Archives: 05/2011

When the Government Lobbies Itself

“National Public Radio (NPR) is paying the lobbying firm Bracy, Tucker, Brown & Valanzano to defend its taxpayer funding stream in Congress, according to lobbying disclosure forms filed with the Secretary of the Senate,” reports Matthew Boyle at the Daily Caller. Once again, a government-funded entity is using its taxpayer funds to lobby to get more money from the taxpayers.

When the bailouts and takeovers started in 2008-9, I noted that there was lots of outrage in the blogosphere over revelations that some of the biggest recipients of the federal government’s $700 billion TARP bailout had been spending money on lobbyists. And I wrote:

It’s bad enough to have our tax money taken and given to banks whose mistakes should have caused them to fail. It’s adding insult to injury when they use our money — or some “other” money; money is fungible — to lobby our representatives in Congress, perhaps for even more money.

Get taxpayers’ money, hire lobbyists, get more taxpayers’ money. Nice work if you can get it.

At the same time, Dan Mitchell wrote that companies that received government money and then lobbied for more “deserve a reserved seat in a very hot place.” Taxpayer-funded lobbying is a scandal, but it’s a scandal that has been going on for decades:

As far back as 1985, Cato published a book, Destroying Democracy: How Government Funds Partisan Politics, that exposed how billions of taxpayers’ dollars were used to subsidize organizations with a political agenda, mostly groups that lobbied and organized for bigger government and more spending. The book led off with this quotation from Thomas Jefferson’s Virginia Statute of Religious Liberty: “To compel a man to furnish contributions of money for the propagation of opinions which he disbelieves is sinful and tyrannical.”

The book noted that the National Council of Senior Citizens had received more than $150 million in taxpayers’ money in four years. A more recent report estimated that AARP had received over a billion dollars in taxpayer funding. Both groups, of course, lobby incessantly for more spending on Social Security and Medicare. The Heritage Foundation reported in 1995, “Each year, the American taxpayers provide more than $39 billion in grants to organizations which may use the money to advance their political agendas.”

In 1999 Peter Samuel and Randal O’Toole found that EPA was a major funder of groups lobbying for “smart growth.” So these groups were pushing a policy agenda on the federal government, but the government itself was paying the groups to lobby it.

Taxpayers shouldn’t be forced to pay for the very lobbying that seeks to suck more dollars out of the taxpayers. But then, taxpayers shouldn’t be forced to subsidize banks, car companies, senior citizen groups, environmentalist lobbies, labor unions, or other private organizations in the first place.

Will Republicans Come to Grips With Immigration?

Today POLITICO Arena asks:

Given President Obama’s speech today in El Paso, Texas, is immigration a winning issue for Democrats?

My response:

Immigration will be a winning issue for Democrats only if Republicans allow it, which they’re quite capable of doing. Where’s the anti-immigrant part of the Republican base going to go — to the Democrats? Hardly. With so much else at stake, will they sit out the 2012 elections, over this one issue? Please.

If Republicans play it right, this can be a winner. No one seriously believes that the estimated 10 to 12 million illegal immigrants in the country, most working, can or should be sent back to their countries of origin. So the main issues are paving the way to legalization, better securing the borders, and providing for a rational guest worker program. If Republicans got behind a package like that, immigration would cease to be a Democratic issue. This isn’t rocket science.

Grasping the Full Costs of the Auto Bailout

E.J. Dionne seems perfectly comfortable with the fact that he doesn’t understand economics—as long as the Washington Post continues to allow him to interpret economic events in a manner that comports with his political predispositions. Dionne sees GM’s recent good fortune as evidence of the propriety of government “step[ping] in when the market fails.” Dionne, like others before him, stands slack-jawed, in awe, ready and willing to buy the Brooklyn Bridge, donning narrow blinders and viewing just a narrow sliver of the world, oblivious to the fact that related events are transpiring in the other 359 degrees that surround him. Dionne is the perfect Bastiat foil.

Last week, GM reported first quarter profits of $3.2 billion—its best quarterly performance in ten years and its fifth consecutive profitable quarter. That’s good for GM (although it remains to be seen how GM performs going forward). But that is really beside the point. Dionne creates a straw man, contending that bailout critics thought that the government couldn’t resuscitate GM. But the most thoughtful criticism—my opposition to the bailout, at least—wasn’t predicated on the notion that GM couldn’t be saved by the government extinguishing debt, rewriting ownership, providing cash infusions, and underwriting sales rebates. That opposition was borne of concern that that the government would do just that.  And it did.

In the process of “saving” GM (which I still contend would have survived without the intervention and the number of jobs losses in the industry would have been comparable to the job losses that occurred anyway), the government inflicted huge costs on the economy, which—rather than repeat—I cite from an earlier post. After all, my argument that IPO euphoria (from November) was misplaced is nearly identical to my argument that GM’s positive financial statement does not confer a verdict of success on the bailout.

Here’s the real issue. Today’s IPO is nothing more than testament to the fact that the government threw GM a lifeline, enabling the company to expunge most of its debts and firm up its balance sheet on terms more favorable than a normal bankruptcy process would have yielded. That enabled GM to partake of the cyclically growing U.S. auto market in 2010 and turn a profit through the first three quarters. So what? Did anyone really think that a chosen company so coddled and insulated from market realities couldn’t turn a short-run profit? Yes, even GM, under those favorable conditions should have been expected to turn a profit this year.

But at what cost? That answer—even the question—seems to be elusive in the public discussion of the IPO. The cost was not only $50 billion—the amount diverted to GM in the first place. Nor was it that $50 billion minus the proceeds raised in today’s IPO (and minus the proceeds raised later when the government divests entirely of GM – it will still hold 33% of GM after today). In other words, making taxpayers whole does not absolve the Bush and Obama administration’s for the auto intervention. Recouping the $50 billion only gets us partially out of the hole. (And I’m not even sure who “us” includes because the costs are so far reaching.)

Yes, GM is making sales and accounting for market share, but only at the expense of the other automakers. Had GM been forced to severely atrophy or liquidate, the other automakers would have had greater revenues, more market share, and probably higher profits). They would have been able to attract GM’s best engineers and line workers. They would have more money to invest in R&D and to lead the industry into the future. Instead, by keeping GM in the mix, some of those industry resources remain misallocated in a company that the evolutionary market process would have made smaller or extinct. 

The auto industry wasn’t rescued with the GM bailout. GM was “rescued.” By rescuing GM, the government overrode market forces, and there are significant costs to assign for that. Witness the stagnant economy with 9.6 percent unemployment. Is it not plausible that businesses are sitting on their cash and not investing or hiring because of the fear inspired by the government interventions starting with the bank and auto bailouts? It’s more than plausible. The regime uncertainty that persists to this day was spawned by the GM bailout and other interventions.

What about the weakening of the rule of law? Doesn’t the diversion of TARP funds by the Bush administration, in circumvention of congress’s wishes and in contravention of the language of the law, represent a cost? How about the property right of preferred bondholders who were forced to take pennies on their investment dollars under the Obama bankruptcy plan? Any costs there? What about U.S. moral authority to dissuade other governments from meddling in their markets or indulging industrial policy? That may be costly to U.S. enterprises. And with the government still holding a third of GM, its hard to swallow the idea that public interest will be the driver of policies affecting the auto industry. And that suggests even more costs.

Transparency: The Inside and Outside Camps

Late last week, the Project on Government Oversight’s Danielle Brian took a little umbrage at a Huffington Post piece by former U.S. Deputy Chief Technology Officer Beth Noveck, who had been implementing the Obama Administration’s Open Government Initiative until she recently returned to New York Law School.

Brian’s piece suggests a slight schism in the transparency community, between what I believe are the “insider” and “outsider” camps. Brian leaves to the end a crucial point: “[C]an’t the two camps in the open government world peacefully co-exist? There’s just too much work to be done for us to get bogged down in denigrating each others’ agendas.” They most certainly can.

Noveck was a bit dismissive of the open government movement as perceived by much of the transparency community. “Many people, even in the White House,” she wrote, “still assume that open government means transparency about government.” Actually, Noveck continued, open government is “open innovation or the idea that working in a transparent, participatory, and collaborative fashion helps improve performance, inform decisionmaking, encourage entrepreneurship, and solve problems more effectively. By working together as team [sic] with government in productive fashion, the public can then help to foster accountability.”

Visualize the difference between these two approaches: open government as a tool for public oversight and open government as a tool for public participation. When open government is about public oversight, the wording connotes the public looking down from above on the work its servants are doing. When open government is about collaboration, the public is at best an equal partner, allowed to participate in the work of governing. Noveck’s unfortunate language choice treats accountability as a kind of dessert to which the public will be entitled when it has donated sufficient energies to making the government work better.

The administration’s December 2009 open government memorandum predicted this divide. In calling for each agency to publish three “high-value data sets,” it said:

High-value information is information that can be used to increase agency accountability and responsiveness; improve public knowledge of the agency and its operations; further the core mission of the agency; create economic opportunity; or respond to need and demand as identified through public consultation.

As I noted at the time, it’s a very broad definition.

Without more restraint than that, public choice economics predicts that the agencies will choose the data feeds with the greatest likelihood of increasing their discretionary budgets or the least likelihood of shrinking them. That’s data that “further[s] the core mission of the agency” and not data that “increase[s] agency accountability and responsiveness.” It’s the Ag Department’s calorie counts, not the Ag Department’s check register.

Noveck wants us to put the calorie counts to use. Brian wants to see the check register.

There is no fundamental tension between these two agendas. Both are doable at the same time. The difference between them is that one is the openness agenda of the insider: using transparency, participation, and collaboration to improve on the functioning of government as it now exists.

The openness agenda of the outsider seeks information about the management, deliberation, and results of the government and its agencies. It is a reform (or “good government”) agenda that may well realign the balance of power between the government and the public. That may sound scary—it’s certainly complicates some things for insiders—but the “outsider” agenda is shared by groups across the ideological and political spectra. Its content sums to better public oversight and better functioning democracy, things insiders are not positioned to oppose.

I think these things will also reduce the public’s demand for government, or at least reduce the cost of delivering what it currently demands. But others who share the same commitment to transparency see it as likely to validate federal programs, root out corruption, and so on (a point I made in opening our December 2008 policy forum, “Just Give Us the Data!”) There are no losers in this bet. Better functioning programs and reduced corruption are better for fans of limited government than poorly functioning programs and corruption.

Forward on all fronts! The existence of two camps is interesting, but not confounding to the open government movement.

Attention Students: Internships and Cato University

What’s harder to get into than Harvard? The Cato Institute summer internship. Harvard just announced that “an all-time low of 6.2 percent of applicants were offered admission to the Harvard College Class of 2015, beating records for the sixth consecutive year.” Harvard’s acceptance rate is slightly lower than the rate at Princeton, Stanford, and Columbia.

But not lower than the Cato summer internship rate! Cato’s incoming interns survived an application process more selective than Ivy League universities, with about 4 percent of applicants offered an internship. The process is a little less competitive for Fall and Spring internships, and we encourage students to check out the application deadlines for those upcoming classes.

Also note: There are no more summer internships available, but you can still apply for a scholarship to Cato University this summer until Friday.

Of course, non-students are also welcome at Cato University, which is being held this year in beautiful and historic Annapolis, Maryland, the city where George Washington returned his military commission to the Continental Congress and became, in the words of George III, “the greatest man in the world” by giving up power and establishing the new country on the firm path to republican government. We’ll have a mix of people of all ages from all over the country and indeed the world, and we hope you’ll sign up today.

More on Cato’s internships here, including last year’s comparative acceptance rates.

How Bush Lost bin Laden

By spring 2002, less than a year after the initial U.S. invasion of Afghanistan, President George W. Bush decided to pull most of America’s Special Operations Forces and CIA paramilitary operatives off the hunt for Osama bin Laden so they could be redeployed for a possible war in Iraq. I’ve written about this before, but I did not know the extent to which the war in Iraq contributed to our loss of bin Laden until I read this piece from the Washington Post:

The American campaign [in Afghanistan] was conducted primarily from the air. Despite the pleas from CIA operatives, U.S. officials were reluctant to send in ground troops to flush out bin Laden. They told officers on the ground in Afghanistan that Pakistani troops would help them, cutting off bin Laden if he tried to cross into their country.

First, why would the Bush administration rely on a foreign government to capture Osama bin Laden, only weeks after 9/11? Second, of all the foreign governments to rely on, why would it be Pakistan, the country that during the seven-year period leading up to 9/11 was actively funding, arming, and advising Afghanistan’s ruling Taliban regime that harbored Osama bin Laden? But it gets worse:

But in early December, over lunch at his palace in Islamabad, Pakistani President Pervez Musharraf made it clear to U.S. officials that he did not want to commit troops unless the Americans would help transport them to the border by air. According to Wendy Chamberlin, then the U.S. ambassador to Pakistan, Musharraf told her and Gen. Tommy R. Franks, commander of U.S. Central Command: “I’d put the troops in trucks, but that’ll take weeks. Could you give me air support?”

Franks would not comment for this article, but according to Chamberlin he was noncommittal about air support. Only later did she learn that the general was already “planning for Iraq,” she said. “Even if he could have helped out, he was already starting to have to reshuffle.”

Whatever one thinks about Musharraf, my problem lies primarily with Bush. The article explains:

A few months after Tora Bora, as part of the preparation for war in Iraq, the Bush administration pulled out many of the Special Operations and CIA forces that had been searching for bin Laden in Afghanistan, according to several U.S. officials who served at the time.

Even the drones that U.S. forces depended on to track movements of suspicious characters in the Afghan mountain passes were redeployed to be available for the Iraq war, Lt. Gen. John Vines told The Washington Post in 2006. Once, when Vines’s troops believed they were within half an hour of catching up to bin Laden, the general asked for drones to cover three possible escape routes. But only one drone was available — others had been moved to Iraq. The target got away.

That’s right folks! The Bush White House lost whatever opportunity it had to get bin Laden by diverting scarce resources to  Iraq. Of course, it should go without saying that even if America hadn’t gone into Iraq, it would’ve been difficult for Bush to have captured or killed bin Laden. But what really “grinds my gears” is to hear members of the Bush team claim credit for bin Laden’s recent demise—torture was “critically important”—while simultaneously ignoring their culpability for not helping to capture bin Laden when they had the chance.

Aside from the military, other vital resources were spread thin. Iraq diverted international funds, journalistic resources, public attention and criticism, and adequate Congressional oversight. Iraq also dealt a severe blow to NATO’s unity of effort in Afghanistan. U.S. Defense Secretary Robert Gates said that many European allies “have a problem with our involvement in Iraq and project that to Afghanistan.” Those forthright remarks were echoed by Dr. William Maley, Professor at Australian National University, and Mr. Daoud Yaqub, Research Scholar at Australian National University. “[T]o many observers in Europe,” say Maley and Yaqub, “Iraq is a war of choice, and as a result Europe has no particular duty to shoulder a heavier burden in Afghanistan. The Afghan government and people are victims of this tension.”

Thank you, Mr. Bush, Mr. Rumsfled, Ms. Rice, et al. for taking your eyes off the ball.

Cross-posted from The National Interest

Monday Links

  • If you are a nonlawyer looking to understand what is going to be argued in the appellate courts regarding the health care legislation in the coming weeks, beginning with the Fourth Circuit in Richmond VA tomorrow, start right here.
  • Just how libertarian is the 2012 Republican field?
  • The U.S., not China, walks the green walk.
  • Please join us Tuesday, May 10, at 4:00 p.m. for a Book Forum on America’s Allies and War: Kosovo, Afghanistan, and Iraq, featuring the author Jason W. Davidson, Associate Professor of Political Science at the University of Mary Washington; with comments by Charles Kupchan, Senior Fellow, Council on Foreign Relations and Professor of International Relations, Georgetown University; moderated by Christopher Preble, Director of Foreign Policy Studies, Cato Institute. Complimentary registration is required by noon, eastern, Monday May 9, 2011. We hope you can join us in person, or online.