The Good Graft: How The Government Profits Off The Poor

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By Sal DiCiccio

“The goals of government programs always sound noble at first, for example, to provide quality affordable housing for the poor. But as you’ll see in this article, the ones who truly benefit from these programs are not the poor, but instead, government workers.”

Affordable housing built by the government is anything but affordable. The goals of government programs always sound noble at first, for example, to provide quality affordable housing for the poor. But as you’ll see in this article, the ones who truly benefit from these programs are not the poor, but instead, government workers. Under the guise of noble causes – like affordable housing – government, particularly local government, profits off the poor at the expense of the taxpayers. I call this scheme the good graft and it’s happening all over the country.A few years ago, the city of Phoenix built affordable housing for the poor on 24th Street and Van Buren, on land the city already owned. This type of housing should have cost $150,000 per unit for a simple apartment unit. As a comparison, remember the median cost of a single-family home in Phoenix is about $195,000. Instead, the project ended up costing the taxpayers $281,000 a unit, for a total cost of approximately $32 million. For perspective, in one of the most expensive neighborhoods in Phoenix near the luxurious Biltmore Hotel, an upscale apartment complex built by a private sector developer was sold at a price considered the highest ever in the city of Phoenix at the time. It had every high-end finish and amenity. This luxurious apartment complex sold for $277,000 a unit – a little less than the affordable housing apartment complex the taxpayers were forced to fund.

So, what went wrong? The city of Phoenix gave itself the ability to self-select. This meant that even though there were multiple bids on the project from the private sector at about half the cost, Phoenix was able to select itself as the developer of the project.

The poor and the taxpayers stand to lose the most when this happens. Phoenix could have doubled the number of affordable units for the poor by selecting one of the other bids, but instead awarded the bid to itself. In doing so, the project ended up costing millions more than it should have.

So how does a modest government project cost have such inflated costs? Where did the extra money go?

It went toward paying civil service workers to pad their budgets and increase the power of the civil service managers. It went to support salary increases for government employees to allow them to live a lifestyle to which they have become accustomed. It supported dramatic increases in the pensions of managers and civil service workers.

Because of this, civil service workers and managers in government have little to no incentive to reduce costs and improve efficiency. The more projects they self-select, the more revenue their departments will show, the more of their friends and family they can hire, the more pension and health care benefits they can lobby for. Once one project is over, they will urgently find another, so they don’t lose their jobs and their Cadillac benefits. This Ponzi scheme of government creates a cycle that requires more and more of your hard-earned tax dollars.

Today, our cities and states control how most of our federal dollars are spent – federal dollars meant for the poor. The federal block grant program funnels federal monies into the hands of local governments. Block grants merely specify the objectives of the funding, with few specifics on how exactly those federal funds must be spent.

Which means the real control over spending is in the hands of the local government staff , who, through their closed door relationships with the politicians who hired them, have created a new model of good graft benefiting only themselves. Local elected officials who should be watching over these tax dollars and answering to the public, have now entered into a partnership with their own professional staff and become complicit in the scheme.

This systemic problem transcends party lines. Whether you are Democrat or Republican, this type of soft corruption distorts the goals and agendas of otherwise good, caring people who seek to serve their fellow citizens.

This is not just happening in Phoenix, but across the nation. The pilfering of federal dollars is just the start. This is not only happening with housing for the poor, but with road projects, water plants and any time government self-selects itself to do what others do more efficiently and effectively.

The good graft won’t end until there is accountability. And accountability starts when the politicians make the conscious decision to protect the taxpayer first and to place the needs of the poor above the needs of the government staff. The solutions are really quite easy, but getting politicians to act above their own self-interest is not.