Newsletters

Newsletter 94 - Summer 2019

Let' s hear it for smaller, more focused, less costly government!

Screen Shot 2017-09-25 at 10.40.58 AM



So it begins
Food stamps
Social Security disability
Ethanol blending
Renewable Portfolio Standard (DE)
Compulsory vaccination
Update: Big bank denies debanking
Video corner (Thomas Jefferson)
About SAFE

So it begins – How do government programs get started? Here’s the general pattern. An issue is pointed out (faction X arguably needs help) – government action is proposed – the initially projected costs are relatively modest – seems promising, let’s try it.

The results of Program X may undershoot expectations, however, for one of several reasons (or perhaps a combination thereof). The initial assessment was overly optimistic, understating costs while overstating benefits. The program proved so popular that Congress decided to increase the funding or liberalize the eligibility requirements. Unintended consequences cropped up, erasing the anticipated net benefits.

Government programs might be thought of as falling into three categories – green (go), yellow (consider), and red (stop) – with the challenge being to choose the best mix of programs within the overall resources available.

Screen Shot 2019-06-25 at 4.31.20 PM

Many problematic programs have accumulated in the government’s portfolio over the years, which need to be right-sized, adjusted or abolished. See the ensuing stories in this newsletter for some illustrative examples.

In the words of Ronald Reagan, “government programs, once approved, never disappear." And sure enough there often seems to be more energy for new initiatives – like Medicare for All or the Green New Deal - than fixing existing programs.

Moral: fiscal conservatives should express their concerns about proposed government programs early and often, not wait and see how things develop.

Food stamps (“yellow”) – Growing spending programs is relatively easy, whereas tightening the purse strings can be a struggle. Take the Supplemental Nutritional Assistance Program (or SNAP), better known as “food stamps.”

The food stamps program was launched in 1939, abolished in 1943 (when food was being rationed), but revived as a pilot program during the Eisenhower era and expanded by the Food Stamp Act of 1964.

In principle, the aim of feeding the hungry has obvious appeal – the question is where to draw the line on government support. At the time of the FSA, it was estimated that 4 million people would receive food stamps at a cost of $360 million per year.

The program grew much faster than estimated, however, despite substantial pruning during both the Reagan and Clinton administrations. One of the reasons: the federal government bears the full cost so state governments have an incentive to sign up as many participants as possible.

By 2012, in the wake of the 2008 fiscal crisis/recession, 50 million Americans (about 1 in 7) were receiving food stamps and annual SNAP expenditures hit $85 billion. Some food stamps history and where to now,
4/29/13.

The number of food stamp recipients has declined since 2012, in a recovering economy, but the program continues to represent a substantial drain on the US Treasury (some $60 billion per year).

Accordingly, expanded work requirements for food stamp eligibility were included in the 5-year farm bill passed by the House in 2018 – only to be stripped out of the bill in the Senate. The GOP’s food stamp failure, Wall Street Journal,
12/9/18.

The political question is whether Congress will ever have the mettle to fix food stamps if not now. The labor market is stronger than it’s been in years but the program still hasn’t returned to pre-recession enrollment levels.

No matter, the revised farm bill was passed by overwhelming majorities in both the Senate and House and swiftly signed into law. Trump signs farm bill that backs climate change program, avoids food stamp cuts, John Siciliano, Washington Examiner,
12/20/18.

Trump signed the long-awaited agriculture measure, saying it was a "great bill" that was difficult to pass — but had to be passed to support ranchers and farmers.

As a consolation prize, the Trump administration has proposed regulations that would make it more difficult for states to waive existing work requirements for food stamps. The expected savings would be some $15 billion over 10 years, which on a yearly basis works out to about 2.5% of the current funding level. Trump admin moves toward new work requirements for food stamp recipients, westernjournal.com,
12/20/18.

Social Security disability (“yellow”) – It would be hard to argue that the government has no responsibility for helping people who are unable to find productive employment due to serious disabilities, and providing SSD benefits + early Medicare benefits seems like a reasonable way to go about it.

That being said, rapid growth of this program (see table below) plus other evidence suggested that applicants and their advocates might be gaming the system. Time to do something about Social Security disability program,
6/1/15.

Screen Shot 2019-06-25 at 4.41.18 PM


At the time, SAFE reviewed some proposed program fixes, which obviously needed to include a transfer from the retirement benefits trust fund to prevent the DI (disability income) trust fund from running dry in 2016 (thereby forcing a cut in disability benefits for all recipients).

We were hopeful that steps would also be taken to improve the underlying situation, and offered some thoughts on making the conservative case. Ibid.

Put the other side on the defensive by dwelling on examples of fraud and presenting charts showing the cost increases, propose step-by-step reforms instead of sweeping changes, and above all don’t surrender tactical advantages like the pending exhaustion of the DI trust fund without extracting concessions to adequately compensate therefor.

More recent data show a welcome shift. SSD spending for 2017 came in at $147B, only slightly higher than in 2013. And the DI trust fund projections are now looking considerably healthier than those for the SS retirement trust fund. Summary: Actuarial status of the Social Security trust funds, ssa.gov,
April 2019.

Depletion of the DI Trust Fund asset reserves is now projected for 2052, 20 years later than in last year's report. Disabled-worker applications have continued to decline since 2010 and disability incidence rates have been well below expectations. Based on sustained lower incidence rates, the Trustees have reduced the long-range disability incidence rate assumption for this report.

Ethanol blending (“red”) – A 40¢ per gallon subsidy for the blending of ethanol in gasoline was enacted in 1978 based on the premise that US oil reserves were dwindling and this country needed to augment them with “renewable fuels.”

The program grew rapidly after a Renewable Fuel Standard (phased-in ethanol blending mandate) was enacted calling for 36 million barrels of ethanol in US gasoline by 2022.

Ethanol reached about 10% of US gasoline sales by 2010, and the Environmental Protection Agency recently finalized a rule permitting the year-round sale of 15% ethanol gas (E15). With this latest change, the 36 million barrel target by 2022 may be within reach.

If so, however, what’s the payoff? Reliable sources indicate that ethanol blending (a) raises fuel costs for the general public by some $10 billion per year, (b) drives up food costs, (c) achieves no clear-cut environmental benefits, and (d) does not usefully extend the life of petroleum reserves (which are not expected to run out any time soon due to the fracking boom). In short, there are no economic benefits in prospect, only unnecessary costs.

The only real rationale for the RFS is winning the political support of corn farmers and the ethanol lobby, both of which benefit from the continuation of this program. Too bad that critics didn’t ask more questions up front. Renewable Fuel Standard is an unjustifiable giveaway,
6/10/19.

Renewable Portfolio Standard (“red”) – This is a regulatory scheme designed to force growing use of “renewable energy” to generate electric power sold in Delaware. The purported benefits (fight “global warming” and create “green jobs”) are illusory, in our view, so the principal result would be to inflate electric power costs and/or undermine reliability. A move is currently afoot to expand the RPS (which will peak at 25% in 2025 under existing law), e.g., to 100% by 2050. Advocates are viewing this proposal in moral or political terms without any serious consideration of the pros and cons. See SAFE’s letter to the governor, 5/27/19 (& response).

Compulsory vaccination (“green”) – Instead of reviewing an existing program in the “green” category, let’s talk about a possible new one: averting the spread of infectious diseases like measles by putting the government’s weight behind more widespread vaccinations. We chose this particular topic because it (1) has been in the news of late, and (2) hasn’t been politicized to the same extent (at least not yet) as many policy issues.

From a personal liberty standpoint, one might think Americans at an individual/ family level should be free to decide whether to get vaccinated. My body – my choice! But low vaccination rates facilitate the spread of infectious diseases, so individual decisions not to be vaccinated endanger the health of others. Searching for a verdict in the vaccination debate, harvard.edu,
1/4/16.

When the number of immunized individuals within a population reaches a critical threshold, herd immunity is conferred. Herd immunity protects the entire population, even those who are not vaccinated are protected from disease. The percentage of the population that must be immunized to achieve herd immunity varies for individual diseases, with thresholds for common diseases ranging from 75-94%.

Vaccinations have proven invaluable in combatting a variety of diseases. Milestones include the 1979 eradication of polio in the US and the 1980 eradication of smallpox worldwide.

A 1998 study indicating that vaccinations might cause autism has been thoroughly debunked, and the original article on the subject was withdrawn by Lancet in 2010.

Sorry, libertarians, but so long as vaccinations are relatively inexpensive and safe (e.g., exceptions made for infants, individuals with special sensitivities, etc.), it seems to us that all concerned should be prepared to get with the program for “the general good.” And if government action is needed to make the point, that’s OK.

Update: Big bank denies “debanking” – SAFE’s last newsletter reported claims that JP Morgan Chase Bank had abruptly closed the accounts of Trump supporters including several individuals well-known in the social media sphere. At a minimum, we suggested, these actions should have been forthrightly explained.

When Chairman Jamie Dimon was asked about these cases at the bank’s annual meeting, he denied that anyone’s account had been closed based on their political views versus, say, “regulatory-type” requirements, It was not specified why the accounts had been closed, however, nor was there any commitment that matters would be handled differently in the future. Press release of Free Enterprise Project,
5/21/19.

Video corner – Share this account of the life of Thomas Jefferson with one of the younger people in your life. Wrote the Declaration of Independence - 1st secretary of state and 3rd president - founded the University of Virginia. Free school, youtube.com, video (6:19), 7/11/16.

About SAFE - Secure America's Future Economy is a non-partisan, all-volunteer organization that was founded in 1996. We advocate smaller, more focused, lower cost government, to be achieved by cutting spending, restructuring “entitlements,” simplifying taxes, and rationalizing regulations.

SAFE BOARD OF DIRECTORS
Andrew Betley, (302) 239-9679
Suzie Dickson
John Greer, (302) 479-0485
Dan Kerrick, treasurer, (302) 521-4272
Steve McClain, (302) 998-3910
Jerry Martin, (302) 478-5064
John Nichols, (302) 378-0683
rycK Stout, (302) 478-9495
Bill Whipple, president, (302) 464-2688
For e-mail addresses see:
Contact us

The SAFE agenda is promoted through: (1) Our website, including issue statements, a weekly blog, and a “Delaware Chatter” microblog; (2) Letters to the editor, public events, legislative contacts, etc., which are also posted and/or recapped on the website; (3) This quarterly newsletter, available in print (since 1996) and now electronic editions; and (4) Posts on Twitter and/or Facebook (click icons on the website to access).

SAFE dues are $10 per year for subscribers to the print edition of the newsletter and zero for electronic subscribers. Contributions are also appreciated and may be tax deductible (SAFE is a Section 501(c)(3) non-profit organization).

To join SAFE, renew your membership, or make a contribution, please print and complete this
form and mail it with your check to SAFE, 115 Dungarvan Drive, Wilmington, DE 19709. Thank you!