Feeds:
Posts
Comments

Archive for the ‘Lobbying’ Category

Here’s a stomach-turning story from the Chicago Sun Times about how the political class uses special insider deals to get rich (or richer). What’s remarkable is that there may be nothing technically illegal in this story of crony capitalism and government contracts. But does anyone doubt that being the Mayor’s son was not a relevant (if not the key) consideration?

For years, City Hall maintained that Mayor Richard M. Daley’s son, Patrick Daley, had no financial stake in the deal that brought wireless Internet service to city-owned O’Hare Airport and Midway Airport. But it turns out that the younger Daley still reaped a windfall of $708,999 when Concourse Communications was sold in 2006, less than a year after the Chicago company signed the multimillion-dollar Wi-Fi contract with his father’s administration, company documents obtained by the Chicago Sun-Times show. …Exactly how the deal was structured isn’t clear. Neither Patrick Daley nor his father replied to interview requests. But the amount that Patrick Daley was paid was linked to the sale price of the company, a source with knowledge of the arrangement said: The more the company was sold for, the more Patrick Daley would be paid. The elder Daley — who left office May 16 after deciding not to seek re-election — is now in business with his son. The two Daleys are working out of offices on Michigan Avenue on international business deals. Patrick Daley’s Wi-Fi windfall was part of $1.2 million he was paid as a result of deals he had with Cardinal Growth, a Chicago venture-capital firm that invested in Concourse and other businesses. Among those businesses was a sewer-inspection company that got millions of dollars in no-bid city-contract extensions. In addition to Patrick Daley, Cardinal Growth also has had business dealings in which it made payments to two of his cousins, Robert G. Vanecko and Richard J. “R.J.” Vanecko. …In addition to the $708,999 from those payments linked to the Concourse sale, Cardinal Growth made numerous other payments to Patrick Daley, totaling $543,127, between July 10, 2002, and Oct. 31, 2009, company records show. It isn’t clear what those payments were for.

Chicago has a reputation for this kind of corruption, and I suppose I could make a snarky comment about Obama learning how to be a politician in that environment, but I have little doubt that there are untold versions of this story in every part of government, at all levels of government.

The moral of the story is that big government is the mother’s milk of cronyism, sleaze, unearned wealth, and other forms of corruption. I posted my video on this topic just a few weeks ago, but this is a perfect opportunity to include it again for those who didn’t see it.

Read Full Post »

General Electric has received a lot of unwelcome attention for paying zero federal income tax in 2010, even though it reported $5.1 billion in U.S. profits. This is a good news-bad news situation.

The good news is that GE’s clever tax planning deprived the government of revenue. And I’m in favor of just about anything that reduces the amount of money that winds up in the hands of the most corrupt and least competent people in America (a.k.a., the political class in Washington).

The bad news, though, is that politicians can engage in borrow-and-spend vote-buying behavior, so depriving them of revenue doesn’t seem to have much impact on the overall burden of government spending.

Moreover, there are good ways to cut taxes and not-so-good ways to cut taxes. Special loopholes for politically powerful companies and well-connected insiders are unfair, corrupt, and inefficient.And I’ve already written about GE’s distasteful track record of getting in bed with politicians in exchange for grubby favors.

Ideally, we should junk the corrupt internal revenue code (and the corporate side of the tax code makes the personal tax code seem simple by comparison) and replace it with a simple and transparent system such as the flat tax.

That way, all income would be taxed since loopholes would be abolished, but there would be a very low tax rate and no double taxation.

Tim Carney of the Washington Examiner is one of the best economic and policy journalists on the scene today, and this excerpt from his column explains what is right and wrong about GE’s tax bill.

GE allocates hundreds of talented minds to attempts at lowering taxes. I don’t blame GE for that. It’s probably worth it — which is exactly the problem. In a world with a simpler tax code — or better yet, with no corporate income tax — GE would spend those resources creating something of value. Again, this is a case where government creates a chasm between what’s profitable (gaming tax law) and what’s valuable for society. Also, this story demonstrates once again how Big Government hurts small business much more than it affects Big Business, which can afford to figure out a way around taxes.

Read Full Post »

I sometimes assert that the greatest enemies of freedom in Washington are mortgage payments and tuition bills. When people give me a blank stare, I say that I’m joking, but I use the opportunity to explain that the desire for easy wealth (and the lifestyle it enables) lures many Republicans to become lobbyists and to promote policies that they almost surely understand are bad for America.

These GOPers, who do the wrong thing to line their own pockets, are the worst people in Washington. They presumably first got involved in policy because they recognized government is a cesspool, but eventually got corrupted and decide it is a hot tub. To put it mildly, this gets me very agitated. For instance:

I have slammed a former Reagan Administration official for defending earmarks. I think it is morally offensive that he gets rich by facilitating the transfer of money from taxpayers to powerful interest groups.

I have condemned the former Senate Republican leader for defending Obamacare. I think it is disgusting that he puts his lobbying income ahead of America’s best interests.

I have denounced Illinois Republican legislators for killing school choice. I think it is downright nauseating that they condemn inner-city children to terrible schools in exchange for campaign contributions from teacher unions.

So you won’t be surprised to know that I am on the verge of going postal after reading a report from The Hill about all the Republican lobbyists who are getting lucrative contracts to fight against the Tea Party agenda and lobby on behalf of big government. Here are the utterly nauseating details.

A stable of former GOP aides has been hired by public television stations, children’s hospitals and other interest groups that fear they’ll be targeted for spending cuts by the Republican House. Most of the aides left Congress years ago, but many still have close ties to senior Republicans on Capitol Hill, including Speaker John Boehner (Ohio). They’ve been hired to try to convince the new GOP Congress that some public spending is worth continuing and not reducing. An advocacy group for the Association of Public Television Stations, for example, has hired GOP lobbyists John Feehery and Marc Lampkin of Quinn Gillespie & Associates to fight off budget cuts. …A review of lobbying disclosure records by The Hill shows the public television stations are hardly alone in recruiting GOP muscle. A number of associations hoping to retain federal funding have recently added GOP lobbyists with connections to the new majority. The hiring binge indicates Republican lobbyists are earning dividends from their party’s re-taking of the House in November and points to the headaches in store for a Republican House that wants to take a hatchet to public spending. Targets of GOP budget cuts say they need all the help they can get from the coming GOP-led onslaught. “Everyone is going to make their case for government support for their projects,” said one GOP lobbyist. …The California High-Speed Rail Authority has hired Ogilvy Government Relations’ Drew Maloney, a former aide to DeLay, to work on retaining federal grants for high-speed rail. …Williams & Jensen has registered to lobby for AARP to work on senior-citizen issues and President Obama’s deficit commission report. Prominent Republican lobbyist Steve Hart is among those working for the group, which wants to make sure the new healthcare law is not repealed. …The National Association of Children’s Hospitals (NACH) has hired former Rep. Deborah Pryce (R-Ohio) of Clark Lytle & Geduldig to lobby for the reauthorization of the Children’s Hospitals Graduate Medical Education program, which uses $317.5 million in federal funding a year.

Some of my Republican friends sometimes respond by asserting that Democrats are worse, but I grade on a curve. Democrats seek to make government bigger because they believe in statism. So it’s not terribly surprising or philosophically inconsistent for them to become lobbyists and get rich pushing to expand the burden of government (though some Democrats lobby for things that are not completely consistent with a left-wig agenda, such as special tax breaks or defense contracts, so it’s not a black-and-white divide).

Republicans, however, tell voters that they believe in small government and individual liberty. So when GOP politicians and staffers decide to get rich by lobbying for bigger government, that is more disgusting.

Doing the wrong thing is bad. But doing the wrong they when you know it is wrong is even worse.

Read Full Post »

The internal revenue code is nightmarishly complex, as illustrated by this video. Americans spend more than 7 billion hours each year in a hopeless effort to figure out how to deal with more than 7 million words of tax law and regulation.

Why does this mess exist? The simple answer is that politicians benefit from the current mess, using their power over tax laws to raise campaign cash, reward friends, punish enemies, and play politics. This argument certainly has merit, and it definitely helps explain why the political class is so hostile to a simple and fair flat tax.

But a big part of the problem is that tax lawyers dominate the tax-lawmaking process. Almost all the decision-making professionals at the tax-writing committees (Ways & Means Committee in the House and Finance Committee in the Senate) are lawyers, as are the vast majority of tax policy people at the Treasury Department and the Internal Revenue Service.

This has always rubbed me the wrong way. Yes, some lawyers are needed if for no other reason than to figure out how new loopholes, deductions, credits, and other provisions can be integrated into Rube-Goldberg monstrosity of existing law.

But part of me has always wondered whether lawyers deliberately or subconsciously make the system complex because it serves their interests. I know many tax lawyers who are now getting rich in private practice by helping their clients navigate the complicated laws and regulations that they helped implement. For these people, the time they spent on Capitol Hill, in the Treasury, or at the IRS was an investment that enables today’s lucrative fees.

I freely admit that this is a sour perspective on how Washington operates, but it certainly is consistent with the “public choice” theory that people in government behave in ways that maximize their self interest.

There’s now an interesting book that takes a broader look at this issue, analyzing the extent to which the legal profession looks out for its own self interest. Written by Benjamin H. Barton, a law professor at the University of Tennessee, The Lawyer-Judge Bias in the American Legal System explains that the legal profession has self-serving tendencies.

Glenn Reynolds, of Instapundit fame, interviews Professor Barton about his new book.

I freely confess that I’m looking at this issue solely through my narrow prism of tax policy. But since Barton’s thesis meshes with my observations that tax lawyers benefit from a corrupt tax system, I’m sympathetic to the notion that the problem is much broader.

One of the most quoted lines from Shakespeare’s Henry VI is, “let’s kill all the lawyers.” But rather than making lawyer jokes, it would be a better idea to figure out how to limit the negative impact of self-serving behavior – whether by lawyers or any other profession that might misuse the coercive power of government.

This is one of many reasons why decentralization is a good idea. If people and businesses have the freedom to choose the legal system with the best features, that restrains the ability of an interest group – including lawyers – to manipulate any one system for their private advantage. This new study by Professors Henry Butler and Larry Ribstein is a good explanation of why allowing “choice of law” yields superior results.

Read Full Post »

I have a piece in this morning’s New York Post, and I did not try to be polite. Commenting on the end-of-year orgy on Capitol Hill, I slam corrupt deal making that leads to ever-bigger government. Here’s part of what I say about the “omnibus” spending bill.

The weeks since Election Day have provided nauseating confirmation of Mark Twain’s observation: “There is no distinctly native American criminal class except Congress.” Exhibit A is the “omnibus” spending bill Harry Reid is trying to push through the Senate. This monstrosity contains about 6,500 earmarks — special provisions inserted on behalf of lobbyists to benefit special interests. The lobbyists get big fees, the interest groups get handouts and the politicians get rewarded with contributions from both. It’s a win-win-win for everyone — except the taxpayers who finance this carousel of corruption. …earmarks and pork-barrel spending are the gateway drug that turns good legislators into big spenders.

And here’s some of my commentary on the tax deal.

Regardless of what you think of its core elements, it’s also packed with provisions — known as “extenders” — that reek of corruption and special-interest deal making. Extenders are the tax version of pork-barrel spending: special tax breaks put in the law by powerful politicians in exchange for campaign cash and other support. …There are strong policy arguments against these kinds of special tax breaks, especially since we could use the revenue to finance lower tax rates — but most people are even more upset by the dead-of-night process used to put these goodies into the tax bill. The behavior on Capitol Hill reminds me of the movie classic, “Animal House”: After their fraternity has been placed on “double-secret probation,” John Belushi and the rest of guys at the Delta House decide to go out in a blaze of glory with a toga party. Likewise, the politicians on Capitol Hill just got placed on the equivalent of probation by a Tea Party uprising. Yet rather than mend their crooked ways, they’re throwing a massive party with our money.

But after further thought, I feel compelled to apologize to the guys at Animal House. To paraphrase Ronald Reagan, at least they were partying with their own money.

Read Full Post »

Tim Carney of the Washington Examiner has a great piece looking at the utterly indefensible panoply of ethanol subsidies and handouts that screw consumers and taxpayers in order to line the pockets of the politically powerful. Unfortunately, several senior GOP lawmakers have unseemly ties to the lobbyists for the industry. So this is a test, but don’t expect a passing grade.

Ethanol fuel (especially ethanol distilled from corn) is subsidized in dozens of ways by governments at all levels. Two of the longest-running subsidies — a 54-cent-per-gallon tariff on imported ethanol, and 45-cent tax credit for every gallon blended with gasoline — expire on Dec. 31, making them a top priority for industry lobbyists during the lame-duck session. …In recent years, Americans have learned about the downsides of ethanol subsidies. The 2005 and 2007 energy bills mandated the use of ethanol, igniting a corn boom, which crowded out other crops, contributing to spikes in food prices. Ethanol was even blamed for tortilla riots in Mexico. Growing and distilling ethanol uses immense amounts water (contributing to river and aquifer depletion) and energy (some scientists argue that more energy goes into making a gallon of ethanol than is contained in that gallon). The added corn demand means more fertilizer production and use, adding to harmful runoff, which is blamed for “dead zones” in the Gulf of Mexico that choke out aquatic life. There are plenty of policy reasons to kill ethanol subsidies, but historically, a powerful lobby has kept them alive. And while the GOP talks about free markets, Republican lawmakers are cozier with the ethanol lobby than Democrats are. Republicans raised more than Democrats from Poet, the nation’s largest ethanol maker. Former Republican Rep. Jim Nussle of Iowa is now the president of Growth Energy, a leading pro-ethanol lobby. Presumptive incoming House Ways & Means Chairman Dave Camp has long supported ethanol subsidies, as has Finance Committee ranking member Chuck Grassley. Republican coziness with corn growers and ethanol distillers could outweigh sound policy considerations.

Read Full Post »

The “appearance of impropriety” is often considered the Washington standard for corruption and misbehavior. With that in mind, alarm bells began ringing in my head when I read this Washington Times report about Jacob Lew, Obama’s nominee to head the Office of Management and Budget. Why did Citigroup decide to hire a career DC political operator for $1.1 million? As a former political aide, lobbyist, lawyer, and political appointee, what particular talents did he have to justify that salary to manage an investment division? Did the presence of Lew (as well as other Washington insiders such as Robert Rubin) help Citigroup get a big bucket of money from taxpayers as part of the TARP bailout? Did Lew’s big $900K in 2009 have anything to do with the money the bank got from taxpayers? Is it a bit suspicious that he received his big windfall bonus four days after filing a financial disclosure? Read this blurb from the Washington Times and see if you can draw any conclusion other than this was a typical example of the sleazy relationship of big government and big business.

President Obama’s choice to be the government’s chief budget officer received a bonus of more than $900,000 from Citigroup Inc. last year — after the Wall Street firm for which he worked received a massive taxpayer bailout. The money was paid to Jacob Lew in January 2009, about two weeks before he joined the State Department as deputy secretary of state, according to a newly filed ethics form. The payout came on top of the already hefty $1.1 million Citigroup compensation package for 2008 that he reported last year. Administration officials and members of Congress last year expressed outrage that executives at other bailed-out firms, such as American International Group Inc., awarded bonuses to top executives. State Department officials at the time steadfastly refused to say if Mr. Lew received a post-bailout bonus from Citigroup in response to inquiries from The Washington Times. But Mr. Lew’s latest financial disclosure report, provided by the State Department on Wednesday, makes clear that he did receive a significant windfall. …The records show that Mr. Lew received the $944,578 payment four days after he filed his 2008 ethics disclosure.

Lest anyone think I’m being partisan, let’s now look at another story featuring Senator Richard Shelby. The Alabama Republican and his former aides have a nice incestuous relationship that means more campaign cash for him, lucrative fees for them, and lots of our tax dollars being diverted to moochers such as the state’s university system. Here are some of the sordid details.

Since 2008, Alabama Sen. Richard Shelby has steered more than $250 million in earmarks to beneficiaries whose lobbyists used to work in his Senate office — including millions for Alabama universities represented by a former top staffer. In a mix of revolving-door and campaign finance politics, the same organizations that have enjoyed Shelby’s earmarks have seen their lobbyists and employees contribute nearly $1 million to Shelby’s campaign and political action committee since 1999, according to federal records. …Shelby’s earmarking doesn’t appear to run afoul of Senate rules or federal ethics laws. But critics said his tactics are part of a Washington culture in which lawmakers direct money back home to narrow interests, which, in turn, hire well-connected lobbyists — often former congressional aides — who enjoy special access on Capitol Hill.

Some people think the answer to these stories is more ethics laws, corruption laws, and campaign-finance laws, but that’s like putting a band-aid on a compound fracture. Besides, it is quite likely that no laws were broken, either by Lew, Citigroup, Shelby, or his former aides. This is just the way Washington works, and the beneficiaries are the insiders who know how to milk the system. The only way to actually reduce both legal and illegal corruption in Washington is to shrink the size of government. The sleaze will not go away until politicians have less ability to steer our money to special interests – whether they are Wall Street Banks or Alabama universities. This video elaborates.

Read Full Post »

Dan Henninger authored a fascinating column in the Wall Street Journal a few days ago comparing people who became rich honestly to those who used government favoritism. He warns that Obama’s policies will encourage the latter version – meaning that smart entrepreneurs will seek wealth by gaming the political system. At best, this is a zero-sum game for the overall economy, and it is quite likely that it will reduce prosperity since labor and capital will be allocated based on political power rather than market forces. But there are two other reasons to reject Obama’s industrial policy. First, political control is necessarily unjust and corrupt since political insiders will have an advantage. This is something that also should upset honest left wingers. As my Cato colleague Will Wilkinson sagely noted, “…the more power the government has to pick winners and losers, the more power rich people will have relative to poor people.” Second, this system undermines support for genuine free markets because the average person begins to associate wealth with corrupt government handouts. This insight (sent to me by an American who fled Greece many years ago) helps explain why average people sometimes support punitive tax rates in hopes of clawing back some of the unearned wealth in the hands of insiders. The downside of that approach, of course, is that the honest and productive entrepreneur also suffers from those policies, thus undermining the economy’s ability to generate earned wealth:

…a small classic by Hillsdale College historian Burton W. Folsom called “The Myth of the Robber Barons: A New Look at the Rise of Big Business in America” (Young America’s Foundation). Prof. Folsom’s core insight is to divide the men of that age into market entrepreneurs and political entrepreneurs. Market entrepreneurs like Rockefeller, Vanderbilt and Hill built businesses on product and price. Hill was the railroad magnate who finished his transcontinental line without a public land grant. Rockefeller took on and beat the world’s dominant oil power at the time, Russia. Rockefeller innovated his way to energy primacy for the U.S. Political entrepreneurs, by contrast, made money back then by gaming the political system. Steamship builder Robert Fulton acquired a 30-year monopoly on Hudson River steamship traffic from, no surprise, the New York legislature. Cornelius Vanderbilt, with the slogan “New Jersey must be free,” broke Fulton’s government-granted monopoly. If the Obama model takes hold, we will enter the Golden Age of the Political Entrepreneur. The green jobs industry that sits at the center of the Obama master plan for the American future depends on public subsidies for wind and solar technologies plus taxes on carbon to suppress it as a competitor. Politically connected entrepreneurs will spend their energies running a mad labyrinth of bureaucracies, congressional committees and Beltway door openers. Our best market entrepreneurs, instead of exhausting themselves on their new ideas, will run to ground gaming Barack Obama’s ideas. …Political entrepreneurs create fewer jobs than do market entrepreneurs. We need new mass markets, really big markets of the sort Ford, Rockefeller and Carnegie created. Great employment markets are discoverable only by people who create opportunities or see them in the cracks of what already exists—a Federal Express or Wal-Mart.

Read Full Post »

« Newer Posts

%d bloggers like this: