The government has filed an 82-count indictment, carrying
penalties of 907 years in prison and a $28 million fine, against the
man who allegedly cheated donors to the Foundation for New Era
Philanthropy out of $115 million. The difference between what New Era
did and the classic Ponzi scheme is that the victims were some of the
nation's savviest money-managers of philanthropic funds, including Dr.
John M. Templeton Jr., Laurance Rockefeller, and investors for big
New Era lured investments from its victims by promising they would
be doubled by contributions from anonymous donors. There were no
anonymous donors; those who reaped some returns were paid with money
"invested" by new suckers. New Era finally went belly up.
I question whether there is any substantive difference between New
Era's double-your-money deceit and the whole liberal tax-and-spend
process, especially Medicare and Social Security. They are all schemes
to pay current seniors generously (many times what they paid in) by
imposing high taxes on younger workers who will never enjoy similar
Like New Era, and like every Ponzi fraud, the day of reckoning
finally comes. It has already come for the social-welfare states of
Europe (so long admired as models by U.S. liberals), and it is coming
for Americans within a few years in Medicare, Social Security, and
Yet the entire campaign now being waged by Bill Clinton, by the
unions' "non-political" television spots, and by Democratic
Congressional candidates is one long vituperative harangue against all
Republicans for daring to assert that government spending is out of
control and that taxes must be cut. The con men of federal Ponzi
schemes are painted as "compassionate" and their critics as "mean-spirited."
The "compassionate" pressure groups and media disdain Bob Dole's
promised 15 percent tax cut because, they falsely assert, it is
impossible to cut taxes even that small amount and balance the budget
at the same time. Poppycock. His 15 percent tax cut will be just a
down payment on recouping the money taxpayers lost under the Clinton
tax increase and the infamous George Bush tax increase.
For an eye-witness look at the systemic corruption of the federal
bureaucracy, I recommend an article by Diane Ravitch in the current
issue of The Key Reporter, the journal of Phi Beta Kappa.
A scholar who was recruited to work in George Bush's Department of
Education when Lamar Alexander was Secretary, her article tells what
she learned from her federal experience.
Washington is a "dream factory" that feeds the fantasy that
"intractable, deep-rooted problems and even psychological needs" can
be solved by new federal programs. Federal programs that long ago
outlived their usefulness continue to receive appropriations, year
after year, protected by friends in Congress.
When she asked such questions as "why is the federal government
doing this? Whom does it help?", she discovered that there is no
evaluation of programs, no matter how many years they have been funded.
She found that it is impossible to abolish or "zero out" useless or
obsolete spending projects because every program has its own lobbyists
and a cadre of grant recipients who move into action to assure that the
funding flow continues.
Ravitch discovered that, while many career employees worked hard
and effectively, there were also highly paid employees (in the $80,000
to $110,000 annual salary range) "who did nothing at all, ever, and it
was impossible either to remove them or to get them to do any work."
When Congress in 1992 directed the Department of Education to
award a five-year grant for $25 million to establish a mathematics and
science education center, Ravitch discovered that there already was a
federally funded center with that precise mission, plus $2 billion of
annual math/science spending in 16 other agencies. However, that
didn't stop the new appropriation.
Ravitch described her unpleasant experience when she made a
decision not to approve a grant for a program that she thought wasn't
worth its $6 million price tag. She was subjected to hostile
investigations and accusations of "politicization," as well as the
anger of Senators who expected the money to flow to their districts.
Bill Clinton is this week boasting that he forced Congress to vote
billions more for "education." But Ravitch says that "all federal
education programs are designed by lobbyists employed by education
Ravitch concluded this revealing article by saying that she has
learned "the value of turnover." The amount of power that is
concentrated in the nation's capital is immense, she says, and only a
regular rotation of newcomers with a fresh perspective, and an
intention to go home someday, "can restrain the permanent and insular
political class that has made Washington its home."
Yes, Virginia, taxes can be cut 15 percent and the federal
government downsized, but only if we have a President and a Congress
with the will to do it.