How To Beat The System and Stick The Taxpayers With The Tab

One of the great myths of our times is that most government programs actually accomplish what they are supposed to accomplish. Whether we are talking about the infamous visitors' center in D.C., the government/taxpayer bailout of the big banks, health care reform, etc., we talk as if the government and the ruling political is actually capable of successfully executing the legislation in a timely, cost efficient, and purposeful manner.

In fact, just the opposite is true. The political class historically cannot run anything efficiently, effectively, and accomplish what was originally intended. Consider what we pay for now as taxpayers as outlined in "Love My Country, Loathe My Government:"

• Social Security And Medicare - these programs suck up more and more of the taxpayers' dollars every year but both are heading towards bankruptcy, even though most knowledgeable people in the world have known this direction for decades. The political class has done nothing to reverse this trend. Also, both programs are riddled with fraud and abuse.
• Post Office System - fading fast and sucking up more resources for less mail than ever.
• Border Control - by most estimates, there are well over ten million illegal immigrants in this country. The infamous fence along the Mexican border to prevent illegal entry is way over budget and behind schedule and has already been breached more than 3,000 times. Seems more like "lack of control" than "control."
• National Energy Strategy - nonexistent despite having a Cabinet post for decades.
• Education - failing public/government schools are the norm.
• War On Drugs - losing cause.
• Escalating Health Care Costs - not likely to be fixed anytime soon even with the current legislation (see below example).
• Campaign Finance Reform Laws - probably unconstitutional and ineffective anyway. Until you can control earmarks and pork, there is no such thing as campaign finance reform.
• FEMA - ask the people of New Orleans how that worked out.
• Federal Tax System - overly complicated, overly expensive, and leaking like a sieve from fraud.
• National Highway System - crumbling infrastructure that has killed Americans on a Minnesota bridge and in a Boston tunnel.

The list of traditional failures could go on and on. We have to get past this notion that once a bill is passed by the political class, everything is fine and good. In fact, most, if not all, actions by the political class either waste money and/or do not accomplish what is intended. Consider the following examples that are becoming evident of how to beat the system and stick the taxpayer with the bill:

• The probable new Federal health care bill will not allow health care insurers to deny coverage to anyone with a pre-existing condition and will also require everyone to buy health insurance, regardless of their health, age, or financial status. If you do not buy health insurance, you could be fined for not carrying a policy. However, the fines as currently envisioned, are very low relative to the cost of having a policy. Given the government's inability to track anything well, many uninsured people will probably game the system and run the risk of not buying insurance (saving a lot of money) vs. getting caught and paying a fine (a little amount of money). However, in Massachusetts, which has a state version of the Federal legislation in place, some people know how to beat the system already. Whenever they need medical help, they take out a policy, get the medical work done under the policy, and afterwards, cancel the policy. Since they cannot be denied coverage under Massachusetts law, they can just flit in and out of the system as their medical needs (and bills) dictate. This places a cost burden on the insurance companies which then need to charge their other customers higher premiums to overcome the gamesmanship of those that flit in and out. See the Business Week article on page 26 of the October 26, 2009 issue for more details. Thus, health care costs go up for most people, the exact opposite of what the legislation was supposed to prevent.
• In the proposed cap and trade policy that the Obama administration wants to pass to curb carbon emissions, the shenanigans have already started, prior to the legislation being passed. The simplistic view of cap and trade is if I do something good for the environment, e.g. plant some trees, I can get carbon credits that I can then sell to those who are polluters. However, there are apparently some large loopholes in the current U.S. plan. Take Sierra Pacific, the largest non government landowner in California and a major timber harvester. It promises to keep 60,000 acres of its land filled with trees that will soak up carbon emissions. For this promise, the company would receive about $10 million in carbon credits. Sounds great. However, according to the November 19, 2009 article in Business Week that describes these loopholes, Sierra had already agreed long ago, prior to cap and trade even existing, to conserving trees, i.e. they would be getting government money for doing something they would have done anyway, something they agree to do long ago. Thus, the company gets carbon credits to benefit its bottom line, a polluter buys these credits to offset his pollution levels and passes these higher costs onto the American taxpayer. However, there is no incremental decrease in carbon emissions since those trees would have been saved with or without the cap and trade legislation. The taxpayer pays the costs without any benefit.
• The article goes on to describe another organization gaming the system of cap and trade. The Conservation Fund established two large forestry projects in California with land the Fund purchased in 2004 and 2006, with state subsidized loans. The Fund had to promise to leave the land basically untouched by commercial interests. However, they are eligible for $17 million in carbon offsets for saving land that they had already agreed to save four or more years ago. According to the article, "having agreed to preserve the trees several years ago, the Fund will be paid for making the same guarantee again." This example is even more obnoxious since taxpayer money helped buy the land in the first palce and taxpayer money will help pay for the carbon offsets for a project that would have happened anyway, with or without cap and trade.
• If global warming has any chance at all of being beat, if it exists, then China and its coal spewing power plants must be brought under control. However, an article in the December 21, 2009 issue of Business Week, "China's Carbon-Credit Hustle" shows how any cap and trade system can be manipulated. The example given is similar to the California examples mentioned above. China had built a huge windmill farm and had applied for carbon credits on the international market, claiming that the windmills were deserving off carbon offsets. However, the UN denied the request, claiming that the wind farms were going to be built anyway. According to the article, "the sale of credits would not stimulate production of any additional clean energy. Credit purchasers would receive empty environmental rights, and the Chinese developers would obtain an undeserved windfall." David Victor, a professor at the University of California at San Diego, estimates that between one third and two thirds of all carbon credits awarded under the Kyoto agreement rewards entities for doing projects they would have done with or without carbon credits. Does not sound very efficient to me when one to two dollars of every three spent are worthless. The article concludes with the description of a similar scheme in Nigeria.
• A Fortune magazine article in the December 7, 2009 issue, "A Deal on Climate Change? Not Exactly," explained how well the Europeans have done with their cap and trade program. Bottom line: "the first few years were experimental and not particularly successful...although that's now gotten a bit better." If you were not successful and got a bit better, it still sounds like a bad program.
• News reports from the past few days indicate that the major banks were able to game the Treasury Department and Federal Reserve out of billions of taxpayer dollars in unneeded bailout funds. We have already discussed how most major banks have already paid back their government bailout loans, only months after having received them, indicating they did not need the loans to begin with. However, new reports indicate that the banks used AIG to get/launder even more money out of the American taxpayer, money that they did not have to pay back, sticking the American taxpayer with the bill and collapse of AIG. More on this scam in a post this week.

In all of these games and schemes, it is the taxpayer who gets hurt. Empty, unnecessary costs are incurred and passed along to the honest individuals who get stuck with the higher costs and taxes. Thus, do not assume that health care reform works and reduces health care costs, do not assume that cap and trade will actually reduce global emissions and do not assume that the political class is capable of running anything well or as intended. History dictates the politicians of today cannot.

Visit our website at www.loathemygovernment.com to order an autographed copy of the book, "Love My Country, Loathe My Government -Fifty First Steps To Restoring Our Freedom and Destroying The American Political Class" and to sign up for the cause. The book is also available online at Amazon and Barnes And Noble.