiscally prudent thing to do in war time. But not now! Now, they haven’t cut out the big bucks for oyster recovery in South Carolina, or marsh restoration in New Hampshire, or saving the Bering Sea crab in Alaska or brown tree snakes in Hawaii.

“Quite to the contrary,” he continues, “Congress porked out at record levels. FOR FISCAL 2003, APPROPRIATORS STUCK 9,362 PROJECTS IN THE 13 APPROPRIATIONS BILLS, an increase of 12 percent over last year’s total. In the last two years, the total number of projects has increased 48 percent.”

HIGH RISKS

We’re back outside on Connecticut Avenue. You want to walk for a while to clear your head. But yesterday, Sunday, it got down to 19 degrees, and this morning there’s ice on the sidewalks. So we hail a taxi.

“Rayburn House Office Building,” I tell the driver.

As the cab heads toward the Capitol, I try to put it in perspective: “All the pork-barrel spending you just heard about is merely the tip of the iceberg — mostly a metaphor for the truly huge waste and mismanagement you’re going to hear about next.”

“But where are we going now?”

“To a House Ways and Means Committee hearing. Some staffers from the GAO — the U.S. General Accounting Office — are testifying. If there’s truly such a thing as an independent and non-partisan government agency in this town, it’s the GAO. They’re the government’s watchdog. Plus, since 1990, they’ve got special task forces working on what they call ‘high-risk’ problems in the federal government. The people we’re going to hear now are running those task forces.”

Fifteen minutes later, we arrive at the House office building, go through security and amble over to room B-318. Two men and a woman are wrapping up their summary testimony on the Pension Benefit Guaranty Corporation (PBGC), the government agency that backs up private pension funds in the country …

“We’ve been warning about this for a long time,” says the woman. “The PBGC insures the pension benefits of over 34 million participants. It covers more than 30,000 private defined benefit plans. And it’s in trouble.

“Recently,” she continues, “we added the PBGC to our list of high-risk areas. Why? Because it had sunk from $9.7 billion accumulated surplus in 2000 to a $3.6 billion deficit in fiscal 2002!” (6)

“When was that?” queries a Congressman.

“Last summer — in July. But now look at this news release from the PBGC that just came out on January 15th. I quote: ‘The PBGC’s insurance program for pension plans sponsored by a single employer suffered a net loss of $7.6 billion in fiscal year 2003. As a result, the program’s fiscal year-end deficit worsened to a record $11.2 billion. That’s three times larger than any previously recorded deficit.’ End quote. Plus,” she adds, looking up from her notes, “there’s another $35 billion or more in unfunded liabilities among companies that are weak financially.” (7)

DEPARTMENT OF DEFENSE

A second witness stands up and points to some flip charts on the U.S. Department of Defense (DOD), representing the single largest portion of the entire federal budget.

“Since 1995,” he declares, “the DOD’s financial management has been on GAO’s list of high-risk areas vulnerable to waste, fraud, abuse, and mismanagement. (8)

“Taken together,” he continues, “DOD’s financial management deficiencies represent the single largest obstacle to achieving an unqualified opinion on the U.S. government’s consolidated financial statements. DOD continues to face financial management problems that are pervasive, complex, long-standing, and deeply rooted in virtually all its business operations. Here’s just a sampling of the issues we have uncovered:

“One. Government travel card delinquency rates for the Army and Navy that were nearly double those of federal civilian agencies.

“Two. Numerous instances of potential fraud and abuse, including purchases of a wide range of goods and services unrelated to official business.

“Three. Illegal adjustments to amounts appropriated by the Congress.

“Four. An inability to ensure the Congress that funds it received for spare parts were used for that purpose.

“Five. Selling critical inventory items such as unused sets of chemical and biological protective garments for about $3 each, while at the same time procuring hundreds of thousands of other such garments for over $200 per set.”

TWENTY-THREE HIGH RISK AREAS

“There’s more,” I whisper. “The Pension Benefit Guaranty Corporation and the Department of Defense are just two out of 23 high-risk areas the GAO is going to talk about today.” (9)

“TWENTY-THREE?!!” You exclaim rather loudly.

You listen while the next witness rattles off some of the main ones and I jot down the highlights …

MEDICAID: Pays for acute health care and long-term care services for over 44 million low-income Americans. Financed jointly by the federal government and the states. Cost: $228 billion in 2001. Projected to double in a decade. Subject to widespread exploitation.

Example: Some states have created the illusion that they have made large Medicaid payments to certain providers, such as county health facilities, in order to generate excessive federal matching payments. In reality, the states have only momentarily made payments to these providers —generally through electronic funds transfers — and then required that the payments be returned. Some of these schemes have cost the federal government several billions of dollars each year.

U.S. POSTAL SERVICE: Outlook for fiscal year 2001 changed from a $480 million surplus to a $2 billion – $3 billion deficit. Weakened cash flow increased borrowing pressures. Debt levels approaching statutory borrowing limit.

MEDICARE: Covered about 40 million elderly and disabled Americans and cost about $241 billion in year 2001. The program’s spending as a share of the economy projected to double by 2035. Vulnerable to waste, fraud, abuse, and mismanagement.

Since 1996, annual audits by the Department of Health and Human Services Office of the Inspector General have found that Medicare contractors have improperly paid claims worth billions of dollars. In 2001, auditors found that 59 of 80 health plans had misreported key financial data or had accounting records too unreliable to support their data.

OTHER HIGH RISK AREAS: Department of Energy, Housing and Urban Development, Federal Disability Programs, Federal Real Property, FAA Air Traffic Control, IRS Business Systems Modernization, Forest Service Financial Management, FAA Financial Management, IRS Financial Management, Collection of Unpaid Taxes, Student Financial Aid Programs, DOD Weapon Systems Acquisition, DOD Contract Management, NASA Contract Management …

VOTING FOR MORE OF THE SAME

As the witness drones on, naming one government sacred cow after another, the main point of our tour becomes clear:

Although some presidential candidates are better than others, no matter which one you vote for, it’s likely you’re going to get more of the same: More spending. More pork. More high-risk areas to be added to the GAO’s ever-growing list. Easily the most tragic comedy of all time.

And therein lies a primary reason why …

– The federal deficit is out of control.

– Lasting prosperity is not exactly “around the corner.”

– You had better continue to play it safe with your savings, your investments, your home.

HOPE FOR THE FUTURE

But all is not lost. Look at the bright side:

FIRST, all the information in this e-mail is from actual reports that are PUBLICLY available. Be thankful that you live in America. Because in many other countries, this kind of damning information would be strictly confidential, never to see the light of day.

SECOND, there are strategic plans in place — or on the way — to try to deal with each and every one of these problems.

But don’t hold your breath. Even if we start today, it’s going to take us many, many years to extricate ourselves from this mess — recovery or no recovery.

My advice: To protect yourself from any outcome, be sure to build a solid nest-egg of liquid cash.

Good luck and God bless!

Martin

Martin D. Weiss, Ph.D.
Editor, Safe Money Report
Chairman, Weiss Ratings, Inc.
martinonmonday@weissinc.com

P.S. This was a fictional tour, naturally. But all the data is real, as you can see from my notes, below …

(1) Council For Citizens Against Government Waste, January 22, 2004, “CCAGW Blasts Congress, Omnibus Package”

(2) The Heritage Foundation, “Omnibus Spending Bill Hikes Discretionary Spending by 9 Percent in 2004.”

(3) Congressional Budget Office. “CBO’s Current Status of Discretionary Appropriations,”

(4) Council For Citizens Against Government Waste, ibid.

(5) Council For Citizens Against Government Waste, 2003 “Pig Book.”

(6) General Accounting Office, “Pension Benefit Guaranty Corporation Single-Employer Insurance Program: Long-Term Vulnerabilities Warrant ‘High Risk’ Designation.”

(7) Pension Benefit Guaranty Corporation. “PBGC Releases Fiscal Year 2003 Financial,” January 15, 2004.

(8) United States General Accounting Office. “High-Risk Series: An Update.” January 2003.

(9) All other high risk areas: Same source as note 8.

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Martin Weiss and “Martin on Monday” are non-partisan. Third-party ads do not necessarily represent their opinion and should not be interpreted as an endorsement.