There’s No Telling Where the Money Went


My buddy Chris DeMuth and I are about to embark upon a long-term research project on fines, settlements, and fees collected by federal agencies. If we manage to pull it off, you’ll hear more about it.

Why would otherwise sentient humans volunteer for such a green-eyeshades program? Because the government itself doesn’t collect the data—not in one place, and very often not at all; and it doesn’t keep tabs on the spending, either. To paraphrase a leading public finance expert (the late Robert Palmer), the trend is irresistible—and there’s no telling where the money went.  It appears, though, that a bunch of federal agencies have become profit centers for Congress. Our working hypothesis is that that’s bound to have incentive effects throughout the government. None of them, we suspect, are likely to be good.

While it’s hard to obsess over the FCC’s fee structure and the like, there’s ample reason to worry about the general tendency of funding government through non-tax revenues. The Washington Post recently carried a series of terrific articles  on federal civil asset forfeiture programs. (“Civil” forfeiture is actually anything but: the government seizes your stuff first and lets you have it back if you can prove that it wasn’t connected to some criminal activity.) The Post series focused on a federal program called “Equitable Sharing”: when state or local officials seize assets in pursuit of federal crimes (such as money laundering), the feds kick most of the money back to the locals. That’s how police departments fund anything from popcorn makers to pensions. A favored tactic is highway stops: the cops pull over suspicious-looking cars (tinted windows; too clean; too dirty); ask for permission to search the vehicle; find cash; and let you move along provided you consent to letting them keep the money.

Naturally, a consulting and networking industry has sprung up around the practice. Government grants fund outfits like Black Asphalt and Desert Snow, which train and assist police in revenue maximization. The grants come from the same federal government that also has at least four programs to supply local police with armored vehicles, tear gas, and helicopters. (Plus bayonets, and whatever else the actual U.S. Army no longer wants.) Yet another broken presidential promise: we are putting boots on the ground—just not in Fallujah. In Ferguson. Call it nation-building at home.

Actually, we’re not building anything at all. The programs at issue were prompted by the “war on drugs” and 9/11, but they’ve long taken on a life of their own. Nobody is really trying to turn the country into a police state; it just so happens that that’s where the money is. So it comes that some hapless G-13 sends money to outfits with Covert Ops names and competition unfolds on a margin where you really don’t want it.

It’s precisely the mindlessness, though, that bears watching, because there’ll be more of it: it’s the mindlessness of a transfer state that has reached its limits. Suppose Congress convened to pass a budget (not that it would but suppose): it would find that all the money is already spent on Social Security, Medicare, Medicaid, and payments on the debt. The same is true for state and local governments: once you’re done with private transfers, the money available for public functions is pretty close to zero. If you don’t want to tax some more or reduce the transfers, you can do only one of two things: rack up more debt, or pave the country with black asphalt.

Take your pick.

Reader Discussion

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on September 18, 2014 at 10:00:45 am

Anytime, I hear someone say that "government should be run like a business" I want to gag - or at least throw out all the money I keep stashed in the back of my beat up old Ford Ranger.
This is what happens when guvmnt tries to be business like and establishes "profit centers."
Am I mistaken or did not the Big O recently announce that some such department was going to become a profit center.
Anyone remember which dept it was?

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Image of gabe
on September 18, 2014 at 10:18:06 am

The IRS. But it is also a profit distribution center, plus it has what you might call unlimited overdraft capabilities.
And I wouldn't put to much faith in what O says, he's probably denying he said it, or anything else, already.

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john trainor
on September 18, 2014 at 10:38:38 am

A noble but quixotic endeavor. Beware the maw of gargantuan government, the endless maze of departments, sub-departments, mini- departments, regulations, the monstrous federal register, and federal workers themselves, most of whom appear to be in constant transit between Las Vegas and Washington and do not take lightly a peon/citizen approaching them with bothersome questions while they are taking their post-lunch nap. You may find yourself being audited, for starters.

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john trainor
on September 18, 2014 at 16:40:27 pm

A good way to see where the money went is to Google "Comprehensive Annual Financial Report." Its not the "budget" that counts but the CAFR. Whether its your local town,county,state or Federal governments the "CAFR" reports will tell you where all the "off budget" money went. Its amazing how much of the extorted taxes,borrowing and money printing that is taken in by the various American government entities are then hidden by those governments and invested to enrich the Political Classes at the expense of the productive Economic Class. The Constitution and the Republic have been buried for decades yet all we hear from the politicians is that we all have to "pay our fair share." The question then arises "why should I pay my fair share when I never get my fair share?"

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libertarian jerry
on September 18, 2014 at 16:58:12 pm

That would be the Department of Redundancy Department...it's right across the hall from the Department of Public Apathy

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Image of THX1138
on September 19, 2014 at 17:36:43 pm

Now; why will we not be surprised when the first areas of research turns up extensive channels of agency "self-funding" from the revenues produced via fines, settlements ,etc.???

Want to examine a "great" one where the politicians have devolved the "glory" of spending and appropriation of billions (B) to outsiders? Look at what is collected on telephone bills and where that goes (to an illegally formed corporation, no less- then where, how, and by whom, determined).

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R Richard Schweitzer

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.