Archives: 05/2008

Fannie Mae’s Rent-Seeking Empire Expands

Jeffrey Birnbaum, who covers lobbyists for the Washington Post, reports:

Lorraine A. Voles, until recently communications director for the congressional office of Sen. Hillary Rodham Clinton (D-N.Y.), has joined Fannie Mae as a senior vice president.The move is a reunion of sorts. Voles, who was communications director to Al Gore when he was vice president, worked previously at the public relations firm Porter Novelli. There, her boss was Charles V. Greener, who is now Voles’s boss at Fannie Mae.Greener had been the mortgage finance giant’s senior vice president in charge of communications and is now chief of staff to Fannie Mae chief executive Daniel H. Mudd. Voles is taking his old job. Before he joined Porter Novelli, Greener was a spokesman for the Republican National Committee.

That’s right: A former mouthpiece for Clinton and Gore is working quite happily for a former GOP spokesman – for a second time. Only in Washington.

One big happy family here in the Imperial City. Those who are paid to fight the red-blue wars, fight. Those who are paid to lobby both sides against the taxpayers, lobby. And as the McCain campaign is demonstrating, the most effective players can switch roles on a moment’s notice.

It’s relevant to note that Ms. Voles and Mr. Greener are now working for Fannie Mae, one of the most skilled rent-seekers in Washington and a pioneer in hiring top players from both parties. As a Cato study noted a few years ago, “The special governmental links that apply to Fannie Mae and Freddie Mac yield little that is socially beneficial, while creating significant potential social costs.” And as an earlier Cato study (by financial analyst Vern McKinley, now a candidate for Congress) noted, “Fannie Mae and Freddie Mac preserve their privileged status through a multi-million-dollar lobbying effort that includes massive ‘soft money’ campaign contributions and the payment of exorbitant salaries to politically connected executives and lobbyists.” Ten years later, that’s still the bottom line.

No Majority Yet

The banner headline across the top of this morning’s Washington Post is

Obama Takes Delegate Majority

But that isn’t true. As the story itself (and the online headline) correctly said, Sen. Barack Obama is now “claiming a majority of the pledged delegates at stake.” His campaign is doing a great job of getting the media to declare that a “milestone” and a “major victory.” But in fact it tells us nothing we didn’t know already: Obama is ahead of Sen. Hillary Clinton in the race, and it seems impossible for Clinton to catch up. But “a majority of the pledged delegates” is virtually meaningless. There are several kinds of delegates that make up the convention, and you have to get a majority of all the delegates. “A majority of the pledged delegates” is no more relevant than Obama claiming “a majority of the delegates from coastal states” or Clinton claiming “a majority of the white delegates.” (I don’t actually know if either candidate has those majorities.) When Obama produces a list of 2025 delegates pledged to vote for him, it will be time for the Post to drag today’s headline out again.

Nothing to see here, folks. Move along. Just a little campaign bombast.

Give the People What They Want

The latest Rasmussen national survey “found that 62% of voters would prefer fewer government services with lower taxes. Nearly a third (29%) disagrees and would rather have a bigger government with higher taxes. Ten percent (10%) are not sure.”

No doubt that if Downsizing the Federal Government were on college reading lists, support for reform would jump from 62% to at least 90%.

Still, no matter how well-informed the public becomes, Congress poses a barrier to reform. The magic of Congress is its ability to consistently transmogrify the long-standing public preference for smaller government into ever larger budgets. Part of the trick is that members always claim that they support budget restraint in general, while arguing at the same time that each particular program, when it is up for a vote, desperately needs to be expanded.

How then can we realign congressional procedures to better reflect the 62 percent support for government downsizing? Part of the answer is to impose a cap on growth in the overall federal budget, allowing it to grow no more than the average family budget each year.

In Mexico, It’s a War

“The war on drugs has never seemed less like a metaphor” claims The Economist this week, referring to Mexico’s drug violence. The British newspaper is right. Just yesterday, there were 34 drug-related executions in that country. So far this year, there have been 1.356 similar killings in Mexico.

Cato’s Ted Galen Carpenter wrote a few years ago that Mexico risked becoming the next Colombia. It’s seems we’re already there.

Obama, McCain Swap Places on Trade with Cuba

During their time in the Senate, John McCain has voted in a free-trade direction on 88 percent of major votes affecting barriers to trade, Barack Obama only 36 percent of the time. But on trade with the pathetic, socialist island of Cuba, the two presumptive presidential nominees swap places.

In a speech yesterday, McCain accused Obama of changing his position on the U.S. government’s almost 50-year-old embargo against Cuba. “Now Senator Obama has shifted positions and says he only favors easing the embargo, not lifting,” Mr. McCain said, according to a story in this morning’s New York Times. “He also wants to sit down unconditionally for a presidential meeting with Raúl Castro. These steps would send the worst possible signal to Cuba’s dictators—there is no need to undertake fundamental reforms, they can simply wait for a unilateral change in U.S. policy.”

Cuba is one of the few trade-related issues where Democrats generally come down on the right side and Republicans on the wrong side, and the two presidential front-runners are true to type.

According to the Cato Institute’s “Free Trade, Free Markets” web feature that tracks congressional votes on trade, Sen. McCain voted in 2003 against ending the ban on Americans traveling to Cuba. In 2005, Sen. Obama voted to defund enforcement of the ban. In their public statements, McCain has supported the comprehensive embargo in place since 1960, while Obama has questioned its usefulness.

The politics behind the embargo are quite straightforward. Florida is a swing state that is home to half a million politically active Cubans who rightly detest the communist regime in Havana. Many of them wrongly see the embargo as a test of America’s resolve to bring an end to the regime. But the embargo’s lack of substance is also equally straightforward. After almost half a century, the embargo has failed to prompt the Cuban government to undertake anything remotely resembling “fundamental reforms.” It has made the Cuban people a bit poorer, while not making them one bit freer.

For a comprehensive argument against the embargo, check out the text of a speech I gave in 2005 at the James A. Baker III Institute at Rice University in Houston. The only thing I would consider changing is the title, which was, “Four Decades of Failure: The U.S. Embargo against Cuba.” My new title would be, “Almost Five Decades of Failure.”

Last Minute Farm Bill Earmarks

The wildly popular, bipartisan farm bill is cruising toward becoming law this week after the likely road bump of President Bush’s veto pen. It passed the House and Senate by veto-proof margins last week. Congressional enthusiasm for the farm bill helps to explain the 18 percent approval rating of Congress in a recent Gallup poll.

Taxpayers aren’t likely to be impressed by a $500 million giveaway for a timber company and other wasteful earmarks in the bill. The official list of earmarks total $934.5 million (not including the $500 million timber tax break or six earmarks authorized without specific funding levels). The earmarks were air-dropped into the bill’s conference report, after legislators spent years — and held countless hearings — crafting it.

Fourteen senators (nine Democrats and five Republicans) and one House Democrat inserted 26 earmarks, according to the conference report. Three earmarks appear to be multi-member earmarks. [Here’s the PDF of the earmarks.]

The earmarks represent only one-third of one percent of the bill’s expected cost ($289 billion). Legislators will soon issue laudatory press releases patting themselves on the back for rewarding their districts and deflecting criticism by pointing out the “low” cost of earmarks. That’s not the point. The sneaky way the earmarks were inserted and the inefficiency of the federal government doling out money for local projects (also an affront to federalism) helps explain why the public has lost faith in Congress.

Earmark critics also point to several provisions in the farm bill not disclosed as earmarks. The Associated Press briefly described these giveaways to favored companies and industries.

Perhaps most egregious is a vague provision inserted by Baucus which would authorize $500 million in tax-credit bonds to purchase 400,000 acres of land (mostly in Montana). Although not mentioned in the bill, there’s only one company that would qualify for this stealth earmark: the Plum Creek Timber Co., which is the largest private landowner in the United States.

Plum Creek’s in-house lobbying operation spent $1.1 million on lobbying from 2005 to 2007, according to Congressional lobbying records rounded to the nearest $20,000. The company spent $140,000 in the first quarter of 2008, the most recent period records are available.

Plum Creek also hired the lobbying firm Nutter & Harris to lobby Congress for the provision and other issues from 2006 to 2008. Firm principal Robert L. Harris, a former Senate staffer, handled the Plum Creek account. Plum Creek paid the firm $300,000 ($120,000 in 2006 and 2007 and $60,000 in the first quarter of 2008).

In the 2006 cycle, Baucus received $9,000 from Plum Creek’s PAC (the Plum Creek Timber Good Government Fund), run by Robert Jirsa, the company’s in-house lobbyist. The PAC gave Baucus $1,000 in the 2004 cycle and $5,000 in the 2002 cycle. It has doled out $511,266 since 1998 to parties and candidates, according to the Center for Responsive Politics. The PAC favored Republican federal candidates until they lost the majority in 2006. Their 2008 cycle donations favor Democrats (60 percent to 40 percent).

All told, that’s roughly a $2 million investment over nearly ten years ($1.4 million in lobbying and $500,000 in PAC contributions) for a windfall tax break of $500 million.

House Republican Leader John Boehner criticized the earmarks in the farm bill, but his warning proved insufficient to stop most Republicans from voting for the bloated bill. It’s a victory for bipartisan, logrolling politics as usual. It’s a defeat for conservative Republicans who tried to convince leadership and rank-and-file members to take a stand on the farm bill as part of an effort to return to conservative fiscal principles after years of out-of-control spending and earmark scandals.

To read previous posts on the farm bill by Sallie James, Cato’s expert on the topic, click here.

The “Fundamental” Problem

Goldwater Institute VP Matt Ladner offered his thoughts today on an exchange between the Ed Sector’s Kevin Carey and myself. In the process of defending Cato, Matt suggested that: “The Cato Institute can be accused of being fundamentally opposed to public schooling. I’d guess that they would happily plead guilty to that….”

As I explained in my reply to Kevin, Cato doesn’t take positions, only its scholars do. So, am I “fundamentally opposed to public schooling” as Matt imagines? No.

I’m not fundamentally opposed to, or in favor of, any policy. I do my best to rationally derive policy recommendations by examining the best and broadest possible array of relevant evidence. That means studying school systems from ancient times to the present, from all over the world, and determining if some systems consistently work well or poorly regardless of variations in cultural and economic circumstances. I recommend a free market approach to education, coupled with need based financial assistance to ensure universal access, because that is the pattern that emerges from the evidence. 

Policy scholars who find these conclusions inconsistent with their beliefs might wish to familiarize themselves with the historical and international evidence so that they can form conclusions of their own and offer informed commentary on mine. I’m sure we would all benefit from that process, as would American children.