09/12/2017 - The Roundtable Insight: Adam Andrzejewski On Unsustainable And Reckless Government Spending, Deficits And Debt
FRA: Hello, Welcome to FRA’s Roundtable Insight. Today we have Adam Andrzejewski. He is the CEO and founder of Open the Books (OpenTheBooks.com), a government watchdog organization not funded by government, and he’s a national leader in bringing transparency to government spending. Welcome, Adam.
Adam Andrzejewski: Great to be on the program, Richard. Thank you very much for your interest in our work.
FRA: I notice on your website you initially set up homepages as the nation’s largest publisher of community telephone directories?
Adam Andrzejewski: That’s right, I’m probably the only guy you’ll ever meet anymore that actually monetized a yellow page publishing company in the internet age. So I had the good fortune to sell my shares to my brother and an investor from the east coast back in 2007, that was 1 year before the iPhone was invented.
FRA: Wow. And then you ran for governor of Illinois with a pledge to create this organization, correct? The OpenTheBooks.com?
Adam Andrzejewski: So I ran for governor based on my private sector success. And I knew in Illinois, where we ranked high we should have ranked low and where we ranked low we should have ranked high and I felt we needed new blood, a new day. I ran on two things, both of these things we’ll talk about today. A hard forensic audit of all state and local spending, you know evidentiary, follows the money, holds up in court. If you think about it it’s how we caught Al Capone back in the day and Illinois is horribly corrupted on every level and we needed that audit. And that resonated, that idea resonated on the campaign trail. The second idea I ran on was the tagline slogan “Every dime online in real time” aggressive financial transparency. You know I lost the race. I lost about 5.5% of the vote, I’m comfortable with that. But what we knew was the ideas resonated and I’ve carried those forward at our non-profit charitable organization at OpenTheBooks.com.
FRA: Great, and I just want to point out before we get in some of the details on what you’re saying as well as what your organization is doing about what you’re saying. Just want to point out that every fact, statistic, and development that you’re going to mention, we see as the root cause of increasing central bank and government interventions in the economy and in the financial markets. So all of these spending issues, deficit problems, challenges and overall debt levels the challenge by government to control the burden of that debt, we see as a root cause of increasing central bank and government interventions.
Adam Andrzejewski: Well I think the founders of the country thought the same way. They recognized that knowledge is power, they actually wrote transparency into the United States Constitution. It’s article one section nine, and this gives us at OpenTheBooks.com the authority as citizens from the private sector to open the books on government. So it simply says that a regular statement and account of receipts and expenditures of all public money shall be published from time to time. So Richard this is our information, the people own this government spending information and at OpenTheBooks.com our mission is to post online every dime taxed and spent at every level of government across the entire country. We’ve captured 4 billion federal state and local expenditures and it’s 80 cents on every dollar of spending at every level right now. And we have visibility over the course of the next 18 months to get that first very unique data set so you’ll be able to track every single tax dollar from every level of government.
FRA: And today you’ve compiled some very interesting facts and statistics. First on the state of finances in Chicago and Illinois, how that is evolving. And then also for municipalities, other U.S. states. Do you want to bring some of those up?
Adam Andrzejewski: So I think in the city of Chicago and across the state of Illinois, the number one public policy problem that affects the delivery of all government services whether it’s education, housing, the war on poverty, the soft social safety net, medicine, the delivery of healthcare, it’s quite simply the number one issue, is the extreme level of pay perquisites and pensions for public employees. In Illinois this summer we identified 63,000 highly compensated public employees that make more than $100,000 per year. For instance, in the city of Chicago, Rahm Emanuel paid out nearly $300 million worth of overtime last year. And 1,000 city workers got at least $40,000 in overtime alone. You’ve got people for instance, phone operators in the police department that last year made nearly $200,000 because they got $126,000 worth of overtime.
FRA: Wow.
Adam Andrzejewski: You’ve got 4,800 police officers assigned as detectives that made between $10,000 and $126,000 in overtime last year trying to solve the homicides and thousands of shootings in the city. It’s a mismanagement of public resources, it’s a mismanagement of taxpayer dollars and we’re holding Rahm Emanuel accountable.
FRA: And for overall in Illinois as well?
Adam Andrzejewski: Well it’s just out of control across the whole state. So for instance, there are 30,000 Illinois educators that last year got a check for over $100,000, you know paychecks. Now 20,000 of them are actually currently employed in their school district. But the 10,000 of them, they’re out the door, they’re retired on six figure pensions. So look, you can educate kids, or you can pay a massive education bureaucracy. The delivery of government services is conditional on reasonable levels of compensation. What we’re showing in Chicago and across Illinois, they’re just completely out of control.
FRA: Probably the easiest way to do it is, I remember an example given by Martin Armstrong, he basically said if you have 10 government employees and 4 of those retire, that those 4 need approximately say 3 units of retirement pay pensions and all that benefits, you have to hire for the other 4. So you need a budget then of 13 units. You’re going to raise property taxes 30%, you know it’s unsustainable essentially.
Adam Andrzejewski: In the state of California, when we looked at their highly compensated public employees, and by the way, in California we found 220,000 of them. We took a look at one position, and it was a water management position I believe it was in Los Angeles County. And the position was a million dollar a year position because there were two $350,000 pensions that taxpayers were paying out of the pension plan. And then the current one was hired for about another $350,000 on salary. So you had two out the door, one currently working, and $1,000,000 at stake.
FRA: Wow, that’s in California. So you’ve got some examples you’ve sent also on New York?
Adam Andrzejewski: So in the state of New York it’s not much better than Illinois or California. New York has 170,000 public employees that make over $100,000 a year. And look it’s out of control like every other state. For instance, in the New York City public school system you’ve got 700 janitors, they’re called “custodial engineers” they’re janitors in the public schools. And they can make up to $206,000 a year. Now, we took a look at the average principal salary in those New York City public schools, the average principal makes $125,000 and there’s 700 custodial engineers that out earn the average principals salary.
FRA: Have you also taken a look at projections based on the statistics that you have, projections on unfunded liabilities and sort of unsustainability limits?
Adam Andrzejewski: We leave that for the actuaries. Obviously, those are complicated calculations, but we actually read all the reports. So a number of years ago I remember, this is an interesting story about 2012, I wrote a piece based on what I had read in one of the pension system reports. And it was the Illinois teachers retirement system, that at the time had about a $100 billion unfunded liability and today it’s probably about $130-$140 billion unfunded liability. And we wrote that that system very rapidly was going to run out of money. And I remember getting an email from the spokesperson of the system and he said look, this is scaring people, you are wrong, this is factually incorrect retract it. And we wrote him back we said no, here’s the evidence. About a year and a half later an email was leaked from the executive director of the teacher’s retirement system. And he confirmed and every single year to date he confirms that unless something is done with the system, if the employees need to work a little longer, pay them a little bit more, receive a little less lucrative cost of living adjustment, if these things are not done, the system very very rapidly in the early 2020s will run out of money.
FRA: And so if we look at how governments are coping with this, you know how are they reacting, what draconian measures they are currently resorting to, can you identify some of those measures currently and in the near future?
Adam Andrzejewski: Well I think Illinois is a great example of this. And you know its taxes for as far as the eye can see. So for instance right now there’s huge uproar is in Cook County, Illinois. And that’s the country where- Chicago is encompassed by Cook County. They’re taxing everything, they’re even taxing soda pop. They didn’t tax the Starbucks drinks and things like that, they tax the soda pop. And so regular rank and file people are just in revolt. The soda pop tax in Cook County has a lower poll approval rating then president Donald Trump has in Cook County. It’s very very interesting. So whether it’s ever escalating property taxes, whether its taxes on businesses for a headcount of employees, if they can think of a tax they’re putting in a tax. And of course, that’s what driving everybody out of here, Illinois loses businesses. We’re a very narrow state, there are actually five geographic state borders, we border five states. And it’s very very easy just to move a few miles and jump over a state border to a different state for a future of prosperity.
FRA: And also on sort of a government taking over everything, the militarization of federal agencies, can you go into that?
Adam Andrzejewski: Well I think that once you can’t pay your bills when you have ever escalating taxes, when you have a regulatory regime that continues to regulate everything, tax everything, at a certain point- you know the federal government has 36,000 lawyers enforcing those regulations? Now only 12,000 work for the Department of Justice pursuing crime and criminals. So you got 24,000 federal lawyers enforcing the regulatory states of America, and that’s why people feel over-regulated. So after you grab legal power, and somebody has to enforce the regulations and the taxation. What we have shown, and we broke this on the editorial page on the Wall Street Journal, our honorary chairman is Dr. Tom Coburn, the former U.S. senator from Oklahoma, and we wrote a piece that broke our oversight report. The piece was entitled, and many people still remember this piece, it was called Why does the IRS Need Guns? And there were two major findings in our oversight report, now these were the federal agencies outside of the department of defense. So we found 67 federal agencies bought $1.5 billion in a 7 year period of guns, ammunition, and military style equipment. And 53 of those agencies were not a part of homeland security or the department of justice. These 53 agencies were rank and file, traditional, regulatory, paper pushing agencies like the IRS, like Health and Human Services, like the Animal Health Inspection Services, like the Veratrin’s Affairs. So we found that an IRS special agent can carry an AR15, the Health and Service agents are trained on the same special weapons platforms that our Special Forces military warriors use. They’re trained by the same vendors to use those weapons, and it goes on and on. I just want to point out, Richard, that the second finding in that report was equality as interesting. We quantified for the first time 200,000 plus federal officers with arrest and firearm authority. And that exceeds the number of United States marines at 182,000.
FRA: Wow, amazing. And in terms of what’s happening, you referenced earlier some of the time frame considerations, any idea on how this unfolds timewise? I know Chicago Illinois is sort of fairly the first to have these challenges, but how do you see it playing out between other municipalities, other cities, and states across the country?
Adam Andrzejewski: So, if they follow the lead of Illinois, they’re going to be in trouble. Obviously, the Illinois legislature just hiked taxes with no underline spending reform, the budget they passed with the tax hike is still $1 Billion underfunded. And taxes went up from roughly about 3% to, it was about a 67% tax increase. So the fundamental reforms weren’t there. We had racked up $15 billion worth of unpaid bills, and now Wall Street is going to bear the financing of those bills. To date, Main Street has financed it just waiting to get paid. But now, as of last week, Governor Bruce Rauner has said that he’s going to bond out $6 billion of the $15 billion of unpaid bills. So look, every single day in the state of Illinois we look more and more like Puerto Rico and as a matter of fact, we might be worse than Puerto Rico.
FRA: Wow. And all of this is also causing brain-drain and wealth-drain. Just before we started you gave the example from your hometown.
Adam Andrzejewski: So back in the late 1970s, I grew up in Kankakee County which is about 100 miles south of the city Chicago. And I grew up in a fairly rural area, our County had 100,000 people, and we lost our two main manufacturers. And nearly overnight the population dipped from 100,000 to about 75,000 people. And it took over 20 years before the population recovered. And it was even more than the loss of jobs, it was moral decay. Before I ran for governor in 2010 I took a look at the number of sex offenders in the city of Kankakee and it was 126. And I looked at a similar size town just north of Chicago, and they had 1. So not only do the jobs leave, but capitalism is the best system for honing an individual, keeping them engaged within communities and preventing decay of all types.
FRA: I guess all of this is quite negative, but what your organization has been doing is quite positive, serving as a beacon of light. Can you go into some of the activities that your organization is doing about these developments?
Adam Andrzejewski: Yes. So one of the major issues and lack of transparency at the federal level is the federal pensions and retirement annuities. And with the federal pension systems, taxpayers are on the hook for a $3.5 trillion unfunded liability. But right now Richard, you and I, we have no right to know, we have no ability to see who the retiree is, how long they worked, what they put into this system, what taxpayers put into this system, and what that retiree receives in retirement. We have no ability to look at the federal agencies to see who is confirming the most for instance 6 figure retirement pensions. And we have no right because all of this pension data is not subject to the Freedom of Information Act. And so we have legislation that we’ve put together with Florida Congressman Ron DeSantis and it’s a great bill. The bill is called Federal Pension Disclosure Act and it already has 10 sponsors in the house, in congress. And we’re optimistic that this will pass the house and we’re looking for Senate sponsors. So this would open up all of that. I mean wouldn’t you like to see Lois Lerner, she was the IRS boss who is rumored to have retired on full pension benefits? She allegedly led, she plead the fifth in front of congress and she allegedly led the targeting scandal of the conservative and tea party groups ahead of the 2012 election for Barrack Obama. I just think all of this needs sunlight and that’s just one of the areas that we are aggressively moving forward to open up.
FRA: Now a lot of people have pointed out the potential for a movement to the far left. I mean you mentioned capitalism just a few minutes ago and there may be some misunderstanding by the millennial generation of the current economic system, especially in the light of what happened during the financial crisis and the causes of that. Do you have any initiatives that can reach out to the millennial generation?
Adam Andrzejewski: Yes we actually use the latest in technology to display all this data. And millennials love having the tools and the ability to hold the political class accountable. So I think it’s a generation that naturally fits our mission and vision of empowering citizens with robust facts and hard data. In the year of, fake news is talked about all the time, well this information actually comes from the government, so it’s true. And I think people like having that ability to just circumvent and ask hard questions demand answers and hold people accountable for tax and spending decisions.
FRA: Great, and how can our listeners learn more about your work? And do you have a service or a newsletter they can subscribe to?
Adam Andrzejewski: Yes, so if you come to OpenTheBooks.com all you have to do is, if you want to give me feedback on this interview just do the contact us, and then you’ll have subscribed to all of our services. So that’s just the easy way to do it, is just come to OpenTheBooks.com and send me an email through the “contact us” function.
FRA: Great thank you very much, Adam, for being on the show.
Adam Andrzejewski: Richard, thank you for your interest in our work, I look forward to keeping you updated.
FRA: Great, and we’ll end it there. And yeah Adam, we’ll do this again. It will be interesting to see how this continues to evolve. And especially on the reaction by governments, what they’ll do, and also perhaps maybe if the federal government steps in to do like a bailout of the states, if that’s going to happen in some way. So it would be interesting to see how this evolves.
Adam Andrzejewski: It really is, and we’re going to be there for it. I mean you and I, we’re young we got a lot of years to go and this probably in states like Illinois won’t take too long. I mean you know the levels of debt, the levels of spending, the lack of- the political structures that have been cemented in place just ensures that all of this continues to a race to the bottom. So it’s not a question of if, it’s just a question of when. And you know the trend can continue for a good bit. But at the end of the day it does stop, and when it stops it’s going to be a painful experience. And I don’t think it’s going to take that long.
FRA: Right, actually I was just talking this morning with an economist who’s originally from Argentina and now is working in Canada. And all the economic devastation down there, he mentioned how prevalent and how the Austrian School of Economics is in trying to sort of bring back the economy positively from down there. So they’re sort of much ahead of the evolutionary process if you will then where we’re at now in the US. I know your partner Matt, he takes a very close view of the Austrian School as well.
Adam Andrzejewski: Right, right. No, I kind of looked at things through more of a political frame. So what I hear or what I see is just further genius of the system instituted by the founders. So it’s conditioned on federalism. So the laboratories of the states, they try out all these different ideas. The successful states over time where a lot of people want to live have the better ideas. That’s what you’re seeing, you’re seeing people moving from California and Illinois and New York and they’re going to states like Texas and Florida. And those states eventually grow in political power, in federal power and the states with bad ideas, they die. And they become less powerful over the course of time. Now, things are so bad in some of these states, you know California is the most populous state and Illinois is the fifth most populous state and New York is the third most populous state. I mean, can these states bring down the good old United States of America before federalism rights the ship? And I think that’s an open question. Federalism may be moving too slow to help us this time.
FRA: Yeah, that’s a very interesting observation.
Transcript written by Jake Dougherty <Jdougherty@ryerson.ca>
