Archive for the ‘Corruption’ Category

The polls are not looking good for Donald Trump. Indeed, I suspect my most recent prediction for the 2016 race gives him too many states.

With time running out, he now faces pressure to come up with some new idea or a new narrative to change the likely outcome.

Which may explain why he just unveiled a new plan to “drain the swamp” in Washington with new ethics rules. Such initiatives tend to be popular with voters, who view Washington as a corrupt mess. And an ethics-reform agenda may be an effective way of reminding voters that Hillary Clinton has major problems with corruption.

But let’s consider whether his plan actually would work. Taken directly from his campaign website, here’s what Trump is proposing.

As you can see, he basically wants to make it harder for Washington insiders to go through the revolving door.

And to augment his lobbying restrictions, Trump also has embraced congressional term limits.

Donald Trump added a new proposal to his recently unveiled ethics reforms package on Tuesday, promising to pursue a constitutional amendment that would impose term limits on members of Congress should he win the election on Nov. 8. …Establishing term limits at the federal level would help “break the cycle of corruption” that has plagued Washington and “give new voices to change so that we can have a government that works again and can function properly,” Trump argued.

For what it’s worth, I suspect many voters will like what Trump is saying.

If you look at Chapman University’s “Survey of American Fears,” the most commonly cited concern is “corruption of government officials.”

For people in the political world, the obvious follow-up issue is whether a popular issue/agenda actually will attract voters. In other words, will people concerned about Washington corruption rally to Trump simply because he highlights the issue.

Beats me.

I’m much more concerned with a different follow-up issue, which is whether his five points (six if you include term limits) would actually work if they were adopted.

To be blunt, I’m not holding my breath. And the reason for my concern is that Trump isn’t proposing to actually drain the swamp. There’s rampant sleaze in Washington because politicians and bureaucrats have massive powers to give undeserved wealth to those with political connections.

In other words, the “swamp” is big government. And since Trump isn’t proposing to shrink the size and scope of Washington, the incentives that currently exist to get unearned wealth via government coercion will still remain.

If you look at Trump’s proposals, what he’s really talking about is a plan to make it somewhat more difficult for certain people to wade into the swamp.

I have no objection, by the way, to additional rules that hinder the ability of politicians, congressional staffers, and presidential appointees to cash in on the connections they’ve made.

But I’m also not naive enough to think that this will reduce Washington sleaze. The policies that Trump is proposing are like pressing down on one part of a balloon and somehow hoping that other parts of the balloon won’t expand. Indeed, that’s the message of my video on the very strong link between the size of government and the amount of corruption.

P.S. Let me add a technical point that is very important in this discussion. Lobbying occurs when someone asks a politician to vote “yes” or “no” on a piece of legislation. It’s not lobbying, however when someone tells a politicians that an idea is good or bad (which is what I often do as part of my job).

But if Trump can change the definition of lobbying for former government officials (the third point in his five-point plan), that might disrupt the status quo for certain people (assuming it could be effectively enforced).

But so long as the size and scope of government isn’t curtailed, that kind of change won’t eliminate the incentive of interest groups to hire people who are allowed to lobby. The only way to reduce corruption is to reduce government.

P.P.S. By the way, restrictions on campaign donations also won’t work.

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Here’s an interesting issue to ponder. Is corruption rampant in government because the perverse incentive structure of politics turns good people into bad people?

Or do bad people naturally gravitate to government and politics because it’s the easiest (and legal, though generally immoral) way to take money from other people?

I guess this is like a chicken-and-egg question with no clear answer, though Mark Twain preferred the latter interpretation.

Though he was being too narrow. Yes, Congress if filled with people who are willing to use coercion to take money from ordinary people in order to line the pockets of their cronies, but this is also true for politicians and bureaucrats in the executive branch, as well as their counterparts at the state and local level.

Let’s look at a couple of oleaginous examples. We’ll start with a grotesque example of nepotism. Except this isn’t a routine example of daddy giving junior an undeserved job in the family company. In this case, we have Washington-style nepotism. Daddy has ransacked taxpayers to line the pockets of his daughter. The Daily Caller has the unseemly details.

More than $9 million of Department of State money has been funneled through the Peace Corps to a nonprofit foundation started and run by Secretary of State John Kerry’s daughter, documents obtained by The Daily Caller News Foundation show. The Department of State funded a Peace Corps program created by Dr. Vanessa Kerry and officials from both agencies, records show. The Peace Corps then awarded the money without competition to a nonprofit Kerry created for the program. Initially, the Peace Corps awarded Kerry’s group — now called Seed Global Health — with a three-year contract worth $2 million of State Department money on Sept. 10, 2012, documents show. Her father was then the chairman of the Senate Committee on Foreign Relations, which oversees both the Department of State and the Peace Corps. Seed secured a four-year extension in September 2015, again without competition. This time, the Peace Corps gave the nonprofit $6.4 million provided by the Department of State while John Kerry was secretary of state.

What makes this story especially outrageous is that John Kerry is a multi-multi-millionaire, having married in the Heinz family fortune.

Does he really need to pick the pockets of taxpayers to boost his daughter’s finances?

Here’s another example. The Governor of New York, Andrew Cuomo, set up an “economic development program” that predictably turned into a playground for the politically well connected (sort of a state version of the corrupt program in Washington that financed Solyndra and other money-losing schemes).

The New York Times outlines this scandal, though be prepared to shower after reading.

Federal corruption charges were announced on Thursday against two former close aides to Gov. Andrew M. Cuomo, a senior state official and six other people, in a devastating blow to the governor’s innermost circle and a repudiation of how his prized upstate economic development programs were managed. The charges against the former aides, Joseph Percoco and Todd R. Howe, and the state official, Alain Kaloyeros, were the culmination of a long-running federal investigation… The charges stemmed from “two overlapping criminal schemes involving bribery, corruption and fraud in the award of hundreds of millions of dollars in state contracts and other official state benefits,” federal prosecutors said in the complaint. Mr. Percoco, who had served as Mr. Cuomo’s executive deputy secretary, is accused of soliciting and taking more than $315,000 in bribes between 2012 and 2016 from two companies… Until January, when Mr. Percoco left the administration…, he was Mr. Cuomo’s all-purpose body man, political enforcer and shadow.

The good news is that at least some of the people in this disgusting display of cronyism may face legal consequences.

Oh, by the way, Cuomo used to be the head of the Department of Housing and Urban Development when regulations were implemented that required Fannie Mae and Freddie Mac to make more dodgy housing loans. This guy is a walking disaster area.

For the umpteenth time, the moral of the story is that the only way to reduce corruption in government is to reduce the overall amount of taxing, spending, and regulating.

Or you can magically wish that only angelic people will gravitate to the public sector. Maybe I’m a cynic, but I’ll go with the former option.

P.S. I wrote a few days ago about the IMF’s hypocrisy in attacking Trump for his views on trade taxes. The bureaucrats are right that we shouldn’t increase the tax burden on global commerce. My complaint was that sauce for the goose wasn’t sauce for the gander. Hillary’s plan to increase the tax burden on work and investment is an even bigger threat to growth, yet the IMF gives her a free pass.

Anyhow, one of the points I made is that trade taxes currently are quite low, so they presumably cause only a minor amount of damage, whereas tax rates on work and investment are relatively high, meaning that further increases would be especially debilitating to growth. I cited some research from a Spanish academic to show how trade policy has improved over time, but didn’t have specific details on trade taxation.

My buddy Bryan Riley from the Heritage Foundation has come to my rescue, sharing an article that includes this chart on historical tariff rates.

The bottom line is that trade taxes have declined by somewhere between 75 percent and 90 percent since the end of World War II. This has been a great victory for economic liberty.

Trump should be condemned for wanting to halt further progress and/or go in the wrong direction by boosting trade taxes.

But, to echo what I wrote the other day, Hillary also should be condemned for proposing a different set of tax hikes that would cause even more harm to economic liberty.

P.P.S. I wrote a column earlier this month entitled “Anatomy of a Brutal Tax Beating” to highlight how an expert at the Tax Foundation completely dismantled a silly and unlearned article by a writer for Vox.

Well, we now have an “Anatomy of a Brutal Education Beating.” Except it’s not right-on-left violence. It’s left-on-left violence. Jonathan Chait writes for New York magazine and he formerly had stints at The New Republic and The American Prospect, so he’s definitely not a libertarian type.

But he’s ethical and doesn’t have a high level of tolerance for other leftists who launch dishonest ideological attacks on charter schools. Here’s some of what he wrote while debunking an article by some guy named Charles Pierce.

Esquire’s Charles Pierce, a fervent charter critic, …does not dispute the findings that urban charters in Massachusetts provide dramatic education benefits. He simply doesn’t care. …In the sentence, Pierce goes on to assert that the cap on charters serves a vital purpose. But the Brookings study, which I doubt he’s read, shows the opposite. …The cap in Massachusetts is completely perverse, in fact. It allows more students to enroll in charters serving suburban students, where the charters do not outperform the neighborhood schools, and prevents more students from enrolling in urban charters, where the schools do exceed the traditional neighborhood schools. …Presented with evidence that certain schools are providing a clearly better education to low-income urban students, Pierce argues that education should be denied because … somebody is making money off of it. It is more important to him to stick it to the capitalists than to allow low-income, disproportionately nonwhite students to have a chance to have a better life. …What’s even more perverse about Pierce’s argument is that it is factually wrong. Charters in Massachusetts are not for-profit vehicles. State law prohibits for-profit operators from running a public charter school… The notion that charters are “companies” and an “industry” with “profits” — that is, the entire basis for Pierce’s opposition — is a figment of the imagination. …Pierce rails suspiciously against the donors to the anti-cap side. …It is strange to accuse people who are giving away their money to the cause of educating poor children of not “giv[ing] a rat’s ass about educating children in Roxbury or Mattapan”.

Wow. Chait drove over Pierce, then hit the brakes, put the car in reverse, and then drove over him again just for the fun of it.

A perfect example of the difference between a sincere person of the left and a hack who is probably just flacking for teacher unions.

P.P.P.S. I can’t resist returning to John Kerry. It’s not merely that he’s a staggeringly rich guy who nonetheless sees no problem with diverting money from taxpayers to his daughter. It’s also that he does everything possible to minimize the amount of tax that he pays. Everything possible.

P.P.P.P.S. This column focused on corrupt Democrats, but this is a bipartisan problem. Indeed, the worst offenders are probably Republicans.

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Why did a for-profit college pay former President Bill Clinton the staggering sum of $16.5 million to serve as an “honorary chancellor for Laureate International Universities”? Was it because he had some special insight or expertise on how to improve education?

Why did Goldman Sachs pay former Secretary of State Hillary Clinton hundreds of thousands of dollars for a couple of speeches? Was it because she had valuable observations about the economy and investments?

The answer to all those questions is that companies sometimes are willing to transfer large sums of money to influential politicians because they want something in exchange.

In some cases, they want help from powerful insiders so they can use the coercive power of government to take other people’s money, which is reprehensible and disgusting. In other cases, they are seeking to guard against being victimized with high taxes and punitive regulations and so they pay “protection money” to powerful insiders in hopes of being left alone, which is unfortunate but understandable.

In either case (one moral and the other immoral), the companies are making rational decisions. Politicians have immense ability to tax, spend, and regulate, so it makes sense to get on their good side, either by giving them money directly or contributing to their campaigns.

This is a problem in the United States, of course, but it’s also a problem in Europe.

Consider the curious case of José Manuel Barroso, the recently retired President of the European Commission who was recently hired by Goldman Sachs to be “non-executive chairman of Goldman Sachs International.” According the press release from the company, he will…well, it’s not clear what his role will be or what value he will provide. All we get is fluff about his political career and a murky statement that, “He will also be an advisor to Goldman Sachs.”

So let’s look at his Wikipedia bio. Maybe we’ll find some evidence that he has great expertise on investment matters. But all we find there is that he’s been a career politician, first in Portugal and then in Brussels (where he was a bit of a laughingstock).

There’s no indication that he ever held a job in the private sector. But we do get this tidbit.

In his university days, he was one of the leaders of the underground Maoist MRPP (Reorganising Movement of the Proletariat Party, later PCTP/MRPP, Communist Party of the Portuguese Workers/Revolutionary Movement of the Portuguese Proletariat).

That doesn’t sound like the pedigree of someone who just landed a lavishly compensated position in the supposed temple of global capitalism.

But the real story is that Barroso isn’t a communist (at least not now) and Goldman Sachs isn’t a bastion of free markets. Instead, both of them are expert practitioners of cronyism.

Indeed, the cronyism angle is so obvious in this case that the European Commission has launched an ethics probe.

Which is very upsetting to Senor Barroso. The Financial Times reported on the controversy.

José Manuel Barroso has accused the European Commission — a body he led for 10 years — of being “discriminatory” and “inconsistent” after the EU’s executive arm set up an ethics probe to examine his new role at Goldman Sachs. …Mr Barroso vigorously defended his decision to take a job as adviser with the US investment bank, which triggered a backlash across the EU. …French president François Hollande described the appointment as being “legally possible, but morally unacceptable”. …The committee will examine Mr Barroso’s contract to ascertain whether it complies with Mr Barroso’s obligation under EU law “to behave with integrity and discretion” when taking appointments or benefits after leaving office. Campaigners have argued that Mr Barroso could be stripped of his pension — worth €15,000 per month — if he is found to have violated these rules. …Other former members of the commission have gone on to take high-profile roles with big businesses, leading some to claim that Goldman Sachs has been singled out because of its role in the financial crisis.

Though it’s worth noting that Barroso is simply the latest example of a revolving door between senior euro-crats and Goldman Sachs.

The bottom line is that Barroso hasn’t behaved with integrity. But that’s true of his entire career. Taking a position with Goldman Sachs is simply a way of monetizing decades of cronyism.

P.S. Shifting back to the US version of cronyism, Kevin Williamson has a must-read analysis of the corrupt nexus of Wall Street and Washington.

P.P.S. The solution to this mess (other than Glenn Reynold’s revolving-door surtax) is to dramatically shrink the size and scope of government. When there’s less to steal, there will be fewer thieves.

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Back in 2009, I shared some academic research showing the unsavory link between lobbying expenditures and bailout cash from TARP.

Just in case anybody naively thinks that such distasteful favor-swapping no longer occurs, here’s some more evidence. A column in the International Business Times summarizes some new scholarly research, once again showing the corrupt nexus between big government and the financial sector.

…analysis from London Business School professors Ahmed Tahoun and Florin Vasvari analyzed how the personal finances of congressional lawmakers changed once they were appointed to the Senate Finance Committee, the Senate Banking Committee or the House Financial Services Committee. It also evaluated how their finances compared with other lawmakers who are not on those panels. …the researchers found that finance committee members’ personal borrowing tended to jump in the first year they were appointed to the panels — a trend not seen for other lawmakers who were given seats on other powerful committees. Similarly, the data show that upon joining the finance panels, lawmakers tended to be given 32 percent more time — or on average 4 and a half years more — to pay back those new debts than loans they previously had and that other members of Congress have. The study found that lawmakers also “report more favorable debt terms when they join the finance committee, relative to other years and to the terms other congressional members obtain including those on other powerful committees.”

Needless to say, the companies aren’t giving special treatment to these politicians because of altruism. For every quid, there’s a quo.

…the influence may operate in the other direction, too. Looking at which particular financial institutions are lending to lawmakers, the researchers found that underperforming banks provided new — and bigger — loans to more finance committee members than to other Members of Congress. They say that because those firms could face more regulatory scrutiny and financial instability from new federal policies, they are more reliant on strong political connections than competitors that are in better shape.

In other words, if you can’t succeed by competing in the marketplace, then curry favor with politicians so that you can be propped up by big government.

Though companies presumably have learned from the Countrywide scandal to be more cautious about disguising the fact that they are dispensing goodies.

…mortgage industry titan Countrywide Financial created a “VIP loan unit” that gave lower mortgage rates and expedited loan processing services to lawmakers that oversaw legislation affecting the firm. …Democratic U.S. Senators Chris Dodd and Kent Conrad were cleared by the ethics committee, which said they did not knowingly seek the perks. The committee, though, told the lawmakers they “should have exercised more vigilance in your dealings with Countrywide in order to avoid the appearance that you were receiving preferential treatment based on your status as a senator.”

By the way, I’m not exactly shocked that the congressional ethics committee (wow, talk about an oxymoron) didn’t even bother slapping the wrists of the politicians who got the favors. After all, imagine how much harder it would be to raise campaign cash if politicians couldn’t use the coercive power of government to swap favors with interest groups.

But the folks on Capitol Hill are amateurs compared to Bill and Hillary Clinton. The Wall Street Journal explains that the charity they set up has basically been a scam to advance their personal and political interests.

The foundation served for years as a conduit for corporate and foreign cash to burnish the Clinton image, pay for their travel expenses for speeches and foreign trips, and employ their coterie in between campaigns or government gigs. Donors could give as much as they wanted because the foundation is a “charity.” …the foundation promised the White House when Mrs. Clinton became Secretary of State that the foundation would restrict foreign donations and get approval from the State Department. It turned out the foundation violated that pledge, specifically when accepting $500,000 from Algeria. The foundation also agreed to disclose donor names but failed to do so for more than 1,000 foreign donors until the failure was exposed by press reports.

Some readers may think it doesn’t matter where the money came from. What really counts is that the Clinton Foundation used the money to make the world a better place, right?

Um, not exactly. Only pennies on the dollar were used for charitable purposes.

The rest of the money was a slush fund to finance the Clinton family’s political machinery.

If you think this sounds unfair to the Clinton Foundation, you may change your mind after reading this article from the Daily Caller. Here are some excerpts.

Clinton Foundation officials have ignored virtually all of the “best practices” urged by good governance organizations for public charities… Most glaringly, for example, the foundation’s insular board of directors…are among President Bill and Hillary Clinton’s closest and richest friends. The “good governance” movement in the nonprofit field has been gathering strength for two decades, but it clearly has yet to reach the Clinton Foundation. …Good governance groups also encourage well-managed non-profits to create dedicated oversight committees… The Clinton Foundation has none of those committees, according to its Internal Revenue Service 990 tax filings. …the Clinton Foundation spent $12.6 million on Bill Clinton’s 60th birthday party. The foundation recorded the expense as “fundraising expenses.” …In December 2014 the board approved a $395,000 pay package for Braverman to become the new CEO.  But the next month he abruptly resigned. Politico reported that Clinton’s insular staff were appalled at Braverman’s attempts at reforms. Braverman never explained the reasons for his departure. But Politico believes it was a backlash from Bill and Hillary’s hardened loyalists and “mega-donors” who chafed at the notion of more openness and transparency.

If the Clinton Foundation was a truly private organization, it wouldn’t be anybody’s business whether how it operated.

Moreover, it would be hypocritical for me to make that accusation. After all, I’m on the Board of the pro-tax competition Center for Freedom and Prosperity and the other Board members are long-time friends. And we don’t have a bunch of oversight committees since CF&P’s annual budget has averaged less than $200,000, which means such things don’t seem necessary (though we’ve managed to do a lot with a little, even earning a front-page attack from the Washington Post).

The real issue, however, is whether a nonprofit organization is genuinely private. In the case of the Clinton Foundation, ” the organization seemingly operated as a “pay-to-play” gatekeeper for goodies from the State Department?

Consider these blurbs from a column in the Wall Street Journal.

…more than two dozen companies and groups and one foreign government paid former President Bill Clinton a total of more than $8 million to give speeches around the time they also had matters before Mrs. Clinton’s State Department, according to a Wall Street Journal analysis. Fifteen of them also donated a total of between $5 million and $15 million to the Bill, Hillary and Chelsea Clinton Foundation, the family’s charity… In several instances, State Department actions benefited those that paid Mr. Clinton.

Here’s one of the examples discussed in the column.

…the capital of the United Arab Emirates asked for a facility to clear travelers for U.S. entry before they boarded planes so they could avoid delays when arriving in the U.S. …U.S.-based airlines, which have no direct flights between Abu Dhabi and the U.S., opposed the idea as a giveaway to the government-owned airline, Etihad Airways. …While Mrs. Clinton’s State Department and the Department of Homeland Security were working out a “letter of intent” with Abu Dhabi for the facility, Mr. Clinton sought permission to give a paid speech in Abu Dhabi. …On Dec. 6, 2011, U.S. officials signed the letter of intent. One week later, Mr. Clinton gave a 20-minute talk on climate change to the Abu Dhabi government environmental gathering. He collected $500,000, his wife’s disclosure report shows. In December 2012, Mr. Clinton sought approval for another speech in Abu Dhabi before the World Travel and Tourism Council…the speech was sponsored by three Abu Dhabi tourism agencies, all owned by the government. …Mr. Clinton gave a keynote address on the value of tourism. He was paid $500,000, his wife’s disclosure filings say. One week later, the U.S. and Abu Dhabi signed the final agreement for the facility. …Mrs. Clinton’s spokesman said it was “farcical” to suggest any connection between the speeches and the facility’s opening.

The “farcical” part of this is the notion that a) Bill Clinton is an expert on the “value of tourism”, and b) that his supposed expertise on the topic is worth $500,000.

Though I have to give Bill Clinton credit for getting good deals. When I give a speech, I’m content with simply getting the organizer to pay for a coach ticket and a hotel room.

But the L.A. Times reveals that Bill Clinton gets much better treatment, not even counting the giant piles of money funneled to the Clinton Foundation.

Clinton changed the rules of political speech-making for cash. He would push not just corporate hosts but also nonprofits and universities to pay fees well beyond what they were accustomed to. …He and Hillary Clinton would become so skilled at churning profits out of their lectures that they would net more than $150 million from speaking alone after he left the White House. …refusing questions that were not screened by his staff in advance. There is the nearly $1,400 bill for a day’s worth of phone calls from San Francisco’s Fairmont Hotel and the $700 dinner for two. …Clinton would demand in his contract to be shuttled by private jet from San Francisco to UC Davis, where he spoke at the Mondavi Center. The center had to appeal to its network of donors to find someone able to fly him the 70 miles, something it had never done and hasn’t since.

By the way, I don’t object to Bill Clinton being treated far better than me. But I do get agitated if he’s getting goodies because some interest group is participating in a pay-for-play scam based on favors from government.

And that does come out of my pocket, as well as from the pockets of every other taxpayer, consumer, and worker.

Speaking of pay-to-play, here’s a story from the Washington Examiner about some unseemly behavior from the Clinton Foundation.

A Clinton Foundation official asked an aide to then-Secretary of State Hillary Clinton if the government would allow the well-connected charity to accept a donation from an oil company with extensive ties to Iran. …The email shows Petronas, a Malaysian state-owned oil company, wanted to send CEO Shamsul Azhar bin Abbas to a Clinton Global Initiative event as a paying member. …Two months earlier, the State Department highlighted a $150 million contract between Petronas and General Electric in Malaysia. …David Bossie, president of Citizens United, said the timeline of the State Department’s announcement of the deal with GE should raise questions. “A month after the announcement, the Clinton Foundation staff is contacting the State Department saying, ‘Hey, we want to shake down the CEO, essentially, of Petronus, is that ok?’…,” Bossie said. “That is political crony capitalism — that’s the definition of it, is using your political contacts and your political achievements for financial gain for the foundation,” he continued. “Clearly, [there was] a conflict of interest.”

The only good news is that the proposed shakedown of Petronas apparently didn’t happen, though it’s unclear from the records whether this was because the company said no or because the idea was so over-the-top corrupt that it was rejected by the State Department.

Let’s close with a really nauseating example of Clintonian sleaze. A story in National Review exposes how the family’s Foundation victimized the people of Haiti.

Their story goes back to 2010, when a massive 7.0 earthquake devastated the island, killing more than 200,000 people, leveling 100,000 homes, and leaving 1.5 million people destitute. The devastating effect of the earthquake on a very poor nation provoked worldwide concern and inspired an outpouring of…some $10.5 billion in aid, with $3.9 billion of it coming from the United States.

But all this money hasn’t helped the poor people of Haiti.

…very little of this aid money actually got to poor people in Haiti. …Port-au-Prince was supposed to be rebuilt; it was never rebuilt. Projects aimed at creating jobs proved to be bitter disappointments. Haitian unemployment remained high, largely undented by the funds that were supposed to pour into the country. Famine and illness continued to devastate the island nation.

Why didn’t all the money have a positive impact?

Part of the answer is that foreign aid generally ineffective. Another part of the answer is that Haiti has statist policies that inhibit growth and prosperity.

But a final part of the answer is that a bunch of grifters diverted the money to their own pockets.

Where did it go? …Bill Clinton was the designated UN representative for aid to Haiti. …his wife Hillary was the United States secretary of state. She was in charge of U.S. aid allocated to Haiti. …an interesting pattern involving the Clintons and the designation of how aid funds were used. …a number of companies that received contracts in Haiti happened to be entities that made large donations to the Clinton Foundation. …For example, the Clinton Foundation selected Clayton Homes, a construction company owned by Warren Buffett’s Berkshire Hathaway, to build temporary shelters in Haiti. Buffett is an active member of the Clinton Global Initiative who has donated generously to the Clintons as well as the Clinton Foundation. …the contract was never competitively bid for. Clayton offered to build “hurricane-proof trailers” but what they actually delivered turned out to be a disaster. The trailers were structurally unsafe, with high levels of formaldehyde and insulation coming out of the walls. There were problems with mold and fumes. The stifling heat inside made Haitians sick and many of them abandoned the trailers because they were ill-constructed and unusable.

Here’s another example of pay-to-play favoritism.

The Clintons also funneled $10 million in federal loans to a firm called InnoVida, headed by Clinton donor Claudio Osorio. …Normally the loan approval process takes months or even years. …InnoVida had not even provided an independently audited financial report that is normally a requirement for such applications. This requirement, however, was waived. On the basis of the Clinton connection, InnoVida’s application was fast-tracked and approved in two weeks. The company, however, defaulted on the loan and never built any houses. An investigation revealed that Osorio had diverted company funds to pay for his Miami Beach mansion, his Maserati, and his Colorado ski chalet.

Gee, isn’t government a great racket!

Here’s one final oleaginous example.

In 2011, the Clinton Foundation brokered a deal with Digicel, a cell-phone-service provider seeking to gain access to the Haitian market. The Clintons arranged to have Digicel receive millions in U.S. taxpayer money to provide mobile phones. The USAID Food for Peace program, which the State Department administered through Hillary aide Cheryl Mills, distributed Digicel phones free to Haitians. Digicel didn’t just make money off the U.S. taxpayer; it also made money off the Haitians. When Haitians used the phones, either to make calls or transfer money, they paid Digicel for the service. Haitians using Digicel’s phones also became automatically enrolled in Digicel’s mobile program. By 2012, Digicel had taken over three-quarters of the cell-phone market in Haiti. Digicel is owned by Denis O’Brien, a close friend of the Clintons. O’Brien secured three speaking engagements in his native Ireland that paid $200,000 apiece. These engagements occurred right at the time that Digicel was making its deal with the U.S. State Department. O’Brien has also donated lavishly to the Clinton Foundation, giving between $1 million and $5 million sometime in 2010–2011. Coincidentally the United States government paid Digicel $45 million to open a hotel in Port-au-Prince.

If you’re not thoroughly nauseated, read the entire article for many more examples of pay-to-play sleaze.

By the way, I’m not merely picking on the Clintons. Yes, they seem to be remarkably amoral in their approach to politics, but the underlying problem is that big government enables corruption regardless of who is in charge.

That’s the moral of the story.

P.S. Don’t forget that the Clinton Foundation easily got approved by the IRS while innocuous Tea Party groups were stonewalled. Another typical example of government in action.

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I have a Bureaucrat Hall of Fame to publicize civil servants who manage to get wildly over-paid while being notoriously under-worked. And I have a Moocher Hall of Fame to identify welfare recipients who have displayed special skills in living off the labor of other people.

But now I’m thinking I may need to create a Hall of Fame to “honor” politicians who go above and beyond the call of duty by displaying extraordinary levels of arrogance, elitism, malfeasance, and corruption. That’s because my initial plan to give a once-per-year award has been superseded by events.

  • Back in May, I gave a “Politician of the Year Award” to Rodrigo Duterte, the newly elected president of the Philippines, because he announced to voters that none of his mistresses is on the public payroll.
  • But earlier this month, I had to reopen the balloting since it was revealed that the follicly-challenged President of France, Francois Hollande, was squandering more than $100,000 per year on a hair stylist.

To make matters even more complicated, the Prime Minster of Malaysia has decided to join the contest.

And if these blurbs from a Wall Street Journal column are any indication, he definitely deserves some sort of recognition.

U.S. prosecutors on Wednesday linked Malaysian Prime Minister Najib Razak to hundreds of millions of dollars they believe were stolen from the Malaysian state-owned investment fund 1MDB. …The evidence of fraud connected to 1MDB from investigations in the U.S., Singapore, Switzerland and at least four other countries is damning. The U.S. Justice Department put the losses at $3.5 billion on Wednesday. The Swiss Attorney General’s office said earlier this year it suspects $4 billion was misappropriated.

That’s some serious diverting of other people’s money. Makes scams like Solyndra, Export-Import Bank, and Fannie Mae and Freddie Mac seem like amateur hour by comparison.

Not surprisingly, the Prime Minister and his cronies are using political coercion to silence and sidetrack whistle blowers.

…officials who tried to investigate 1MDB were sidelined. Attorney General Abdul Gani Patail was on the verge of bringing charges against Mr. Najib last summer when he was forced to resign for “health reasons.” …Abu Kassim Mohamed, chief commissioner of the Malaysian Anti-Corruption Commission, had advised prosecutors to charge Mr. Najib and was investigating 1MDB until last month, when the government announced he would move to a lower post.

Gee, seems like bad health and demotions are quite common in Malaysia.

The stonewalling reflects Mr. Najib’s strong political position at home. He has played the nationalism card to portray himself as a victim of foreign forces, used repressive laws to silence critics in the press and opposition, and expelled dissidents from his party. …Mr. Najib has also been helped at home by the appearance of close ties to U.S. President Obama, who invited him for a golf outing and ostentatious photo-op in Hawaii in December 2014.

I’m shocked, by the way, that Najib’s name hasn’t been linked to the money-laundering racket sometimes known as the Clinton Foundation. Seems like that would be a match made in heaven.

But perhaps I simply haven’t looked closely enough.

Also, this is a good opportunity to recognize the reporter, Clare Rewcastle Brown, who has done more than any other person to publicize this scam. She even got added to Fortune‘s list of “World’s Greatest Leaders.”

Through her website Sarawak Report, London-based journalist Brown has become an irritant in the corridors of power in Malaysia. Her exposés on state investment fund 1MDB—publicizing the alleged siphoning of $700 million into the pockets of Prime Minister Najib Razak—have made her a hero and a villain in the country, depending on whom you ask. The government has tried to arrest her for “activities detrimental to Parliamentary democracy” and has banned her website.

Speaking of her website, you can read her indictment of Najib by clicking here.

Let’s close with a caveat and a lesson.

The caveat is that Prime Minister Najib still hasn’t been convicted of anything. We have to hold out the possibility, however remote, that he’s actually innocent.

The lesson is that the Malaysian government shouldn’t be in the business of trying to allocate capital.

Even if a big government-run development bank miraculously and improbably steered clear of corruption, it’s always a bad idea to let politicians and bureaucrats invest with other people’s money.

And when you add the inevitable corruption to the mix, the net result is that you damage the economy while simultaneously lining the pockets of insiders.

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Last year, I shared the most depressing PowerPoint slide in Danish history.

Back in 2011, I wrote about a depressing picture of tax complexity in America.

Let’s continue with the “depressing” theme today.

James Bessen, from Boston University Law School, has an interesting article in the Harvard Business Review about the source of corporate profits in the 21st century (h/t: James Pethokoukis).

He starts with an observation and a query.

Profits are up. …is it good news for society?

The default answer presumably is yes. Higher profits, after all, generally are a sign of wise investments.

And when labor and capital are allocated wisely, that’s good news for consumers and workers.

But Bessen correctly observes that profits can increase for bad reasons, and that’s the focus of his research.

…the rise in profits might represent a decline in…economic dynamism. …Firms engage in political “rent seeking”—lobbying for regulations that provide them sheltered markets—rather than competing on innovation. If so, then high profits portend diminished productivity growth. …In a new research paper, I tease apart the factors associated with the growth in corporate valuations.

Unfortunately, he finds that cronyist policies account for a depressingly large share of corporate profits.

I find that investments in conventional capital assets like machinery and spending on R&D together account for a substantial part of the rise in valuations and profits, especially during the 1990s. However, since 2000, political activity and regulation account for a surprisingly large share of the increase.

Here’s a very grim chart from his article. At the very least, I’ll call this the most depressing image of 2016.

Ugh, what a dismal observation on the state of our economy. Companies are almost making as much money from manipulating Washington as they earn from serving consumers. Heck, just consider the way politically connected financial institutions tilt the playing field for unearned goodies.

Bessen adds some analysis, including the very important insight that regulation and intervention tends to help big companies relative to small companies and new competitors.

Much of this result is driven by the role of regulation… Lobbying and political campaign spending can result in favorable regulatory changes, and several studies find the returns to these investments can be quite large. For example, one study finds that for each dollar spent lobbying for a tax break, firms received returns in excess of $220. …regulations that impose costs might raise profits indirectly, since costs to incumbents are also entry barriers for prospective entrants. For example, one study found that pollution regulations served to reduce entry of new firms into some manufacturing industries.

It’s also worth noting that he finds that this bad news really started back in 2000, which makes sense given that both Bush and Obama have pushed policies that have expanded the clumsy footprint of government.

This research supports the view that political rent seeking is responsible for a significant portion of the rise in profits. Firms influence the legislative and regulatory process and they engage in a wide range of activity to profit from regulatory changes, with significant success. …while political rent seeking is nothing new, the outsize effect of political rent seeking on profits and firm values is a recent development, largely occurring since 2000. Over the last 15 years, political campaign spending by firm PACs has increased more than thirtyfold and the Regdata index of regulation has increased by nearly 50% for public firms.

What an awful cycle. Government gets bigger and more powerful, which lures companies into viewing Washington as a profit center, which then leads to more policies that expand the size and power of the federal government, which leads to further opportunities for rent-seeking behavior. Lather, rinse, repeat.

Oh, and don’t forget this is one of the reasons why there’s a revolving door of insiders who shift back and forth between the private sector and government, but their real job is always to be working the system to obtain undeserved wealth.

Which is why I periodically explain that there’s a big difference between being pro-market and being pro-business.

P.S. Earlier this year, I shared some data, based on sources of billionaire wealth, that suggested that cronyism wasn’t a major factor in the United States. But Bessen’s new research nonetheless shows we do have a major problem, perhaps because people who get rich honestly then decide to maintain their wealth dishonestly.

P.P.S. If there’s any sort of silver lining to this bad news, it’s this amusing parody commercial about Kronies, which are toys for the children of Washington’s gilded class.

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My main problem with Hillary Clinton is that she not only supports the bloated and enervating welfare state that already exists, but she wants to make it even bigger. Indeed, there’s only a very small gap between her and crazy Bernie Sanders when you examine their voting records.

There’s only a trivially small difference…between Hillary Clinton’s lifetime rating of 10.6 from the National Taxpayers Union and Bernie Sanders’ lifetime rating of 9.4. They both earned their failing grades by spending other people’s money with reckless abandon.

That being said, I’m disgusted and outraged by her dishonest and corrupt behavior.

The rule of law is one of the most important building blocks of a just and prosperous society, so it’s both morally nauseating and economically destructive when members of the elite enjoy special treatment.

Josh Barro definitely isn’t a member of the vast right wing conspiracy, so his list of Hillary’s ethical lapses should carry extra weight.

It’s possible that Clinton and Lynch were just catching up — “a social meeting,”… Similarly, it’s possible foreign governments donated to the Clinton Foundation because they viewed it as the most efficient available philanthropic opportunity, without regard for the favorable impression it might make on Bill and Hillary Clinton. It’s possible Goldman Sachs paid Hillary Clinton $675,000 for three speeches because they thought she would be really interesting, not because they thought the payment might help the bank make a favorable impression on a potential future president. It’s possible a major Clinton donor ended up on a State Department nuclear advisory board for perfectly innocent reasons, and that there were no untoward effects from top Clinton staffers being simultaneously on State Department and private payrolls. …The list goes on and on. …the Clintons have no apparent concern for appearances of impropriety, as long as they believe their actions cannot get them in trouble with the law.

And the Clintons get away with things that would land ordinary Americans in jail, so you have to give them credit for knowing how to exploit their political connections and power.

And that has a lot of people legitimately upset. The Washington Examiner opined about Hillary’s free pass from the FBI.

The Founding Fathers embraced principles that transcended their own human weaknesses and those of their posterity. They created a system in which process and law could check base personal ambition, favoritism and other low and common temptations. The idea was to put in place a system that would survive incompetent and corrupt leaders. …the public witnessed what happens when the system fails. Special people receive special treatment. Equal protection under the law turns out to be a fancy fiction. Some people are more equal than others. …An average government official who spent five years breaking the rules to frustrate the Freedom of Information Act, and who recklessly compromised classified information (more than 100 times), including top secret information (eight times), would serve time in federal prison. But Hillary Clinton is almost certain to suffer no consequences at all.

But what about Hillary supposedly having no bad intent, as the FBI Director offered up as a distraction?

This is bunk. Intention is something this law does not require. “Gross negligence” alone is sufficient grounds for prosecution because the officials to which it applies are entrusted with secrets that bring greater obligations than average citizens must bear. Precisely because of that greater risk of prosecution, high-ranking government officials who handle classified information, including Clinton, sign agreements that spell out their legal jeopardy.

Jacob Sullum of Reason also addresses this topic.

…one of the statutes guiding the FBI’s investigation, 18 USC 793, makes it a felony to “mishandle classified information either intentionally or in a grossly negligent way” (emphasis added), as Comey himself notes… Former New York City Mayor Rudy Giuliani, …who was the U.S. attorney for the Southern District of New York during the Reagan administration, says Comey’s description of Clinton’s behavior plainly qualifies as a violation of 18 USC 793(f). …Giuliani told NBC’s Brian Williams yesterday, “because he clearly found a direct violation of 18 United States Code, Section 793, which does not require intent. It requires only gross negligence in the handling of anything relating to the national defense. …The definition of gross negligence under the law is extreme carelessness. It’s the first definition that comes up in the law dictionary. …So that is a clear, absolutely unassailable violation of 18 United States Code, Section 793, which is not a minor statute. It carries 10 years in prison.”

For those who think Rudy Giuliani is perhaps exaggerating because of his support for Trump, then consider the views of former Attorney General Michael Mukasey, who is part of the #neverTrump camp.

It is a felony for anyone entrusted with lawful possession of information relating to national defense to permit it, through “gross negligence,” to be removed from its proper place of custody and disclosed. “Gross negligence” rather than purposeful conduct is enough. …As an example of the kind of information at stake, he described seven email chains classified at the Top Secret/Special Access Program level. These were the emails that the government had said earlier are so sensitive that they will never be disclosed publicly. …To be “extremely careless” in the handling of information that sensitive is synonymous with being grossly negligent.

Needless to say, ordinary Americans would never get this kind of preferential treatment.

David French, a former military officer, explains what would happen to someone in the armed forces who treated national security with the same degree of disdain.

I served ten years as an Army lawyer, and one of my responsibilities was advising the command on matters of military justice, including incidents where soldiers mishandled classified information. And if Hillary Clinton was a soldier, she would lose her security clearance, face administrative action, and face the specter of criminal prosecution. I’ve not only seen the pattern, I’ve also participated in the process. …If Hillary were Captain Clinton instead of the presumptive Democratic nominee and wife of a disbarred former president, the following things would occur, more or less simultaneously. First, the command would immediately suspend her security clearance. …Next, her commander would probably draft an administrative reprimand. …a career-killer if placed in an officer’s permanent file…Finally, the command would consider criminal charges. …the officer would in all likelihood not only violate the Espionage Act (the same statute at issue in Clinton’s case) but also the Uniform Code of Military Justice. …In other words, her actions would have ended her military career, and she would have been fortunate to resign in lieu of enduring a court-martial. In her post-military civilian life, she would have been unemployable in any serious government position… To say that Hillary Clinton is unfit to be commander-in-chief is to give her too much credit. It implies that she might be fit for other positions of responsibility. She’s not fit to be POTUS, and she’s not fit to be a private.

But there is a silver lining to the dark cloud of Hillary favoritism.

We can enjoy some dark humor while the rule of law is further eroded.

The clever folks at Reason TV put together this video showing how Hillary Clinton has blatantly lied about her actions.

By the way, Hillary’s negligence and disdain for national security is just the tip of the iceberg.

She already has engaged in countless other shady acts, such as allowing her top aide, Huma Abedin, to be on the government payroll while simultaneously getting payoffs as an influence peddler.

Or consider the Clinton Foundation. Investor’s Business Daily makes a compelling case that it’s nothing but a racket.

…the Clinton Foundation gathered some $100 million from a variety of Gulf sheikhs and billionaires, not to mention taking in millions of “donations” from private businesses that later benefited from their supposed “charitable” largesse. Some of those who gave big bucks to the Clintons had interests that were, to put it mildly, not in keeping with U.S. interests. …now comes a more serious, far-reaching question: Is the entire Clinton Foundation so full of conflicts of interest and questionable dealings that it amounts to little more than a massive fraud intended solely to enrich its presidential namesake and his family? Charles Ortel, a Wall Street financial analyst, who pored over the Clinton Foundation’s books, filings and records, thinks so. He concluded that “a substantial portion of Clinton Foundation activities is certainly not ‘charitable’ or ‘tax-exempt’ in the accepted legal senses…” the nonprofit watchdog Charity Navigator removed the Bill, Hillary and Chelsea Clinton Foundation from its list of charities because of its “atypical business model.” …Getting rich isn’t a crime. But it might be if you did it in the guise of being a tax-free humanitarian charity, interested only in the betterment of humankind.

The Washington Examiner also has looked at the Clinton Foundation’s dodgy finances and activities.

The Clinton Global Initiative has a curious record of leaving its projects unfinished, despite receiving multiple large donations from foreign interests that could benefit if Hillary Clinton is elected president (and may have already benefited from her service at the State Department). …the initiative has completed fewer than half of the commitments made since 2005. Thirty-six percent of them are listed as being “in progress.” Many others are listed as “stalled,” “unfulfilled,” or haven’t had any progress reported in at least two years. This may just be a sign of bad timing or ineffective philanthropy, but when combined with the rest of the information available about the Clintons’ philanthropic activities, it hints at something more sinister. …accepted a great deal of money in donations from businesses and foreign governments that had a lot to gain from her help.

Here one of the examples that certainly seems tawdry, if not sinister.

In one well-known case, a group of Canadian mining magnates made millions in undisclosed donations to the Clinton Foundation, and a Russian bank closely linked to the Kremlin paid Bill Clinton $500,000 to give a single speech in Moscow. All of these parties involved in funneling money to the Clintons and their enterprises were part of a large mining deal that required approval from a government panel on which Clinton sat.

We also have the Clintonian equivalent of Trump University, as outlined by Professor Jonathan Turley.

Donald Trump has been rightfully criticized and sued over his defunct Trump University. There is ample support for claiming that the Trump University was fraudulent in its advertisements and operations. However, the national media has been…sidestepping a scandal involving the Clintons that involves the same type of fraud allegations. The scandal involves a dubious Laureate Education for-profit online college (Walden) and entails many of the common elements with other Clinton scandals: huge sums given to the Clintons and questions of conflicts with Hillary Clinton during her time as Secretary of State.

Here are some of the sordid details.

Laureate Education was sued over its Walden University Online offering, which some alleged worked like a scam designed to bilk students of tens of thousands of dollars for degrees. Students alleged that they were repeatedly delayed and given added costs as they tried to secure degrees, leaving them deeply in debt. …The respected Inside Higher Education reported that Laureate Education paid Bill Clinton an obscene $16.5 million between 2010 and 2014 to serve as an honorary chancellor for Laureate International Universities. …Various sites have reported that the State Department funneled $55 million in grants during Hillary Clinton’s tenure to groups associated with Laureate’s founder.  That would seem a pretty major story… The Wall Street Journal reported that Laureate was able to “skirt” regulations on reporting “gainful employment” due to its large number of schools and students outside of the country… Laureate has come up in the Clinton email scandal.  In her first year as Secretary of State, Clinton is quoted as directly asking that Laureate be included in a high-profile policy dinner — just months before the lucrative contract was given to Bill Clinton. …the size of the contract to Clinton, the grants from State and the complaints over alleged fraud should warrant a modicum of attention to the controversy.

Let’s close with one final example of Clintonesque sleaze. She apparently thinks insider trading is a good idea so long as the insiders are members of her family.

In 2012, Mezvinski, the husband of Chelsea Clinton, created a $325 million basket of offshore funds under the Eaglevale Partners banner through a special arrangement with investment bank Goldman Sachs. The funds have lost tens of millions of dollars predicting that bailouts of the Greek banking system would pump up the value of the country’s distressed bonds. …newly released emails from 2012 show that she and Clinton Foundation consultant, Sidney Blumenthal, shared classified information about how German leadership viewed the prospects for a Greek bailout. Clinton also shared “protected” State Department information about Greek bonds with her husband at the same time that her son-in-law aimed his hedge fund at Greece. …sharing such sensitive information with friends and family would have been highly improper. Federal regulations prohibit the use of nonpublic information to further private interests or the interests of others. The mere perception of a conflict of interest is unacceptable. …monitoring Greece was part of Clinton’s job description, but, ethically, that does not mean that a family member should make bets that depend upon the actions of another family member.

The point of all this is not that Hillary Clinton is sleazy and corrupt, though that’s one obvious conclusion.

Instead, as I’ve demonstrated over and over again, the real lesson is that Washington is filled with people like her.

And the reason that sleazy people gravitate to Washington is that we have Leviathan-sized government that enables politically well-connected people to obtain vast amounts of unearned and undeserved wealth.

Including lots of Republicans, so this isn’t a partisan argument.

Moreover, the problem almost certainly won’t get solved by electing different people. The only real solution is shrinking the size of government so there’s less opportunity for graft.

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