Financial Doomsday Clock Is Ticking for Medicare, Social Security

April 8, 2024

Topline: It will take an extra $175.3 trillion to keep Medicare and Social Security intact for when today’s children reach old age, according to OpenTheBooks’ analysis of the nation’s latest financial report.

Key facts: The Treasury Department projected spending over the “infinite horizon,” or the lifetime of everyone in the country today.

It projects that current participants in Medicare and Social Security will collect $105.4 trillion more in benefits from the programs than they contribute into them through payroll taxes.

Future participants, who are younger than 15 and even in the womb, will use up $69.9 trillion more than they pay in taxes.

Combined, that’s an unfathomable $175.3 trillion gap that can only be closed with “increased borrowing, higher taxes, reduced program spending or some combination,” according to the Treasury.

There’s no easy way to put that number in context. The national debt is “only” $34 trillion. The federal government has spent roughly $200 trillion on everything since the Constitution was written in 1787, even adjusted for inflation.

Medicare Part B, which covers doctor’s visits and medical equipment, is the largest liability. It’s expected to be underfunded by $99.5 trillion.

Social Security needs an extra $68.8 trillion to be solvent.

Background: Medicare and Social Security are supposed to fully fund themselves through payroll taxes, health care premiums and benefit taxes, a process that worked well until the 1980s.

Former President Ronald Reagan, among others, warned of the looming funding crisis and encouraged Congress to pass the Social Security Reform Act of 1983.

But since then, the system has remained largely untouched.

Medicare spending was equal to 2.9% of the U.S. GDP in 2022, but the Congressional Budget Office expects it to reach 5.9% of GDP by 2052. Social Security spending is projected to rise from 4.9% to 6.4%.

Medicare is expected to start cutting benefits in seven years, but the long-term implications are much more serious. The Treasury is required by U.S. law to borrow money if there is not enough to pay for Medicare and Social Security, which may soon be impossible without multiplying the federal debt.

Summary: There’s no realistic path toward generating the amount of money needed to avoid slashing Medicare and Social Security payments. Politicians have deferred having this difficult conversation for decades, but soon that will no longer be an option.

 

 

NIH Awards Grants Based On “Diversity Statements”

April 9, 2024

Topline: A National Institutes of Health program expected to cost $241 million over nine years prioritizes “diversity, equity and inclusion” over merit when awarding grants.

Key facts: The Faculty Institutional Recruitment for Sustainable Transformation (FIRST) promotes “inclusive excellence” in science by paying top universities to hire researchers from minority backgrounds. 

FIRST has sent grants to 16 colleges since 2021, including four awards totaling $64 million in the latest round of funding.

All potential hires must submit a statement “describing their commitment to promoting diversity and inclusive excellence.”

Universities funded by FIRST have their own NIH-approved rubric for grading these statements, some of which the Wall Street Journal has obtained through open records requests.

Rubrics at the University of South Carolina and University of New Mexico penalize candidates who want to “treat everyone the same” regardless of their background and reward those who embrace DEI as a “core value,” according to the WSJ. The schools received $13 million and $15.6 million, respectively, from the NIH in late 2022.

Northwestern University’s rubric says that a candidate’s “commitment to diversity” is equally as important as their academic ability. The college received $16 million from the NIH.

At Florida State University, part of the initial wave of FIRST grants, 28% of the rubric is set aside for DEI.

Background: The Department of Health and Human Services pays out some of the highest government salaries in the nation. Eighteen employees made more than $400,000 each last year, according to records at OpenTheBooks.com.

The department has its own diversity office and an additional eight diversity offices for its subdivisions like the NIH and CDC.

Chief Diversity Officer Karen Comfort made $190,000 in 2023.

Critical quote: National Association of Scholars fellow John Sailer wrote in the WSJ that, “In medical research, lives depend on putting excellence first. The NIH distorts that value, subordinating it to political ideology and endangering those it’s supposed to serve.”

Summary: Debates over DEI don’t seem like they will stop anytime soon. Some state governments are banning the ideology, while the federal government is paying colleges millions to embrace it.

 

 

Maryland Railway Will Cost Billions More Than Necessary

April 10, 2024

Topline: Development on the Red Line transit system in Baltimore has been paused and restarted by several governors since 2008. Now it’s finally being built, but it will likely cost at least $300 million more than if it had been completed years ago — and potentially $4.3 billion more.

Key facts: The Red Line will use either buses or light rail trains to connect East and West Baltimore.

Planning began under former Maryland Gov. Martin O’Malley with an estimated cost of $2.9 billion. The Maryland Transit Administration secured a $900 million grant from the federal government and spent $300 million of its own money on planning and land acquisition. O’Malley approved a new gas tax to raise funds, which taxpayers still pay.

But once Republican Gov. Larry Hogan took office in 2015, he canceled the project and repurposed the federal grant. Hogan later said, “Everybody in that transportation department said that project made no sense whatsoever.”

Current Gov. Wes Moore took office in 2023 and restarted the project’s planning phase.

The new price estimates are alarming. If the route includes a tunnel — as was originally planned by O’Malley — it will cost between $5.9 billion and $7.2 billion, the MTA estimates.

Without a tunnel, it would still cost between $3.2 billion and $4.6 billion. So even the cheapest outcome costs $300 million more than if the Red Line had never been postponed.

The cost could be lower if Maryland uses buses instead of trains, but the state is already looking into acquiring rail tracks.

Critical quote: The train will also serve fewer residents than it would have in the past, according to policy analyst Marc Joffe.

Joffe also points out that light rail trains “inevitably operate at a loss,” with a similar Baltimore line costing $52.6 million to operate in 2022.

Supporting quote: The Baltimore Equity Transit Coalition said the Red Line’s postponement is a civil rights issue comparable to Jim Crow laws.

In an open letter, they wrote that the system is “an historic opportunity … for job creation and economic growth” that offers “accessibility for disabled riders” and is “the most effective response to climate change.”

Background: Light rail trains also need to be maintained by rail technicians, who earn impressive taxpayer-funded salaries in Maryland.

In 2022, there were 11 rail technicians at the MTA making between $200,000 and $275,000, per OpenTheBooks.com.

In total, there were 882 MTA employees making six figures in 2022 with a total payroll of $271.5 million.

Summary: If Maryland was going to build what may be nothing more than a boondoggle, they should have at least built it efficiently.

 

 

Throwback Thursday: Feds Spend Millions, But Demolish Tiger Stadium Anyway

April 11, 2024

Throwback Thursday! 

Topline: In 2008, the City of Detroit was offered perhaps the best construction contract imaginable: two companies offered to pay the city $300,000 for the opportunity to demolish the vacant Tiger Stadium.

Instead, the federal government earmarked $3.8 million to preserve the stadium — until Detroit voted to destroy it anyway, wasting $5.6 million in today’s money.

That’s according to the “Wastebook” reporting published by the late U.S. Senator Dr. Tom Coburn. For years, these reports shined a white-hot spotlight on federal frauds and taxpayer abuses.

Coburn, the U.S. Senator from Oklahoma, earned the nickname "Dr. No" by stopping thousands of pork-barrel projects using the Senate rules. Projects that he couldn't stop, Coburn included in his oversight reports.  

Coburn's Wastebook 2008 included 65 examples of outrageous spending worth more than $1.3 billion, including the $3.8 million earmark for Tiger Stadium.

Key facts: The Detroit Tigers baseball team moved to a new ballpark in 2000, leaving Tiger Stadium unused for years.

The city announced plans to tear the stadium down in early 2008 because two construction companies had agreed to do it for free. Steel prices were high at the time, and the companies wanted to keep and reuse the scrap steel.

A group of Tigers fans, though, banded together to form the Old Tiger Stadium Conservancy and petitioned the city to preserve the stadium, or at least save a corner of it.

The demolition companies did not like that idea. It would take more money and time to save a corner of the stadium instead of just razing the whole thing. The companies even offered to pay Detroit $300,000 just so they would not have to save the corner.

The Tigers fans did not convince the City of Detroit, but they did persuade then-Michigan Senator Carl Levin. He earmarked $3.8 million in the federal budget to renovate the baseball field for use by local teams.

There was just one problem: demolition had already begun. The project went on pause for months while lawmakers decided what to do.

Even the Tigers themselves weren’t interested in saving the ballpark, according to the New York Times.

In June 2009, Detroit's Economic Development Corp. commission voted 7 to 1 to finish destroying the ballpark.

By that time, scrap steel was not as valuable, and Detroit had to pay the demolition companies $400,000 to finish the job. Taxpayers would not have spent a cent had the project just gone on as planned from the start.

Lawmakers then had to find a new way to use the $3.8 million earmark. As of 2014, funds were still being dispersed to random businesses in the neighborhood — including a hot dog stand and an antique store — and it’s unclear where all the money eventually went.

Summary: For most private citizens, choosing between a $300,000 profit and a $3.8 million loss would be a simple decision. Once the federal government and earmarks are involved, that logic seemingly goes out the window.

 

 

D.C. Taxpayers Fund Mother’s Miami Vacation

April 12, 2024

Topline: Washington D.C. gave $10,800 to a new mother to help her deal with poverty, but she spent most of the money on a five-day vacation in Miami, according to the Washington Post.

Key facts: The “Strong Families, Strong Future DC” program is funded with $1.5 million to help expectant mothers with expenses like childcare and clothing. It has given 132 mothers either a $900 monthly payment or a $10,800 lump sum.

Canethia Miller used $6,000 to take her three sons and their father to Miami.

They ate steak dinners and took an expensive boat tour past the cities’ mansions — all on taxpayers’ dime, the Post reported.

Miller, 27, said she hoped the boat tour would inspire her kids to work hard so they could eventually live in a mansion.

Other trip expenses included a $180 makeover for Miller so she would not look like a “working mom” and new toys for her kids, according to the Post.

Miller also receives cash from a separate program to cover her $120 rent each month.

She dropped out of college in summer 2022 after her third child was born, which she said worsened her financial situation.

Supporting quote: Miller told the Washington Post that the D.C. program taught her how to save money for the future.

“A lot of communities in my area don’t know the financial gain of credit [or] saving for your kids; that’s why we’re broke. That’s why we don’t have nothing to pass down or no house to give down,” Miller explained. “I’m trying to get to the level where I’m passing something down that really matters, so I can be set and my kids can be set, and they don’t need to push so hard like I’m doing now.”

Summary: If Miller truly believes her lavish vacation taught her to be more financially responsible, then Washington D.C.’s welfare program may not be having its intended effect.

The #WasteOfTheDay is presented by the forensic auditors at OpenTheBooks.com.