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Posts Tagged ‘Lobbying’

I very much suspect Obama partisans and Trump partisans won’t like this column, but the sad reality is that both Obamacare and Trump’s protectionism have a lot in common.

  • In both cases, government is limiting the freedom of buyers and sellers to engage in unfettered exchange.
  • In both cases, the fiscal burden of government increases.
  • In both cases, politicians misuse statistics to expand the size and scope of government.

Today, let’s add another item to that list.

  • In both cases, the Washington swamp wins thanks to increased cronyism and corruption.

To see what I mean, let’s travel back in time to 2011. I wrote a column about Obamacare and cited some very persuasive arguments by Tim Carney that government-run healthcare (or, to be more accurate, expanded government control of healthcare) was creating a feeding frenzy for additional sleaze in Washington.

Congress imposes mandates on other entities, but gives bureaucrats the power to waive those mandates. To get such a waiver, you hire the people who used to administer or who helped craft the policies. So who’s the net winner? The politicians and bureaucrats who craft policies and wield power, because this combination of massive government power and wide bureaucratic discretion creates huge demand for revolving-door lobbyists.

I then pointed out that the sordid process of Obamacare waivers was eerily similar to a passage in Atlas Shrugged.

Wesley Mouch…issued another directive, which ruled that people could get their bonds “defrozen” upon a plea of “essential need”: the government would purchase the bonds, if it found proof of the need satisfactory. …One was not supposed to speak about the men who…possessed needs which, miraculously, made thirty-three frozen cents melt into a whole dollar, or about a new profession practiced by bright young boys just out of college, who called themselves “defreezers” and offered their services “to help you draft your application in the proper modern terms.” The boys had friends in Washington.

Well, the same thing is happening again. Only this time, as reported by the New York Times, protectionism is the policy that is creating opportunities for swamp creatures to line their pockets.

The Trump administration granted seven companies the first set of exclusions from its metal tariffs this week and rejected requests from 11 other companies, as the Commerce Department began slowly responding to the 20,000 applications that companies have filed for individual products. …several companies whose applications were denied faced objections from American steel makers. …companies that have applied for the exclusions criticized the exercise as both long and disorganized. “This is the most screwed-up process,” said Mark Mullen, president of Griggs Steel, a steel distributor in the Detroit area. “This is a disservice to our industry and the biggest insult to our intelligence that I have ever seen from the government.”

From an economic perspective, it certainly is true that this new system is “disorganized” and “a disservice” and an “insult to our intelligence.” Those same words could be used to describe the welfare state, the EEOC, farm subsidies, the tax code, and just about everything else the government does.

But there’s one group of people who are laughing all the way to the bank, The lobbyists, consultants, fixers, and other denizens of the swamp are getting rich. Whether they’re preparing the applications, lobbying for the applications, or lobbying against the applications, they are getting big paychecks.

And the longer this sordid protectionist process continues, we will see a repeat of what happened with Obamacare as senior-level people in government move through the revolving door so they can get lucrative contracts to help clients manipulate the system (yes, Republicans can be just as sleazy as Democrats).

Washington wins and we lose.

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Ordinary Americans have a low opinion of Washington, but they’re underestimating the extent of the problem.

The nation’s capital is basically a playpen for special interests. It’s now the richest region of the country, with lobbyists, bureaucrats, contractors, politicians, and other insiders and cronies getting fat and happy thanks to money that is taken from people in the productive sector of the economy.

Republicans play the game and Democrats play the game, with both sides getting undeserved wealth at our expense.

Let’s take an up-close look at how this sordid game is played.

Here are some excerpts from a column by Catherine Rampell in today’s Washington Post.

The GOP is no longer the Party of Reagan. It’s the Party of Michael Cohen. …the Cohen blueprint for achieving the American Dream: Work minimally, if you can, and leverage government connections whenever possible. …following Donald Trump’s unexpected presidential victory, Cohen cashed in. …Cohen told companies that he could provide valuable “insights” into the new administration. Huge multinational corporations lined up to purchase these “insights,” dumping millions into Essential Consultants LLC… Cohen is hardly the only prominent Trumpster invoking White House connections… Cabinet members and other senior government officials, too, have enjoyed a sweetheart apartment deal, lobbyist-arranged vacations and private jet rides. These are not amenities secured through brains, honesty and hard work, the virtues that Republicans traditionally say are required for upward mobility and financial comfort. They are the fruits of luck, cronyism and a loose approach to ethical lines.

This is disgusting. Republicans often come to Washington claiming they’re going to “drain the swamp.” Many of them, however, quickly decide it’s a hot tub.

But don’t forget that sleaze is a bipartisan activity in Washington.

Here are excerpts from a Wall Street Journal report about influence-peddling on the other side of the aisle.

Tony Podesta was in line to be king of K Street. His lobbying firm ended 2015 as the third largest in Washington, D.C., with nearly $30 million in revenue from more than 100 clients, spanning Alphabet Inc.’s Google to Wells Fargo & Co. With his longtime friend Hillary Clinton expected to win the White House, 2016 promised to be even better. Mr. Podesta…hosted lawmakers and power brokers at his flat in Venice during the Art Biennale. It was one of many homes around the globe, including the Washington mansion where he displayed a collection of museum-grade artwork. In early 2016, he was ready to buy a $7.4 million condo overlooking Madison Square Park in New York City. …At age 59, he married Heather Miller, a congressional staffer 26 years younger. …Mrs. Podesta started her own lobbying firm, Heather Podesta + Partners, and they emerged a Washington power couple. …Mr. Podesta drew an annual salary of more than $2 million and made millions more in commissions and bonuses. …The Podesta Group grew from the 20th largest lobbying firm to third in three years, in terms of domestic and foreign lobbying revenues, propelled by business during President Barack Obama’s first term.

But this story of graft and corruption has a happy ending.

Then he fell, a calamitous collapse… The Podesta Group lost its banker over news the firm did work for the U.S. subsidiary of a Russian bank under sanctions. …Mrs. Clinton’s…victory would go a long way to fixing many of his problems. She lost…and Mr. Podesta, like many who had banked on her victory, did too. Clients who had hired him for access to a new Clinton administration fell away. By the end of the year, the departures cost the firm more than $10 million in annual business… the Podesta Group did public relations work in 2015 for Raffaello Follieri, an Italian businessman who had pleaded guilty to swindling millions of dollars from an investment fund run partly by Mr. Clinton, one of Mr. Podesta’s early patrons. …Before closing the firm’s doors, Mr. Podesta gave himself an advance on his lobbying commissions.

The common theme, as explained by Karen Tumulty for the Washington Post, is that D.C. is an utterly corrupt place.

…the game in Washington never really changes. The only things that shift from election to election are the most sought-after players. …When Trump won, the traditional rosters of lobbyists — ex-congressmen, lawyers from white-shoe firms, former congressional staffers — were of little use in figuring out and gaining access to a band of outsiders who came to town vowing to demolish the old order. Cohen was not the only Trump insider to see a chance to cash in… The president’s former campaign manager, Corey Lewandowski, along with former Trump aide Barry Bennett, also opened a consulting firm, which quickly had more business than it could handle. “It was like shooting fish in the barrel,” Bennett told The Post. …Nor is Team Trump unique in seizing these opportunities. President Barack Obama had not been in office a month before his 2008 campaign manager, David Plouffe, was paid $50,000 to give a speech in Azerbaijan to a group with close ties to that repressive government. …Washington continues to have a most durable ecosystem: The swamp is never drained; it just gets taken over by different reptiles.

Utterly nauseating.

But allow me to point out that lobbying isn’t inherently bad. And neither are campaign contributions. It all depends on the reason.

If a company hires a lobbyist or give cash to a politician because it wants handouts or government intervention that will produce unearned profit, that’s wrong. Sort of like being a co-conspirator to a crime.

However, if a company hires a lobbyist and donates money because it is fighting tax hikes or new regulatory burdens, that’s noble and just. Sort of like engaging in an act of self-defense.

But wouldn’t it be wonderful if there wasn’t a need for either the bad type of lobbying or the good type of lobbying?

Richard Ebeling, a professor at the Citadel, offers a very good solution in a column for the Foundation for Economic Education. He starts by explaining that government and corruption have always been connected.

The corruption of government officials seems to be as old as recorded history. …the ancient Roman senate passed laws against such political corruption in the first century, B.C. …Emperor Constantine issued one of the strongest decrees against corruption during this time in A.D. 331. …Today, high levels of political corruption remain one of the major problems people confront around the world. …Political corruption, clearly, is found everywhere around the world… Why?

Richard answers his own question, pointing out that big government is a major enabler of corruption.

Part of the answer certainly…can be found in the relationship between the level of corruption in society and the degree of government intervention in the marketplace. In a generally free market society, …government officials have few regulatory or redistributive responsibilities, and therefore they have few special favors, privileges, benefits, or dispensations to “sell”… The smaller the range of government activities, therefore, the less politicians or bureaucrats have to sell to voters and special interest groups. And the smaller the incentive or need for citizens to have to bribe government officials to allow them to peacefully go about their private business and personal affairs. …On the other hand, the…interventionist state…taxes the public and has huge sums of money to disburse to various programs and projects. It imposes licensing and regulatory restrictions on free and open competition. It transfers great amounts of income and wealth to different groups through sundry “redistributive” schemes. …Those in the government who wield these powers hold the fate of virtually everyone in their decision-making hands. It is inevitable that those drawn to employment in the political arena often will see the potential for personal gain… The business of the interventionist state, therefore, is the buying and selling of favors and privileges. It must lead to corruption because by necessity it uses political power to harm some for the benefit of others, and those expecting to be either harmed or benefited will inevitably try to influence what those holding power do with it.

So what’s the bottom line?

Ending global political corruption in its various “petty” and “grand” forms, therefore, will only come with the removal of government from social and economic life. When government is limited to protecting our lives and property, there will be little left to buy and sell politically.

Amen. That’s the message I also shared in this video from the Center for Freedom and Prosperity.

Sadly, Donald Trump’s promises to “drain the swamp” don’t seem to have been very sincere. Earlier this year, he meekly acquiesced to a budget deal that produced a feeding frenzy among the swamp creatures.

How is that any different from what would have happened if Hillary Clinton was in the White House? Big government doesn’t magically become less harmful and corrupt just because Republicans are in charge.

Indeed, there’s some hard evidence the problem actually becomes worse.

As Ms. Tumulty wrote, “Same swamp, different reptiles.”

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Every so often, I share an image that is unambiguously depressing. Usually because it suggest that freedom is slowly eroding.

I now have another addition to that depressing list.

Just as the Minneapolis Federal Reserve has an interactive website that allows users to compare recoveries and recessions, which is very useful for comparing Reaganomics and Obamanomics, the St. Louis Federal Reserve has an interactive website that allows users to compare national and regional economic data.

And that’s the source of today’s depressing chart. It shows median inflation-adjusted household income for the entire nation and for the District of Columbia. As you can see, the nation’s capital used to be somewhat similar to the rest of the nation. But over the past 10 years, DC residents have become an economic elite, with a representative household “earning” almost $14,000 more than the national average.

By the way, I put quotation marks around “earning” in the previous sentence for a very specific reason.

There is nothing wrong with some people accumulating lots of wealth and income if their prosperity is the result of voluntary exchange.

In the case of Washington, DC, however, much of the capital’s prosperity is the result of coercive redistribution. The lavish compensation of federal bureaucrats is a direct transfer from taxpayers to a gilded class, while the various lobbyists, contractors, cronyists, politicians, and other insiders are fat and happy because of a combination of direct and indirect redistribution.

I should also point out that the entire region is prospering at the expense of the rest of the nation.

By the way, some people will be tempted to argue that rising income levels in DC are simply a result of gentrification as higher-income whites displace lower-income blacks. Yes, that is happening, but that begs the question of where the new residents are getting all their income and why the nation’s capital is an increasingly attractive place for those people to live.

The answer, in large part, is that government is a growth industry. Except it’s not an industry. It’s increasingly just a racket for insiders to get rich at the expense of everyone else.

P.S. To close on a semi-humorous note, some cartoons are funny even if the underlying message is depressing.

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I’ve written many times that Washington is both a corrupt city and a corrupting city. My point is that decent people go into government and all too often wind up losing their ethical values as they learn to “play the game.”

I often joke that these are people who start out thinking Washington is a cesspool but eventually decide it’s a hot tub.

During the presidential campaign, Trump said he wanted to “drain the swamp,” which is similar to my cesspool example. My concern is that El Presidente may not understand (or perhaps not even care) that shrinking the size and scope of government is the only effective way to reduce Washington corruption.

In any event, we’re soon going to get a very strong sign about whether Trump was serious. With Republicans on Capitol Hill divided on how to deal with this cronyist institution, Trump basically has the tie-breaking vote on the issue.

In other words, he has the power to shut down this geyser of corporate welfare. But will he?

According the Susan Ferrechio of the Washington Examiner, Trump may choose to wallow in the swamp rather than drain it.

President Trump now may be in favor of the Export-Import Bank, according to Republican lawmakers who met with him privately Thursday, even though Trump once condemned the bank as corporate welfare.

Veronique de Rugy of the Mercatus Center is one on the Ex-Im Bank’s most tenacious opponents, and she’s very worried.

…if the reports are true that Trump has decided to support the restoration of the crony Export-Import Bank’s full lending authority, it would be akin to the president deciding to instead happily bathe in the swamp and gargle the muck. …If true, the news is only “great” for Boeing, GE, and the other major recipients of Ex-Im’s corporate welfare. It is also at odds with his campaign promises since much of the way the program works is that it gives cheap loans — backed by Americans all over the country — to foreign companies in China, Russia, Saudi Arabia, and the UAE. Restoring Ex-Im’s full lending-authority powers is renewing the policy to give cheap loans backed by workers in the Rust Belt to companies like Ryanair ($4 billion in guarantee loans over ten years) and Emirates Airlines ($3.9 billion over ten years) so they can have a large competitive advantage over U.S. domestic airlines like Delta and United. It continued to subsidize the large and prosperous state-owned Mexican oil company PEMEX ($9.7 billion over ten years). Seriously? That’s president Trump’s vision of draining the swamp?

Ugh. It will be very disappointing if Trump chooses corporate welfare over taxpayers.

What presumably matters most, though, is whether a bad decision on the Ex-Im Bank is a deviation or a harbinger of four years of cronyism.

In other words, when the dust settles, will the net effect of Trump’s policies be a bigger swamp or smaller swamp?

The New York Times opined that Trump is basically replacing one set of insiders with another set of insiders, which implies a bigger swamp.

Mr. Trump may be out to challenge one establishment — the liberal elite — but he is installing one of his own, filled with tycoons, Wall Street heavyweights, cronies and a new rank of shadowy wealthy “advisers” unaccountable to anyone but him. …Take first the Goldman Sachs crowd. The Trump campaign lambasted global financiers, led by Goldman, as having “robbed our working class,” but here come two of the alleged miscreants: Gary Cohn, Goldman’s president, named to lead the National Economic Council, and Steven Mnuchin, named as Treasury secretary. …Standing in the rain during Mr. Trump’s inaugural speech, farmers and factory workers, truckers, nurses and housekeepers greeted his anti-establishment words by cheering “Drain the Swamp!” even as the new president was standing knee-deep in a swamp of his own.

I’m skeptical of Trump, and I’m waiting to see whether Gary Cohn and Steven Mnuchin will be friends for taxpayers, so I’m far from a cheerleader for the current administration.

But I also think the New York Times is jumping the gun.

Maybe Trump will be a swamp-wallowing cronyist, but we don’t yet have enough evidence (though a bad decision on Ex-Im certainly would be a very bad omen).

Here’s another potential indicator of what may happen to the swamp under Trump’s reign.

Bloomberg reports that two former Trump campaign officials, Corey Lewandowski and Barry Bennett have cashed in by setting up a lobbying firm to take advantage of their connections.

The arrival of a new president typically means a gold rush for Washington lobbyists as companies, foreign governments, and interest groups scramble for access and influence in the administration. Trump’s arrival promises to be different—at least according to Trump. Throughout the campaign, he lambasted the capital as a den of insider corruption and repeatedly vowed to “drain the swamp,” a phrase second only in the Trump lexicon to “make America great again.” …Trump’s well-advertised disdain for lobbying might seem to augur poorly for a firm seeking to peddle influence. …“Business,” Lewandowski says, “has been very, very good.”

This rubs me the wrong way. I don’t want lobbyists to get rich.

But, to be fair, not all lobbying is bad. Many industries hire “representation” because they want to protect themselves from taxes and regulation. And they have a constitutional right to “petition” the government and contribute money, so I definitely don’t want to criminalize lobbying.

But as I’ve said over and over again, I’d like a much smaller government so that interest groups don’t have an incentive to do either the right kind of lobbying (self-protection) or the wrong kind of lobbying (seeking to obtain unearned wealth via the coercive power of government).

Here’s one final story about the oleaginous nature of Washington.

Wells Fargo is giving a big payout to Elaine Chao, the new Secretary of Transportation.

Chao, who joined Wells Fargo as a board member in 2011, has collected deferred stock options —  a compensation perk generally designed as a long-term retention strategy — that she would not be able to cash out if she left the firm to work for a competitor. Her financial disclosure notes that she will receive a “cash payout for my deferred stock compensation” upon confirmation as Secretary of Transportation. The document discloses that the payments will continue throughout her time in government, if she is confirmed. The payouts will begin in July 2017 and continue yearly through 2021. But Wells Fargo, like several banks and defense contractors, provides a special clause in its standard executive employment contract that offers flexibility for awarding compensation if executives leave the bank to enter “government service.” Such clauses, critics say, are structured to incentivize the so-called “reverse revolving door” of private sector officials burrowing into government. …Golden parachutes for executives leaving firms to enter government dogged several Obama administration officials. Jack Lew, upon leaving Citigroup to join the Obama administration in 2009, was given a cash payout as part of his incentive and retention awards that wouldn’t have been paid if he had left the firm to join a competitor or under ordinary circumstances. But Lew’s Citigroup contract stipulated that there was an exception for leaving to work in a “full time high level position with the U.S. government or regulatory body.” Goldman Sachs, Morgan Stanley, and Northrop Grumman are among the other firms that have offered special financial rewards to executives who leave to enter government.

This rubs me the wrong way, just as it rubbed me the wrong way when one of Obama’s cabinet appointees got a similar payout.

But the more I think about it, the real question isn’t whether government officials get to keep stock options and other forms of deferred compensation when they jump to government.

What bothers me much more is why companies feel that it’s in their interest to hire people closely connected to government. What value did Jacob Lew bring to Citigroup? What value did Chao bring to Wells Fargo?

I suspect that the answer has a lot to do with financial institutions wanting people who can can pick up the phone and extract favors and information from senior officials in government.

For what it’s worth, I’m not a fan of Lew because he pushed for statism while at Treasury. By contrast, I am a fan of Chao because she was one of the few bright spots during the generally statist Bush years.

But I don’t want a system where private companies feel like they should hire either one of them simply because they have connections in Washington.

I hope that Trump will change this perverse set of incentives by “draining the swamp.” But unless he reduces the size and scope of government, the problem will get worse rather than better.

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Two years ago, I wrote that Washington’s parasite class was having a very merry Christmas.

But I wasn’t mocking welfare recipients, many of whom actually deserve sympathy for getting trapped in the web of government dependency.

Instead, I was referring to the unearned wealth being accumulated by Washington’s gilded class of bureaucrats, cronyists, lobbyists, contractors, politicians, and other insiders.

To cite a truly horrifying statistic, the redistribution of money from America to Washington has made it the nation’s richest metropolitan region.

And it’s getting worse.

Let’s look at what Tim Carney just wrote in the Washington Examiner about Christmas on K Street.

It’s that magical season when Republicans and Democrats come together to look after the needs of corporate America, K Street lobbyists, and the U.S. Chamber of Commerce. …The highway measure is a huge win for industry while a loss for good governance. Far worse, however, is the…provision reviving the defunct Export-Import Bank, a corporate-welfare agency…K Street lobbied incessantly to revive Ex-Im, backed by President Obama, Hillary Clinton and nearly every Democratic lawmaker. …As a corporate cherry on top, the bill repeals a recent minor cut in federal crop insurance subsidies, a program that benefits financial firms… Congressional leaders are currently negotiating another year-end legislative package, the notorious annual tax extenders bill. …the bill will extend (at least for a short-time) green-energy subsidies: The Production Tax Credit for wind and the Investment Tax Credit for solar. …Almost all of them are crucial for some special interest and the revolving-door lobbyists they employ.

Tim points out that the feeding frenzy is bipartisan, which some people think is a measure of good policy.

Like me, though, Tim isn’t impressed when the Evil Party and the Stupid Party both conspire to produce bad policy.

As this legislation — the highway bill, the energy bill, the tax extenders, plus the omnibus spending bill—pass through both houses, expect hosannas to the “bipartisanship” and “compromise” involved. …there’s one common theme here: Corporate lobbyists win in almost every case.

But catering to the interests of K Street lobbyists is probably not a good strategy for Republicans.

Republican leaders are probably confused about why all their accomplishments and imminent accomplishments, including the highway bill, tax extenders and appropriations, haven’t dragged Congress’s approval out of the gutter—after all, everyone they talk to thinks Congress is doing a bang-up job.

Now let’s look at what Kevin Williamson recently wrote for National Review. His article is primarily about corruption in Chicago, but his observations apply just as well to how Washington operates.

Bill and Hillary Clinton, Barack Obama, Rahm Emanuel, Al Gore, and the rest of that sorry lot aren’t trying to get rich — they’re already rich, some of them wildly rich. They are building a patronage society. And building a patronage society costs a lot of money… The horrifying fact is that Barack Obama can make you a rich man — if you’re the right kind of man. If you operate a politically connected business, the government can direct the better part of $1 billion straight into your coffers… At the other end of the spectrum, a federal tormenter can be the end of your enterprise: Ask those Tea Party groups illegally targeted by Barack Obama’s IRS. Ask a voting-reform advocate who was targeted by the ATF in spite of not being in any business related to A, T, or F.

But it’s not just a case of undeserved goodies getting steered to political cronies.

Yes, that’s a problem, but the economic concern is that this type of economic model misallocates resources and leads to stagnation.

The Clintons’ game isn’t enjoying the $100 million in their checking account — it’s making use of the $44 trillion in American-owned assets as if they owned them themselves. Barack Obama doesn’t want a garage full of Rolls Royces — he wants a world in which Rolls Royce has to ask his permission before building a car or selling one.

In effect, a nation slowly but surely becomes Greece as more and more people either rely on benefits or have jobs in the bloated bureaucracies that dispense goodies.

…you cannot build a patronage society on patrons alone: You need clients. And that’s where the ever-growing public sector comes in. …There is effectively no one working at your local DMV, public school, police station, or IRS office who could earn even 80 percent of his government compensation in a private-sector job. …the really nefarious dependency agenda isn’t focused on the people who cash welfare checks, but on the people who write them, the vast bureaucracies of overpaid functionaries… Get enough of those and you have effective control over the entire economy — Chávez-style socialism without the nasty business of formal expropriation.

By the way, it’s not just libertarian types who worry about bloated government and cronyism.

Here’s an excerpt from a recent column by Robert Samuelson that succinctly captures an inherent problem with government. Writing about the reasons for diminishing productivity growth, he cites the work of Mancur Olson.

Olson revolutionized thinking about the political power of interest groups. …conventional wisdom held that large groups were more powerful than small groups in pursuing their self-interest — say, a government subsidy, tax preference or a protective tariff. …Just the opposite, Olson said in his 1965 book “The Logic of Collective Action.” With so many people in the large group, the benefits of collective action were often spread so thinly that no individual had much of an incentive to become politically active. The tendency was to “let George do it,” but George had no incentive either. By contrast, the members of smaller groups often could see the benefits of their collective action directly. They were motivated to organize and to pursue their self-interest aggressively.

Samuelson continues, elaborating on Olson’s insight about concentrated benefits and dispersed costs.

Here’s an example: A company and its workers lobby for import protection, which saves jobs and raises prices and profits. But consumers — who pay the higher prices — don’t create a counter-lobby, because it’s too much trouble and the higher prices are diluted among many individual consumers. Gains are concentrated, losses dispersed. This was Olson’s great insight, and it had broad implications, he said. In a 1982 book, “The Rise and Decline of Nations,” he argued that the proliferation of special-interest concessions could reduce a society’s economic growth. “An increase in the payoffs from lobbying . . . as compared with the payoffs from production, means more resources are devoted to politics and cartel activity and fewer resources are devoted to production,” he wrote.

The last part of the excerpt is crucial.

When we get to the point when businesses are focused on harvesting favors from Washington (such as bailouts, export subsidies, special tax preferences, etc), that is a very depressing indication of a cronyist economy rather than a capitalist economy. Of being Argentina rather than Hong Kong.

If you’re not already sufficiently depressed, my colleague Chris Edwards has a very good description of the lawmaking process. You should read the whole thing, but here are a few excerpts as a teaser.

In a romantic view of democracy, legislators act with the interests of the general public in mind. They grapple with policy issues, work toward a broad consensus, and pass legislation that has strong support. To ensure that funds are spent wisely, they frequently reevaluate existing programs and prune the low-value and harmful ones. They put citizens first and carefully limit their actions to those allowable under the U.S. Constitution. The problem with this “public interest theory of government” is that it has little real-world explanatory power. …we can better understand congressional actions by looking at incentives.

And when you look at how the process really works, you learn it is dominated by “rent seeking,” which is academic jargon for interest groups obtaining undeserved benefits via government coercion.

Members…seek federal benefits for their states because most of the costs will fall on other states. This is a major factor causing federal failure. The structure of Congress leads members to support programs that benefit their states but that are losers for the nation as a whole. …There is no built-in check—no invisible hand, as in markets—to guide members to make value-added decisions… Special-interest groups dominate policy discussions. Most witnesses to congressional hearings favor the programs being examined, and they focus on program benefits, not the costs. Most visitors to member offices on Capitol Hill are there to plead for special benefits. …Washington is teaming with lobbyists seeking special benefits—subsidies, regulations, trade protections—that come at the expense of the general public. …rent seeking is a two-way street. Jonathan Rauch of Brookings noted, “In the public’s mind, the standard model of lobbying in Washington involves special interests buying influence, in a sort of legalized bribery. In fact, the process more often involves politicians shaking down special interests.”

If you’ve read this far, you probably want to go take a shower and wash away the stench of Washington corruption.

But there’s one tiny glimmer of hope. If we can somehow figure out how to shrink the size and scope of government, we can reduce the problem. That’s the message of this video.

While we know the solution, our real challenge is that we can only shrink government by convincing politicians to change policy. Yet asking politicians to reduce government is like asking burglars to be in favor of armed homeowners.

And based on everything I wrote above, we know politicians generally have bad incentives.

But it’s not hopeless. While I certainly enjoy mocking politicians, they’re not totally immoral or even amoral people. Many of them do understand there’s a problem. Indeed, I would argue that recent votes for entitlement reform are an example of genuine patriotism – i.e., doing the right thing for the country.

So is there a potential solution?

Maybe. Let’s use an analogy from Greek mythology. Many politicians generally can’t resist the siren song of a go-along-to-get-along approach. But like Ulysses facing temptation from sirens, they recognize that this is a recipe for a bad outcome. So they realize that some sort of self-imposed constraint is desirable. And that’s why I’m somewhat hopeful that we can get them to impose binding spending caps.

We know there are successful reforms by looking at the evidence. And we know there is growing support from fiscal experts. And we even see that normally left-leaning international bureaucracies such as the OECD and IMF acknowledge that spending caps are the only effective fiscal rule.

So if Ulysses can bind himself to the mast and resist the sirens, perhaps we can convince politicians to tie their own hands with a Swiss-style spending cap.

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In the past, I’ve identified the world’s most misleading headlines and I’ve also identified the world’s least surprising headline.

Today, I’m going to share the world’s most disappointing headline.

When I first saw this story in USA Today, I thought it was time to celebrate.

Wow, I thought, what a great outcome. I’ve always wanted a restoration of federalism, but I never thought this is how it would occur.

So I decided to read the story to find out what’s causing DC’s well-deserved disappearance.

Alas, none of those reasons apply for the simple reason that the headline is an absurd exaggeration.

I hate to burst anyone’s bubble, but Washington isn’t really going away. Here’s what’s actually in the story.

…new research from the U.S. Geological Surveyand the University of Vermont shows that the land in the district — where the Lincoln Memorial was built on silt dredged from the Potomac River — is expected to fall 6 inches or more during the next 100 years.

Sigh, how disappointing.

In other words, we’re going to have to rely on old-fashioned methods if we really want to cut Washington down to size. Since it’s not going to disappear on its own, we’ll need tax reform, deregulation, and program terminations if we want to solve the problem.

And one fringe benefit of this approach, as pointed out by the Wall Street Journal, is that a smaller government means fewer lobbyists and special interest groups.

Businesses have no choice but to lobby a government that can cripple them with a single new regulation. …The real problem is the opportunities for corruption and special dealing that a too-large government provides. Every new regulation or twist of the tax code is an opening for some powerful Member to assist the powerful. But the solution is to reduce the size and scope of the regulatory state and to reform the tax code.

Amen. I’ve been arguing for years that big government means big corruption. I even narrated a video making that point.

But I think I said it best in this CNBC interview when I equated big government to a dumpster in an alley.

So we may not be able to sink Washington, but we can make it less of an unseemly nuisance by reducing the size and scope of the federal government.

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

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

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

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

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

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

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

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

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

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

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

That’s sort of like having productive pickpockets.

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

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

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

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

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

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

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

By and large, this sounds good.

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

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

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

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

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

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

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

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

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

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