Cato At Liberty

Danny Hakim of the New York Times tells us how state government works under Andrew Cuomo, in an in-depth investigation of the Empire State Development Corporation:

New York State’s economic development agency created a new position last June, and then found a candidate to fill it: a young man named Willard Younger, who had just graduated from Colgate University with a degree in classics and religion. He became a special projects associate, at a salary of $45,000 a year, according to state personnel records.

His father, Stephen P. Younger, is a lawyer and power broker in legal circles who was a member of one of Gov. Andrew M. Cuomo’s transition teams. He has also donated $26,000 to Mr. Cuomo’s campaigns over the years, disclosure records show.

The next month, the agency hired 23-year-old Andrew Moelis, a University of Pennsylvania graduate, for another new position, strategic planning associate, at a salary of $75,000 a year.

Shortly before Mr. Moelis’s first day of work, his father, Ron Moelis, a prominent real estate developer, gave $25,000 to Mr. Cuomo’s re-election campaign, according to the records.

Check out the return on investment available to political donations: give $25,000, get $75,000 within a year. I wonder if any of Mr. Moelis’s real estate developments offered such an ROI. As I wrote many years ago in the Wall Street Journal:

Business people know that you have to invest to make money. Businesses invest in factories, labor, research and development, marketing, and all the other processes that bring goods to consumers and, they hope, lead to profits. They also invest in political processes that may yield profits.

If more money can be made by investing in Washington than by drilling another oil well, money will be spent there….

Every dollar spent by the federal government ends up in someone’s pocket as a salary, a transfer payment, a subsidy, a purchase or a loan. But there are other valuable services available, too: regulations that eliminate or hamstring your competitors, for instance, or a tax provision that induces consumers to purchase your product.

But “jobs for the boys” can also be a way to reward political supporters. And if it’s a job for your own boy, so much the better.

Agencies like this can also be very helpful to a politician with larger ambitions:

Empire State has also hired friends of Mr. Cuomo who may help form his political brain trust should he decide to run for president in 2016.

James P. Rubin, a former State Department spokesman, was hired at the agency in 2011 as counselor on competitiveness and international affairs, with a salary of $150,000 a year. Mr. Rubin’s appointment was seen by political consultants as a move by Mr. Cuomo to add a foreign policy hand to his stable.

Empire State hired 49 people in the first 20 months of the Cuomo administration, according to personnel records obtained by The Times. Nearly a third were the governor’s political associates, donors and friends, or their relatives, the records and interviews show.

At least seven of the new hires with connections were placed in newly created positions.

We hear a lot about austerity in government today. We hear that “state and local government coffers [are] empty.” We hear that spending has been “cut to the bone.” I’d say that the Empire State Development Corporation would be a good place to save the New York taxpayers $741.8 million this year.

David Brooks has a piece in the New York Times this morning that’s worth reading, “Health Chaos Ahead,” even if it misses a crucial aspect of its subject. Obamacare is off to a rough start, he argues, and it’s only going to get worse. He says he’s talked to a bipartisan group of health care experts, and even some of the law’s supporters “think the whole situation is a complete disaster”—many predicting that it will collapse. Yet “a clear majority,” he adds, including some of the law’s opponents, believe that after a few years of messiness we’ll all settle down to a new normal.

That’s hard to believe, given the “cascades” of problems Brooks goes on to discuss: structural, technical, cost, adverse selection, and provider concentration cascades. That last one is especially noteworthy because, as Brooks says, “the law further incentivizes a trend under way: the consolidation of hospitals, doctors’ practices and other providers.”

That it does. So why does Brooks himself seem to believe that the system will survive? It’s because, even if the law’s unpopularity costs President Obama and the Democrats control of the Senate in 2014, the giant insurance companies and health care corporations spawned by Obamacare will come to the fore to defend it. “Having spent billions of dollars adapting to the new system, they are not going to want to see it repealed or replaced.”

He’s doubtless right about that, but it’s not simply because they want to preserve their “sunk costs” in the new system that these “rent seekers,” as economists call them, are and will continue to be the system’s biggest defenders. These are the same institutions, after all, that were onboard with Obamacare from the start. And they were onboard because, working hand-in-hand with government, they sought to gain advantages over smaller competitors that invariably find it difficult and often impossible to compete in so highly regulated a market as we have here.

Call it “crony capitalism,” yet it’s not capitalism at all. Labeled most charitably, it’s cartelism. But the root of the problem is not with the corporate importunings of Congress. It’s with congressional acquiescence. They’re the people who take an oath to uphold our Constitution for limited government. I’ve always thought that the snake, in the Garden of Eden, got a bum rap. Yes, he was tempting Eve, but she could have just said “no.” Maybe the 114^th Congress will have enough members, viewing the health care disaster unfolding before them, who will just say “no.” Then we might start returning to real capitalism.

In the 19th Century, when railroads were being built across the West, the federal government granted significant land and benefits to the railroad companies. The Great Railroad Right-of-Way Act of 1875 allowed the government to give railroad companies easements to build tracks — that is, a right to use sections of another’s property without legally owning it. The Brandt family eventually acquired land in Wyoming that came with pre-existing railroad easements.

In 2001, the owner of the easement formally abandoned all claims to it, presumably returning the property to the Brandts. But the government wanted that land. In 2006, it sued for title to the former easement land on the theory that the government retained a residual claim to it after the railroad abandoned it. The Brandts argue that the government has no such right and that taking their land requires just compensation under the Fifth Amendment’s Takings Clause.

Although this may seem like a small, unique problem, the scope of the Old West’s railway system was huge and those old easements criss-cross the land of thousands of property owners. In 1983, Congress amended the National Trails System Act to allow the government to take abandoned railroad easements and turn them into land for public recreation and “railroad banking.” Landowners have been fighting the taking of their property under the Trails Act ever since, claiming, as here, that the government’s original grant to the railroads contained no residual right of possession for the government.

Indeed, two federal courts of appeals, the Seventh and Federal Circuits, have held that the government didn’t retain any residuary rights. In the Brandts’ case, however, the Tenth Circuit held otherwise. This circuit split is untenable. Over 5,000 miles of abandoned track has been taken by the government since the Trails Act, and about 10,000 property owners are currently fighting in federal courts to hold onto their property.

Of course, given the possible benefits of not having to pay compensation to landowners, the government has responded to these claims by being aggressively litigious, reaching into its endless war-chest of taxpayer-provided resources to challenge the landowners on every tiny point. As the Federal Circuit said, the government’s behavior is “puzzling” in that it is “foregoing the opportunity to minimize the waste both of its own and plaintiffs’ litigation resources, not to mention that of scarce judicial resources,” but also by advancing arguments “so thin as to border on the frivolous.”

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