• Tag Archives corruption
  • Michael Cohen, Tony Podesta, and the Nauseating Corruption Enabled by Big Government

    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 gives 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.”

    Reprinted from International Liberty.

    Daniel J. Mitchell

    Daniel J. Mitchell is a Washington-based economist who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

    This article was originally published on FEE.org. Read the original article.

  • You Can’t Regulate Away Crony Capitalism

    In a time of political polarization, it can be reassuring when the left and the right agree on an issue. One such area of consensus is the recognition of crony capitalism where big business and government work together for their own interests through systems of reciprocal favors.

    The Taxi Industry Is a Prime Example of Crony Capitalism

    An example of crony capitalism can be seen in the conflict between rideshare companies, like Uber and Lyft, and the taxi industry. Because Uber poses a competitive threat to the taxi business, the taxi industry has pushed hard to ban Uber from cities across the country by lobbying local governments with varying degrees of success.

    The taxi industry has enjoyed a monopoly for a long time thanks to their close relationship with government. By creating occupational licenses and charging what is often several hundred thousand dollars for a medallion, the taxi industry posed massive barriers to entry on their competition. Now, this government-sanctioned monopoly is facing an inevitable dissolution because of the innovation of ridesharing companies.

    Although both sides of the political spectrum may agree that relationships like the one between the taxi industry and local governments are a problem, they often disagree on the solution.

    The Solution of Increased Regulation Is No Solution at All

    The solution usually proposed by the left is to give the government more power to regulate business. The theory is that if we can increase the scope of the government, then government can clamp down on big business. But although this may sound good initially, it ignores the incentives created by government regulations.

    When government has more power to regulate business, businesses will respond by shifting more of their resources towards influencing the government to intervene in their favor. Businesses are incentivized to twist the law to their own advantage. Put simply, when the government has the power to control businesses, businesses will end up controlling the government.

    Increasing the scope of government over business accelerates the problem of crony capitalism in a cyclical manner which resembles a positive feedback loop. The government is given more power to regulate business, so businesses shift more resources towards gaining advantages using government power, and on and on it goes. Although many people who want the government to regulate business may have good intentions, in reality, this proposal ends up contributing to the very problem it seeks to solve.

    Another costly effect of regulations is that they disproportionately harm small businesses. Bigger businesses often have the resources to deal with costs from regulations (or to twist regulations to their own advantage), but small businesses frequently do not. Regulations impose costs on businesses in the forms of both time and money, neither of which small businesses can afford to re-allocate if they want to remain competitive in their market.

    Zero-Sum, Rent-Seeking Behavior

    Regulations, then, decrease competition and shift the market towards monopoly in two ways. Not only do they incentivize companies to use government power to their own advantage and to the detriment of competitors, but regulations also bury small businesses in compliance costs.

    Government regulations lead to what economists call “rent-seeking.” Rent-seeking, in this case, is when businesses divert their resources towards capturing a bigger portion of the existing wealth in a market instead of using their resources to create new wealth.

    One of the defining characteristics of a free market is that it allows for the creation of wealth instead of merely the spread of existing wealth. In a free market, people can trade resources in a way that is mutually beneficial and produces a net gain for each party. But the introduction of government force into the equation shifts things towards a zero-sum game where one party benefits at the expense of another.

    Government force in the form of regulations incentivizes this zero-sum, rent-seeking behavior. What this then leads to in a market is inefficiency, corruption, and less competition.

    Economist Frederic Bastiat may have summed it up best when he said, “As long as it is admitted that the law may be diverted from its true purpose—that it may violate property instead of protecting it—then everyone will want to participate in making the law, either to protect himself against plunder or to use it for plunder.”

    The solution to crony capitalism that logically follows from all of this is quite simple. The solution is to decrease and limit the scope of government power. The less power the government has to regulate businesses, the less incentive businesses have to get in bed with the government. If government intervention is decreased and limited to only what is absolutely necessary, we will see the problem of crony capitalism radically diminish in both frequency and severity.

    Proposals for government regulations are a classic case of why policies must be based on more than merely good intentions. If one wants to evaluate a proposed policy, one of the best ways to do so is to consider the incentives that it will produce and the effects those incentives will have. Government regulations are a case where, although unintended, the results are very often negative.

    Sam Dugan

    Sam Dugan is a fourth-year undergraduate student at West Chester University of PA, studying economics and philosophy.

    This article was originally published on FEE.org. Read the original article.

  • Government Run Amok at the Bureau of Alcohol, Tobacco, and Firearms


    The Bureau of Alcohol, Tobacco, and Firearms (BATF) must be anxious to get on my list of government bureaucracies that shouldn’t exist.

    The bureaucrats have engaged in some really silly and petty behavior (such as confiscating Airsoft toy guns because they might be machine guns), and they’ve engaged in some behavior that is criminally stupid and dangerous (running guns to Mexican drug gangs as part of the “Fast and Furious” fiasco).

    If It’s Not One Thing, It’s Another

    Now we have another example. Though it’s so bizarre that I’m not sure how to classify it. Basically, the bureaucrats created an illegal slush fund, and then used the money illegally.

    The New York Times has been on top of this story. Here are excerpts from the latest report.

    For seven years, agents at the Bureau of Alcohol, Tobacco, Firearms and Explosives followed an unwritten policy: If you needed to buy something for one of your cases, do not bother asking Washington. Talk to agents in Bristol, Va., who controlled a multimillion-dollar account unrestricted by Congress or the bureaucracy. …thousands of pages of newly unsealed records reveal a widespread scheme — a highly unorthodox merger of an undercover law enforcement operation and a legitimate business. What began as a way to catch black-market cigarette dealers quickly transformed into a nearly untraceable A.T.F. slush fund that agents from around the country could tap. …One agent steered hundreds of thousands of dollars in real estate, electronics and money to his church and his children’s sports teams, records show. …At least tens of millions of dollars moved through the account before it was shut down in 2013, but no one can say for sure how much. The government never tracked it.

    Oh, by the way, the BATF was breaking the law.

    Federal law prohibits mixing government and private money. The A.T.F. now acknowledges it can point to no legal justification for the scheme.

    But you won’t be surprised to learn that there have been no consequences.

    …no one was ever prosecuted, Congress was only recently notified, and the Justice Department tried for years to keep the records secret.

    And it’s also worth noting that this is also a tax issue. As I’ve noted before, high tax rates encourage illegality.

    Though cigarettes are available at any corner store, they are extraordinarily profitable to smuggle. That’s because taxes are high and every state sets its own rates. Virginia charges $3 per carton. New York charges $43.50. The simplest scheme — buying cigarettes in Virginia and selling them tax-free in New York — can generate tens of thousands of dollars in illicit cash. By some estimates, more than half of New York’s cigarettes come from the black market.

    By the way, I can’t help but wonder why the federal government is engaging in all sorts of dodgy behavior to help enforce bad state tax laws. Yes, I realize the cigarettes are crossing state lines, but so what? The illegal (but not immoral) behavior occurs when an untaxed cigarette is sold inside the borders of, say, New York. Why should Washington get involved?

    In other words, I like the fact that borders limit the power of government. It’s why I don’t like global schemes to undermine tax competition (why should Swiss banks be required to enforce bad U.S. tax law?), and it’s why I don’t like the so-called Marketplace Fairness Act (why should merchants in one state be required to enforce the sales taxes of other states?).

    But I’m digressing.

    Let’s get back to the Bureau’s misbehavior. Here’s some additional reporting from the U.K.-based Times.

    A US government crime-fighting agency ran a secret bank account that its employees used to buy luxury cars, property and trips to casinos. Officers for the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), charged with investigating smuggling and gun crimes, built up a slush fund worth tens of millions of dollars through illicit cigarette sales, ostensibly as part of an operation to catch traffickers. The scandal is the latest controversy to hit the agency, which has been criticised in recent years for lack of accountability and allowing the flow of guns and drugs to go unchecked. …Cash from the slush fund generated at an ATF field office in Bristol, Virginia, …funded activities such as a trip to Las Vegas, donations to agents’ children and the booking of a $21,000 suite at a Nascar race.

    But That’s Not All

    And what about the overall BATF bureaucracy? Well, it’s getting some unfavorable attention. Keep in mind that this scandal is on top of the “Fast and Furious” scandal of the Obama years.

    The ATF has said that it has “implemented substantial enhancements to its policies, and has markedly improved leadership, training, communication, accountability and operational oversight”. Under the previous administration, it was widely derided for a botched weapons operation known as “Fast and Furious”. The agency allowed licensed firearms dealers to sell weapons to illegal buyers, hoping to track the guns to Mexican drug cartel kingpins. But out of the 2,000 firearms sold, only a fraction have been traced. The secret account scandal has renewed calls from across the political spectrum for the department of about 2,000 agents to be reformed or shut down.

    Last but not least, I think we have a new member of the Bureaucrat Hall of Fame.

    Thomas Lesnak, a senior ATF investigator, began the scheme. …Mr Lesnak retired with his pension and was not reprimanded.

    Just like Lois Lerner and the IRS, engaging in corrupt and crooked behavior and then escaping any punishment.

    Maybe the two of them should hook up? They’d make a great couple. I’m sure they could even figure out a way to make taxpayers finance their wedding and honeymoon.

    P.S. The “Fast and Furious” scheme was just one of the scandals that occurred during the Obama years, but it may have been the most foolish. Didn’t anybody at the BATF realize that it wasn’t a good idea to funnel weapons to Mexican drug gangs?!?

    P.P.S. The silver lining to that dark cloud is that we got a couple of good one-liners about the Obama Administration’s gun-running scandal from Jay Leno and Jimmy Fallon.

    Reprinted from Intentional Liberty

    Daniel J. Mitchell

    Daniel J. Mitchell is a Washington-based economist who specializes in fiscal policy, particularly tax reform, international tax competition, and the economic burden of government spending. He also serves on the editorial board of the Cayman Financial Review.

    This article was originally published on FEE.org. Read the original article.