Topic: Tax and Budget Policy

K for Korruption

The Washington Post has been running a series on its website (Citizen K Street) on the life of Gerald Cassidy, the preeminent entrepreneur of federal budget earmarking since the 1970s. Here are a few thoughts:

- Cassidy is a liberal Democrat, but a much more important aspect of his character seems to be his insatiable quest for money, money, money.

- Rather than adding to the nation’s gross domestic product, Cassidy earned his fortune of about $125 million as the middleman in the forced transfer of wealth from taxpayers to state and local recipient groups willing to play the Washington game.  

- Annual revenues of registered lobbyists in Washington have increased from $100 million in 1975 to $2.5 billion by 2006.

- The word “conservative” doesn’t have any meaning when it comes to big government spending. The Post describes former Rep. Jamie Whitten as a “conservative Mississippi Democrat,” yet Whitten was a famous pork barrel spender. The Post story also captures a smiling Tom Delay and Roy Blunt–supposedly staunch Republican conservatives– at a party in honor of Cassidy and Associates’ 30-year record of lobbying for pork.   

- Cassidy pioneered earmarking for universities and other state and local institutions. His firm provides a very high return on investment for his clients. One client paid Cassidy $1.3 million in fees and was rewarded with a $29 million taxpayer-funded earmark. Another client paid Cassidy $15 million and received $106 million in earmarks. And in another case, a client paid Cassidy $1.2 million and received a $15 million earmark.

- Washington tends to attract sharp, aggressive, amibitious people like Cassidy, who want to become rich, and don’t seem to care about limited government, constitutional government, good government, or the broad public interest. 

- When you combine democracy with the tremendous entrepreneurial abilities of folks like Cassidy, and some of the members of Congress he serves, the result is a federal government that will spend about $3 trillion this year.   

Europe’s Insane Agriculture Subsidies

American politicians have created a wretched system of agricultural subsidies, but it seems that Europe’s lawmakers win the prize for concocting the most perverse ways to squander tax money. The Times reports that there is now a secondary market in buying and selling agricultural subsidy entitlements:

City dwellers are making huge profits out of an EU loophole that allows people who have never set foot on a farm to claim European farm subsidies. …Auctioneers and brokers who used to sell cattle and farm-land are now focusing their attention on selling the rights to receive European taxpayers’ money — known as entitlement trading — in what one described as a “ferocious” market with the rights to subsidies “flying off the shelf”. …Open auctions are being held — with one in Aberdeen due next Friday — while investors are also buying the rights to subsidies over the telephone, through brokers, through internet auction sites and inter-active trading. …Under EU regulations, only someone classified as a farmer can buy the right to receive subsidies, but to be classified officially as a farmer, people need only hold a lease on a minimum of 1.7 acres for ten months of the year, and never need to visit it. Scottish landowners are now leasing out vast tracts of rocky highland for as little as £5 an acre a year, so that investors can claim to be farmers. For each acre you lease, you can buy annual subsidies averaging £100 an acre, but which can rise to over £1,000 an acre.

A newspaper in Scotland, meanwhile, reports that one dairy farmer has figured out how to scam the system for about $2 million per year - most of which is received as a subsidy for milk that does not exist:

A Scottish dairy farmer has exploited a glaring loophole in European law to annually earn the right to claim more than £1million in subsidies. William Hamilton and Sons, of Meldrum Farm, Blairdrummond, Stirling, has taken advantage of a flaw that allows it to get handouts on almost nine times the amount of milk it produces. Under EU law, the business will continue to qualify for the lottery-size payment annually until 2012 - even if it stops producing milk.

British Taxpayers Pay to Give Self-Esteem Massages to Welfare Recipients

In the global contest to waste taxpayer money, the U.K. has a very strong entry. According to the Times, people who already receive handouts are now getting taxpayer-financed shopping sprees, beauty treatments, and other goodies to supposedly build their confidence. Not surprisingly, European Union funds also are subsidizing this boondoggle, so at least British taxpayers can take comfort from the fact that some of the cost is shifted to people in other parts of Europe:

The government is paying for unemployed single parents to have massages, beauty treatments and shopping sprees to “boost their confidence” and encourage them to attend job centre appointments. The treats, part of a programme named Big Brother…, include £30 to spend on a day out, as well as lunch and childcare. …A brochure describes it as a “free two-week scheme that will boost your self-esteem and supercharge your confidence”. Organisers said it would be “nice” if participants found work, but this was not vital. …A man from Whitley Bay, Tyne and Wear, whose teenage daughter works at a salon involved in the scheme, said: “She was baffled when she was told these women were getting treatment for nothing. They had their make-up done, they had facials, they had their nails filed and some even had their ears pierced. “My daughter doesn’t get a penny from the government and will earn less than these single mothers get in benefits. What message does this send out?” …Martin Callanan, a Conservative MEP for the North East, said: “There are lots of other parents, not to mention pensioners, who would like the state to pay for their pampering. It is suspicious that they are unable to tell us how much this is costing taxpayers.”

Is This a Log Cabin?

Photo from Washington PostBelmont College guard Andrew House complained that the NCAA assigned his team to this hotel, the historic Brookstown Inn in Winston-Salem, N.C. He objected to the old, 19-inch television sets in the room and said that the hotel felt more like a log cabin.

Isn’t it great to live in a world so rich that a 20-year-old college student thinks a beautiful, historic four-story hotel is like a log cabin? Next year, no doubt, players will complain about being assigned to hotels with old Ethernet connections that you actually have to plug your laptop computer into, like pioneer times.

In Search of the Libertarian Democrat

Virginia Postrel writes today of the importance of empiricism to advancing liberty. She also mentions the possibility of persuading Democrats to become more sympathetic to the struggle for limited government.

I decided to assess the likelihood of a liberal-libertarian coalition empirically by looking at Democratic replies to questions about government spending. How open are Democrats to limiting government? These responses came from the 2004 pre-election survey conducted by American National Election Studies.

ANES posed the following choice: “Some people think the government should provide fewer services even in areas such as health and education in order to reduce spending. Suppose these people are at one end of a scale, at point 1. Other people feel it is important for the government to provide many more services even if it means an increase in spending. Suppose these people are at the other end, at point 7.” People could also choose 2 through 6, 4 being the median choice.

About 9 percent of Democrats responded on the low or limited government end of the scale. 70 percent of Democrats responded 5 or more; almost one in four answered 7 to the question, the response farthest from the limited government answer. Not much evidence of a desire for limited government.

ANES also asked: “Some people feel the government in Washington should see to it that every person has a job and a good standard of living. Suppose these people are at one end of a scale, at point 1. Others think the government should just let each person get ahead on their own. Suppose these people are at the other end, at point 7. And, of course, some other people have opinions somewhere in between, at points 2, 3, 4, 5, or 6.” In other words, the lower your score, the more you favor a nanny state.

Slightly less than half the Democrats gave a 1 to 3 response to the question. One in five Democrats gave the most extreme response favoring a nanny state. Three out of four Democrats gave a median response or higher.

ANES also asked about whether spending should be increased in various ways. Here are the percentages of Democratic respondents who favored increased spending on:

Aid to the poor 73.9%

Social Security 72.1%

Public Schools 87.3%

Science and Technology 57.3%

Dealing with Crime 68.4%

Child care 72.4%

Border security, illegal immigration  57.3%

In a few cases, a majority of Democrats did not favor increased spending. Here are the percentages of Democrats who favored increased spending on:

Highways 35.9%

Welfare programs 28.7%

War on terrorism 38.3%

Foreign aid 14.1%

However, on each of these issues, the percentage of Democrats who favored either increasing spending or keeping it the same was

Highways 90%

Welfare programs 75%

War on terrorism 71.7%

Foreign Aid 60.1%

No Democratic majority could be found that favored decreasing spending on any issue broached by the ANES survey.

Postrel notes, “a liberal-libertarian coalition may sound crazy when you look at the Democratic Congress, the 2008 presidential field, or the Democrats’ reflexive demonization of pharmaceutical companies.” But this data makes it clear that the Congress and the presidential candidates reflect the attitudes of Democrats more generally.

Crazy is not the correct word for the liberal-libertarian gambit. It is not like believing the Cato Institute building is made of cheese. But a political coalition requires some agreement in basic outlook about what government should do (or not do).

To believe in the liberal-libertarian proposal, you have to believe that huge, unprecedented numbers of Democrats are going to change their minds about increasing government spending or that libertarians are going to stop caring about increases in government spending.

I am sure the former will not happen.

Euphemisms for Theft

English is a rich language. One reason is that we don’t have an equivalent of l’Academie Française, which tries (and fails) to prevent loan words, neologisms, and deviations from prior rules of grammar. 

Another reason is that political processes keep generating euphemisms designed to disguise horrid behavior. (“Did I say death camps? I meant happy camps.”) 

To honor that tradition, I offer this list of euphemisms for theft:

Email me mcannon [at] cato [dot] org (here) with additional candidates.

The Emergency Du Jour

True to form, Congress has added some non-defense items to the current “emergency” supplemental spending bill that was proposed mainly as a way to fund the troop surge in Iraq.  Among my favorites (as reported in this chart – subscription required – in today’s Congressional Quarterly):

* $1.8 billion in crop subsidies

* $283 million in price supports for milk producers

* $74 million for “peanut storage” subsidies

* $25 million in aid to spinach growers who lost money during the 2006 contamination scare