Shutdown Fatigue

The federal government shut down at midnight, when Congress proved to be unable to agree on a another stopgap spending bill.  As is usually the case, the Democrats and the Republicans used the looming shutdown to try to increase their leverage to obtain their political goals — whether those goals are immigration reform, or health care funding, or something else — and when neither side blinked, the shutdown occurred.  Of course, each side then blamed the other.

maxresdefaultWe’ve been through this scenario multiple times before, most recently in 2013.  We somehow made it through each of those prior cataclysms, and I’m pretty sure that the sun will come up today as well.

I may be wrong about this, but out here in the heartland I’m sensing a lot less angst, generally, about this shutdown than seemed to be the case with prior shutdowns.  Maybe it’s because we’ve been through this same, pointless charade multiple times before, and the country just has a lingering case of shutdown fatigue.  Maybe it’s because, with the flood of scandals and tweetstorms and investigations and unseemly behavior that has been washing over the nation in recent months, we’ve already used up our storehouses of outrage and have just been psychologically bludgeoned until we’re functionally insensate.  Or maybe, just maybe, we’ve come to recognize that all of this shutdown stuff is just more callous political maneuvering by both parties, and we’re heartily sick and tired of being viewed as mere pawns to be manipulated in the stupid power games that are always being played in Washington, D.C.

Whatever the cause, we’ll just go on living our lives, without paying too much attention to the yammering politicos and their efforts to pin all of the blame for this unnecessary disruption and unending dysfunctionality and irresponsibility somewhere else.  Who knows?  Maybe if we just ignore this latest shutdown, the politicians might realize that their shutdown gambit isn’t working anymore and actually go back to doing their jobs.

Advertisements

Spreading Out The Federal Effect

Where are the richest counties in the United States, as measured by median household income?  You might think one of the counties in Silicon Valley, or one of the high-end areas in Connecticut, or around Boston, or the home to bustling computer, software, and internet companies around Seattle . . . but you would be wrong.

According to recently released census data, the top four counties in the United States for median household income are all located in Virginia and Maryland — and all just happen to be suburbs of Washington, D.C.  In each of those counties, the median household income doubles the national average.  Moreover, nine of the top 20 highest household income counties in America are suburbs of our nation’s capital.

washington-capitol-building-money-cash-620x348This shouldn’t really surprise us.  The federal government is by far the biggest spender in the country, and there are lots of people — lobbyists, consultants, media analysts, messaging advisors, and countless others — who make a lot of money advising other people and groups about how to get their share of the money gushing out of the federal spigot.  And because Congress and the vast majority of the federal agencies are headquartered in the D.C. area, of course the money flowing in to try to line groups up for a share of the money flowing out is going to be concentrated in the D.C. area, too.

This is probably one reason why, in this past election, there was a clear disconnect between the political punditry and the rest of the country.  People in D.C. looked around, sipped their $10 caramel lattes after their hot yoga sessions, saw housing values going through the roof, and thought things were going pretty well in the U.S. of A.  They were blissfully unaware of what it was like in the parts of the country between the coasts — and the anger that many people apparently felt for the fat cats in Washington who were gleefully lining their pockets while the rest of the country struggled.

What to do about the income disparity?  How about considering whether some federal departments and agencies should move out of the D.C. metroplex, to be closer to the folks that they are regulating?  Is there any reason, for example, that the Department of Agriculture shouldn’t be headquartered in Iowa or Nebraska, the Department of Energy shouldn’t be headquartered in Texas or Louisiana, and the Department of Labor shouldn’t be headquartered in, say, Cleveland or Chicago?  And why can’t the Department of Housing and Urban Development, the Department of Health and Human Services, the Department of Education, and the Department of Commerce be moved to some other locations away from the D.C. Beltway?

The census data makes clear that the federal government has a significant impact on wealth production.  The U.S. is a big country; why not take steps to spread that income effect around a little?  Maybe doing so would also bring the regulators closer to the people they’re affecting, and at the same time help to minimize the “inside the Beltway” mentality that appears to be an increasing problem in the country.

Droning About Drones

Recently the Federal Aviation Administration announced that Americans who own “hobbyist” drones — those that weigh between .55 pounds and 55 pounds — must register their drones starting on December 21.  Registration is free if it occurs before January 20; after that, it will cost $5.00.  Failure to register can result in civil penalties of up to $27,500, or criminal fines of up to $250,000 — and the FAA estimates that, through 2020, it will cost $56 million to operate its drone registration program.

dronesteaserIn our outsized federal government, the institution of a new program is a barely noticeable event.  Still, $56 million over 5 years seems like a lot of money to me, so I wonder:  are the operation of hobbyist drones really a problem that can be dealt with through registration?  Notwithstanding the institution of a nationwide registration program, the answer isn’t very clear.  In 2014, the FAA received 238 reports of unsafe drone use; so far in 2015, it has received 1,133 reports of unsafe drone operations.  The FAA also reports that pilot sightings of drones are increasing.  So far, there hasn’t been a catastrophic incident in which a drone has produced a safety problem by, for example, colliding with a commercial aircraft.

Although you see humorous commercials featuring skies filled with drones ready to dive-bomb workers heading to their cars, and drones seem to be prominent in oddball news stories, most of us have never seen a drone being used — at least I haven’t.  That may be about to change.  The federal government forecasts that as many as 1 million drones will be sold in America this year to hobbyists, and drones outfitted with cameras are available for less than $600.  So, if you want to spy on your neighbors, catch people misbehaving in their cars, or try to get footage that you can sell to a website, buying your own drone won’t break the bank.

Maybe that means there will be a lot more drones overhead in 2016 and beyond, and the droneless among us will come to view them as colossal pests someday soon.  But still — is requiring registration by the federal government, and the institution of some new bureaucratic office of Federal Drone Registration And Enforcement, really a necessary or appropriate response?  Isn’t the better approach to simply ban the use of drones in the areas where they might create a safety issue, such as around airports, above highways, or in places that might interfere with the work of firefighters or emergency personnel, and then prosecute people who violate such safe-use laws?  And how is the mere act of registration going to ensure safe or appropriate operation of drones in any event?

I’m all for being proactive in trying to make sure that new technology is used safely and properly, but I also think we are way too quick to establish costly nationwide programs that don’t really address the problem.

The Ever-Present Direct Government Payment Solution

Yesterday I saw an article that I think capsulizes what has gone wrong with the direction of our country.  The article reported that Senator Elizabeth Warren, that darling of the progressives, wants to send every senior citizen in the country a check for $580.

Why?  These days, I’m not sure that there actually needs to be a reason for a politician to propose a direct government payment to some constituency or another, but the stated reason is that Senator Warren believes the payment is needed because the cost of living for Social Security recipients increased last year.  Social Security benefit payments already are indexed to inflation, of course, but this year the formula that calculates the cost of living indicated there should be no increase.  So why do we need to make a $580 payment?

Well, Senator Warren contends that “Congress’s formula is volatile and does a poor job of reflecting what older Americans actually spend.”  She apparently has more perfect insight into the true spending habits of seniors.  She notes that part of the reason why the index didn’t increase this year is that gas prices fell and argues that seniors don’t drive as much as other Americans.  If there’s an empirical basis for that conclusion, I haven’t seen it, and working stiffs who walk to work, or take public transportation, might properly be skeptical of that claim.  But in any case it makes no sense as a policy matter:  in past years, when gas prices have surged, the existing formula has yielded increases to Social Security payments.  So if seniors, in fact, drive less than other Americans, then in prior years they got a windfall when their benefit payments increased to reflect higher gas costs that they weren’t paying.  In short, even if the cost of living formula is improperly weighted as to gas prices given senior spending habits, the advantages and disadvantages even out.

How did Senator Warren come up with the proposal to send Social Security recipients a check for $580, or about 3.9 percent of their current benefits?  According to the article linked above, it’s not by using the alternative inflation calculation Democrats propose for seniors, which would produce a 0.6 percent increase in benefits.  No, according to Senator Warren 3.9 percent represents the average increase of compensation for CEOs last year.  It’s not clear how that 3.9 percent number was calculated and which CEOs were included in any analysis that was done — was it limited to CEOs of America’s largest public companies, for example, or did it include the CEOs or proprietors of every business in the country? — but in any case there is no correlation between “CEO compensation” and Social Security benefit levels.  You might as well determine Social Security payment increases by looking to changes in the salaries of NBA players, or law school professors, or federal bureaucrats, or the presidents of unions.

So why choose CEOs?  Because people like Senator Warren consider them to be the evil greedheads in our society.  They make lots of money and run impersonal corporations — so they must be evil by definition.  Of course, the CEOs of public companies have enormous management responsibilities, their salaries are set by boards of directors whose members can be removed by shareholder vote and paid by the corporations themselves, and they often get sacked if their company is struggling.  But those realities don’t matter.  Senator Warren’s proposal will allow some people to argue that Congress favors CEOs over senior citizens.  And, of course, there are a lot more senior citizens than CEOs.

This is what we’ve come down to:  politicians like Senator Elizabeth Warren will do just about anything to rationalize the government cutting checks to directly pay off a chunk of the population and build her resume as a populist icon.  She’s not alone, of course, which is why we have a federal government that runs jaw-dropping annual deficits of hundreds of billions of dollars despite taking in record levels of tax revenue.

I’m afraid that the system is broken.

When A Reporter’s Story Makes A Difference

Earlier this week The Associated Press reported that the federal healthcare.gov website — the portal that many Americans have used to search for health care plans under the Affordable Care Act — was sharing private information about users with a number of third-party entities that specialize in advertising and analyzing internet data for marketing purposes.  The AP reported that the personal information made available to those entities could include age, income, ZIP code, and whether a person smokes or is pregnant, as well as the internet address of the computer that accessed the healthcare.gov website.

The federal government responded that the point of the data collection and sharing was simply to improve the consumer experience on the healthcare.gov website and added that the entities were “prohibited from using information from these tools on HealthCare.gov for their companies’ purposes.”  The latter point seems awfully naive — once data gets put into detailed databases on powerful computer systems, who is to say it is not used to help a third-party company better target pop-up ads for their other clients? — and in any case ignores the ever-present risk of a hacking incident that exposes the personal information to criminals.  Privacy advocates and Members of Congress also argued that the extent of data collected went beyond what was necessary to enhance customer service.

On Friday the AP reported that the Obama Administration had changed its position and reduced the release of healthcare.gov users’ personal data.  Privacy advocates remain concerned about the website’s data collection and storage policies and the available data connections with third parties — connections which conceivably could be used to access personal information — but the Administration’s response at least shows some sensitivity to privacy issues and is a first step toward better protecting personal information.

It may not amount to a huge matter in the Grand Scheme of Things, but it’s gratifying when an enterprising reporter’s story can expose a troubling practice and cause a change in a way that benefits the Average Joe and Jane.  It’s how our system is supposed to work, and it’s nice to see that it still work when journalists do their jobs and do them well.

Uncle Sam, The Scooter Sap

Over the weekend the Washington Post carried a terrific article about how fraudsters ripped off Medicare — and through Medicare, the American taxpayer — in the Great Scooter Scam.  It’s another troubling, cautionary tale that shows how good intentions can run awry, how fraudsters are always ready to pounce, and how our ponderous governmental apparatus is just not well-suited to ferreting out fraud.

The fraud scheme grew out of Medicare’s requirement that claims be paid promptly, and the vast scope of coverage that Medicare supplies.  With millions of claims being received, there was no way to check them out before making the required prompt processing decision.  So Medicare’s default approach was to pay claims first, investigate later.  The fraudsters learned this, and rubbed their hands with glee.  But fraudsters can’t perform surgery or other medical care, so how do they take advantage of that gaping vulnerability in the system?  Medical equipment was the answer . . . but the crooks then had to find just the right kind of equipment, where real money could be made.

Ultimately, they realized that scooters and motorized wheelchairs were perfect.  The need for them was plausible, and there was a huge gap between the actual cost of the devices and the inflated amount Medicare would pay.  The fraudsters created elaborate schemes that included “recruiters” who identified seniors to receive the scooters and bogus medical supply companies — and seniors who willingly participated because they thought there were getting a freebie, even if it was something that they didn’t need.  When Medicare changed the rules to require in-person doctor visits to try to stop the fraud, the crooks recruited doctors who were willing to participate in the fraud in exchange for a cut.

The result?  Perfectly able-bodied seniors with wheelchairs, still in their wrapping, gathering dust in their garages or serving as the perch for oversized teddy bears.  Seniors riffing on the Seinfeld episode and having scooter races in their neighborhoods.  And huge amounts of federal money lining the pockets of criminals.

The scope of the fraud is astonishing.  The Medicare system has paid billions for motorized wheelchairs, and they don’t even know how many of the purchases are legitimate.  One recent audit of paid bills showed that 80 percent were improper.  And even after the federal government became aware of the scooter scam, in 1998, it continued to pay billions in phony claims.  Since 1999, Medicare has paid $8.2 billion for 2.7 million motorized wheelchairs and scooters.  In 2003 alone, $964 million was spend on the devices.  These seem like huge numbers, but they are only a blip in the vast Medicare system — which is part of the reason why it took so long to meaningfully tackle the problem.

The Medicare system now says that it has effectively addressed the scooter scam, and the amounts spent on motorized wheelchairs fell to only $190 million in 2013.  Should we have confidence that all of that money — and all of the billions of dollars shelled out for other forms of medical equipment — is being spent in response to legitimate medical needs?  Not really.  The system is too large, oversight is minimal, and there are too many gaps where the fraudsters can take advantage.  And, perhaps most distressingly, there apparently are lots of “recruiters,” doctors, and seniors who apparently are all too willing to participate in a criminal scam so long as they get something out of it.

The Washington Post article about the Great Scooter Scam should be required reading for every Member of Congress who thinks the best way to solve a problem is to create a governmental program that pays out money to address it.

Adding Up The Obamacare Tab

When the Affordable Care Act was passed, its drafters contemplated that states would design their own health care exchanges, with the federal healthcare.gov website serving as a kind of backstop.  That turned out to be a miscalculation.  More than 60 percent of the states — 36 out of 50 — elected not to create their own health care exchanges.

At the time, some critics argued that the decisions of states with Republican governors to refrain from building their own websites was politically motivated.  In retrospect, however, the decisions to eschew developing state-specific health care exchanges seem more like a wise recognition of the limitations of state capabilities, because the experiences of states that did attempt their own websites have been decidedly mixed.

Six of the 14 states that chose to create their own exchanges — Masschusetts, Oregon, Nevada, Maryland, Minnesota, and Hawaii — have had severe functionality problems and have become tremendous cash drains and political albatrosses.  In Massachusetts, Oregon, Nevada, and Maryland alone, the federal government has paid at least $474 million to support the establishment of non-functional exchanges, and that cost total seems certain to increase significantly.  In those states, Democratic politicians are blaming the website contractors and threatening litigation, and Republicans are saying that the states never should have attempted to build the exchanges in the first place.

Obamacare has become such a political football that every fact and development gets spun to death — but if we can’t learn from the current reality, and recognize that mistakes were made in the legislation and its conception, then we are just compounding our problems.  In all, the Kaiser Family Foundation estimates that about $5 billion in federal funds that have been shelled out to states to allow them to assess whether to create state-specific exchanges and then, in some cases, to support their creation.  That’s an enormous sum of money, and it is becoming clear that a significant part of it has been wasted.  Whatever happens with Obamacare, let’s at least hope that in the future we refrain from enacting statutes that require states to develop large-scale, complicated technological systems, on their own, with the federal government picking up the tab.  As the mounting Obamacare costs demonstrate, that approach is fraught with peril.