When Will Folks Figure Out That the Federal Government Simply Does not Deliver as Promised
In spite of the federal government’s best intentions, they simply do not deliver what they say they are going to deliver. Furthermore, when they do deliver, it ends up costing 10 to 20 times what they originally said it was going to cost. In the private sector, doing this just one time would get folks fired yet we continue to empower our government to do this over and over and over again? Why? Here are just a few examples.
The United States Post Office (USPS) lost $5.7 billion during the nine-month period ended June 30th compared to $5.4 billion in the same period of 2010! In its fourth straight year of declines, the agency has a net loss of $8.5 billion for the 2010 fiscal year. In spite of the overall losses, the USPS said shipping and standard mail saw growth in the third quarter, with revenues up 7.3 percent and 1.7 percent respectively. Why is this happening? In the private sector, adjustments would be made to obviously get a handle on their costs. Why can’t the postal service do the same?
Large cost overruns are routine on federally funded transportation projects. An example is the Springfield, VA highway interchange project. This project was estimated to cost $241 million, but ended up costing $676 million. Then officials involved with the project claimed the project was completed on time and under budget when in fact the project cost 3 times what it was intended to cost. Did heads roll? —of course not.
How about the “Big Dig” in Boston. This is the underground local highway project that all of us taxpayers outside of the state of Massachusetts ended up paying for thanks to former Senator Kennedy. The Big Dig was the most expensive highway project ever to be done in America. It was plagued with escalating costs, scheduling overruns, leaks, design flaws, charges of poor execution and use of substandard materials, criminal arrests, and even four deaths. The project was scheduled to be completed in 1998 at an estimated cost of $2.8 billion. The project was not completed, however, until December of 2007 at a cost of over $14.6 billion. The Boston Globe recently stated that the project is still not completed as originally specified and that it will ultimately cost $22 billion included interest and not be paid off until 2038!
Not all federal government projects are mismanaged like the Big Dig but cost overruns and delays are routine. A government accountability office study found that half of the federal highway projects it examined had significant cost overruns in excess of 25%! And nothing is being done about this!
It goes on and on and one. Despite billions of dollars in cost overruns and years of delay, Lockheed Martin Corp and US Navy officials are hanging on to the development of a new “Presidential helicopter.” The program initially called for $6.1 billion in spending to develop and build the next generation of Marine One choppers—but the expected cost of the program is now estimated to be $11.2 billion.
In 2008, the GAO completed a review of costs and schedule of approximately 72 weapons program and found that the average cost overrun for development was 40 percent! A recent study by Deloitte Consulting agrees that defense cost overruns are getting worse.
Who is to blame—that’s an easy one—our Congress. They hold the purse strings and rather than looking after taxpayers interests, most members fight attempts to reduce spending in their districts.
These cost overruns go on forever. The Erie Canal project incurred a 46% cost overrun, the Panama Canal 106%, Hoover Dam a small 12%, Louisiana Superdome 366%, and the renovation of Yankee Stadium 317%.
The system is broken. Many times these proposed project are low-balled when they are proposed to Congress, and then after approval, it moves ahead and becomes very difficult to terminate even if it becomes an obvious boondoggle.
This kind of low-balling happens also in entitlement programs. When Medicare Part A was enacted in 1965, costs were projected to rise to $9 billion by 1990, but the costs were actually $67 billion that year! When home care benefits were added to Medicare in 1988, they were projected to cost $4 billion by 1993, but ended up costing $10 billion. When the 1996 farm law was passed, subsidies were stated to be $47 billion in total between 1996 and 2002, but were in fact $121 billion.
Now for the big one. The 2003 Medicare prescription drug bill. Bush promised that the legislation would cost $400 billion in the first 10 years, but in fact after passage, this number was immediately adjusted to $534 billion.
What is the solution? Simple—reform the procurement process and terminate or privatize as many federal activities as possible. Move state projects back to the states and get the federal government out of play, which in effect will shrink the size of government.
One more detailed example please. Amtrak ridership has increased year after year and has climbed 18 consecutive months. Yet, Amtrak’s financial losses are projected to widen this year. Amtrak officials project an operating loss of $506 million in the current fiscal year ending September 30th, up from a loss of $419.9 million last year. Amtrak officials have projected a loss next year of $616 million. This is a waste of taxpayer money. Federal subsidies cover about 16% of Amtrak’s operating expenses, which are projected to total $3.94 billion this year. How can you be serving more and more passengers yet at the same time, losing more and more money? Amtrak was created by Congress. Besides the operating subsidies, it also received recently a $450 million capital appropriation to upgraded a 24 miles segment between Morrisville, PA and New Brunswick, NJ. Why are we not pushing to open Amtrak lines to competing rail operators thereby creating some competition? All of these costs translates into American taxpaying citizens providing a subsidy of $32 for each and every passenger who rides an Amtrak train during the year which is four times the operator’s estimate-seeing a pattern here?
I could give so many more examples. I will mention just a few here—but the point is made—we must get control of this spending and these overruns—they simple are not tolerated in the private sector so why are we accepting them in the public domain.
Denver International airport—original estimate was $1.7B—final cost $4.8 billion.
Clinch River Breeder Reactor program-original estimate $400 million- final cost $4 billion
Future Gen clean coal project- original estimate $1 billion—final cost $1.8 billion
C-130J Hercules- original estimate $10.9 million- final cost $430.3 million
Extended Range Munitions- original estimate $86.8 million—final cost $ 500.1 million
Air Traffic control modernization- original estimate $8.9 billion- final cost $14.6 billion
Why would anybody in their right mind believe the Obamacare projections—or that the federal government is actually capable of curing the high cost problem in healthcare? Only a fool. The government is simply incapable as demonstrated time and time again of hitting their budgeted targets or that of the CBO—it simply does not happen. So we should as prudent and common sense people just assume that Obamacare in the end will most likely cost 10X of what is proposed. Logic and demonstrated track record here prevails. It is for this reason, that hopefully after the elections in 2012, we can again put our representatives in Washington back to work to kill this really ugly piece of legislation.