April 18, 2005

April 18, 2005 | Commentary on

Legislative Lowdown -- Week of April 18th

What do a courtly, soft-spoken but iron-willed senator from Alabama and a brash, flamboyant real estate developer from New York have in common? Answer: A shared outrage at the incompetence of the United Nations.

Amid the oil-for-food scandal and widespread humanitarian abuses by UN "peacekeepers" in the Congo, UN apologists again are struggling to explain the inexplicable. Conservative stalwarts on Capitol Hill, aghast that the UN has requested $1.2 billion to renovate its modernistic headquarters on Manhattan's East Side, have joined forces with New York developer Donald Trump to challenge yet another UN mishandling of taxpayer dollars.

First, a few facts: The United Nations wants the United States to extend it a $1.2-billion loan, interest free, to overhaul its headquarters. UN officials want to spend an additional $650 million in U.S. money on a 35-story building to use as "swing space" to house UN employees during the renovation as well as construct an elaborate 100,000-square-foot esplanade park that would extend into the East River. Altogether, the total bill for this extravaganza may be as much as $2.5 billion, with U.S. taxpayers expected to foot more than $500 million of the final bill.
Enter Sen. Jeff Sessions, a principled conservative Republican from Alabama who chairs the Senate Steering Committee. Sessions read press accounts about the renovation in which Trump and other New York developers questioned the exorbitant cost of the project. At up to $1,100 per square foot, the expected cost would be quadruple the "absolute maximum" cost, according to one leading developer. Trump summed up the consensus view in New York's real estate community. "The United Nations is a mess," he said, "and they're spending hundreds of millions of dollars unnecessarily on this project."

Sharing Trump's outrage, Sessions proceeded to establish an unlikely friendship with his seemingly polar opposite.

Speaking on the Senate floor during consideration of a State Department bill, Sessions noted that Trump recently had completed the 90-story Trump World Tower for a "mere" $350 million, less than one-third the projected cost of the UN renovation. One European official also noted this discrepancy and arranged a meeting between Trump and beleaguered UN Secretary-General Kofi Annan. Trump described the meeting to Sessions: "The person who has been working on this project for four years couldn't answer basic questions about what was involved in renovating a major building. He was not capable nor competent to do the job."

Trump being Trump, he immediately offered to deliver a higher-quality renovation at less than half the cost, and even offered to waive his fee for managing the project. To date, he hasn't received a response from this increasingly dysfunctional institution.

Sessions has drafted the legislative equivalent to Trump's famous admonition to supplicants on his top-rated television show--a "you're fired" amendment to limit to $600 million the amount of any loan extended to the UN. He plans to offer it to an upcoming bill in the Senate. This one will be fun.

Calculated Distortions

Senate Minority Leader Harry Reid (D.-Nev.) suffered a major setback in his effort to undermine President Bush's campaign to reform Social Security when the respected website run by the Annenberg Public Policy Center of the University of Pennsylvania (FactCheck.org) declared that a Social Security calculator posted on Reid's website--and those of at least 16 other Senate Democrats--was "rigged" and "based on a number of false assumptions and deceptive comparisons."

Those who check the "Social Insecurity" calculator are hit immediately by the heading "How Will You Lose Under Bush Privatization Plan." An entry alongside the final calculation invites one to see "Your Annual Percentage CUT Under Bush Privatization." How objective! The researchers at FactCheck.org concluded: "The calculator systematically underestimates the likely returns of investments" by assuming a rate of return of only 3% above inflation. In fact, "the stock market has averaged 6.8% above inflation for the past century." Indeed, several prominent economists quoted in the analysis estimated future stock market returns to be about twice the rate assumed on Reid's calculator.

Analysts at the liberal Center on Budget and Policy Priorities, who created the calculator, explain that they base their 3% assumption on a previous study by the nonpartisan Congressional Budget Office. But CBO Director Douglas Holtz-Eakin told FactCheck.org that the 3% assumption was flat-out "wrong" and that "we assume that equities will return 6.8% in the future."

There is at least one additional, significant flaw in the calculator. Social Security experts at the Heritage Foundation reviewed the fine print and found the following statement: "For simplicity's sake, this website assumes that all workers will retire at age 65, although the full retirement age is gradually increasing under current law, reaching age 67 for those born in 1960 and thereafter." In other words, the calculator wrongly overstates the returns from the current program by assuming workers pay into the system for up to two fewer years than is the case, and that they receive benefits for up to two years more than allowed under current law.

It is nothing short of breathtaking that purportedly serious researchers would foist such a knowingly deceptive product on Americans in the midst of such a serious policy debate. 
 
Mr. Franc, who has held a number of positions on Capitol Hill, is vice president of Government Relations at The Heritage Foundation.

About the Author

Michael Franc Distinguished Fellow
Government Studies

First appeared in Human Events