The following appears in the April 6-12, 2012 issue of the Long Island Business News:

The first-ever state corruption risk investigation performed by the Center for Public Integrity has been released, and the findings are depressing.

After examining state government anticorruption programs and policies, and accountability and transparency standards utilizing 330 integrity indicators, the center concluded that not a single state deserved an A grade. Five states were awarded a B, 19 a C, 18 a D and eight states received an F.

The primary reason for the poor grades: Ethic laws, disclosure procedures, open records and enforcement policies lack the bite needed to effectively combat the culture of corruption that has infested the inner sanctums of many state governments.

The most surprising grade was New Jersey’s B+.  Jersey, which has been the mecca of corruption, investigations and indictments, did well because in recent years it has enacted “some of the toughest anticorruption laws in the nation.” It boasts a transparent pension fund, a powerful and aggressive ethics enforcement agency, detailed financial disclosure requirements for the governor and other state officials, and genuine anti-pay-to-play laws for contractors.

Sadly, New York came in 36th place with an overall grade of D.

This poor grade should not be a surprise to New York taxpayers who have watched the membership of Albany’s Gallery of Rogues grow by leaps and bounds in recent years. Seventeen state legislators have left office to confront corruption charges or to check into prisons during the last 11 years.

The latest gallery nominee, former state Sen. Pedro Espada Jr., is on trial in federal court answering charges of six counts of embezzlement and theft totaling millions of dollars. If convicted, he will become New York’s poster boy for corruption.

One count of the indictment accuses Espada of stealing more than $200,000 from Soundview, a government-supported charity, between 2005 and 2009. This indictment alleges that the money was used to pay for lavish dinners, Broadway show tickets and a down payment on a Bentley. He’s even accused of pressuring a videographer, who filmed his grandson’s birthday party, to bill the Community Expansion Development Corp., a cleaning company controlled by Espada, and to call the party a “Children’s Community Outreach” event.

While Albany’s wrongdoings get most of the media attention, New York’s local municipal employees and officials are not immune from criminality. Just this past week a former assistant commissioner in New York City’s Department of Housing Preservation and Development pleaded guilty to accepting $600,000 in bribes and kickbacks.

A University of Illinois Institute of Government Affairs report, released in February, named New York the most corrupt state in the nation. Department of Justice public corruption convictions compiled by the Institute revealed that between 1976 and 2010, 2,522 public employees were found guilty of crimes. Runners-up were California and Illinois, which had 2,345 and 1,828 convictions, respectively.

Until New York creates a truly independent public ethics commission and really tough and transparent disclosure, accountability and campaign finance laws, all of which keep political foxes out of Albany’s henhouse, expect the state to continue receiving poor and failing grades on the Corruption Risk Report Card.

Statement by
George J. Marlin
Director
Nassau Interim Finance Authority

March 22, 2012

At NIFA’s December 8, 2011 meeting, I agreed to support the County’s multi-year plan to achieve a GAAP balanced budget contingent on the County cutting $150 million in spending from its 2012 operating budget.  In my statement that day I said:

And let me remind the County that approval of a plan is not approval of all the parts.  NIFA will base the approval of each part of the plan that comes before us in the coming months on whether the County carried out its responsibilities.

To date, the County has achieved, at best, only 60 percent of those cuts.  And the County is two months past its budget imposed deadline.

Today I voted for 60 percent of the County’s Capital spending request.  If the County does not quickly meet $150 million in cuts, I expect to vote No on future requests.

Some other comments:

1. I am concerned that the Memos of Understanding with the police and detective unions announced this week may wipe out some, most or all of the police precinct closings projected savings.  I await back-up documentation from the County. 
2. As promised at our last meeting, I sent a letter to the New York State Comptroller’s office outlining my concerns regarding Nassau County’s contracting procedures and its interaction with regulations and state and local laws.  In that letter I said:

The County, in 2011, may have violated regulations, procedures and laws related to contracts over $25 thousand on numerous occasions.  There appears to be a pattern of vendors being hired to perform non-emergency services without prior legislative or NIFA approval.  Time and again the County has submitted contracts to NIFA where work had been already completed or substantially underway.  There have also been complaints from charities that provide essential social services for the poor and disabled that the County has delayed, in many cases for months, forwarding their federally- and state-funded contracts to NIFA for approval.

In my judgment, the County’s actions make a mockery of the statutory responsibility delegated to NIFA to approve or disapprove contracts and effectively nullifies the clear legislative intent of the NIFA law, one enacted pursuant to a unanimous vote of the County Legislature in a home rule message, a vote that included that of then County Legislator Mangano.

I am pleased to report that I received a reply from the State Comptroller’s Examiner-in-Charge of the audit, Mr. Ira McCracken.  He has assured me that he will investigate the issues I raised.

      3.    The County has a habit of announcing deals before it has a deal.

The County announced it had a coliseum deal with Wang before it had a deal and subsequently were taken to the cleaners.  Fortunately the voters had the good sense to reject the plan.

Then there was the Mitchell Field borrowing.  The County announced it had a deal before it had a deal and the County was taken to the cleaners.  I voted against that borrowing.

Then the County announced it had a bus privatization deal before it had one—and the County was once again taken to the cleaners.  I reluctantly voted for that contract in late December because County residents needed bus service on January 1, 2012.  However, I predicted the bus contract would prove to be a disaster for commuters—and sadly that is coming to pass.

This week the County announced the makings of a new borrowing scheme—without a deal in hand.  If it becomes a reality it will be the biggest one-shot revenue fiscal abuse in the County’s history.  It will replace Governor Mario Cuomo’s sale of Attica Prison to the Urban Development Corporation as the poster child of one-shots.  (Just in case the County has forgotten, let me remind the County that any net revenue after Nassau sewer bonds are defeased would, under GAPP, have to be amortized over the life of the lease contract.)

As always, the devil will be in the details.  But I find it hard to believe that the County will negotiate a deal with a for-profit corporation that will not result in significant increases in sewer charges (a/k/a Toilet Flushing Tax) for Nassau’s over-taxed residents.

It appears to me that the sole motivation for leasing the Sewer Systems is to get one-shot revenue that at the end of the day will not fix the County’s structural operating deficit.  Whether or not it is good public policy does not appear to be part of the equation.

Personally, I agree with Governor Andrew Cuomo’s position, that government “has used a variety of financial gimmicks and one-shot revenues that hide the fact that spending is growing at an unsustainable rate.”

“One shots” do not eliminate structural deficits and excessive reliance on them is frowned upon by rating agencies and financial analysts.

 The following appears in the March 23-29, 2012 issue of the Long Island Business News:

There has been much chatter among media talking heads about a study conducted by Cornell University psychologist David Dunning that concluded our democratic form of government is fatally flawed because voters are dumb.

According to Dunning, most people are not smart enough to pick the best candidates running for office or to make sound public-policy choices. Worse yet, the “Dunning Effect” alleges the dopey electorate suffers from “illusionary superiority” because they do not know they lack the mental capacity to make sound judgments. “To the extent you are incompetent; you are a worse judge of incompetence in other people. If you have gaps in your knowledge in a given area, then you’re not in a position to assess your own or the gaps of others,” Dunning has said.

Well, if the electorate is dumb, are the people they elect to federal, state and local offices dumb, too? They must be because they are not experts on every law they vote for or on every public policy they impose on the people they represent. For instance, during the ObamaCare debate, Speaker Nancy Pelosi admitted she had no idea what she was voting on. “We have to pass the bill so we can find out what’s in it,” she blurted in a news conference.

And what about judges? They certainly don’t have superior knowledge of every issue they rule on. Should the federal judge who complained in a ruling he made in January that the Medicare statute is an incompre-hensible “tortuous” text resign or be impeached?

If the voters and their elected representatives are not competent to govern, just who is? The answer for people like Dunning: managerial elites – that small, self-sufficient group who believe they have the training, special knowledge and expertise to rule.

Throughout the history of mankind, every society has had a subset of people who viewed themselves as superior to the rest of the population due to their self-perceived distinctive qualities: intelligence, breeding, class or wealth. These elites have generally held that because they are exceptional persons they are best-suited to conduct the affairs of state. The ideological formulas of these elites may vary but their ends have been the same – the domination of the common man. These self-proclaimed “managers of the collective life” expect the people to submit to their notions of the good society. For them, “government by the people” has been merely a slogan to humor the masses.

In the Age of Barack Obama, the economic crisis opened whole new vistas to these managerial types. The New York Times columnist David Brooks has claimed the new standards are being dictated by “Ward Three” bureaucrats. Ward Three is a neighborhood in northwest Washington, D.C., populated by regulators, staffers, lawyers and senior civil servants – the new managerial class.

The agenda of Obama’s professional governing class is not limited to economics. Obama czars and regulators are reaching into every home and church. Their significance in the world hinges on the transformation of America into a Ward Three nation. For them, liberty means obedience to the enlightened values of a managerial elite.

Frankly, I reject the Dunning Effect and subscribe to the view expressed in 1962 by the late William F. Buckley Jr., “I should sooner live in a society governed by the first two thousand names in the Boston telephone directory than in a society governed by the two thousand faculty members of Harvard University.”

I celebrate the common people who had the good sense to elect Jackson, Lincoln, Cleveland, two Roosevelts, Truman, Eisenhower and Reagan. And I honor the “Greatest Generation,” common people who willingly took up arms to defeat the forces of tyranny.

I’ll bet every time on the common sense of the ordinary Janes and Joes to set and observe the standards and policies for their neighborhoods over tin-eared, condescending, detached, arrogant, remote elites who believe they have a providential role and know what is best for all Americans.

The following appears in the March 9-15, 2012 issue of the Long Island Business News:

As Democrats and Republicans slug it out in the public square over the so-called “fairness” issue, the facts are every year fewer people pay federal income taxes and more people become dependent on government entitlement programs.

In 1984, the percentage of people who did not pay a dime in federal income taxes and were not claimed as a dependent by a person paying taxes was 14.8 percent. Since then the percentage has increased every year and in 2000 stood at 34.1 percent and by 2010 it had risen to 49.5 percent.

In terms of real numbers, 34.8 million filers paid zero taxes in 1984 and 151.7 million paid nothing in 2009. As the 2012 Index of Dependence on Government report compiled by the Heritage Foundation recently reported, “The country is now at a point where roughly one-half of ‘taxpayers’ do not pay federal income taxes and where most of that same population receives generous federal benefits.”

The declining number of taxpayers is forking over hard-earned dollars to fund dependence-creating programs – housing, health care, welfare, retirement, higher education, rural and agricultural services – that are growing by leaps and bounds. In 2010, these programs consumed 70.5 percent of federal spending, versus 28.3 percent in 1962 and 48.5 percent in 1990. The Cato Institute has estimated that the Feds fund more than 2,000 subsidy programs, up 200 percent since the early 1980s. This explains why total federal spending between 2000 and 2010 grew 62 times faster than inflation, and antipoverty spending jumped 89 percent faster than inflation.

Social Security and Medicare, for example, have an unfunded liability of $45.9 trillion – about $200,000 per citizen. The number is huge because during the next 25 years, 77 million baby boomers will begin drawing Social Security checks and will begin receiving Medicare benefits. Ten thousand boomers a day will be eligible to start collecting checks.

Since these two programs are mandatory government obligations and are not part of the federal budget process, all federal revenues must first go to fund them before a single dollar can go to fund budgetary priorities like the armed forces. In other words, to keep the government operating, trillions will have to be borrowed annually.

Welfare expenditures have also been rising. The highly successful 1996 Welfare Reform Act which brought down the number of case loads by 57.5 percent between 1996 and 2010 was emasculated by the Obama administration. In 2009, President Barack Obama signed into law legislation that reverted the welfare system to pre-1996 funding programs that encouraged the swelling of welfare rolls and eliminated many of the Clinton administration’s reforms that encouraged self-sufficiency.

As a result, the national welfare system now consists of 70 programs, six federal departments and scores of state agencies, and will cost about $900 billion this year. A typical welfare recipient receives assistance from a half-dozen programs including Medicaid, food stamps and public housing.

And don’t expect spending on poverty programs to decline after the United States gets through the recession. Obama in his proposed 2011 federal budget projected spending $10.3 trillion on welfare over the next 10 years.

Reviewing these spending trends, the Heritage Foundation rightly concludes that all Americans who support our Republican form of government should be concerned. “If the citizens’ representatives are elected by an increasing percentage of voters who pay no income tax, how long will it be before these representatives respond more to demands for yet more entitlements and subsidies from nonpayers than to the pleas of taxpayers to exercise greater spending prudence?”

If Washington politicians do not learn to say no, do not effectuate genuine tax and entitlement reform and start promoting opportunity, not dependence, our nation could be buried under an avalanche of debt and could experience an economic and fiscal meltdown similar to Greece, Spain and Italy.

 The following appears in the February 24-March 1, 2012 issue of the Long Island Business News:

 In a remarkable essay titled “The Once and Future Liberalism,” historian Walter Russell Mead explains why “the core institutions, ideas and expectations that shaped American life for the 60 years after the New Deal don’t work anymore.”

In the post-World War II era, the United States was the world’s richest, most powerful and most productive nation. We possessed half the world’s wealth and produced two-thirds of the world’s machinery. British historian Robert Payne, after touring the United States in 1949, rightfully concluded “the rest of the world lies in the shadow of American industry.”

To secure their slice of the American dream, the “Greatest Generation,” World War II veterans, embraced what liberal economist John Kenneth Galbraith called the “Iron Triangle”: Big Government, Big Business and Big Labor Unions. Taken together this “blue model,” as Mead calls it, permitted both blue-collar and white-collar workers to procure lifetime industrial and government jobs that provided defined benefit pensions, shorter work hours, more leisure time and earlier retirement.

In the “halcyon days of the blue model,” American industries, utilities, insurance companies and banks were so mighty and so protected by federal regulators they could easily afford the expense of these higher labor costs by simply passing them on to their captive customer base.

By the 1970s, however, the industrial blue model began to decay and today it is financially in extremis. New communication models, foreign competition, offshore financial markets and the environmental movement were the death knells for Ma Bell, the Detroit auto industry, regulated airlines and banks, and scores of manufacturing plants.

Private sector managers and their trade labor union employees that clung to the blue model (i.e., steel industry) experienced shrinking market shares and profitability, and eventually went out of business.

The few blue companies that have continued to limp along have needed government trade protection or direct subsidies to survive. In Mead’s judgment, however, “neither works very well or for very long. Both are unsustainably expensive given current levels of national debt … and using public resources to try to prop up the old system is a waste of those resources and a hurtful diversion from the need to figure out what we need to do next.”

The great American crisis today, Mead argues, “is the accelerating collapse of blue government, not blue private industry, which is a phenomenon largely behind us.” The costs of the blue system social contract – retirement and other social benefits – are exploding and it is unlikely that federal, state and local governments, “the last true blue employers,” will be able to fund these obligations at some future point. Voters, particularly those with insecure private-sector jobs, defined-contribution pension plans and incomes below public-sector workers, will refuse to be taxed to pay for the costs of blue government.

Concluding that most politicians and bureaucrats have refused to face fiscal realities, Mead gives this gloomy prognosis:

As long as the federal government can print money and find lenders to buy its bonds, it can bleed slowly. … But state and local governments increasingly need vast transfers of cash from the federal government to keep their blue noses above the rising tide. The stock market declines after September 2008 wiped out huge chunks of the wealth that state pension systems needed to have even a hope of paying the pensions promised to government retirees. … California and New York are headed over the cliff without federal bailouts, and others are following close behind. That is why a substantial share of the Obama administration “stimulus” spending was targeted less at New Deal-era infrastructure projects than at simply keeping unsustainable state bureaucracies and systems afloat for a few months or years longer.

Mead’s trenchant essay on the need to get beyond the dysfunctional and outdated ideas of 20th century liberalism is a must read particularly for delusional Long Island politicians who strive to “retrieve the irretrievable” blue government model.