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Archive for the ‘Sleaze’ Category

Whether I like what’s happening (getting rid of Operation Choke Point) or don’t like what’s happening (expanding civil asset forfeiture), it appears that the Justice Department under Attorney General Jeff Sessions is willing to make decisions.

With one very puzzling exception.

No steps have been taken to reverse the Obama-era policy of stonewalling to hide evidence of IRS scandals. Everything seems to be on auto-pilot.

The Wall Street Journal opined about the issue today and is justifiably frustrated.

The Obama Justice Department dismissed the IRS political targeting scandal as no big deal, and the Trump Administration hasn’t been any better. …These are basic questions of political accountability, even if the IRS has stonewalled since 2013. President Obama continued to spin that the targeting was the result of some “boneheaded” IRS line officers in Cincinnati who didn’t understand tax law. Yet Congressional investigations have uncovered clear evidence that the targeting was ordered and directed out of Washington. Former director of Exempt Organizations Lois Lerner was at the center of that Washington effort, but the IRS allowed her to retire with benefits. She invoked the Fifth Amendment before Congress. One of her principal deputies, Holly Paz, has submitted to a deposition in separate litigation, but the judge has sealed her testimony after she claimed she faced threats. The Acting Commissioner of the IRS at the time, Stephen Miller, stepped down in the wake of the scandal, but as far as anyone outside the IRS knows, no other IRS employee has been held to account. Even if the culprits were “rogue employees,” as the IRS claims, the public deserves to know what happened. …The Trump Administration also has a duty to provide some answers. The Justice Department and IRS have continued to resist the lawsuits as doggedly as they did in the Obama era. Attorney General Jeff Sessions can change that… Seven years is too long to wait for answers over abuses of the government’s taxing power.

This is spot on. It’s outrageous that the Obama Administration weaponized and politicized the IRS. But it’s also absurdly incompetent that the Trump Administration isn’t cleaning up the mess.

I understand why the bureaucrats at the Justice Department instinctively (and probably ideologically) want to protect their counterparts at the IRS. But, as the WSJ stated, there’s no reason why Attorney General Sessions isn’t using his authority to change policy.

The President’s failure to fire the ethically tainted IRS Commissioner is a troubling sign that the problem isn’t limited to the Justice Department.

One of Republicans’ least favorite Obama administration officials remains in his position: IRS Commissioner John Koskinen. Some Republicans lawmakers have asked President Trump to ask for Koskinen’s resignation. The commissioner’s term expires in November, but he has said he would step aside sooner if asked by the president. …Koskinen to lead the IRS in 2013, not long after it was revealed that the agency had subjected Tea Party groups’ applications for tax-exempt status to extra scrutiny and delays. …Many Republicans accuse Koskinen of impeding congressional investigations into the political-targeting scandal. They argue that he made false and misleading statements under oath and didn’t comply with a subpoena. During the last months of Obama’s presidency, some House Republicans pushed for a vote on Koskinen’s impeachment… Since Trump has taken office, there have been calls from GOP lawmakers for Koskinen to step down. Days after Trump’s inauguration, Republican Study Committee (RSC) Chairman Mark Walker (R-N.C.) and more than 50 other lawmakers sent a letter urging Trump to fire Koskinen “in the most expedient manner practicable.” …It’s unclear why Trump hasn’t ousted Koskinen or if he plans to do so in the future.

Very disappointing. I’m not a fan of conspiracy theories, but this almost leads me to wonder whether Koskinen has some damaging information on Trump.

Incidentally, the Justice Department may be dragging its feet and the White House may have cold feet, but the Treasury Department is overtly on the wrong side. And the problem starts at the top, resulting in praise for the Treasury Secretary from the pro-IRS forces at the New York Times.

President Trump’s Treasury secretary, Steven Mnuchin, knows that investing in the Internal Revenue Service yields significant returns… And he’s right: Every dollar spent on the agency returns $4 in revenue for the federal government, and as much as $10 when invested in enforcement activities. …At his confirmation hearings in January, Mr. Mnuchin bemoaned the cuts to the I.R.S. budget over the last seven years. The agency “is under-resourced to perform its duties,” he said, adding that further cuts “will indeed hamper our ability to collect revenue.” He also acknowledged that money spent on the I.R.S. is a good investment: “To the extent that we add resources, we can collect more money.” …his faith in the I.R.S. work force prompted one of his congressional interrogators to call it “refreshing” to hear someone “praise the employees at the Treasury Department.”

Yet should we give more money to a bureaucracy that has a big enough budget to finance this kind of reprehensible behavior?

The Internal Revenue Service has seized millions of dollars in cash from individuals and businesses that obtained the money legally, according to a new Treasury Department inspector general’s report. …individuals and businesses are required to report all bank deposits greater than $10,000 to federal authorities. Intentionally splitting up large sums of cash into sub-$10,000 amounts to avoid that reporting requirement is known as “structuring” and is illegal under the federal Bank Secrecy Act. But many business owners engaged in perfectly legal activities may be unaware of the law. Others are covered by insurance policies that don’t cover cash losses greater than $10,000. Still others simply want to avoid extra paperwork, and keep their deposits less than $10,000 on the advice of bank employees or colleagues. …The reporting requirements were enacted to detect serious criminal activity, such as drug dealing and terrorism.

I’m very skeptical that these intrusive anti-money laundering laws are successful by any metric, but I’m nauseated that the main effect is to give IRS bureaucrats carte blanche to steal money from law-abiding people.

The IRS pursued hundreds of cases from 2012 to 2015 on suspicion of structuring, but with no indications of connections to any criminal activity. Simply depositing cash in sums of less than $10,000 was all that it took to arouse agents’ suspicions, leading to the eventual seizure and forfeiture of millions of dollars in cash from people not otherwise suspected of criminal activity. The IG took a random sample of 278 IRS forfeiture actions in cases where structuring was the primary basis for seizure. The report found that in 91 percent of those cases, the individuals and business had obtained their money legally.

But here’s the part that’s most outrageous.

Innocent people weren’t the byproducts of a campaign to get bad guys. They were the targets.

…the report found that the pattern of seizures — targeting businesses that had obtained their money legally — was deliberate. “One of the reasons why legal source cases were pursued was that the Department of Justice had encouraged task forces to engage in ‘quick hits,’ where property was more quickly seized and more quickly resolved through negotiation, rather than pursuing cases with other criminal activity (such as drug trafficking and money laundering), which are more time-consuming,” according to the news release. In most cases, the report found, agents followed a protocol of “seize first, ask questions later.” Agents only questioned individuals and business owners after they had already seized their money.

In any event, the Trump Administration’s failure to deal with the problem seems to have emboldened the tax collection agency.

Despite promises to Congress, the Internal Revenue Service has yet to take advantage of a red-flag alert system designed to prevent it  from rehiring past employees with blots on their records, a watchdog found. …the Treasury Inspector General for Tax Administration found that more than 200 of 2,000-plus former employees “whom the IRS rehired between January 2015 and March 2016 had been previously terminated or separated from the tax agency while under investigation,” according to a report released on Thursday.

And keep in mind that IRS bureaucrats awarded themselves big bonuses in response to the scandal.

By the way, the problem isn’t limited to the executive branch.

Republicans in 2015 (after they had control of both the House and Senate!) decided that the best response to IRS scandals was to increase the agency’s budget. I’m not joking (and I’m also not happy). At the risk of being redundant, only the Stupid Party could be that stupid.

I sarcastically wrote four years ago that we should be thankful that Obama reminded the American people that the IRS isn’t trustworthy. Little did I realize that Republicans would fumble a golden opportunity to deal with the mess once they got power.

P.S. I’ve certainly done my part to explain why the IRS bureaucracy deserves scorn.

P.P.S. I don’t want to end on a sour note, so here’s more examples of IRS humor from my archives, including a new Obama 1040 form, a death tax cartoon, a list of tax day tips from David Letterman, a cartoon of how GPS would work if operated by the IRS, an IRS-designed pencil sharpener, two Obamacare/IRS cartoons (here and here), a sale on 1040-form toilet paper (a real product), a song about the tax agency, the IRS’s version of the quadratic formula, and (my favorite) a joke about a Rabbi and an IRS agent.

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When I write about the actions of state governments, it’s usually to highlight a specific bad policy. As you can imagine, states like California, Connecticut, Illinois, New York, and New Jersey give me a never-ending amount of material.

But I frequently run across things that are happening in the states that don’t really merit an entire column, but they nonetheless are worthy of attention since they symbolize the venality and incompetence of politicians.

So I’ve decided that it’s time for a series on “great moments in state government” to augment my already well-developed series on “great moments in local government.”

Let’s start by looking at a truly bizarre example of occupational licensing from Tennessee.

A decade ago, Martha Stowe founded True Equine, an equine-services company, a few miles south of Nashville, Tenn., in Williamson County. After earning a certificate in equine myofascial release, a massage technique that releases tension and pain in a horse’s body, Martha soon acquired a large clientele. …In April 2016, however, Stowe’s well-established business was upended when she received a threatening letter from the Board of Veterinary Medical Examiners, a board within Tennessee’s Department of Health. Only licensed veterinarians are permitted to massage horses, the board’s attorney explained, and if Stowe continued to practice myofascial release, she could be fined up to $500 and receive a six-month jail sentence. …The board also sent the letter to fellow Williamson County resident Laurie Wheeler, a professional jazz musician and licensed massage therapist who, like Stowe, is certified in equine myofascial release. …Upon receiving the veterinary board’s letter, Wheeler was stunned — after all, she was certified, and not only that, she had never even accepted money for her services. But, she says, the government threatened to “fine me and put me in jail for voluntarily working on animals.” For Wheeler, helping horses is more than a volunteer position or an occupation; it’s a call to duty.

But there is some good news.

A pro-market think tank is helping the women fight back.

Both women disregarded the veterinary board’s warnings and subsequently looked to the Beacon Center of Tennessee, a free-market think tank, for legal representation. According to Braden Boucek, director of litigation for the Beacon Center, the board’s decision to allow only licensed veterinarians to massage horses is a violation of the U.S. Constitution’s equal-protection clause. Moreover, because the Constitution protects private property, which in turn protects the right to acquire property and the right to earn a living, the board’s decision violates the 14th Amendment. …Threatening to jail an individual for massaging a horse is absurd. These women aren’t giving medical advice to owners, or surgically operating on horses, or doing anything that only a licensed veterinarian could do. Remember, this kind of massage is not even taught in veterinary school. Under Tennessee’s logic, why shouldn’t massage therapists who practice exclusively on people be required to hold a medical degree? The veterinary board ought to take the necessary steps to begin updating this illogical statute. If it doesn’t, it will need to explain in court why it’s permissible to deprive Stowe and Wheeler of their fundamental constitutional rights.

Amen. I admire Tennessee for not having an income tax. It’s time, though, for the Volunteer State to extend economic freedom to horse masseurs.

Now let’s shift to Wisconsin, where we have another example of cronyism.

State lawmakers may be brave when it comes to curtailing special privileges for government employees, but they like special protections for private industry.

Wisconsin state regulators…[are]…banning state grocery stores from selling one of the Emerald Isle’s most popular (and tasty) products: Kerrygold butter. Never mind that Wisconsinites have been buying Kerrygold for years with no problems. Or that it remains legal in the 49 other states. Badger State bureaucrats, trying to protect the state dairy industry, are suddenly enforcing a 1970 law that requires all butter sold in the state to go through a complicated evaluation by a state panel. This is the same state that once banned margarine because it was a competitive threat to local dairies. …as a result of the ban, Kerrygold-loving Wisconsinites have been forced to make butter runs across the state border, bringing back suitcases stuffed with the import. In Ireland, meanwhile, the ban is leading to headlines such as this in the Irish Mirror: “Shopkeepers in Wisconsin could face JAIL if they sell Kerrygold butter.”

Maybe butter consumers in Wisconsin can fly to Norway and learn how to get around misguided policies that make butter a black-market commodity.

Remember, if you outlaw butter, only outlaws will have butter.

Now let’s look at some onerous government intervention in my state of Virginia. And this one is personal since I don’t like the hassle of annual vehicle inspections.

…my annual Virginia motor vehicle safety inspection was due in a month. I knew my car wouldn’t pass and that I wouldn’t be allowed to stay on the road with that light on. Never mind that the light has nothing to do with the safe operation of the vehicle. And also never mind that in a 2015 study the Government Accountability Office “examined the effect of inspection programs on crash rates related to vehicle component failure, but showed no clear influence.” AAA Public Affairs Vice President Mike Wright said, “Nobody can prove with any degree of certainty that spending the money, suffering the inconvenience of getting your vehicle inspected, actually produces desired results.” …Virginia has a personal vehicle safety program overseen by the state police that cannot be shown to enhance public safety. The people who perform inspections are often the same people who fix any identified deficiencies. …A government program that requires the purchase of a good or service in return for a nonexistent public benefit is illiberal and anti-consumer. Two-thirds of states see no need to impose the burden of annual personal vehicle safety inspections on their citizens; Virginia should end its inspection requirement.

For what it’s worth, the People’s Republic of the District of Columbia doesn’t have this requirement. Kind of embarrassing that Virginia is more interventionist.

Our final example come from Illinois, where a local newspaper has a superb editorial on a sordid example of wasteful sleaze in the state budget.

Let’s eliminate the Illinois Arts Council Agency from the state budget. They must have taken lessons on government efficiency from our local townships, spending $1 million on staff and overhead in 2016 to hand out $834,900 in grants. The council is chaired by Shirley Madigan, who has been in that position since 1983. Funny, her husband, Mike, has been Illinois House Speaker since then, too. …guess who gets the money? Their well-heeled friends. Madigan’s alma mater received $95,100, another board member’s employer received $165,650 and yet another board member’s pet opera company received $503,000. Surprise! …Illinois Gov. Bruce Rauner has an opportunity to let someone else be a matron of the arts and appoint a majority of board members dedicated to either eliminating the council or at least making it a transparent organization that helps local artists rather than makes your taxes a minor revenue source for well-connected, large arts institutions.

Needless to say, the first option (eliminating the council) is the superior choice, just like we should shut down the National Endowment for the Arts in D.C.

But let’s set that aside. I’m still scratching my head about a bureaucracy that spends $1 million to give away $834.9 thousand. Though that’s actually efficient if you compare it with the German tax that resulted in €30 euros of government expense for every €1 collected.

To conclude, there’s a common thread in these four stories. In each case, politicians at the state level have policies to enable unearned wealth to flow to the pockets of their friends and allies.

In other words, the First Theorem of Government doesn’t just apply to what’s happening in Washington.

P.S. I’ve only had a few previous “great moments” for state governments. One from Florida involved a felony arrest of some luckless guy who was simply trying to impress his girlfriend by releasing some balloons, and the other from Virginia involved three misdemeanors for the horrid crime of rescuing a wounded deer.

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I’ve written before about Hillary Clinton’s unethical and (presumably) illegal actions, both in terms of her email server and the Clinton Foundation.

We’ve probably only seen the tip of the iceberg, but one thing that can be said with confidence is that there is strong scent of corruption, cronyism, and insider dealing that surrounds Mrs. Clinton.

Every day seems to bring new evidence. Writing for the Wall Street Journal, Kimberly Strassel puts it in blunt terms.

A Hillary Clinton presidency will be built, from the ground up, on self-dealing, crony favors, and an utter disregard for the law. This isn’t a guess. …It comes in the form of a memo written in 2011 by longtime Clinton errand boy Doug Band, who for years worked simultaneously at the Clinton Foundation and at the head of his lucrative consulting business, Teneo. It is astonishingly detailed proof that the Clintons do not draw any lines between their “charitable” work, their political activity, their government jobs or (and most important) their personal enrichment. Every other American is expected to keep these pursuits separate, as required by tax law, anticorruption law and campaign-finance law. For the Clintons, it is all one and the same—the rules be damned. …Any nonprofit lawyer in America knows the ironclad rule of keeping private enrichment away from tax-exempt activity, for the simple reason that mixing the two involves ripping off taxpayers. Every election lawyer in the country lives in fear of stepping over the lines governing fundraising and election vehicles. The Clintons recognize no lines. Here’s the lasting takeaway: The Clintons…know the risks. And yet they geared up the foundation and these seedy practices even as Mrs. Clinton was making her first bid for the presidency. They continued them as she sat as secretary of state. They continue them still, as she nears the White House. This is how the Clintons operate. They don’t change. Any one who pulls the lever for Mrs. Clinton takes responsibility for setting up the nation for all the blatant corruption that will follow.

Let’s look at some examples.

And we’ll start with the example of a Swiss bank that was being wrongfully persecuted by the American government for the supposed crime of protecting the privacy of clients (i.e., for following Swiss law inside Switzerland).

In other words, I’m very sympathetic to the bank. But I’m not a big fan of the Clintons using the bank’s legal woes as an opportunity to raise a bunch of money in exchange for a favorable disposition. Yet that’s exactly what happened, as reported by the U.K.-based Guardian.

In February 2009, the IRS sued UBS and demanded that it disclose the names of 52,000 possible American tax evaders with secret Swiss bank accounts. …On 19 August 2009, it was announced that UBS would pay no fine and would provide the IRS with information about 4,450 accounts within a year. Since the deal was struck, disclosures by the foundation and the bank show the donations by UBS to the Clinton Foundation growing “from less than $60,000 through 2008 to a cumulative total of about $600,000 by the end of 2014”… The bank also teamed up with the foundation on the Clinton Economic Opportunity Initiative, creating a pilot entrepreneur program through which UBS offered $32m in loans to businesses, the newspaper reported. Other UBS donations to the Clinton Foundation include a $350,000 donation from June 2011 and a $100,000 donation for a charity golf tournament. Additionally, UBS paid more than $1.5m in speaking fees to Bill Clinton between 2001 and 2014, the newspaper reported.

James Freeman, in a column for the Wall Street Journal, cites two other examples of Clinton-style pay-to-play. The first example deals with Morocco.

We now know from emails published by WikiLeaks that before Mrs. Clinton formally launched her campaign, she arranged for the king of Morocco to donate $12 million to Clinton Foundation programs. What’s significant about the Morocco case is that for years the Clintons peddled the fiction that donors write checks simply to support wondrous acts of Clintonian charity. But that cover story isn’t available here. Mrs. Clinton’s trusted aide Huma Abedin put it in writing: The Moroccans agreed to the deal on the condition that Mrs. Clinton would participate at a conference in their country. Panicked Clinton-campaign aides persuaded Mrs. Clinton to avoid such a trip before launching her candidacy—and the foundation got the king to settle for Bill and Chelsea Clinton. But the record is clear. The king wanted the access, influence and prestige that all strongmen crave from legitimate democracies.

The second example comes from Kazakhstan.

This wasn’t the first time the Clintons satisfied such a desire while collecting megadonations. When it comes to human rights, Kazakhstan’s dictator, Nursultan Nazarbayev, makes Morocco’s king look enlightened. In power since 1991 and never freely elected, Mr. Nazarbayev must have enjoyed the sensation of Mr. Clinton endorsing him to lead an international election-monitoring group in 2005. The Kazakh strongman knows how to return a favor, and he granted valuable mining concessions to Clinton Foundation donors. The donors then built a global uranium powerhouse that was eventually sold to the Russians in a deal that required the 2010 approval of a U.S. government committee that included Mrs. Clinton’s State Department.

There’s a lot more material I could share, but the purpose of today’s column isn’t to demonstrate Hillary’s recent unethical behavior.

Instead, I want to show how she has a decades-long pattern of using government for self-advancement and self-enrichment. And I’ll follow by drawing (what should be) a very obvious lesson about public policy.

To keep today’s column manageable, let’s review just two examples.

First, let’s go back more than 20 years to the early days of Bill Clinton’s presidency. Peggy Noonan explains Hillary’s attempt to replace the career professionals at the White House travel with cronies from Arkansas.

Why don’t people like Hillary Clinton? …Why, when some supposed scandal breaks and someone says she’s hiding something, do people, including many of her supporters, assume it’s true? …the scandals stretch back…all the way to her beginnings as a national figure. …It was early 1993. …It was the first big case in which she showed poor judgment, a cool willingness to mislead, and a level of political aggression that gave even those around her pause. It was after this mess that her critics said she’d revealed the soul of an East German border guard.

Let’s look at what happened.

On May 19, 1993, less than four months into the administration, the seven men who had long worked in the White House travel office were suddenly and brutally fired. The seven nonpartisan government workers, who helped arrange presidential trips, served at the pleasure of the president. But each new president had kept them on because they were good at their jobs. A veteran civil servant named Billy Dale had worked in the office 30 years and headed it the last 10. He and his colleagues were ordered to clear out their desks and were escorted from the White House, which quickly announced they were the subject of a criminal investigation by the FBI. They were in shock. So were members of the press, who knew Mr. Dale and his colleagues as honest and professional. A firestorm ensued. Under criticism the White House changed its story. They said that they were just trying to cut unneeded staff and save money. Then they said they were trying to impose a competitive bidding process. They tried a new explanation—the travel office shake-up was connected to Vice President Al Gore’s National Performance Review. (Almost immediately Mr. Gore said that was not true.) The White House then said it was connected to a campaign pledge to cut the White House staff by 25%. Finally they claimed the workers hadn’t been fired at all but placed on indefinite “administrative leave.”

Noonan continues.

Why so many stories? Because the real one wasn’t pretty. It emerged in contemporaneous notes of a high White House staffer that the travel-office workers were removed because Mrs. Clinton wanted to give their jobs—their “slots,” as she put it, according to the notes of director of administration David Watkins—to political operatives who’d worked for Mr. Clinton’s campaign. And she wanted to give the travel office business itself to loyalists. There was a travel company based in Arkansas with long ties to the Clintons. There was a charter travel company founded by Harry Thomason, a longtime friend and fundraiser, which had provided services in the 1992 campaign.

Unsurprisingly, Mrs. Clinton lied about her efforts to turn the travel office into a goodie for a crony.

All along Mrs. Clinton publicly insisted she had no knowledge of the firings. Then it became barely any knowledge, then barely any involvement. When the story blew up she said under oath that she had “no role in the decision to terminate the employees.” She did not “direct that any action be taken by anyone.” In a deposition she denied having had a role in the firings, and said she was unable to remember conversations with various staffers with any specificity. A General Accounting Office report found she did play a role. But three years later a memo written by David Watkins to the White House chief of staff, recounting the history of the firings, suddenly surfaced. (“Suddenly surfaced” is a phrase one reads a lot in Clinton scandal stories.) It showed Mrs. Clinton herself directed them.

By the way, the most disgusting part of this scandal is the way Hillary sicced the government on Mr. Dale.

The White House pressed the FBI to investigate, FBI agents balked—on what evidence?—but ultimately there was an investigation, and an audit. …Billy Dale was indicted on charges including embezzlement. The trial lasted almost two weeks. …The jury acquitted him in less than two hours.

In other words, expect to see more Lois Lerner-type scandals if Hillary reaches the White House. There should be little doubt that she will use the power of government to attack her political opponents.

Now let’s go back even further in time, to the late 1970s when Hillary Clinton somehow managed to turn a $1,000 “investment” into $100,000 is less than one year. The New York Times reported on this rather implausible story back in 1994.

…in 1978 Hillary Rodham Clinton invested $1,000 in commodities futures and that the investment grew in 10 months of trading in the notoriously volatile market into a gain of nearly $100,000. Seeking to dispel suggestions that the trades were risk-free and improperly arranged by an Arkansas lawyer who represents one of the state’s most powerful companies, the White House issued a statement this afternoon that said the First Lady had put up her own money and that she bore all of the financial risks in a marketplace where three out of four investors lose money. The officials also released a year’s worth of brokerage statements from one of Mrs. Clinton’s two accounts. …Mrs. Clinton based her trades on information in The Wall Street Journal.

In other words, we’re supposed to believe that Mrs. Clinton, a complete novice, with no experience in the private sector or the investment business, suddenly decided to sink money into a very complex type of speculation.

And we’re supposed to believe that she made a series of very clever market-timing decisions and turned small amount of money into a big pile of money.

Needless to say, even the reporter for the New York Times couldn’t help but express skepticism and doubt. Particularly since nobody was willing to back up Mrs. Clinton’s story.

The White House insisted today that Mrs. Clinton received no improper financial assistance on the trades from the lawyer, James B. Blair, a close friend who at the time was the top lawyer for Tyson Foods of Springdale, Ark., the nation’s biggest poultry company. Mr. Blair has said that he had suggested that she get into the commodities market, and that he used his knowledge of trading to guide her along the way. During Mr. Clinton’s tenure as Governor, Tyson benefited from several state decisions, including favorable environmental rulings, $9 million in state loans, and the placement of company executives on important state boards. …brokers in the Springdale office of Refco where Mrs. Clinton executed the trades, including the one she describes as her personal broker, said in interviews in recent weeks that they have no recollection of ever talking with her about the trades. Mrs. Clinton and Mr. Blair have said that they used Robert L. (Red) Bone, the broker who founded the Springdale office of Refco, a Chicago commodities firm, to execute the trades. But Mr. Bone, who worked at Tyson for 13 years until 1973, insisted in several interviews this month that he has no recollection of ever trading for Mrs. Clinton or talking to her about commodities trades.

Here’s the bottom line. Back when this scandal surfaced in the 1990s, I talked to several people in the financial markets, every one of whom was 99.99 percent certain that Hillary was the beneficiary of a gift (if they were favorable to her) or a bribe (if they were unfavorable to her). And they all agreed that somebody on the inside arranged to give her, after the fact, the winning side of trades in order to make it look like she was simply a good investor.

Moreover, every single Democrat that I talked to admitted (but only off the record) that she was the recipient of a gift or a bribe.

And she hasn’t changed in the past 38 years. Government is a vehicle for personal advancement and personal enrichment.

Now let’s conclude by bring public policy into the discussion. Corrupt politicians are able to amass lots of power and money because government is big and powerful.

And I’m not making a partisan argument. Indeed, here are the same bullet points I used when pointing out the empty futility of Trump’s plan to “drain the swamp” and end DC corruption.

All I’m saying is that Hillary Clinton both supports big government and profits from big government. And as the public sector gets larger, don’t be surprised when you find out that Hillary and her cronies have figured out additional ways of feathering their own nests.

P.S. By the way, I do recognize that there’s an infinitesimally small possibility that Hillary’s story about cattle futures is accurate.

I also recognize, for what it’s worth, that there’s a greater-than-zero possibility that aliens will invade the earth tomorrow.

But neither of these hypotheses is remotely plausible (though if I had to pick, I’d go with the alien invasion for the simple reason that it would bring great joy to Paul Krugman).

P.P.S. Plenty of Republicans will get rich as well as Hillary expands government. If you don’t believe me, just consider how many of them collect campaign cash in exchange for votes in favor of ethanol and the Export-Import Bank.

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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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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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In hopes of learning some lessons, let’s take a tour through the dank sewer of government, the place where malice is rewarded and malfeasance is a stepping stone to success.

Writing for the Washington Post, Professor Stephen Medvic argues that America’s political system is mostly clean.

…there is very little political corruption in the United States. …According to Transparency International’s 2015 Corruption Perceptions Index, a survey of expert opinion about the level of corruption in 167 countries, only 15 countries were judged to be cleaner than the United States. …our score of 76 (out of 100) was considerably higher than the average score of 67 in the European Union and Western Europe.

But before concluding that Mr. Medvic is a crazy crack addict, he is using a very narrow definition of corruption in the above excerpt, focusing on politicians who trade votes for under-the-table money that goes into their personal bank accounts.

Using a broader definition, there’s a different conclusion.

…corruption happens whenever there is a privileging of private interests over the public good in the policymaking process. Under this interpretation, while elected officials may not be reaping private benefit from their positions of power, they are placing the (private) interests of some subset of the public above the collective interests of the people as a whole. When a politically powerful industry gets public subsidies or a well-connected corporation receives a special tax break, it suggests to some that the system has been corrupted.

And from this perspective, corruption is rampant.

Here are six examples.

First, Veronique de Rugy of the Mercatus Center describes how a Louisiana politician (gee, what a surprise) wants to use government coercion to hinder competition in the market for contact lenses.

An estimated 40 million Americans wear contact lenses. That’s a $4 billion industry. Thanks to the heavy-handed government regulation of all things health care, contacts already cost more than they should. However, if an ongoing effort to reduce competition through government cronyism were to succeed, costs might soon rise even more. …a bill was introduced by Sen. Bill Cassidy, R-La., called the Contact Lens Consumer Health Protection Act of 2016, which would place pointless and costly new mandates on sellers and eliminate market competition. …it would require dedicated phone lines and email addresses for prescribers to communicate questions to sellers about the prescriptions the sellers need them to verify before the sellers are allowed to fill orders. …With this move, these special interests demonstrate that they would rather avoid the grind of competition, which requires that companies deliver high-quality goods at low prices to consumers. Instead, they’re trying to rig the system to force consumers into paying more for less.

Paying more for less? Maybe that should be Washington’s motto, though it’s hard to argue with the existing motto.

Second, Mike Needham of Heritage Action exposes how a shoe company cut a sleazy deal with the Obama White House.

Currently, new Army and Air Force recruits can use a one-time stipend to choose from about a dozen different shoes from multiple manufacturers. …shoe choice is exceedingly important for not only comfort, but also to prevent injury. Despite the differences that exist among the military’s roughly 250,000 new recruits every year, there is an effort afoot to force those recruits to wear shoes made by just one company. During last month’s mark up of the National Defense Authorization Act (NDAA), Massachusetts Democrat Niki Tsongas added language that would effectively force the Department of Defense (DoD) to provide only New Balance athletic shoes for new military recruits. …This alone reeks of the revolving door politics the political left is usually swift to condemn, but it gets even worse. Last month, New Balance revealed the company disengaged from the fight over the Trans-Pacific Partnership last year because it had cut a secret deal with the Obama administration. …Using the legislative process to limit choice and competition is par for the course in our corrupt political system, but doing so at the expense of America’s brave sons and daughters outrageous.

Unfortunately, wasting money is a Pentagon tradition.

Third, here’s a typical story of insider dealing in the bureaucracy.

A Department of Veterans Affairs manager who steered a $4 million contract to a relative was promoted to the second-highest position in the hospital weeks after she was caught and exposed in the national media. …The hospital evaluated 16 plots, five of which were owned by relatives of Gillis. A committee ranked them by suitability, and a non-Gillis plot was determined to be best. But in an “unusual” move, the VA selected land owned by William Gillis instead, and paid him $4.25 million. …Within three months, in June 2015, Gillis was put on a detail to serve as acting associate director, the second-highest position in the hospital, The Daily Caller News Foundation has learned. The elevation was a big promotion considering the fact that others were more senior and higher-ranked.

I suspect Gillis was one of the VA bureaucrats to also get a fat bonus despite shoddy treatment of America’s veterans.

Fourth, a former Senator is now lobbying to help H&R Block stifle competition for mom and pop tax preparers.

Former Sen. Jon Kyl (R-Ariz.) has registered to lobby on behalf of the tax preparation company H&R Block. Kyl and a colleague at his new employer, Covington & Burling, will advocate on behalf of H&R Block in favor of the “creation of minimum standards for paid tax preparers,” according to a registration form. …H&R Block has also hired another firm, Fierce Government Relations, that it is lobbying on “oversight of tax preparation” for the company. Forbes-Tate and Rock Creek Counsel also lobby for H&R Block, and the company has its own in-house lobbyists.

Yet another example of a Republican advocating bigger government to line his own pockets.

Fifth, here’s another probable example of insider dealing.

U.S. Sen. Diane Feinstein’s husband Richard Blum won the first-phase construction contract for California’s high-speed rail. …If I didn’t witness the insanity and corruption in politics every day, I wouldn’t have believed this. “The Perini-Zachary-Parsons bid was the lowest received from the five consortia participating in the bidding process, but “low” is a relative term,” the Laer Pearce, author of Crazifornia wrote. ”The firms bid $985,142,530 to build the wildly anticipated first section of high speed rail track that will tie the megopolis of Madera to the global finance center of Fresno. Do the division, and you find that the low bid came in at a mere $35 million per mile.”

Wasting money on a high-speed rail boondoggle is bad enough, but steering the contract to the spouse of a senior politician adds insult to injury.

Sixth, let’s look at how a former Obama appointee is getting rich because of regulations he oversaw while in government.

Even progressives need to make a living. …Some of them are even smart enough to do it by exploiting the regulations they pushed while in government. …Jim Shelton, the deputy secretary of education in 2013 and 2014…became “chief impact officer” at 2U, a publicly traded company that caters to public and nonprofit colleges and universities. …it’s especially notable that Mr. Shelton has joined 2U because its for-profit online business model allows it to circumvent the onerous regulation that the Department of Education promoted to punish for-profit schools during Mr. Shelton’s tenure. …This rule…has forced even the best for-profit schools to shrink enrollments. Students who have suffered the most tend to be low-income and minorities… The rule has one giant loophole. It doesn’t apply to nonprofit or public universities, and it also largely exempts community colleges. Many of these have graduation rates or loan default rates that are as bad or worse than for-profits… Which works out beautifully now for Mr. Shelton and 2U, which can work around the gainful-employment rule and still make a buck. 2U’s customers don’t have to meet the rule.

Sounds like a scene out of Atlas Shrugged, right?

So what’s the solution to all this sleaze in the Washington Favor Factory?

Returning to the column from Prof. Medvic, he seems to think that the problem is money.

The real problem is…that economic elites and business organizations have a greater impact on policy outcomes than do groups representing average citizens. …the playing field is tilted toward those with money. …the problem with money in politics is that it undermines an essential principle of democratic government.

That’s wrong. Laughably wrong.

The problem is that government has too much power. If we want to reduce sordid dealmaking (and the six examples listed above are a very tiny tip of a very large iceberg), then we need to reduce the size and scope of Washington.

Which is the message of this video.

I suppose the easy thing to do at this stage is to attack politicians for constantly expanding the size and scope of government. And I certainly have done that. A lot.

But let’s not overlook the role of culture. The crowd in Washington gets away with lots of venal behavior because an ever-larger share of the population is losing the spirit of self reliance and personal responsibility.

With that in mind, there’s very little reason for optimism once people decide that it’s okay to steal from their neighbors so long as they use government as a middleman.

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I’m a big fan of Estonia.

According to both the Fraser Institute and the Heritage Foundation, it has considerable economic freedom.

It has a low-rate flat tax, meaning that investors, entrepreneurs, and small-business owners aren’t punished for contributing more to the nation’s economic output.

It responded to the 2008 crisis by cutting spending rather than engaging in a Keynesian spending binge (which also led to an exploding cigar for Paul Krugman).

Now I have another reason to like Estonia.

It’s a role model for how to reduce corruption by shrinking the size and scope of government.

First, some background.

Neil Abrams and Professor Steven Fish have a column in the Washington Post about the seemingly intractable problem of boosting the rule of law in developing and transition economies.

Western aid agencies and scholars agree that the rule of law is required before developing countries can reduce poverty and corruption. For decades, they have supported aid programs designed to help developing countries establish law-based states. …In a rule-of-law state, the rules apply even to the rulers, not just the ordinary folks. The rule of law is not the same as democracy. Scores of developing countries have demonstrated that establishing democracy is the easy part. The rule of law is harder to attain. From India and the Philippines to Argentina, democracy coexists with endemic corruption, and elites remain largely exempt from the rules.

They then explain that its well-nigh impossible to create the rule of law in a society that has a big government.

…our research suggests that they have the sequence backward. Before urging governments to adopt the rule of law, they must first advise reformers to take one key step: eliminating the government subsidies that sustain criminal elites and replacing the compromised bureaucrats who patronize them.

Now for the big takeaway from their column: Estonia is the role model for how this can happen.

Our research shows that a few good policies can pave the way for the rule of law. For instance, Estonia’s clean and capable state administration represents a model of post-communist success. But this was not always the case. In 1991, when communism collapsed, Estonia, like other post-Soviet countries, had almost no working institutions and a burgeoning class of economic predators, nor was Estonia economically privileged. In the early post-Soviet years, its income per capita was only 10 to 20 percent higher than that of Russia and Romania and 20 to 30 percent lower than that of Croatia, Slovakia and Hungary. But Estonian leaders acted boldly. …early Estonian governments ended practically all subsidies to state and private enterprises. …in developing countries, state subsidies almost always benefit corrupt elites more than ordinary people. This policy cut off the budding economic criminals who profit from state largesse rather than entrepreneurial aptitude — and made it possible for real entrepreneurs to thrive. Deprived of subsidies, old-guard enterprise directors and crony capitalists could not muster enough political influence to hold governments hostage.

Sadly, other nations are not copying Estonia, in part because the international bureaucracies and national agencies that dispense foreign aid don’t support policies to shrink government in recipient nations.

Unfortunately, Estonia is the exception and not the rule. That’s  not for lack of trying on the part of the West. The United States, the European Union, the World Bank, the European Bank for Reconstruction and Development and the United Nations have spent billions of dollars for the express purpose of helping countries build a rule of law. …But they’re stumbling. The Western effort assumes that the rule of law will flourish only if developing countries receive enough education, guidance, training and money. In fact, a growing body of research throws such optimism into doubt.

In other words, foreign aid – at best – is useless. And it may be harmful by financing a bigger role for recipient governments.

The authors close by emphasizing the need (assuming genuine rule of law is the goal) to prune the bureaucracy and public sector.

Scholars often treat the rule of law as a prerequisite for market-oriented economic policies such as liberalizing prices and trade and eradicating wasteful subsidies. They’re getting it backward. Instead, first eliminate the subsidies and purge the compromised bureaucrats who stand in the rule of law’s way. This is hard to do. It will provoke tremendous resistance from those who profit from the status quo. But it’s far more realistic and effective than simply encouraging countries to adopt the rule of law.

So what are the implications of this analysis for the United States?

Given that America now ranks below Estonia for rule of law, and given that rule of law is gradually eroding in the United States, the obvious lesson is that the public sector in America needs to shrink.

The real challenge, though, is convincing politicians to give up power.

Professor Glenn Reynolds of the University of Tennessee Law School explains in USA Today that a larger government is good for politicians because it creates opportunities for graft.

The explanation for why politicians don’t do all sorts of reasonable-sounding things usually boils down to “insufficient opportunities for graft.” And, conversely, the reason why politicians choose to do many of the things that they do is … you guessed it, sufficient opportunities for graft. That graft may come in the form of bags of cash, or shady real-estate deals, or “consulting” gigs for a brother-in-law or child, but it may also come in broader terms of political support.

Glenn notes that there’s an entire school of thought in economics that analyzes this unfortunate tendency of politicians to conspire with interest groups at the expense of taxpayers and consumers.

…there’s a whole field of economics based on this view, called “Public Choice Economics.” Nobel prize winning economist James Buchanan referred to public choice economics as “politics without romance.” Instead of being selfless civil servants motivated solely by the public good, public choice economics assumes that politicians are, like other human beings, heavily influenced by self-interest. …You pick a car because it’s the best car for you that you can afford. Politicians pick policies because they’re the best policies — for them — that they can achieve. …the entire system is designed — by politicians, naturally — to make it harder for voters to keep track of what politicians are doing. The people who have a bigger stake in things — the real estate developers or construction unions — have an incentive to keep track of things, and to influence them.

Having received my Ph.D. from George Mason University, home of the Center for the Study of Public Choice, I echo Glenn’s comments about the value of this theory.

So what’s the moral of the story?

As summarized by Professor Reynolds, bigger government means more corruption and smaller government means less corruption.

The more the government does and the more decisions that are relegated to bureaucrats, “guidance” and other forms of decisionmaking that are far from the public eye, the more freedom politicians have to pursue their own interest at the expense of the public — all while, of course, claiming to do just the opposite.

Now let’s look at some real-world examples from Washington.

By the way, I’m not writing to specifically condemn Obama and his team, even though I’m quite confident that the Chicago machine produces people who excel at unethical behavior.

Republicans also get their hands dirty by steering undeserved wealth to special interests, as explained here, here, and here.

That being said, most Washington corruption today seems associated with the Democrat Party for the simple reason that Democrats control the bureaucracy.

For instance, here are some of the key points from a New York Times report.

The State Department, under Secretary Hillary Rodham Clinton, created an arrangement for her longtime aide and confidante Huma Abedin to work for private clients as a consultant while serving as a top adviser in the department. Ms. Abedin did not disclose the arrangement — or how much income she earned — on her financial report. It requires officials to make public any significant sources of income.

To be blunt, this stinks to high heaven.

…the picture that emerges from interviews and records suggests a situation where the lines were blurred between Ms. Abedin’s work in the high echelons of one of the government’s most sensitive executive departments and her role as a Clinton family insider. While continuing her work at the State Department, in the latter half of 2012, she also worked for Teneo, a strategic consulting firm, which was founded by Doug Band, a former adviser to President Bill Clinton. Teneo has advised corporate clients like Coca-Cola and MF Global, the collapsed brokerage firm run by Jon S. Corzine, a former governor of New Jersey.

The Daily Caller also has been doing some first-rate work on the cronyism and corruption inside Washington.

One of their stories, for instance, exposed the left-wing connections of the supposedly “apolitical” bureaucrat at the heart of the IRS scandal.

IRS Exempt Organizations Division director Lois G. Lerner, who has been described as “apolitical” in mainstream press coverage of the IRS scandal, is married to tax attorney Michael R. Miles, a partner at the law firm Sutherland Asbill & Brennan.

And why does that matter?

The 400-attorney firm hosted an organizing meeting at its Atlanta office for people interested in helping with voter registration for the Obama re-election campaign. …Lerner personally signed the tax-exemption approval for a shady charity run by Obama’s half-brother, after an inexplicably brief one-month application process.

Time to wrap this up.

I enjoy Mark Steyn for his biting humor, but he makes a very serious and relevant point is his latest column.

A civil “civil service” requires small government. Once government is ensnared in every aspect of life a bureaucracy grows increasingly capricious. The U.S. tax code ought to be an abomination to any free society, but the American people have become reconciled to it because of a complex web of so-called exemptions that massively empower the vast shadow state of the permanent bureaucracy. Under a simple tax system, your income is a legitimate tax issue. Under the IRS, everything is a legitimate tax issue: The books you read, the friends you recommend them to. There are no correct answers, only approved answers.

I made a similar point, arguing that you can’t have a competent government unless it’s a small government.

But as the public sector expands, effective management becomes much harder.

And, as discussed in an interview with John Stossel, you also get corruption, mixed with incompetence and thuggery.

Let’s close by re-issuing my video explaining how big government enables pervasive corruption. It’s never been more timely and appropriate.

P.S. There are some countries with big governments that are not plagued by corruption. The Nordic nations, for instance, rank at or near the top in many economic indications, including high-quality rule of law. Though it’s worth noting that these jurisdictions scored highly in these areas before the burden of government was expanded.

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