America Faces an Ethics Crisis

Until and unless we confront the ethics behind these legal travesties, we will increasingly hurt our nation. While millions of hard-working, creative Americans, both in and out of government, are sustaining us, the parasites are destroying us.
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Too many Americans are happy to devour national resources at the expense of the nation. Our country benefits from wealth, creativity, a "can do" attitude and a heterogeneous population. But we have no common ethics. Too many people assume that if an action is legal, it must be okay. Congress responds with increasingly longer laws like Dodd-Frank to define acceptable behavior. Unfortunately, these complex laws allow citizens to game the system for personal gain and do nothing to solve the underlying ethical problem.

Just this year we learned that:

  • New York state bureaucrats brazenly overcharged Medicaid and received a staggering $15 billion in federal payments over the past two decades. Among other things, in state fiscal year 2011, officials charged Medicaid $5,118 per patient, per day at state-run developmental residences. By FY2009, the state was charging the system more than five times the established Upper Payment Limit, which is the amount Medicare would have paid for the same service. The state's per capita Medicaid spending in FY 2010 was $2,687, with federal taxpayers subsidizing $1,657 of that. Per capita Medicaid spending in the rest of the U.S. (except California and Pennsylvania), by contrast, was just $1,258. Though the Centers for Medicare & Medicaid Services knew taxpayers being overcharged in New York, the agency did nothing to stop it. After this disclosure, the office of the Inspector General issued an email threatening a New York state employee with "potential discipline" if she cooperated with the House Oversight and Government Reform Committee, which was investigating the situation. The feds have not seriously tried to collect the money owed.
  • Scores of employees at federal agencies are paid by taxpayers to work for their employee union, instead of the jobs they were hired and paid to do, in a practice known as "official time." In 2010, 77 percent of official time hours were spent doing union work, costing taxpayers $137 million. In 2011, taxpayers paid $155 million to cover 3.4 million hours of union work. Taxpayers subsidize these employees' salaries (some in the six-figure range) as well as health insurance and pensions.
  • An Inspector General's report revealed that the Internal Revenue Service targeted conservative groups for extra scrutiny and made onerous requests to delay applications for tax-exempt status based on certain key words in their names that signaled political leanings. The IRS also improperly granted a $500 million contract to Braulio Castillo, a "disabled veteran" whose company, Strong Castle, was based in an "economically disadvantaged" area, or HUBZone. The disability was a hurt ankle Castillo sustained while playing football at a military prep school; Castillo never served in the military, and went on to play college football. More, Strong Castle had its actual headquarters in a wealthy suburb, but claimed HUBZone privileges by maintaining offices in Chinatown, where they employed local college students to work part time.
  • The U.S. Department of Health and Human Services has announced it will not check the salary claims of any American claiming eligibility for subsidies to buy health insurance under the new health care law, until 2015. Thus Americans are invited to defraud the government, with the biggest risk being a $25,000 penalty should someone report them.
  • Some 250,000 federal employees are collecting disability income payments through the Federal Employees' Compensation Act (FECA), which is more generous than any other disability package in the nation. Annual disability pay is 75 percent of the employee's last year's salary, tax-free, for life. While most federal workers return to work within a couple years, an estimated one in five use the disability system as a way to stop working, stay home and still get paid. And too many other federal workers use anti-discrimination laws to keep their federal jobs without pride or competence. Some federal statutes designed to provide a welcoming workplace end up giving cover to employees who file "hostile work environment" claims, thus blocking any supervisory attempt to fire or reassign them.
  • Patent trolls are on the rise, committing legal extortion, killing startup ventures, destroying small companies and diverting large companies' productive resources by threatening lawsuits against thousands of American businesses. In 2011 alone, patent trolls are estimated to have accrued some $29 billion.

In the face of these staggering abuses, our elected leaders have bluntly cut non-discretionary government funding through sequestration. Under these spending cuts, thousands of competent and hardworking government employees whom we rely on to serve the basic functions of government have been sidelined, from inspectors to parole officers, from lawyers to investigators, from park rangers to firefighters. Meanwhile, countless people cheat the system and gobble up government money they have done nothing to earn. Our ethical problem is a national one, but much of the blame rightly belongs with Congress.

America's refusal to make tough decisions and set priorities, our coddling of interest groups, and our reliance on growing entitlements are a toxic recipe certain to sink the next American generation with big interest payments and bigger problems. Until and unless we confront the ethics behind these legal travesties, we will increasingly hurt our nation. While millions of hard-working, creative Americans, both in and out of government, are sustaining us, the parasites are destroying us. It's time we took on the parasites.

Gary Shapiro is president and CEO of the Consumer Electronics Association (CEA)®, the U.S. trade association representing more than 2,000 consumer electronics companies, and author of the New York Times best-selling books, Ninja Innovation: The Ten Killer Strategies of the World's Most Successful Businesses and The Comeback: How Innovation Will Restore the American Dream. His views are his own. Connect with him on Twitter: @GaryShapiro.

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