Oliver Twist famously got in trouble because he had the temerity to ask for more. He made that request in a world where street kids were meant to accept their gruel with gratitude not outrage, and humility not grumbles.
In our modern world, we tend to assume things have moved on. As citizens, we demand a lot of our public services and are furious when those services don't deliver. And sure: We grumble. We're quick to criticize. But clean water comes out of our faucets, children get educated, Medicare and Medicaid protect the elderly, Social Security gets paid, and so on. Many of these things could be done better. They could be done cheaper. But we don't live in Victorian England. We aren't fed on gruel. We demand responsive public services and -- up to a point -- we get them.
Except when we don't.
Take, for example, the small matter of our $3.8 trillion federal budget. The budgetary process might seem perfectly transparent. You can find President Obama's 2013 budget here, for example. The document is easy to access, full of useful data, and written in reasonably accessible, reasonably low-jargon language.
But a budget is no more than a prediction of outcomes. What matters are the outcomes themselves. And here's the thing: We don't know how the federal government spends our money. Take the Department of Health and Human Services, the agency which looks after Medicare and Medicaid. The Office of Management and Budget reckons that the DHHS spends $854 billion. The Census Bureau estimates its spend at $944 billion. The difference is $90 billion -- that's equivalent to all the revenue earned by Google, Amazon and Facebook in 2011. Meantime, USAspending.gov is a government information website that covers only two-thirds of all government spending. Where is the missing trillion? Does it not matter to someone?
It's not that bureaucrats are stealing our money, but that the maze of accounting rules and reporting practices means that no one set of figures is easily comparable with anything else. Did the Labor Department really spend $172 billion (as it claims), $92 billion (as the Census Bureau claims) or $14 billion (as USAspending.gov claims)? When Bloomberg asked Geoff Kenyon, director of Labor's budget figures to reconcile these anomalies, he was unable to do so. The same agency reports Pete Sepp of the National Taxpayers Union as commenting , "To Washington, these are rounding errors. To the rest of America, this is real money that could help real people with real problems."
It gets worse. The federal government is transparent as glass compared with the guys at the Federal Reserve. It's worth, for example, taking a look at this YouTube video, which shows Rep. Alan Grayson interrogating Elizabeth Coleman, the Fed's Inspector General on where a trillion dollars of U.S. taxpayer money went. Grayson asks of that trillion dollars, 'Do you know the identity of the recipients?' Coleman's answer, 'I do not. No. We have not looked at that specific area.' He goes on to ask if there has been any auditing or investigation of some $9 trillion of off-balance sheet transactions, to which she responds, 'We... have not gotten to a specific level of detail to really be in a position to respond to your question.' To the Fed, $9 trillion is just a little too specific to be worth bothering with.
Grayson was asking those questions in the aftermath of the 2008 credit crisis and you could argue (although I wouldn't) that those were extreme times calling for extreme actions. If transparency suffered, you would hope and assume that it was taking a short vacation, that it hadn't retired for good.
Unfortunately, the folks at the Fed prefer walls of concrete to ones of glass. In the course of the bailout of AIG, the Fed ended up with packages of debt securities, which it has recently been trying to sell. And it's pretty clear how you obtain the best price for a bunch of securities. You list the securities you've got to sell and invite bids. The guy who pays the most wins.
Last year, the Fed used just such a public process to sell securities. It was sane, fair and transparent. The interests of taxpayers were being protected -- which didn't go down well with Wall Street. Traders claimed that prices were being injured. So this last month, the Fed chose instead to sell securities to a tiny handful of pre-selected firms, including -- how unsurprising is this? -- Goldman Sachs.
Now just consider that logic for a moment. Imagine you're Ben Bernanke. You are in bailout mode, because Wall Street blew up the economy. That's why you have these bombed-out securities on your books in the first place. The real fraud is in the lack of standardized accounting practices (we need to expand on this with all the lobby money going to stall implementation of the Volcker rule). Why the heck would you give a damn about the financial interests of those Wall Street firms? Why would you place their financial interests above the interests of the U.S. taxpayer in securing the largest possible price for your assets? In effect, the Fed's new opaque sales method transfers wealth from the U.S. taxpayer to the richest firms on Wall Street.
Or, for another example, consider the foreign currency swap lines that the Fed has taken out with a number of foreign central banks. The Fed's own FAQs on the subject state categorically that the Fed takes no foreign exchange or credit risk in these operations -- which is news to me. The current situation in Europe is so desperately unclear that no one can be certain that the euro will continue to exist as a currency. Sure, it'll probably continue in some form -- but 'probably' is a long way from 'certainly' and the United States has a lot of chips riding on the outcome. Worse still, the Fed has placed this huge bet with taxpayer dollars primarily to protect the interest of overseas banks. Banks which are currently unable to access funding from the market, because they are widely regarded as insolvent.
We need to act like modern-day Oliver Twists. We need to insist on our rights. It's our money, we deserve to know how it's spent by government, how precisely the risks of a Euro collapse are being managed by the Fed. In the second decade of the twenty-first century, it seems astonishing that we should have to bang our gruel bowls over these issues. But we do. So let's thump that gruel-bowl and ask, 'Please, sir, where's our money?'