Oh, That Trillion Dollars? Let Me Think...
I understand the impulse to cut the Obama Administration and the Democratic Congress some slack — they came into power under circumstances too awful for any government to manage well, given the number of fragile glass balls in the air, and it is a national habit to bolster new executives with high approval numbers until they inevitably use that latitude to mess up. What I want to suggest, especially to fiscal conservatives like Andrew who are inclined to give Obama & company the benefit of various doubts for awhile longer, is that we literally cannot afford to do so.
Consider this breathtaking, terrifying exchange:
Rep. Alan Grayson (D-Fla.): Have you reached any conclusions about the Fed expanding its balance sheet by over a trillion dollars since last September?
Federal Reserve Inspector General Elizabeth Coleman: We have not reached any conclusions.
Grayson: Do you know who received that money?
Coleman: For, the, we’re, we’re in the process right now of doing our review, and, um…
Grayson: Right, but you’re the Inspector General. My question to you specifically is do you know who received that one trillion dollars plus that the Fed extended and put on its balance sheets since last September? Do you know the identity of the recipients?
Coleman: I do not know. We have not looked at that specific area at this particular point on those reviews…
Grayson: Well, I have a copy of the Inspector General Act here in front of me, and it says among other things that it’s your responsibility to conduct and supervise audits and investigations related to the programs and operations of your agency. So I’m asking you if your agency has, in fact, according to Bloomberg, extended $9 trillion in credit—which by the way works to $30,000 for every man, woman, and child in this country. I’d like to know, if you’re not responsible for investigating that, who is?
Coleman: We actually, we have responsibility for the Federal Reserve’s programs and operations, to conduct audits and investigations in that area. Um, in terms of who’s responsible for investigating—would you mind repeating the question one more time?
Grayson: So are you telling me that nobody at the Federal Reserve is keeping track on a regular basis of the losses that it incurs on what is now a $2 trillion portfolio?
Coleman: I don’t know if—you’re mentioning that there’s losses. I’m just saying that we’re not, until we actually look at the program and have the information, we are not in the position to say whether there are losses or to respond in any other way…
Admittedly, I am not entirely conversant in the topic being discussed, but is there any possible gloss on that conversation that isn’t phenomenally troubling? 2 trillion dollars? Oh yeah, I remember hearing something about that. Is it my job to keep track of it? Technically, except, um, well it depends on what you mean by responsible, really. I feel as though I’m watching that scene in It’s a Wonderful Life where well-meaning Uncle Billy wraps the Bailey Brothers Savings and Loan reserve funds in a newspaper, promptly forgets having done so, and hands the town’s fiscal future to the first unscrupulous profiteer he encounters.
As I said, I understand the impulse to cut these folks some slack, but upon reflection I cannot really think of a time when that kind of attitude actually helped the country, though the CW says there’s supposed to be a honeymoon period. Well, okay, can it be over now? The sums of money at stake here are really phenomenal, and safeguarding them really ought to be a priority—if it takes pointed criticism to illuminate the apparent fiscal irresponsibility we’re witnessing, so be it.
So well done, Rep. Alan Grayson (D-Fla.). Now if the press and the blogosphere would do some follow-up on a scale commensurate with what’s at stake…
The sums of money at stake here are really phenomenal, and safeguarding them really ought to be a priority—if it takes pointed criticism to illuminate the apparent fiscal irresponsibility we’re witnessing, so be it.
I hate to be a broken record, here, but where has this attitude been towards military expense for the last, oh, 30 years? The military budgets have been insanely large for my entire lifetime. It’s difficult to take seriously general opposition to government profligacy when the person so opposed hasn’t been beating the drum against yet another aircraft carrier or stealth bomber— two examples chosen because they represent areas of combat where the United States not only has no rivals, but where there is no conceivable path towards which we could have rivals in the next 20 years.
Here’s the opening, I think: people who are really concerned about the size of these numbers can start a bipartisan movement limiting government spending if they demonstrate the fortitude to take on the military-industrial complex, the most powerful and jealously guarded edifice in American politics. It would lend both cross-ideological integrity and inoculate the people involved from charges of hypocrisy.
We’ve all of us, Democrats and Republicans and others, got to stop pretending that somehow money spent on defense isn’t real money. It’s the biggest piece of the pie, if you include the nuclear arsenal and the Department of Homeland Security, and the easiest to cut without a meaningful impact on the quality of American life.
— Freddie · Jun 9, 02:38 PM · #
It’s odd, while one part is said to favor more private sector regulation, and the other side is said to favor more transparency in government spending, we seem to be finding ourselves in a time in which the general public is clamoring for more of both but Obama is opposed—or at least kind of dragging his feet—on both.
Obama has two defences here. He might be afraid that getting to too strict with where the money is going would disrupt the economy’s “animal spirits”. The instance above strikes even me as a bit too egregious to be justified by that, though.
The other defence is that Congress, especially the Senate, makes it so ridiculously hard to pass laws that the only way to get any major reform is to ram it through as fast as you can, greasing as many wheels as you have to. That speed introduces inefficiencies and losses, but those will have to be cleaned up later.
Whether or not one agrees with that logic, the president seems to buy into it. Which means, paradoxically, that putting up more barriers will tend to make the president’s agenda more, not less, wasteful and inefficient.
— Consumatopia · Jun 9, 02:56 PM · #
Freddie,
It is funny that you ask where this attitude has been for the last thirty years when the person who wrote the post — me! — isn’t even thirty years old yet. Were I to answer for people who aren’t me, however, I suppose I’d say that base closing commissions and Clinton-era post Cold War defense cuts show some willingness to reduce military budgets, but that generally speaking it is very difficult to recommend specific cuts to the military budget due to unfamiliarity with what is actually wasteful combined with an understandable need for classified spending that nevertheless contributes to waste.
I’d certainly be willing to lend my support to defense cuts if I saw a strong, unrefuted argument that some specific expense is unnecessary. But I reject the idea that posts like mine calling on Americans to demand more fiscal responsibility from government should be rejected due to supposed hypocrisy on the part of unnamed people who worry about government spending, deficits and the national debt.
You write, “It’s difficult to take seriously general opposition to government profligacy when the person so opposed hasn’t been beating the drum against yet another aircraft carrier or stealth bomber.” Well okay, if you’re so disposed, don’t take my general opposition seriously (after all, it’s much more plausible that I’m just in the pocket of the Club for Growth and the Military Industrial Complex!).
But while you’re not taking my general opposition seriously, realize that my particular motives or consistency are utterly irrelevant to the pertinent question here — whether, in this specific case, the Obama Administration is exercising laughably irresponsible oversight over trillions of dollars, and in general whether they are jeopardizing our ability to respond to all future problems this country will face by frivolously spending gob-smacking amounts of money without even minimal efficiency or transparency.
— Conor Friedersdorf · Jun 9, 03:30 PM · #
Look, I love the military. I harbor man-crushes on its wicked cool weaponry, and on its ability to drop MOABs anywhere in the world at the drop of a hat. I’m a big fan of America’s BSDness, and feel its much better to be a BFG with a drinking problem than almost any other thing imaginable.
Except for, of course, a BFG without a drinking problem. And that’s where I join with both Conor and Freddie: we need to start marking the bottles.
— Sargent · Jun 9, 03:37 PM · #
Well said.
— nicholas · Jun 9, 03:39 PM · #
Rather,
Well said, Conor.
— nicholas · Jun 9, 03:41 PM · #
Of course. I mean, there’s a gloss that’s a lot more staid and typical. It might still be phenomenally troubling, depending on your outlook. It goes:
No, I couldn’t say right here and right now where it went but of course someone down in the bowels of the organization knows and there are procedures in place so we don’t just throw the money in a hole. And yes it’s my responsibility to investigate these issues, but we haven’t had an investigation yet, have we? Would you like one, or are you too busy preening in front of the public with gotcha questions?
— sidereal · Jun 9, 04:08 PM · #
I’m sorry, but I think both you and Rep. Grayson have a fundamental misunderstanding of what auditors do. The auditors primary function is to audit <i>after the fact<i> that transactions are properly recorded, that there is proper authorization for the transactions and that the control systems for the transactions were properly followed (they do more, but those are the main things). An auditor isn’t going to know who received every dollar and an auditor isn’t going to know about losses that haven’t been realized or entered in the financial records. This is just political grandstanding on Grayson’s part and really adds nothing to the discussion.
— Steven Donegal · Jun 9, 04:23 PM · #
How’s that Obama thing workin’ out for you?
— Bob Cheeks · Jun 9, 04:52 PM · #
Steve –
I agree, Steve, there is a fair amount of grandstanding on the part of Rep. Grayson, attempting to portray himself as concerned over the control and oversight of the expenditure of these many billions of dollars the government is spending, but this is how our elected representatives tend to act. I am afraid I have become fairly cynical regarding their activities, for it seems it is not what they do that matters to them, so much as what they are perceived to be doing. Still, it does not detract from Conor’s greater point, which I believe is best summed up:
the Obama Administration is exercising laughably irresponsible oversight over trillions of dollars… frivolously spending gob-smacking amounts of money without even minimal efficiency or transparency.
What would be your thoughts regarding that view?
(As an aside, the textile format differs from HTLM code in that it generates italics by typing the underline key ( _ ) before and after the word or phrase, like this)
Thanks for your comments.
— nicholas · Jun 9, 05:20 PM · #
Sidereal writes: “of course someone down in the bowels of the organization knows and there are procedures in place so we don’t just throw the money in a hole. And yes it’s my responsibility to investigate these issues, but we haven’t had an investigation yet, have we?”
Yes, that is still phenomenally troubling to me — the idea that trillions of dollars might be spent without any way to determine whether they were wasted until after the fact, and the only hedge against that being that some person (we’re not sure who!) at an obscure and unaccountable level in the bureaucracy is the only check against this happening…
I’m not sure if that hypothetical scenario is what’s actually happening, but like I said, is there any gloss that isn’t deeply worrisome?
Steven, you’re right, I don’t know how auditing works. Your points seem fair insofar as they show that the rep in question was grandstanding. Still, I think the grandstanding illuminated realities that voters like me hadn’t realize. Like, for example, that insofar as there is oversight of all this money it is basically exercised long after it’s too late to do anything about it.
— Conor Friedersdorf · Jun 9, 05:40 PM · #
First of all, this is the Federal Reserve, which is independent of the Obama administration.
Second of all, this is cheap grandstanding by some moron congressman (God, how I hate them all!). Obviously the inspector general of the Fed doesn’t know from whom exactly the Fed purchased assets in the past year. The head of internal control at JP Morgan doesn’t know from whom exactly JP Morgan purchased assets in the past year. It’s a stupid question (or set of questions, really, since the moron floats from one issue to another rather incoherently).
— y81 · Jun 9, 06:25 PM · #
You gotta love y81.
— nicholas · Jun 9, 06:51 PM · #
If you wanted to cut social security, it would be unreasonable for me to insist that you look at the budget of every individual receiving benefits and determine exactly which purchases were unnecessary.
If we had guaranteed univeral education up to grade 30 instead of grade 12, and you thought that was too much, it would be unreasonable for me to expect you to name every single class you would want removed from the curriculum.
Our current military expenditures, relative to those of current rivals, are equivalent to grade 30 universal education. The problem is not that the particular weapons we buy are bad buys, but that any possible weapons we would buy with the last marginal dollar must be bad buys. There is no possible curriculum that would justify that 30th year of schooling for all Americans, and there is no possible weapon that would justify that 500 billionth dollar spent today.
Now, it would be fair to ask for specific cuts in deployments, and my answer would be “most of them”. Until Obama actually brings more troops home, serious cuts will have to wait. But cuts must be made, otherwise the economies of our rivals will race ahead of our own, which would eventually let them match and surpass our military spending. Spending more today means less available to spend tomorrow.
— Consumatopia · Jun 9, 07:01 PM · #
the Obama Administration is exercising laughably irresponsible oversight over trillions of dollars… frivolously spending gob-smacking amounts of money without even minimal efficiency or transparency.
They are definitely spending gob-smacking amounts. It isn’t clear to me, however, that the Obama administration’s oversight is more or less responsible, efficient or transparent than any other administration. One should also not confuse the Federal Reserve with the Obama Administration. While Obama may approve of the way the Fed has pumped up its balance sheet, the Fed is an independent agency. Of the many things for which I am critical of the Bush Administration, the actions of Greenspan’s Fed during the early part of the decade are not among them.
And thanks for the Textile tip
— Steven Donegal · Jun 9, 08:09 PM · #
Look, $1 trillion is only 7% of our economy. 7% of anything isn’t much compared to the other 93%. And as y81 says, why in the world would anyone expect the inspector general to know where it’s going, or to know if anyone else knows where it’s going, or even who she would ask if she were so stupidly inclined to find out where it’s going. Y81 is absolutely right. It’s way too much money for any government office to conceivably track. The idea of even asking questions about it has to be the most mind-numbingly stupidest thing I’ve ever heard.
— Doug · Jun 9, 08:11 PM · #
Doug, that isn’t what an auditor does. An auditor verifies that money was spent appropriately; she doesn’t compile a list of the names of the people who got the money. The congressman is just babbling.
— y81 · Jun 9, 08:23 PM · #
The notion that anyone, anywhere can manage the amount of money that we’re talking about here is insane. The best and the brightest in the world, at the world’s largest corporation (and the most EEEEEVIL), Exxon Mobil, are managing what, $100 billion. And these punks, who’ve never had a real job in the private sector, are trying to tell us they can manage trillions? When are Americans going to wake up?
— jd · Jun 9, 08:39 PM · #
Y81—You’re damn right! He’s so stupid I can’t believe it. Personally, I wouldn’t even say it rises up to babble. Wait, I’ll read it again…no, it doesn’t!
— Doug · Jun 9, 08:41 PM · #
The notion that anyone, anywhere can manage the amount of money that we’re talking about here is insane.
Well, some people thought they could manage quadrillions in derivatives. They turned out to be insane, so your point still holds, but its worth noting that this sort of insanity is not restricted the public sector.
— Consumatopia · Jun 9, 08:52 PM · #
Who was that who thought he could manage quadrillions in derivatives? I want his name and the name of his company.
Please don’t tell me he’s one of Obama’s czars.
— jd · Jun 9, 09:04 PM · #
Quadrillions in derivatives were created, sold, and bought by somebody, and it wasn’t the government.
No one said it was a single individual, as it isn’t a single individual managing the government’s assets, either.
— Consumatopia · Jun 9, 09:28 PM · #
Quadrillions in derivatives were created, sold, and bought by somebody, and it wasn’t the government.
No one said it was a single individual, as it isn’t a single individual managing the government’s assets, either.
Yes, but you make my point. Do you not see the difference between what you describe in the private sector and the government doling out trillions of dollars? If not, then the discussion about public versus private is pointless.
— jd · Jun 10, 01:00 PM · #