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Archive for the ‘Corruption’ Category

Remember Sleepless in Seattle, the 1993 romantic comedy starring Tom Hanks and Meg Ryan?

Well, there should be a remake of that film entitled Clueless in Washington. But it wouldn’t be romantic and it wouldn’t be a comedy.

Though there would be a laughable aspect to this film, because it would be about an editorial writer at the Washington Post trying to convince people to feel sorry for the IRS. Here’s some of what Stephen Stromberg wrote on Wednesday.

Congress has done some dumb things. One of the dumbest is the GOP’s penny-wise-pound-foolish campaign to defund the Internal Revenue Service. …its mindless tantrum against the IRS has produced for taxpayers: a tax season that was “by far the worst in memory,” according to the Taxpayer Advocate Service, an agency watchdog.

Before I share any more of the article, I should point out that the “Taxpayer Advocate Service” isn’t a watchdog. It should be renamed the “Government Advocate Service” since its main goal is to increase the IRS’s budget.

But I’m digressing. Let’s continue with Mr. Stromberg’s love letter to tax collectors.

The underlying problem is that Congress has asked the IRS to do a lot more, such as administering a critical piece of Obamacare, but the GOP Congress won’t give the agency the funding it needs to do its work. …But good luck convincing Republicans to fix the IRS’s entirely predictable and avoidable problems. Not when that would mean restraining the impulse to act on anti-tax orthodoxy, blind populist anger and scandal-mongering about the IRS mistreating conservatives. In fact, Republicans want to double down on their nonsense budgeting, proposing deep cuts to the IRS last month.

Oops, time for another correction.

Stromberg is cherry picking data to imply that the IRS budget has been savaged.

If you look at the long-run data, however, you’ll see that the IRS now has almost twice as much money to run its operations as it did a few decades ago.

And that’s based on inflation-adjusted dollars, so we have a very fair apples-to-apples comparison.

Stromberg also wants us to sympathize with the bureaucrats because the tax code has been made more complex.

The underlying irrationality is the same: The IRS doesn’t write the tax code or health-care law, but the agency must apply these policies and engage with people affected by them, so it is an easy scapegoat.

Part of this passage is correct, and I’ve specifically pointed out that the tax code is mind-numbingly complex and that politicians deserve an overwhelming share of the blame for this sorry state of affairs.

That being said, the IRS goes beyond the law to make the system worse, as we saw when it imposed a regulation that put foreign tax law above American tax law. And when it arbitrarily rewrote the Obamacare legislation to enable additional subsidies.

In other words, it deserves to be scapegoated.

But there’s a bigger issue, one that Stromberg never even addresses. Why should we give more money to a bureaucracy that manages to find plenty of resources to do bad things?

Never forget, after all, that this is the bureaucracy that – in an odious display of bias – interfered with the electoral process by targeting the President’s opponents.

And then awarded bonuses to itself for this corrupt behavior!

Even more outrageous, the Washington Examiner reports today that the IRS still hasn’t cleaned up its act.

A series of new revelations Wednesday and Thursday put the Internal Revenue Service back under fire for its alleged efforts to curtail…conservative nonprofits. …the Government Accountability Office uncovered evidence that holes in the tax agency’s procedure for selecting nonprofit groups to be audited could allow bias to seep into the process. …lawmakers exposed the lack of safeguards that could prevent IRS officials from going after groups with which they disagreed. Meanwhile, the conservative watchdog Judicial Watch released documents Wednesday that suggested the IRS targeted the donors of certain tax-exempt organizations.

Does this sound like a bureaucracy that deserves more of our money?

If you’re still not sure how to answer, consider the fact that the IRS also somehow has enough money in its budget to engage in the disgusting “asset forfeiture” racket.

The Wall Street Journal recently opined on this scandal.

…a pair of new horror stories show why Americans dread any interaction with the vindictive tax man. Khalid Quran owns a small business in Greenville, North Carolina. He emigrated to the U.S. in 1997, opened a convenience store near a local airport, and worked long hours to give his four children more opportunity. After nearly two decades, Mr. Quran had saved $150,000 for retirement. Then in 2014 the IRS seized his bank account because he had made withdrawals that raised red flags under “structuring” laws that require banks to report transactions of more than $10,000. Mr. Quran had made transactions below that limit.

So even though Mr. Quran did nothing illegal and even though it’s legal to make deposits of less than $10,000, the IRS stole his money.

Just like money was stolen from the Dehko family.

Here’s the other example from the WSJ.

Maryland dairy farmer Randy Sowers…had $62,936.04 seized from his bank account because of the pattern of his deposits, though the money was all legally earned. …Mr. Sowers told his story to a local newspaper…a lawyer for Mr. Sowers asked…“why he is being treated differently.” Mr. Cassella replied that the other forfeiture target “did not give an interview to the press.” So much for equal treatment under the law.

Yes, you read correctly. If you have the temerity to expose the IRS’s reprehensible actions, the government will try to punish you more severely.

Even though the only wrongdoing that ever happened was the IRS’s confiscation of money in the first place!

So let’s celebrate the fact that the IRS is being subjected to some modest but long-overdue belt-tightening.

Notwithstanding Mr. Stromberg’s column, the IRS is not a praiseworthy organization. And many of the bureaucrats at the agency deserve our disdain.

The bottom line is that IRS budget cuts show that Republicans sometimes do the right thing.

And maybe if there are continued cuts and the current tax system actually does become unenforceable at some point, maybe politicians could be convinced to replace the corrupt internal revenue code with a simple and fair flat tax.

P.S. Clueless in Washington won’t be the only remake out of DC if President Obama decides to go Hollywood after 2016. Indeed, I suspect his acting career would be more successful than mine.

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A few days ago, I had some fun by writing a tongue-in-cheek column about the world’s most misleading headlines.

Today, I want to share a strong contestant for the world’s most depressing headline.

It’s from The Hill, and it’s the lead to a story about giddy times for Washington’s lobbying community.

So why are lobbyists rolling in cash? What accounts for all the dollars flowing to the influence-peddling community?

The answer, as noted in the article, is that there’s been an end to gridlock.

Nearly all of Washington’s top lobby shops saw gains in revenue in the first half of 2015 as an uptick in activity within both Congress and the Obama administration translated to a boon for K Street. Following a period of relative stagnation in the two-year span preceding the 2014 elections, the Beltway’s biggest lobbying firms have broken through the malaise… “Corporations are a lot more optimistic about whether to invest in Washington,” said Marc Lampkin, a former aide to Speaker John Boehner (R-Ohio)… K Street’s top firm — Akin Gump Strauss Hauer & Feld — continued to bolster its advocacy revenue, earning $10.23 million in the second quarter. …“I think our success during the first half of 2015 reflects the…high degree of activity in Congress,” said Don Pongrace, head of the firm’s public law and policy practice.

In other words, an “uptick in activity” in what gives special interests an incentive to “invest in Washington.”

So the obvious lesson is that if you want to reduce lobbying in Washington, the best option is for Washington to do nothing. My personal preference is to make Congress a part-time legislature. That’s worked out quite well for Texas, so why not try it in the nation’s capital?

But if that option isn’t available, then I’m a big fan of gridlock. Simply stated, if my choices are for politicians to do nothing or to have politicians make government bigger, the answer is obvious.

Which is why I was initially very worried when I saw this headline from another story published by The Hill.

This sounds like my worst nightmare. The last thing we should want is productive politicians!

That’s sort of like having productive pickpockets.

But if you read the story, Governor Bush says he wants a lot of activity as part of an effort to shrink “the federal footprint.”

…the GOP presidential candidate said he’d announce tax and regulatory reform proposals over the “coming months,” as well as changes to entitlement programs and a replacement for ObamaCare. …”The overspending, the overreaching, the arrogance and the sheer incompetence in that city — these problems have been with us so long that they are sometimes accepted as facts of life…” Bush criticized Washington for operating on autopilot, ticking off a slew of pitches meant to push back against what he characterized as a needless expansion of the federal footprint.

And it’s true. Fixing all these problem will require lots of legislation.

So while I’m generally very uneasy with the notion of a “productive” Congress, I also realize that lots of reforms will be needed to restore economic vitality.

Now let’s consider one final headline. This one is from a report in the New York Times, and it also revolves around Jeb Bush and his campaign.

And here’s some of what’s in the article.

Jeb Bush…outlined a wide-ranging plan on Monday to rein in the size of the federal government and curb the influence of lobbyists who live off it. …His proposals, modeled on his record as a budget-cutting governor, amounted to…an assault on the culture of Congress

By and large, this sounds good.

But here’s the catch. You don’t need specific anti-lobbying reforms (such as Bush’s proposed six-year ban on lobbying when Senators and Representatives leave office) if you actually are serious about reducing the size and scope of the federal government.

Reducing the power of Washington is the best way of starving DC’s special-interest community.

Indeed, it’s the only genuinely effective way. I explain in this video that laws to control corruption in Washington don’t work because they don’t address the real problem of politicians having far too much influence over the economy.

I hope you noticed the balloon analogy at the end of the video. If you don’t like Washington’s parasite class, the only way to curtail their privileged existence is with smaller government.

By the way, I don’t want to imply that all lobbying is bad. It all depends on whether lobbyists are engaged in self-defense or extortion. Here’s some of what I wrote last year.

…lobbying is not necessarily bad. If a handful of business owners want to join forces to fight against higher taxes or more regulation, I’m all in favor of that kind of lobbying. They’re fighting to be left alone. But a big chunk of the lobbying in Washington is not about being left alone. It’s about seeking undeserved benefits by using the coercive power of government.

Moreover, I also pointed out two years ago that we need to respect what the Founding Fathers envisioned.

…the First Amendment protects our rights to petition the government and to engage in political speech.

So at the risk of repeating myself, I urge people to fix the real problem of big government and not get overly distracted by the symptom of favor-swapping and corruption in Washington.

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Advocates of economic liberty, free market, and small government haven’t enjoyed many victories in the 21st Century.

Government got bigger and more expensive during Bush’s reign, starting in his first year with the No Bureaucrat Left Behind legislation and then ending in his final year with the odious TARP bailout.

Then Obama came to office, promising “hope and change,” but then proceeded to act like Bush on steroids, giving us the faux stimulus his first year and then the Obamacare boondoggle his second year.

But there have been a few victories since 2010.

The sequester unquestionably was Obama’s biggest defeat, and that policy helped contribute (along with debt limit fights and shutdown battles) to a much-needed five-year slowdown in federal spending between 2009 and 2014.

That’s certainly not a permanent victory, particularly since our long-run fiscal crisis will still be enormous in the absence of genuine entitlement reform.

But better to have some short-run spending restraint than none at all.

And since we’re looking at victories, we have something new to celebrate. Today (July 1) is the first day in decades that America is freed from a very misguided form of corporate welfare known as the Export-Import Bank.

This bit of cronyism was created to give undeserved wealth to big companies by guaranteeing some of their sales to foreign customers, and I argued in 2012 and earlier this year that shutting down the Ex-Im Bank was a test of seriousness for the GOP..

They sort of passed the test. The Ex-Im Bank needed to be authorized by midnight on June 30 to stay in operation and that didn’t happen.

However, this victory also isn’t permanent. Cronyists in the business community plan to push for re-authorization later this year, so it’s still an open question on who will prevail. Particularly since there are some GOPers who like big business more than free markets.

But at least for today, we can enjoy this image from the Ex-Im Bank’s website.

For more information why the Ex-Im Bank should not be re-authorized and instead should be permanently shut down, here are some excerpts from a column by Veronique de Rugy of Mercatus.

Ex-Im Bank puts millions of consumers, firms and workers at a disadvantage. As such, closing it down is an important first step in the battle against the unhealthy marriage between the government and corporate America. …Over 60 percent of the bank’s financing aids 10 giant beneficiaries, like Caterpillar, Bechtel, and General Electric. On the foreign side, the cheap loans go to state-owned companies like Pemex, the Mexican government’s oil and gas giant, or Air Emirates, the airline of the wealthy United Arab Emirates. …More than 98 percent of all U.S. exports occur with no Ex-Im Bank subsidies at all. And considering who the beneficiaries of Ex-Im on the domestic and foreign sides are, there’s no chance that all Ex-Im supported exports will disappear.

And let’s not forget the costs imposed on the rest of the economy thanks to this bit of corporate welfare.

Economists have shown that while export subsidies boost the profits of the recipients, it tends to have a negative impact on economy as a whole by shifting capital, economic growth, jobs and profits from unsubsidized firms to subsidized ones. …victims are taxpayers who now bear the risk for $140 billion in liabilities. These victims are consumers who pay higher prices for the purchase of subsidized goods. These victims are unsubsidized firms competing with subsidized ones. They not only pay higher financing costs but also lose out when private capital flows to politically privileged firms regardless of the merits of their projects. Some are even victimized multiple times: first as taxpayers, then as consumers, then as competitors, and finally as borrowers.

Speaking of economic costs, you definitely should click here and watch a video by another Mercatus expert of why the Ex-Im Bank undermines economic efficiency.

Like Veronique, Tim Carney of the Washington Examiner is one of the unsung heroes in the fight against the Ex-Im Bank. Here’s some of his column from yesterday.

The Export-Import Bank is down. …Legally, Ex-Im’s officers, employees and board members must cease their typical work of subsidizing Boeing, J.P. Morgan and Chinese state-owned enterprises. Instead, under the law that authorized it, Ex-Im is allowed to exist only “for purposes of orderly liquidation, including the administration of its assets and the collection of any obligations held by the bank.” …This week’s knockdown of Ex-Im should be seen in exactly this light: It is an early and visible victory for the GOP’s free-market forces over the forces of K Street, which for so long held a monopoly on the party.

I should also point out that some of my colleagues at the Cato Institute have been working hard for years to explain why the Ex-Im Bank should be abolished. Kudos also to Heritage Action for fighting against this corrupt cronyist institution.

Last but not least, here’s a video Nick narrated last year on why the Ex-Im Bank should not be re-authorized. I like how he starts with a clip of Obama the candidate citing it as wasteful corporate welfare. Now that he’s in power, though, he’s decided the cesspool of DC corruption is really a hot tub.

P.S. Speaking of leftist phonies, Elizabeth Warren likes to portray herself as a scourge of big business, yet she’s a supporter of continued handouts for corporate fatcats. A fake populist, and a fake Indian.

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I don’t like former House Speaker Dennis Hastert. But not because of any personal interactions. I don’t think I’ve every even been in the same room as him, much less ever met him.

But I know that he did nothing to restrain the reckless expansion of government when he had power during the Bush years. Indeed, he fought against those who tried to throw sand in the gears.

So I’ll admit a certain Schadenfreude now that he’s in legal trouble. But I’m also irked. He’s being charged with something that shouldn’t be a crime, while getting (at least so far) a free pass for the bad things that he has done.

As is so often the case, Tim Carney has the right perspective. Here’s some of what he wrote for the Washington Examiner.

If the the stories that have leaked in the media are true, the true sin Hastert committed is unspeakable, but possibly unprosecutable. There is one aspect of the Hastert scandal, however, that reflects a problem that is more troubling than “structuring” bank withdrawals… How in the world could a school-teacher-turned lawmaker afford to pay, reportedly, $3.5 million in hush money?

Tim answers his own question, citing the government’s corrupt ban on incandescent light bulbs.

Hastert monetized his public service into a lucrative lobbying career — largely by increasing government. One telling episode begins in May 2007. Hastert at that time was a chief cosponsor of the “light bulb ban,” the law that effectively outlawed the traditional incandescent bulb, forcing consumers to buy more expensive fluorescent bulbs and LEDs. …in March 2008, Hastert joined Polybrite “as a strategic advisor,” according to a company press release. A year later, after he had joined K Street lobbying firm Dickstein Shapiro, Hastert officially registered as a lobbyist for Polybrite… Hastert’s first lobbying work for Polybrite…was his job to try to get stimulus money for Polybrite.

Hmmm… I wonder is Polybrite was part of the $27 bulb stimulus scandal?

But nanny-state light bulbs are just the tip of the iceberg. Here’s another example.

Ethanol subsidies were another Hastert special. In the first three months of 2015, the ethanol industry lobby group, Fuels America, paid Dickstein Shapiro $60,000 for ethanol-mandate lobbying by Hastert and another lobbyist. All the House members Hastert had rewarded with committee assignments, earmarks and co-sponsorships were now taking phone calls from their former commander on behalf of green-tinted subsidy sucklers. This is part of how Washington turned a school teacher into a millionaire.

In other words, Hastert is a poster child (along with Harry Reid, Bob Dole, and countless others) for the proposition that Washington is basically a giant scam operated for the benefit of insiders who get rich by taking money from earners and producers and giving it to those with political connections.

Which is my message in this video from the Center for Freedom and Prosperity.

But now let’s return to the main topic. Hastert wasn’t charged with being a sleazy insider who used connections to pillage money from taxpayers and steer it to corrupt clients.

Instead, he’s being charged with violating “money laundering” laws that shouldn’t even exist. Here’s some of what Warren Coats (a colleague on the Editorial Board of the Cayman Financial Review) wrote on this topic.

Mr. Hastert is being charged with violating our Anti Money Laundering (AML) laws. These laws allow arresting and convicting people for moving money (as Mr. Hastert was doing) that the government thinks was the proceeds of crime (not the case with Mr. Hastert, his crime was failing to report what he planned to with his money), when they are not able to prove that there was a crime in the first place. As far as I know, paying a blackmailer (which is what Mr. Hastert apparently did) is not a crime, though demanding and receiving such money is. The United States has pushed such legislation and the new bureaucracies needed to enforce it all over the world at the cost of billions and billions of dollars (that could have been used for poverty reduction or other more pressing things) with very little if any benefit to show for it. Charging Dennis Hastert with AML violations is a rare exception. Wow, what a benefit for such intrusions into our private lives. I consider AML laws more than a costly waste of money. They are another expansion of the arbitrary power of governments that can be used for good or ill with limited oversight.

For more information, here’s the video I narrated on why it’s inefficient and intrusive to require banks to spy on their customers.

I suppose the bottom line is that Dennis Hastert is a bad person who did bad things, so he deserves some payback. And that’s exactly what he’s getting.

But I can’t help but wish he was punished for the right reason.

P.S. Like most fans of the New York Yankees, I’m not a big fan of the irrelevant quasi-Major League team on Long Island.

But I confess my allegiances are just an accident of birth, family, and geography.

However, I now have a policy reason to dislike the Mets.

The New York Mets have become the first sports team to join the nationwide anti-gun campaign, aligning with celebrities like Piers Morgan and Chicago Mayor Rahm Emanuel to back today’s National Gun Violence Awareness Day. Sponsored by the Michael Bloomberg-backed Everytown for Gun Safety, people with some 200 organizations are wearing orange to draw attention to the issue. According to the group, the Mets even dressed in orange to show their support.

It’s both amazing and disappointing that there were no real Americans on the team who refused to participate in this attack on the Constitution.

To offset this bad news, here’s some anti-gun control humor to brighten your day.

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In the past week, I’ve written two columns (here and here) extolling the benefits of federalism.

So I now feel compelled to warn that my support for decentralization is not motivated by some Pollyannish view of sub-national governments.

State and local government officials are perfectly capable of adopting policies that lead to the absurd waste of taxpayer money and grotesque abuse of citizens.

And they also are just as proficient at sleaze as their cousins in Washington.

Politico has a sobering report on pervasive state-level corruption. They start with a rundown of what’s been happening with the criminal class in the Empire State.

Other states have plenty of corruption, but it’s hard to beat New York when it comes to sheer volume. The criminal complaint Monday against Dean Skelos, the state Senate majority leader, and his son Adam came just three months after charges were brought against Sheldon Silver, then the Assembly Speaker. Having the top leaders in both chambers face criminal charges in the same session is an unparalleled achievement, but Skelos is now the fifth straight Senate majority leader in Albany to face them. …Senate Republicans are standing by Skelos, but if they decide to make a change, they probably won’t turn to Thomas Libous, the chamber’s Number Two leader. He faces trial this summer on charges of lying to the FBI… All told, more than two dozen members of the New York state legislature have been indicted or resigned in disgrace over the past five years.

New York seems to breed corruption, probably because it is a profligate state and there is a well-established relationship between the size of government and the opportunities for malfeasance.

But other states are doing their best to show corruption and government go hand in hand.

Silver was one of four state House Speakers to face criminal charges over the past year (Alabama, Rhode Island and South Carolina are home to the others). In Massachusetts, three Speakers prior to current incumbent Robert DeLeo all resigned and pleaded guilty to criminal charges. When Dan Walker died last week, it was hard for obituary writers not to note that he was one of four Illinois governors over the past five decades who ended up in prison. …Give any U.S. attorney a year and 10 FBI agents and he or she can probably come back from the state capital with a passel of indictments.

At some point, even non-libertarians need to recognize that 2+2=4. In other words, the evidence is overwhelming that the public sector is a breeding ground for corruption because it is premised on buying votes with other people’s money.

Which is the basic message of my First Theorem of Government.

By the way, I’m not making a partisan point. It should be obvious from the story cited above, but I’ll reiterate that Republicans are just as capable of venal behavior as their opponents.

And don’t delude yourself into thinking that “principled” Democrats are immune to sleazy behavior.

Here’s the video I narrated explaining how bloated government enables corruption.

P.S. You can enjoy some government corruption humor here, here, here, here, and (my personal creation) here.

P.P.S. If you’re a fan of Barack Obama, you may be pleased to know that we’re setting records as a result of his policies.

We already know America has experienced a record drop in labor force participation.

And we also have a new record for weakest recovery since the Great Depression.

As well as a record for declining household income.

Now we have a new record. More Americans than ever before have decided to give up U.S. citizenship. Here are some of the details from a Bloomberg report.

More Americans living outside the U.S. gave up their citizenship in the first quarter of 2015 than ever before, according to data released Thursday by the IRS. The 1,335 expatriations topped the previous record by 18 percent, according to data compiled by Bloomberg. Those Americans are driven to turn in their passports in part because of laws that have expanded bank reporting and tax compliance requirements for expatriates. The increase in early 2015 follows an annual record in 2014, when 3,415 Americans gave up their citizenship. An estimated 6 million U.S. citizens are living abroad, and the U.S. is the only country within the Organization for Economic Cooperation and Development that taxes citizens wherever they reside.

Here’s one example from the story.

“The cost of compliance with the complex tax treatment of non-resident U.S. citizens and the potential penalties I face for incorrect filings and for holding non-U.S. securities forces me to consider whether it would be more advantageous to give up my U.S. citizenship,” Stephanos Orestis, a U.S. citizen living in Oslo, wrote in a March 23 letter to the Senate Finance Committee. “The thought of doing so is highly distressing for me since I am a born and bred American with a love for my country.”

There are two lessons from this story.

  • First, it is absurd that our tax laws are so onerous (even worse than France in this regard) that some people feel compelled to give up American citizenship.
  • Second, while there are lots of ordinary Americans who are being pushed to give up their passports (folks married to foreigners, for instance), the average expatriate presumably has above-average income and is an asset to be welcomed rather than a burden to be repelled.

But such considerations don’t matter to politicians who like to demagogue about the supposed pot of gold at the end of the rainbow of overseas Americans. So we get awful laws like FATCA.

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As an economist, my primary objection to excessive government is – or at least should be – based on foregone growth. After all, government spending (whether it is financed by taxes or borrowing) diverts resources from the productive sector of society and results in the misallocation of labor and capital.

Based on my blood pressure, though, I get even more upset about the perverse unfairness of Washington. It galls me that well-connected insiders obtain undeserved wealth by using the coercive power of government.

And I get especially agitated when I think about ordinary Americans, most of modest means, who have less income and lower living standards because of DC’s corrupt profligacy.

So when I write about shutting down the Export-Import Bank, closing the Department of Housing and Urban Development, and reforming the tax code, I make the standard economic arguments for smaller government. But I also explain that reform is a way of dealing with political sleaze.

Heck, insider corruption is so pervasive that it even causes problems in those rare instances when government is doing sensible.

Let’s look at the example of the EB-5 program that was set up to attract wealthy foreigners to America if they create jobs.

This should be a feel-good story. After all, everyone presumably agrees that these are best type of immigrants since there’s no danger that they’ll wind up on the welfare rolls.

In theory, the program is very simple. As explained by Wikipedia, “individuals must invest $1,000,000…, creating or preserving at least 10 jobs for U.S. workers.”

In reality, though, the program is a bureaucratic mess because…well, simply because that’s the way government operates.

And that means plenty of opportunities for corrupt insiders to work the system.

Here are some of the unseemly details of one example. As reported by the Washington Post, it involves an Obama appointee, the Governor of Virginia, and the brother of Hillary Clinton.

The now-No. 2 official at the Department of Homeland Security intervened on behalf of politically connected favor seekers — including Democrat Terry McAuliffe not long before he was elected Virginia governor, a new report from the department’s inspector general has found. The intervention, on behalf of McAuliffe’s GreenTech Automotive company, “was unprecedented,” according to the report… The long-anticipated report reviewed Mayorkas’s management of the EB-5 program, which allows foreign nationals who create jobs in the United States to obtain green cards. The report concluded that Mayorkas’ actions “created an appearance of favoritism and special access.’’ …McAuliffe’s company was working Gulf Coast Funds Management, a firm that specializes in obtaining EB-5 visas for investors. Gulf Coast was led by Anthony Rodham, brother of then-Secretary of State Hillary Rodham Clinton. …In addition to the case involving McAuliffe’s car company, the inspector general focused on actions Mayorkas took on behalf of a film project in Los Angeles and construction of a casino in Las Vegas, the latter supported by Nevada Democrat Harry Reid, who was Senate majority leader at the time.

Speaking of Senator Reid, the Washington Free Beacon exposes his sordid – and extended – efforts to use the power of his office to get special treatment for donors…and to line the  pockets of his son.

The Senate’s top Democrat was more deeply involved than previously known in an effort to secure U.S. visas for Chinese investors in a Las Vegas casino despite the concerns of career federal officials, according to an inspector general report released on Tuesday. …Executives at the casino’s parent company, a client of Reid’s son Rory, donated thousands of dollars to Reid’s campaign after he helped speed consideration of its applications for visas for its Chinese investors. That expedited consideration came despite warnings from career USCIS officials that applicants had forged paperwork, tried to conceal the sources of their investment, and, in one case, had ties to a child pornography business. …new details in the inspector general’s report reveal that his involvement was deeper and more prolonged. Reid requested and received regular updates from then-USCIS director Alejandro Mayorkas on the status of SLS’ EB-5 applications, agency employees told the IG. The IG report criticized Mayorkas for creating an “appearance of favoritism” in the EB-5 application process. …the senator also had connections to Stockbridge/SBE Holdings, the company behind the SLS project. His son Rory, then an attorney at Lionel Sawyer & Collins, a Nevada law firm, represented SBE Entertainment, one of its parent companies. …USCIS employees interviewed for the IG report described the process as unfair and overly political.

By the way, notice how both examples feature a relative of a powerful politician. Why is that? Because if you’re related to a DC bigwig, donors and special interest groups figure you have inside access to the favor factory in Washington.

A very odious form of nepotism, I think you’ll agree.

Ugh, I feel like I need to shower after writing about this topic.

But now let’s step back and consider the big picture. In most cases, eliminating an agency or shutting down a program is the simple way to deal with DC corruption.

What’s the right approach, though, when government is actually doing something that’s theoretically useful.

Remember, the underlying theory of the EB-5 program is very admirable. Indeed, many nations have similar “economic citizenship” programs because it makes sense to attract successful investors to your country.

Big nations such as the United Kingdom, Australia, and Spain have policies similar to America’s EB-5 program, as do little countries such as Latvia, St. Kitts and Nevis, Cyprus, Dominica, Malta, and Antigua and Barbuda.

So why is America’s system a mess? In part, the answer is that it’s not a simple system. Unlike other nations, where a simple cash payment or property purchase qualifies an investor for residency, the U.S. system requires the creation of 10 jobs. As you can imagine, it’s not necessarily a simple matter to measure job creation, particularly if an investor is putting money into a business that’s already in operation.

And this means the bureaucrats who oversee the program have a reason to drag their feet. Which means an opportunity for well-connected insiders to manipulate the system to the advantage of their friends, cronies, donors, and clients.

Moreover, all nations require some form of background check to weed out criminals. That’s a good thing, of course, but it also gives bureaucrats another excuse to avoid quick approvals. And this creates an opportunity for lobbyists and other members of the political class to use their political pull to get their clients quick and favorable treatment.

All of which means the rule of law is eroded and replaced by discretionary and arbitrary enforcement.

By the way, I spoke at an economic citizenship conference earlier this month in Dubai. My role was to warn that greedy governments would try to hinder the mobility of investors and entrepreneurs, particularly as the welfare state gets closer to collapse.

But it was also very interesting to hear reports from various nations about the operation of their programs. Most of them have shortcomings, to be sure, but it does appear that politicians in America have made our system one of the least effective.

For further background on the seemingly unbreakable link between big government and corruption, here’s a video I narrated for the Center for Freedom and Prosperity.

P.S. Government corruption is also a problem at the state level.

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I’ve pointed out that Washington is a cesspool of legal corruption. But if you don’t believe me (and you have a strong stomach), feel free to peruse these posts, all of which highlight odious examples of government sleaze.

But occasionally elected officials cross the blurry line and get in trouble for illegal corruption.

For those of you who follow politics, you may have seen news reports suggesting that Robert Menendez, a Democratic Senator from New Jersey, will soon be indicted for the alleged quid pro quo of trying to line the pockets of a major donor.

Attorney General Eric Holder has signed off on prosecutors’ plans to charge Menendez, CNN reported on Friday. …A federal grand jury has been investigating whether Menendez improperly used his official office to advocate on Melgen’s behalf about the disputed Medicare regulations when he met with the agency’s acting administrator and with the secretary of Health and Human Services, according to a ruling by a federal appeals court that became public last week. The ruling also said the government was looking at efforts by Menendez’s office to assist a company Melgen partly owned that had a port security contract in the Dominican Republic.

I certainly have no interest in defending Senator Menendez, but I can’t help but wonder what’s the difference between his alleged misbehavior and the actions of almost every other politician in Washington.

Here’s what I assume to be the relevant part of the criminal code, which I downloaded from the Office of Government Ethics (yes, that’s a bit of an oxymoron).

Stripped of all the legalese, it basically says that if a politician does something that provides value to another person, and that person as a result also gives something of value to the politician, that quid-pro-quo swap is a criminal offense.

Now keep this language from the criminal code in mind as we look at some very disappointing behavior by Republican presidential candidates at a recent Iowa gathering.

As Wall Street Journal opined, GOPers at the Ag Summit basically competed to promise unearned benefits to the corporate-welfare crowd in exchange for political support (i.e., something of great value to politicians).

Iowa is…a bad place to start is because it’s the heartland of Republican corporate welfare. Witness this weekend’s pander fest known as the Ag Summit, in which the potential 2016 candidates competed to proclaim their devotion to the Renewable Fuel Standard and the 2.3-cent per kilowatt hour wind-production tax credit. The event was hosted by ethanol kingpin Bruce Rastetter… Two of the biggest enthusiasts were Rick Santorum and Mike Huckabee… The fuel standard “creates jobs in small town and rural America, which is where people are hurting,” said Mr. Santorum, who must have missed the boom in farm incomes of recent years.

But it’s not just social conservatives who were promising to swap subsidies for political support.

Self-styled conservative reformers may be willing to take on government unions, which is laudable, but they get timid when dealing with moochers in Iowa.

Scott Walker, who in 2006 said he opposed the renewable fuel standard, did a switcheroo and now sounds like St. Augustine. He’s for ethanol chastity, but not yet. The Wisconsin Governor said his long-term goal is to reach a point when “eventually you didn’t need to have a standard,” but for now mandating ethanol is necessary to ensure “market access.”

And establishment candidates also tiptoed around the issue, suggesting at the very least a continuation of the quid pro quo of subsidies in exchange for political support.

Jeb Bush at least called for phasing out the wind credit, which was supposed to be temporary when it became law in 1992. But he danced around the renewable standard, which became law when his brother signed the energy bill passed by the Nancy Pelosi-Harry Reid Congress.

Geesh, maybe this is why Bush won’t promise to oppose tax hikes.

And there are more weak-kneed GOPers willing to trade our money to boost their careers.

Chris Christie wouldn’t repudiate the wind tax credit, perhaps because in 2010 the New Jersey Governor signed into law $100 million in state tax credits for offshore wind production. He also endorsed the RFS as the law of the land…, but what voters want to know is what Mr. Christie thinks the law should be. Former Texas Governor Rick Perry sounded somewhat contrite for supporting the wind tax credit, which has been a boon for Texas energy companies.

The only Republican who rejected corporate welfare (among those who participated) was Senator Ted Cruz.

The only Ag Summiteer who flat-out opposed the RFS was Texas Senator Ted Cruz , who has also sponsored a bill in Congress to repeal it. In response to Mr. Rastetter’s claim that oil companies were shutting ethanol out of the market, he noted “there are remedies in the antitrust laws to deal with that if you’re having market access blocked.”

Though even Cruz deviated from free-market principles by suggesting that anti-trust bureaucrats should use the coercive power of government to force oil companies to help peddle competing products.

Sigh.

By the way, I don’t mean to single out Republicans. Trading votes for campaign cash is a bipartisan problem in Washington.

But it is rather disappointing that the politicians who claim to support free markets and small government are so quick to reverse field when trolling for votes and money.

At least politicians like Obama don’t pretend to be a friend before stealing my money.

P.S. Normally I try to add an amusing postscript after writing about a depressing topic.

I’m not sure whether this story from the U.K.-based Times is funny, but it definitely has an ironic component.

Judge Juan Augustín Maragall, sitting in Barcelona, ruled that prostitutes should be given a contract by their employers, who should also pay their social security contributions. …In giving his verdict in the civil case, brought over a breach of labour regulations, the judge went further than expected, ruling that the women’s rights had been flouted by the management and forcing the company to pay the social security payments of three prostitutes backdated to 2012. Because of the ruling all brothels will be forced with immediate effect to issue contracts to staff and pay their social security contributions.

Now here’s the ironic part.

The ruling will generate tax revenue even though it’s actually illegal to employ prostitutes!

…it is against the law to make money from pimping, which carries a four-year jail term.

I guess the Judge could have ruled that the customers were the employers, but somehow I suspect it would have been difficult to extract employment taxes from those men.

Just like it would be difficult to extract employment taxes from the women.

Though the hookers won’t mind getting unemployment benefits so long as someone else is paying the taxes.

Conxha Borrell, of the Association of Sex Professionals, welcomed the ruling.

I guess we should add this to our great-moments-in-human-rights series.

Though maybe I should start a great-moments-in-economic-ignorance series since the prostitutes will be the ones who bear the burden of the tax even if the pimps are the ones writing the checks to the government (just as workers bear the burden of the “employer share” of the Social Security payroll tax).

P.P.S. Maybe Spanish hookers should reclassify themselves as porn artists who allow audience participation? That way, they can take advantage of Spain’s preferential tax rate for smut.

P.P.P.S. The Germans at least have figured out an efficient way to tax prostitutes.

P.P.P.P.S. Though maybe prostitutes should become politicians. The business model is quite similar, and I suspect you can “earn” more income selling access to other people’s money rather than selling sex to men who have to use their own money.

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