From 1789 until the rise of the progressive movement under Woodrow Wilson, Congress adhered to James Madison’s view that the Federal spending power was limited to executing the Constitution’s enumerated powers. From pre-Civil War days bills appropriating aid to education, income support for citizens—except veterans, and grants supporting the poor were rejected by Federal Lawmakers. Lawmakers did enact loan support programs that helped build our railroads and did support the building of Land Grant Colleges, but all these programs were done with loans and loan guarantees and financial constructs, that did not encumber the Federal Government or the States. The construction of The Cumberland Road (1811-1837) and the Pennsylvania Railroad (Pennsy—established 1846) were projects where private funding was secured by the backing but not the funding of government. By 1882 “Pennsy “was the largest private corporation in the world.
The Union Pacific Railroad was another example though the shenanigans of Congress and Federal bureaucrats the project almost went bankrupt during the Credit Moblier Scandal that took our country into a recession in 1872. It was proven that many congressmen were bribed to accept inflated charges from the construction company as the value of their investments in the country soared—then the bottom dropped out. Originally 2000 shares of private equity shares were offered and financed the project for 10 years. Federal lands were sold to the company at a discounted price along the tracks. Jay Gould a Wall Street financier reissued shares under a reorganization of the company—all private projects but there were certainly collusions between the government and private sector on many fronts.
What I want to express in this article are thoughts that are germane to the situation we find ourselves in, both in Idaho and at the Federal level. Each year The Federal Accounting Office reports on the inefficiencies of government spending. Both progressive and Federal think tanks have commented on the inefficiencies of government spending due to internal regulations and overlap of duties between agencies for competing funds. It has been estimated that it takes over $3 of Federal spending (Uncle Joe Biden calls it investing) to get the same return as $1 of private investment.
A ROI in a private project will be far better—and maybe riskier, than in a public project. But the low rate of return on the public investment is a constant risk and opportunity cost that citizens bear—not politicians. The more money left in the hands of private individuals and corporations, the more the return flows back to WE THE PEOPLE. We know this intuitively because a husband or wife running a family budget is far more efficient than even local City Fathers when it comes to allocating scarce resources. They feel individually the ramifications of bad financial decisions. Not so with the solons we elect to “serve” us.
In Idaho, we are fast approaching a 50/50 proposition when our legislators allocate funds. The Federal piece of the pie that is reaching 50% is probably already too much of a burden to the State budget for our legislators to put at risk. The bigger the piece of the pie that the investor holds—the more influence the investor has over how the project proceeds. We are especially at risk in programs at the Idaho Department of Health and Welfare where with the Federal Medicaid match, we are on the hook for 10-20% of the costs, and the Fed is on the hook for the rest.
Then think about who writes the regulations for those funds that are transferred back to the private sector—in the case of Medicaid CMS in Washington DC. Is it any surprise that our large hospital systems and insurance carriers have a vested interest in keeping these Federal transfer programs alive? Not only do they keep their prices high, but the insurance carriers also continue charging high premiums, co-pays and deductibles to support those prices. Is it any wonder that large hospital systems like St. Luke’s that are already patient care centers, banks, real estate companies and pharmacy benefit managers, are also becoming insurance companies? Vertical integration in the hospital business apparently means you can get paid from both ends of the gravy train. Jay Gould would be proud of such an enterprise and so are many of our local and State Politicians and hospital and insurance company CEOs!
Prior to 1965 and The Great Society Programs, the portion of our national GDP was always less than 15%—except in WWII. Today Federal Spending accounts for 24% of GDP while Federal tax revenues run about 18%. Every year our deficits run around 20% of GDP adding to our National Debt that now runs well over 100% of GDP with an interest rate that costs taxpayers over $1trillion/year—more than what is allocated for military spending (certainly an “enumerated” expense) or for non-discretionary programs like Medicare, Medicaid and Social Security
John F. Cogan in the Nov. 26th Wall Street Journal sums up what the relationship of our country’s security—”again an enumerated responsibility” of Congress, to the project facing Mssrs Musk and Ramaswamy as they engage the “swamp” and try to weed out government inefficiencies:
“The abandonment of fiscal federalism has affected more than our towering national debt—it has also begun to undermine our security and (Health care systems)—jml. National defense should be the federal government’s highest priority. Yet since the 1950s spending on traditional state and local affairs has taken its place. Funding these projects has come at the expense of the defense budget, which as a share of the federal total has fallen from around 60% in the mid-1950s to some 13% today. That level is wholly inadequate to meet rising global threats.”
Mr. Trump saved our country once. Our national defense is intimately tied to our national debt. So is the integrity of our health care systems. He must now dive into this problem so that future generations will be able to thrive and be secure. That is the legacy that was passed onto us. That is the least we can do for our children and grandchildren.
