Pigford: The Unexamined Obama Administration Scandal

The Obama administration has again been protected from a troubling scandal by the mainstream media (MSM) using the tactic of omission to simply ignore the scandal, its reality and the negative blowback attendant to a disturbing story.  As sunlight began to illuminate the scandal’s inconvenient and troubling facts, charges of racism were used to temporarily silence those sounding the alarm.  Seemingly, the alarm-ringers’ only crime was having the temerity to respond to the abuses of Pigford with a politically incorrect point of view to those abuses.

The under-reported scandal referenced is generally identified as Pigford.  Pigford’s germination occurred in 1997 as a lawsuit (Pigford vs. Glickman) alleging that 91 African-American farmers were unfairly denied loans by the United States Department of Agriculture (USDA) due to racial discrimination which prevented the complainants from farming.  In 1999, the black farmers won their case.

Pigford has the distinction of being an out of control waste of taxpayer funds and/or a cynical attempt by the Obama administration to curry favor with certain minority groups  to which neither President Obama nor Attorney General Eric Holder can plead ignorance of involvement.  Both have had knowledge since the court ruled on the Pigford lawsuit; in 2008 then Senator Barack Obama supported and voted for the funding of the initial settlement.  Since then Eric Holder (and Obama) have been involved in overseeing and managing the Pigford ‘judgment fund’.

Yet can Pigford be fairly described as a scandal? 

Pigford began innocently enough as a lawsuit to redress a perceived wrong negatively affecting a group of 91…  But then the number climbed to 400…then 1,600…then… 

The number of black farmers has metastasized, nay exploded, and the aggrieved group now includes not only blacks, but Hispanics, Native Americans and females.  In fact over 90,000 people have filed claims seeking a payment under the terms of the original Pigford court ruling.  That decision, now referred to as Pigford #1, was anticipated to cost approximately $120 million including legal fees. 

Pigford #2 is the appellation used to identify an expanded payment regime that funds more African-American payments, Native Americans, Hispanics and females.  This regimen grew out of the fact that thousands of claimants missed the original Pigford #1 filing deadline of October 12, 1999.  Interestingly potential Native American claimants were estimated at 5,300 while ‘plaintiff’ lawyers pegged the exposure at an estimated 19,000 Native Americans.  The ‘judgment fund’ announced by Agricultural Secretary Thomas Vilsack and Eric Holder in 2010 was expanded from just over $120 million to $1.25 billion given the expectation of many more filers.

However, the explosion of claimants has caused payouts to reach $4.4 billion and has swelled legal fees to over $130 million.  More importantly the claim’s process created a rush to get a share of the monies allocated to the ‘judgment fund’ even if no real claim existed.  Essentially the process encouraged people to lie and spawned a cottage industry.  Claimants had only to file applications for a $50,000 payment by stating that they had ‘thought’ about applying for loans to become a farmer.  Proof of a claimant’s intent to farm also included a statement from that petitioner saying he or she had attempted to farm by planting a batch of tomatoes in his or her backyard and having that statement verified by a family member.   In essence the need to be a farmer at the time of the alleged discriminatory actions by the USDA was not a requirement to share in the financial redress.   

Fraud was endemic to the claims process -- for example every apartment… in a New York City building received a settlement of at least $50,000.  Further, some families received checks of $50,000 for each family member (see NYT’s fraud identification narrative of 4-26-13).  These payments were dispensed by the judgment fund’s monitor, whose management and control fell to the Executive Branch and Justice Department.  Due to the application ‘vetting process’ the payouts were criticized by both Representative Steve King (D-IA) and journalist Andrew Breitbart as payoffs to Obama’s/Democrats’ preferred groups to gain a favored political position with those entities. 

King and Breitbart had the courage to indelicately point out that some of payouts were ridiculous, fraudulent and highly politicized.  Both Congressman King and Breitbart were predictably charged with racism by many in the MSM; and only because The New York Times printed their recent investigatory story have some MSM members begrudgingly ceded the veracity of King’s and Breitbart’s concerns. 

The combination of the racial criticism, the MSM’s silence regarding Pigford, and the quarantine on additional Pigford narratives subsequent to the NY Times’ article have emphasized the media’s concern for the damage an ongoing discussion of Pigford could cause the president.  Potential stories may have included added evidence of rampant fraud and controversy:

• A review of the Shirley Sherrod incident/resignation that became an embarrassing chapter in the Obama administration and might have brought into question the fairness of the payout her family received from Pigford which was rumored to total in the millions.  Time magazine also reported that the Sherrods’ received compensation of approximately $330,000 for mental suffering after it was determined that Ms. Sherrod did not use racist tactics in dealing with white farmers, a charge that led to her resignation from the USDA.

• The NY Times’ article disclosing that in 16 ZIP codes in Alabama, Arkansas, Mississippi, and North Carolina the number of successful Pigford claims exceeded the total number of farms that existed in 1997.

• The possible resurrection of a contentious conversation on the redistribution of wealth by whatever means to correct previous wrongs for certain minorities a la the Van Jones reparations argument.

• The blatantly racially charged comments similar to those of Mr. Al Pires, a lead attorney for African-American Pigford farmers, who asserted the USDA was “the biggest racist the world has ever seen.”

Thus, Pigford is another scandal that has received little attention and even less discussion than many of the scandals currently receiving attention.  Nevertheless, this scandal is another example of an administration out of control.  This is perhaps because Americans elected a leader without a modicum of real world management experience -- a person who believes ideology trumps organizational discipline, who believes that political cronies are automatically qualified as leaders/managers, and who uses lies/dissembling as a tool to obscure factual information from the American people. 

In sum, the damage generated by the Pigford scandal, and all the others, continues to be muted by the MSM’s lack of interest in reporting the facts integral to each issue and their lack of desire to dig for more information.  But given the daunting mass of scandals existent, President Obama’s administration will be described in the future by objective historians as the most scandalous in history.  

The EPA – Corruption and Scandal

The EPA and Ms. Lisa Jackson, its chief, have committed extensive violations of law that should receive in-depth scrutiny from Congress, law enforcement and the American people.  Yes the Obama administration has yet another serious scandal on their hands.  The scandal features a fantasy administrator, ‘Richard Windsor’, and ‘his’ email account .  The account was established and used by Ms. Jackson to camouflage controversial EPA processes, discussions, decisions and accountability.  To date the known evidence suggests violations of the Freedom of Information Act (FOIA), mail and wire fraud laws.  Additionally it surfaces another example of the Obama administration’s epidemic chicanery with the law, Congress and the Constitution and another failure to keep faith with the American people.

 

Upon closer inspection the EPA like the GSA and other Obama administration agencies demonstrates a lack of managerial/administrative control.  It also exhibited a culture of obfuscation, malfeasance and corruption that did not blossom overnight.  And like other Obama scandals, the mainstream media has again decided to cover it with their much practiced three monkey act.

For perspective a little recent history is in order.  Lisa Jackson, who is departing the EPA, stated in November of 2011 that, “…What EPA’s role is to do is to level the playing field so that pollution costs are not exported to the population but rather companies have to look at pollution potential of any fuel or any process or any plant or utility when their making investment decisions.”  Simply translated Ms. Jackson makes clear that her job and the EPA’s are to hurt companies/industries that produce energy counter to the wishes of the Obama administration (and the left’s agenda).  Ms. Jackson also demonstrates a very low economic IQ since higher costs incurred by energy companies will be passed to end users/consumers.

Coupling her statement with President Obama’s pronouncement of a year ago, i.e. “Where Congress is not willing to act, we’re going to go ahead and do it ourselves”… exposes his strategy to “legislate” by regulation and executive order (with Jackson’s and the heads of other agencies helping).  Although Obama indicated it would be “nice” to work with Congress, his intentions are to evade a two centuries-old legislative process of the Constitution and impose his will on all Americans.  The EPA under Jackson has become a key bludgeon in this political and ideological power grab and has used illegal methods in the effort.

President Obama’s inaugural speech noted the environment may receive emphasis during his second term. Obama opined that Americans have an obligation to posterity to “respond to the threat of climate change, knowing that the failure to do so would betray our children and future generations”.  Obama immediately followed with a pitch for sustainable energy, e.g. wind, solar and bio (and more crony capitalism?).  Remember this is the man that promoted ‘cap and trade’ legislation early in his initial term when the economy was “nearing a depression”.  

An administration’s ability to regulate in the extreme and by executive action has evolved slowly over the past 70 years gaining momentum after the Reagan years.  The Congress and our courts have ceded appreciable power to the Executive branch and government agencies by enacting laws with little oversight and that rely heavily on internal agency inspectors such as the EPA’s Inspector General.  Further the courts have exhibited discomfort in reining in other government branches unless egregious actions are uncovered.  The Supreme Court’s twisted logic/argument to find ObamaCare constitutional demonstrates the discomfort.

Now due to a whistleblower and the Competitive Enterprise Institute and Christopher Horner’s investigative work a federal court (U.S. Court of Appeals for the D.C. Circuit) has ruled that the EPA must turn over 12,000 ‘Richard Windsor’ emails in four 3,000 email batches.  The first group of emails released totaled a mere 2,100 and not one was from ‘Richard Windsor’.  In a cover letter Ms. Jackson insisted that she only used one government account for EPA business even though this directly contradicted her earlier admission that she used ‘Richard Windsor’ for internal EPA discussions.  The release makes clear that the EPA and Jackson have taken to the foxholes and a full denial/stonewalling mode is now in effect.  Thus the Competitive Enterprise Institute has brought another action against the EPA in the Appeals Court to force immediate release.

Remember, the EPA has an impact on every American with a tsunami of regulation that is both costly and arguably infringing on our Constitutional rights.  Moreover the agency has presided over an attempt to bankrupt the coal industry, close coal burning plants and drive up the cost of motor fuels -- negatively impacting job creation, the economic recovery and America’s energy security.  The estimated costs of EPA regulations range from $353 (Competitive Enterprise Institute) to $460 billion (The American Action Forum) and are growing like a malignant cancer.  These costs represent from 20% to 26% of the total cost of US regulations estimated at $1.75 trillion and are cited in a World Economic Forum report as a key reason for a sluggish recovery and daunting unemployment.  For comparison these costs are appreciably higher than Health and Human Services regulatory costs estimated at $184.8 billion (the 2nd highest). 

   

The EPA under Jackson’s ideological direction has taken a leadership position in exploding these costs.  EPA costs have essentially four components; direct, myriad enforcement costs, permit action reviews and other non-rule making costs.  Yet the EPA in its cost-benefit analyses insists that the benefits of its actions are at worst three dollars in benefits to one in costs.  President Obama has stated on the stump that some regulations show returns of benefits to costs at a ratio of 25 to 1.  The EPA’s analyses essentially only deal with direct costs; not the others noted.  Moreover many of the assumptions used in the analyses are ludicrous and defy common sense (see).  Credible sources outside of government emphatically disagree and posit that the EPA almost always under estimates costs and dramatically over estimates benefits…with the true net seldom being a positive.

Recently the EPA has ruled -- without that power being granted by Congress -- that automobile maker fleet mileage standards must rise to 54 miles per gallon  (adding costs per vehicle of $2,100 to $3,000)…that run-off rain water is a pollutant (vacated by the D.C. Federal Appeals Court)…that lands could not be sold if certain wastes were theoretically present to prevent 0.59 cancer cases per year (about 3 cases every 5 years)costing  $194 to $219 million annually. 

 

Further the use of “sue and settle”, a scam, has become a common tool of the EPA’s to impose oppressive mandates on targeted businesses with incalculable costs.  To implement the scam, the EPA has an environmental or advocacy group file a suit claiming the federal government has failed to satisfy some EPA regulatory requirement.  The EPA can choose to defend itself or settle the suit.  The ‘solution’ is to put in place a ‘court ordered regulation’ requested by the advocacy group…neat, relatively fast and illegal. 

    

But more shockingly the EPA doles out hundreds of millions of dollars every year to certain organizations.  The funds are awarded with no notice, accountability or competition according to the Government Accountability Office.  The monies almost always go to favored entities that in some instances have used the funds for non-environmental purposes. 

In sum the EPA, in particular, has severely reduced our nation’s competitiveness as measured by the 2013 Index of Economic Freedom.  The index places the U.S. behind nations like Chile and Denmark and in tenth place worldwide. 

  

The EPA’s record of sleaziness, its disregard for transparency, its lack of basic integrity, its fraudulent estimation of costs/benefits and now its attempt to defy and evade a Federal Court order (and by extension FOIA, mail and wire fraud laws) combines both inbred corruption and serious scandal.  Together these faults suggest that it may be time to dismantle the agency.

 

Other federal agencies, not just the EPA, have exhibited this general penchant for ignoring Congress, the courts, the law and the American people. This systemic and widespread disregard suggests the approval of a higher governmental authority…the office of the President.

Taxes and Hidden Taxes…How Much Is Enough?

During the fiscal cliff kerfuffle the President and his acolytes succeeded in their quest to implement the divisive class warfare mantra of the election, i.e. impose further taxes on the evil rich.  As that election battle proceeded a basic tax question was often raised by many taxpayers--not just the rich: “how much is enough”?  Americans also voiced concerns and discussed fuel costs, inflation, the cost of government and how these costs might be reduced.  Nevertheless I believe that most Americans do not realize they are paying numerous “hidden taxes” due to government. 

In some discussions a 50% maximum threshold for all taxes was mentioned (e.g. Sean Hannity-almost nightly).  Additionally the Federal Government was cited as not the only authority with a hand in the taxpayer’s pocket.  It was pointedly noted that states, cities, and counties levied taxes… that real estate, personal property, estate, capital gains, fuel, sales and excise taxes were competing for pieces of our hard earned paychecks...and finally that fees, fines and licenses existed…all of which were meaningful and on the rise. 

Currently the federal government uses marginal income tax rates ranging from 10% to 39.6% which are applied to adjusted gross income to define our tax bills.  The states add tax burdens  ranging from a low in Alaska of 7.0% to highs in Connecticut, New Jersey and New York of 12.3%, 12.4%, and 12.8% respectively.  Hence a combination of federal income taxes and state tax burdens--without considering the myriad “other” taxes--place top earners very near the 50% threshold (e.g. if you earn an adjusted gross income of $400,001 as an individual or $450,001 if filing jointly in NY, the tax rate would be 35% + 12.8%=47.8%). 

But the costs/burdens of the federal government (and state govs.) go well beyond their tax regimens.  Our current government, in particular, has burdened us with other meaningful costs (read hidden regressive taxes) that include energy, regulatory, legal/litigation and more recently ObamaCare.  Further hidden taxes can be cited such as inflation, Fed interest rate policy, tariffs and waste and fraud.  Together with all other taxes the combined “tax” load on Americans, both individuals and couples, is well above the numbers found on their federal and state income tax forms.

A Few Key Statistics

US population  (2011) Total=306,110,000; Adult population=243,955,000 (US Census Bureau)    

US households (2010) Total=115,538,000; Persons per household=2.59  (US Census Bureau)

Federal Income Tax Revenues (2011) Individual Income Taxes Collected=$8.093 trillion (US IRS)

Number of Passenger vehicles=254,400,000 vehicles (2007)  (US Bureau of Transit Statistics)  

Government Regulation
Government regulatory costs, benefits, overuse/abuse, even constitutionality are often discussed with little agreement.  To address these factors, the Competitive Enterprise Institute, the Small Business Administration (SBA) and the Heritage Foundation conducted extensive studies (between 2008 & 2012) that stated the costs associated with regulations ranged from $1.75 trillion to $1.80 trillion.  Further regulatory costs are expected to grow rapidly since the Obama administration has added 11,327 pages of new regulations between 2009 and 2011.  The growth of regulations accelerated in 2012 with the number of pages expected to exceed 4,450. 

The 2008 Small Business Administration study calculated regulatory burdens at $1.752 trillion.  The study suggested that 70% of the total or $1.236 trillion were economically driven costs, that environmental regulations added $281 billion; tax compliance another $160 billion and homeland security startlingly topped $75 billion in cost.

Using $1.70 trillion as a reasonable estimate of total regulatory costs, these costs by comparison are almost double the yearly income taxes collected from individuals and cost each adult approximately $6,960 annually.  Yet regulations also provide benefits.  Democrats insist the benefits exceed the costs in opposition to Republicans who believe the reverse.  For this analysis one third of the annual cost per adult is believed to be unnecessary and a hidden tax of $2,320 per adult.    

ObamaCare

ObamaCare taxes became effective January 1st.  Estimates of the act’s costs over ten years run from $700 billion to $1.1 trillion or $70-110 billion per year (CBO est.=$1.1 trillion).  Yet if the past is prologue the track record of the Congressional Budget Office or Bureau of Economic Analysis (CBO or BEA) in estimating government program costs means ObamaCare’s actual price will double or even  triple in two or three years.

Upper income earners will suffer the brunt of the tax increases.  Individuals earning $200k+ per year or couples taking home $250k+ will pay a 0.9% Medicare tax increase on wages above those amounts and an added 3.8% tax on investment income.  Employers (with 50+ associates) will face partially paying for their employees insurance or remitting a $2,000 penalty for each employee. 

Health care insurers, drug companies and medical device companies will also pay higher taxes and fees.  Most notably medical device manufacturers will endure a 2.3% excise tax on sales.  These are just three of twenty additional new taxes/fees directly related to ObamaCare.  Administration officials and ObamaCare supporters argue that much of the extra tax load is borne by business not individuals…but the end user (a consumer) will ultimately pay all the taxes, penalties and fees.

Given a preliminary estimate of $1.0 trillion in cost for ObamaCare the average adult’s share per year will run $410.

Energy  

Energy policy or a lack of a policy has cost individuals and households a significant and growing percentage of their income.  On Obama’s inauguration day the average price of a gallon of gas was $1.82.  Subsequently the average price skyrocketed to over $4.00 per gallon. 

Gasoline consumption per driver varies from 281 to 729 gallons per year based on a variety of assumptions/factors.  Government statistics (albeit dated) indicate that approximately 200 million+ drivers operate passenger vehicles in the US.  A number of studies performed by the US Energy Information Agency and the Department of Transportation have posited that the average household consumes 1,100 gallons per year.  Thus if an average household contains 2 adults the gallon usage per adult equals 550 gallons. 

Although oil is a fungible commodity I believe that an energy policy aimed at real energy independence would have held a gallon of gasoline below $2.25 a gallon (vs. $3.55 now).  A simple calculation demonstrates that current policy is levying a hidden tax on adults of at least $750 per year.

Legal/litigation

The costs associated with civil litigation (aka torts) exploded in the 1970’s and 1980’s.  The costs and side effects of the system soon captured the attention of economists who recognized its economic drag.  As a consequence numerous studies have been conducted to quantify the costs/benefits and the costs of excessive/unnecessary tort actions.

Three studies are referenced with regularity.  Towers Watson calculates the per person cost of frivolous tort actions at $838 or $1,052 per adult.  The Tillinghast estimate touted by the U.S. Chamber of Commerce puts the price per person at $880 or $1,100 per adult.  The Pacific Research Institute’s study generated a stunning estimate of $2,457 per person which translates to $3,071 per adult.  Each of these studies has been criticized for being inaccurate.  Critics contend the studies are totaling the costs of all tort litigation.  In contrast others believe the costs are understated since the fear of a tort action negatively changes behavior, risk taking and investing; costly factors that are very difficult to measure and quantify.

A comparison of the U.S. civil system and similar systems in Europe and other industrialized nations generally indicates our system is twice as expensive.  Those systems require that the losing litigant pays the winners legal fees and do not allow contingency billing to name just two differences.  In summary a cost of $1,050 for every adult appear reasonable given the evidence highlighted above.

Hidden taxes/costs are increasing and quite meaningful to most American budgets today.  A total of the four discussed above equals $4,530.  These costs are not just largely hidden but are regressive in nature and have a greater impact on low wage earners and the elderly.  These costs also push many taxpayers into an ever growing group that involuntarily tithes over 50% of their income to government.   Congress and the President could materially reduce these costs by recognizing their existence and by legislating straight forward solutions.  Instead we get the politics and theatrics of the fiscal cliff nonsense that accomplished little over the past few months.