Will 90 Day Federal Hiring Freeze Be Effective?

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President Donald Trump has taken his first serious step to drain the swamp by placing a freeze on new federal government hiring.
How deep does the draining go? His executive order applies to all civilian government entities, but agency heads can choose to exempt positions with “national security or public safety responsibilities,” presumably exempting large swaths of the Defense, Homeland Security, and Justice departments and other agencies representing a majority of civil service employment. Further exemptions reaching beyond safety may be made by the U.S. Office of Personnel Management, which estimates that 20,000 open positions would be directly affected.
The good news is that the order also requires OPM and the Office of Management and Budget to deliver a long-term plan to actually reduce the size of government within 90 days. The bad news is that the freeze will end automatically after 90 days and any personnel cuts thereafter are to be made through attrition, presumably not through any reductions in force.
It is a good start but too early to evaluate what actually will result. Neither OPM nor OMB directors have been confirmed or even been designated in the case of the former or for the OMB deputy for management. With Democratic Senate Leader Chuck Schumer promising to delay confirmations, the 90 days will go quickly with bureaucrats in charge much of the time.
What is this bureaucracy President Trump must confront? The predominant view sees it as perhaps less than perfectly efficient but only requiring expert management to straighten it out. The other is that bureaucracy itself is a big part of the problem. The president would seem in the latter camp, with his inaugural speech aimed at “a small group in our nation’s capital” reaping “the rewards of government, while the people have borne the cost: Washington flourished but the people did not share in its wealth.” With seven of the nation’s 10 wealthiest counties in the D.C. area, the employee union bosses immediately recognized the fire was directed at them.
The great majority of experts advising presidents, however, follow the public administration community in supporting the so-called “scientific administration” model of government, originated by the great sociologist Max Weber and implemented by his admirer Woodrow Wilson, who fashioned American public administration. It is based on the belief that neutral professional administrators have the expertise to lead a centralized “responsible bureaucracy” toward the scientific solutions necessary to solve the nation’s social problems.
Philip K. Howard is one of the more reasonable experts, an author and president of the government reform organization Common Good. His recommendations to President Trump are a good summary of his ideas and those of much of the public administration community. He offers many good ideas such as making it easier to fire bureaucrats and sunset bad laws and regulations and even suggests constitutional amendments to overrule courts. But his basic approach is to improve internal administration by relying on the career experts.
Howard warns Trump that the last six presidents starting with Jimmy Carter have tried to take political control of the bureaucratic “red-tape machine” and failed. He criticized Trump’s proposal to eliminate two previous rules before adopting a new one because it is too broad, focused upon the number of rules rather than results. Both liberals and conservatives, he argues, follow a flawed “clear law” philosophy that tries “to prescribe every possible good choice and proscribe every possible evil” in a futile effort to exorcise “human responsibility.” In that world, bureaucrats can then blame their poor micromanagement because “the rule made me do it.”
The “only solution,” says Howard, is to focus on results. This can be done by civil servants “who take responsibility for getting the job done” based upon their “expert judgement” under “clear lines of authority and responsibility.” Rather than detailed rules, Howard proposes general principles, such as in the case of safety, that tools be “reasonably suited for the use intended,” or that for nursing homes to provide a “home-like setting.” He concedes even this would not guarantee successful management but “gives us the freedom to try.”
But who does it liberate? Who is this freedom actually for? It is for the expert bureaucrats to make judgements within broader rules that would be inherently more subjective, potentially more arbitrary, and often different than what their political bosses want as policy.
Paul C. Light is perhaps the nation’s No. 1 public administration expert and a professor at New York University’s Wagner School of Public Service. He too has good ideas but articulates his advice to Trump politically rather than directly professionally, saying that for him to govern effectively, he must appeal more broadly to moderate swing voters, who are described as wanting reformed government but also bigger government, major campaign finance reform, tougher financial conflict-of-interest laws, and protection of “essential federal programs,” which apparently means everything Washington does, including opposing bureaucratic hiring freezes.
These hardly seem like Trump material and in fact did not vote for him. Light is nearer his professional concerns with other reforms that his larger report suggests would receive very large public support: cutting the number of layers of bureaucracy that have increased from 17 levels in 1961 to 63 today and reforming the broken government career hiring and personnel systems. He does not say so, but the only ones who would oppose these are the bureaucrats themselves, their powerful unions and the congressional allies they support who have frustrated earlier attempts at reform and are already lined up opposing the hiring freeze.
The real reason angry voters have become the dominant voice is that today’s Washington just might require 63 levels for all it is doing, so getting it right means doing less, sending what is broken to leaner local bureaucracies to fix or to privatize.
The flaw in the Weber plan is that it is derived from private sector experience, whereas economist Ludwig von Mises’ classic book Bureaucracy has demonstrated that government is fundamentally different. Former Intel CEO and Office of Management and Budget Director Roy Ash, as a businessman, described it more colorfully. He compared going from private sector management to government bureaucracy as like going from softball to ice hockey. Your board of directors is made up of your competitors, your employees, your customers and suppliers — and that realization about power politics must guide all you do as a political executive dealing with supposed subordinates who know every trick in book to frustrate and outlast you.
Contrary to Howard, Jimmy Carter’s bureaucracy reforms and Ronald Reagan’s implementation of them actually did even the playing field in this bureaucracy contact sport for a while, but they atrophied as political managers, tired of confronting the politicized bureaucratic blob. The solution is to revitalize and expand the tools to enable political executives coming from outside the bureaucracy to manage their subordinates and make them responsible. To do this, the president must first demand swift action to nominate and confirm nominees all the way down the organizational chain and then demand they actually run their agencies.
Schumer’s plan is to delay confirmations so that sympathetic bureaucrats can be the de facto CEOs of the executive branch for much or all of the critical first 100 days. Reform in a democracy can only come if the opportunity is grasped early on by dynamic chief executives taking bold steps before, as Weber predicted, the charisma becomes routinized.
President Trump is providing the audacity, but unless his administration internalizes Ash’s lesson, the orders and plans can go out from the White House but nothing will happen.
(This article first ran in The American Spectator on January 30, 2017)
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Removing Federal Barriers to P3 Infrastructure Investment

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The Trump campaign proposed a $1 trillion program to foster private investment in aging public-sector infrastructure. According to a proposal by Wilbur Ross and Peter Navarro, eligible projects would be large-scale infrastructure that has, or could have, robust user-fee revenue streams. Revenue-based financing (equity and debt) would be used to raise the needed capital up-front, with investors being paid back over time via the dedicated revenue streams. Eligible projects could include airports, highways, seaports, water-supply, and wastewater treatment facilities.
For the past 15 years, infrastructure investment funds, infrastructure companies, and others have been eager to invest in U.S. P3 projects of this kind. But they have confronted a relatively small number of projects. According to a new Reason Foundation study, that problem stems from two causes: unfamiliarity with P3 models by state and local policymakers and federal barriers to private capital investment in state and local infrastructure. (Download the report here.)
The study identifies thousands of potential project opportunities, in the form of existing airports, highways, seaports, water systems, etc. It then shines a spotlight on an array of federal obstacles that make it difficult, financially disadvantageous, or impossible to do the kinds of P3 infrastructure renewal that takes place routinely in Canada, Europe, and Latin America. Among the largest barriers are the following:

  • A very restricted airport privatization pilot program that erects barriers not found in other countries;
  • A federal ban on using toll revenues to finance the reconstruction and modernization of aging Interstate highways (except for a tiny pilot program); and,
  • A rule from the Office of Management & Budget requiring that if a facility has received direct federal grants, the grant money must be repaid if the facility is leased or sold (which functions as a de-facto tax on such transactions).

But by far the greatest federal obstacle is the inability, in most cases, to use tax-exempt revenue bonds for P3 projects. Since state and local agencies can and do use such tax-exempt bonds for infrastructure, the result is a non-level financial playing field. This kind of disparity between taxable and tax-exempt revenue bonds for infrastructure is virtually unheard of in other developed countries. To the extent that a P3 project cannot obtain tax-exempt bond financing, its financing costs and user fees will be higher, and opponents will cite these as reasons not to use the P3 approach.
The Reason Foundation report proposes two policy changes that would create a level financial playing field for P3 infrastructure renewal. First, generalize the existing Private Activity Bond (PAB) program that now applies only to surface transportation projects to apply to P3 projects for all categories of public-purpose infrastructure. Second, allow the new PABs to be used to acquire and reconstruct existing infrastructure, not just to build new projects.
These two tax changes might find bipartisan support in Congress. First, construction unions generally favor P3 procurement, since this tends to expand the size of the pie by increasing the size and number of major infrastructure projects. Second, the Obama Administration in 2015 had proposed something similar: Qualified Public Infrastructure Bonds (QPIBs) whose purpose was to “extend the benefits of municipal bonds to public-private partnerships.” The White House fact sheet summarizing the proposal pointed out that, unlike the surface transportation PABs, the new QPIBs would:

  • Have no expiration date;
  • Have no volume cap; and,
  • Not be subject to the Alternative Minimum Tax (AMT).

These provisions should all be included in the reform.
Critics will likely claim that these tax changes would cost the U.S. Treasury a significant amount of revenue if they were widely used. But this would only be true if most of the projects to rebuild U.S. infrastructure would otherwise have been carried out with taxable bond financing. The fact that we have a huge backlog of such projects that are not being funded and carried out suggests that very little such investment is attractive with taxable bond financing. The overwhelming majority of U.S. infrastructure projects are financed with tax-exempt municipal bonds.
Secondly, any marginal loss of revenue that might result from allowing wide use of tax-exempt revenue bonds for P3 projects would likely be offset by increased federal tax revenues, of two kinds. To the extent that the new P3 concession companies were profitable, they would pay federal corporate income taxes on those profits. And a large increase in construction work over several decades would likely lead to more jobs for construction workers and more overtime—so their marginal increases in wages would increase personal income tax revenues.
The Reason report does not directly address the alleged need for a federal tax credit to provide an incentive for equity investors in P3 infrastructure projects. That feature of the Ross and Navarro proposal has been a lightning rod for opposition, as a “give-away to Wall Street,” etc. But there is no lack of incentive for infrastructure funds, pension funds, investment banks, etc. to invest equity in U.S. infrastructure. What these would-be investors lament is the lack of a pipeline of large-scale P3 projects. That lack is due to explicit federal barriers of the kind documented in our new report, and especially the non-level financial playing field. The new Administration and Congress could readily address those barriers—and drop the tax credit for equity as not needed.
Download the report here.
(Reprinted from Reason Foundation’s Surface Transportation News, January 25, 2017)
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Wasted billions in Food Stamp Program

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Judicial Watch publishes a newsletter entitled “VERDICT”. You may have read about it filing motions in court to compel former Presidential candidate Hillary Clinton to answer questions. Judicial Watch has been characterized as a “conservative gadfly.”
A recent investigation by Judicial Watch caught my eye regarding billions of dollars wasted on food stamps. It reported on a USDA Office of Inspector General report explaining food stamp administrative costs. The food stamp program is known as Supplemental Nutrition Assistance Program or SNAP, for short. It declared “Not only does the government spend a breathtaking $70 billion a year to give a record number of people food stamps, it wastes billions more to administer the bloated welfare program.”
I was astounded at the numbers cited by Judicial Watch and decided to read the Inspector General’s report regarding USDA-FNS and how it administers the food stamp program.
On page 5 of the Audit Report, it notes that California spends $34.06 to administer each of its 2 million food stamp cases. New York, for example, spends $18.60 to administer each of its 1,698,559 households. Ohio, on the other hand, has 851,972 households, and it spends only $9.55 per case.
The SNAP program is a federal operation. However, the states distribute the benefits and in turn are paid to do so by USDA. California is paid over $825 million to provide food stamps to approximately 2 million households. Ohio is paid $97,648,000 federal dollars to provide food stamps to approximately 852,000 households. USDA’s Inspector General stated “We determined that while FNS [Food and Nutrition service] calculates and reports the cost-per-case data for states, it is not analyzing or reviewing these data to identify trends to help reduce and contain costs.”

Caring about taxpayer money
USDA’s FNS officials, not caring about taxpayer money, said “…it would not be useful to compare the states’ SNAP expenditures as each state has significant autonomy in how it structures and implements the [SNAP] program.” The Inspector General did not buy USDA’s explanation that the cost of living differences account for a portion of the variances. It pointed out that the cost of living for all occupations in San Francisco was approximately $67,000 as opposed to $61,000 in New York City.
Judicial Watch stated succinctly that the USDA Inspector General found “yet another swollen and derelict government agency failing miserably to carry out its basic duties. For the record, 46.5 million people receive SNAP benefits. The USDA Inspector General examined 10 states so it is common sense to assume huge amounts of money are being spent to provide SNAP benefits in the remaining 40 states. Hamilton County, Ohio, spends only $5.70 to administer each of its 61,772 food stamp cases every month.
Judicial Watch has been following federal investigations of the food stamp program since 2012. It claims that USDA has been “…knowingly giving illegal immigrants food stamps for decades.” It also has made public that food stamp recipients use their “…welfare benefit to buy drugs, weapons and other contraband from unscrupulous vendors.” Judicial Watch claims “The nation’s food-stamp program has long been plagued with fraud and corruption…”
When it takes $3.6 billion to give away $70 billion in benefits, and you have counties such as San Francisco spending $73 a month to administer each food stamp case, and Hamilton County only spending $5.70 to administer each food stamp case, something is wrong and needs to be corrected.
A new Secretary of Agriculture and team need to end this blatant waste of dollars.
(This article first ran in Farm Futures on January 17, 2017)
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Hospitals Do Well Here in Virginia

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The recently released annual analysis of Virginia hospitals by the Thomas Jefferson Institute once again confirms that the hospital industry as a whole here in Virginia continues to do well and that its overall financial health continues to improve.
As in past years, the Thomas Jefferson Institute used the financial numbers and lists all the hospitals made available through the Virginia Health Information website.  That website groups hospitals into five regions: North, Northwest, Central, East and Southwest. We list hospitals in two categories: acute hospitals and non-acute hospitals. The numbers on the VHI website are from 2015, the latest year available.
This year’s study, “Virginia’s Hospitals: Doing Well in a Sluggish Economy,” shows that the hospitals enjoyed an overall profit of $1.89 billion in 2015, slightly less than the $1.9 billion in 2014 – a difference of only six-one-hundredth of one percent.  
And, as profits remained stable, the net worth of our hospitals increased by 6.6% or over $1.1 billion.
And to illustrate the growing economic strength of our hospitals in yet another way, once again fewer hospitals are running a deficit.  As a matter of fact, over the past four years – from 2012 through 2015 – the number of hospitals running in the red has decreased by 35% — from 42 in 2012 to 27 in 2015.
The concentration of hospitals running deficits are in the eastern and southwestern parts of our state:  Seven in the East and 10 in the Southwest. Some hospitals have run deficits in years past, other hospitals were in the black in 2014 but not in the 2015.  It is a fluid situation, as in many industries with various operating units whether a retail store or a manufacturing company.
This year’s report also shows that in every region of the state, our hospitals as a whole are running profitably although two of the five regions show less profit than last year. Those regions with less profits in 2015 were the Northwest and Southwest regions.
And in each of the five regions in this analysis, the hospitals showed an increase in their net worth.
This year’s report also lists the compensation of the non-profit hospitals’ CEO’s as listed in Guidestar and in the Richmond Times Dispatch.  The total compensation for the CEO’s of Virginia’s non-profit hospitals ranged from $230,748 to $6,000,797.
The Virginia Hospital and Healthcare Association (VHHA), the lobbying arm of the hospital industry, argues for the continuation of monopoly services through the Certificate of Public Need laws, and advocates for an expansion of Medicaid because it says that its membership is on shaky financial ground.  It claims our study does not look at the solvency of each hospital. Yet, each hospital is listed along with the last two years (2014 and 2015) of profits and losses along with the net worth of each.  Solvency is, indeed, covered in our annual report.
The VHHA also claims that our report does not take into consideration that all hospitals lose money on some services.  As any business leader will tell you:  many major corporations with various divisions don’t show a profit it each but have an overall profit that is healthy.  That is the case with hospitals as well.
This year’s annual study shows that the overall hospital industry here in Virginia continues to get stronger and stronger.  The reported numbers clearly show this.
What this year’s analysis illustrates, as in past years, is that there are more hospitals running deficits in the Central and Southwestern regions of Virginia than in other regions. This might be cause for a focused public policy attention by the state and localities.  This would be a worthy discussion to have with experts to see if other states are faced with similar issues and, if so, what if anything they have done or are doing to help remedy the situation.
This year’s analysis of hospital finances clearly shows that our hospitals as a whole continue to do well in our state and that is something for us to applaud.  Increasing net worth and decreasing numbers of hospitals running deficits is a good thing.  And profits remaining stable as our state economy limps along is also good.
Let’s not allow the Virginia Hospital and Healthcare Association to muddy the waters of public discussion by saying the overall industry is hurting financially.  It is not. And those hospitals which are making healthy profits and seeing their net worth increase might consider doing more to help those folks in our communities who truly can’t afford health care services.
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A Sweet Idea for the New Congress and New President

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The start of a new year with a new Congress, and a new president brings hope for progress on a plethora of issues facing our great country.  After one of the ugliest political seasons in the last fifty years, the time is ripe for our elected officials to begin to take steps to bridge the gaps that widened so dramatically during the election.
While Washington frequently suffers from acrimony and division, here is a sweet idea for bringing the left and right, Congress and the Administration, free-traders and fair-traders together.  Congress and the president could take the small step of coming together on one small policy provision at a time and a great starting point is moving American sugar policy toward a freer market position.  This is a policy step that should appeal to those who favor free markets, to be sure, but also it should provide a welcome change for those on the left who want fewer government supports for agriculture, and budget hawks who worry about possible future costs from the sugar price support program – despite the fact the law mandates the program operate at zero cost to the federal budget.
U.S. sugar farmers have called for a truly free market in sugar where producers in all countries play by exactly the same rules.  U.S. sugar producers have called for a policy that says American producers will give up all price supports if producers in all other sugar producing countries also agree to zero subsidies whether direct or indirect.  This policy is generally called a “Zero for Zero” plan.  U.S. sugar farmers are confident they can compete very effectively in a world without governments putting their fingers on the scales.  Congress and the president should help them to achieve that goal.
The other good news about making this policy change is the evidence of bipartisan support for making it.  In the recently concluded 114th Congress, Representative Ted Yoho (R-FL) introduced legislation that garnered an equal number of Republican and Democratic co-sponsors.  The legislation calls on the president to undertake negotiations through the World Trade Organization to bring all sugar producing countries to the table and to work for the implementation of a Zero for Zero trade deal for the world sugar market.  The new 115th Congress could easily reintroduce this measure and pass it.  The new president could then take up the gauntlet and act on his campaign pledge to make better trade deals such as this one which would remove barriers to free trade and put U.S. sugar farmers on a level playing field.  In the vast scope of the federal government, sugar policy is small but the policy change would be huge and it would allow a rare convergence of political actors from all across the spectrum and from both parties.  It could be a starting point for finding much more common ground.  
In fact, the Zero for Zero concept could be expanded and more generally applied to U.S. agriculture policy to free American farmers across the board.  The successful implementation of the Zero for Zero plan for sugar would set a powerful precedent for other commodities with benefits accruing both to our farmers and the federal budget.
Sugar policy has existed in North America since before the birth of our Republic.  It is old and sticky and the time has come to take the bold steps to replace it with a new fair and open policy.
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