September 30, 2005
Paul Krugman: The Way It Is.
Paul Krugman’s column today, The Way It Is, is interesting, highly so.
Bill Frist, the Senate majority leader, is under
investigation by the Securities and Exchange
Commission. He sold all his stock in HCA, which his
father helped found, just days before the stock
plunged. Two years ago, Mr. Frist claimed that he did
not even know if he owned HCA stock.
According to a new U.S. government index, the effect
of greenhouse gases is up 20 percent since 1990.
Dr. Scott Gottlieb, a 33-year-old Wall Street insider
with little experience in regulation but close ties to
drug firms, was made a deputy commissioner at the
F.D.A. in July. (This story, picked up by Time
magazine, was originally reported by Alicia Mundy of
The Seattle Times.)
The Artic ice cap is shrinking at an alarming rate.
Two of the three senior positions at the Occupational
Safety and Health Administration are vacant. The third
is held by Jonathan Snare, a former lobbyist. Texans
for Public Justice, a watchdog group, reports that he
worked on efforts to keep ephedra, a dietary
supplement that was banned by the F.D.A., legal.
According to France's finance minister, Alan Greenspan
told him that the United States had ''lost control''
of its budget deficit.
David Safavian is a former associate of Jack Abramoff,
the recently indicted lobbyist. Mr. Safavian oversaw
U.S. government procurement policy at the White House
Office of Management and Budget until his recent
When Senator James Inhofe, who has called scientific
research on global warming ''a gigantic hoax,'' called
a hearing to attack that research, his star witness
was Michael Crichton, the novelist.
Mr. Safavian is charged with misrepresenting his
connections with lobbyists -- specifically, Mr.
Abramoff -- while working at the General Services
Administration. A key event was a lavish golfing trip
to Scotland in 2002, mostly paid for by a charity Mr.
Abramoff controlled. Among those who went on the trip
was Representative Bob Ney of Ohio.
It's not possible to attribute any one weather event
to global warming. But climate models show that global
warming will lead to increased hurricane intensity,
and some research indicates that this is already
Tyco paid $2 million, most going to firms controlled
by Mr. Abramoff, as part of its successful effort to
preserve tax advantages it got from shifting its legal
home to Bermuda. Timothy Flanigan, a general counsel
at Tyco, has been nominated for the second-ranking
Justice Department post.
In the aftermath of Hurricane Katrina, New Orleans is
awash in soldiers and police. Nonetheless, the Federal
Emergency Management Agency has hired Blackwater USA,
a private security firm with strong political
connections, to provide armed guards.
Mr. Abramoff was indicted last month on charges of
fraud relating to his purchase of SunCruz, a casino
boat operation. Mr. Ney inserted comments in the
Congressional Record attacking SunCruz's original
owner, Konstantinos ''Gus'' Boulis, placing pressure
on him to sell to Mr. Abramoff and his partner, Adam
Kidan, and praised Mr. Kidan's character.
James Schmitz, who resigned as the Pentagon's
inspector general amid questions about his
performance, has been hired as Blackwater's chief
Last week three men were arrested in connection with
the gangland-style murder of Mr. Boulis. SunCruz,
after it was controlled by Mr. Kidan and Mr. Abramoff,
paid a company controlled by one of the men arrested,
Anthony ''Big Tony'' Moscatiello, and his daughter
$145,000 for catering and other work. In court
documents, questions are raised about whether food and
drink were ever provided. SunCruz paid $95,000 to a
company in which one of the other men arrested,
Anthony ''Little Tony'' Ferrari, is a principal.
Iraq's oil production remains below prewar levels. The
Los Angeles Times reports that mistakes by U.S.
officials and a Halliburton subsidiary, which was
given large no-bid reconstruction contracts, may have
permanently damaged Iraq's oilfields.
Tom DeLay, who stepped down as House majority leader
after his indictment, once called Mr. Abramoff ''one
of my closest and dearest friends.'' Mr. Abramoff
funneled funds from clients to conservative
institutions and causes. The Washington Post reported
that associates of Mr. DeLay claim that he severed the
relationship after Mr. Boulis's murder.
Public health experts warn that the U.S. would be
dangerously unprepared for an avian flu pandemic.
As Walter Cronkite used to say, That's the way it is.
There’s a bit of a mish mash there, under investigation, charged, people seemingly with no qualifications for their jobs and so on. But his basic point? That there is corruption at the heart of the political process? Yes, of course there is.
No, it isn’t as bad as some places (hey, I worked in Russia for 7 years, I know how bad it can get) but is it worse than it ought to be? Sure. Root out those breaking the law and prosecute them. If you do that successfully, jail them.
But here’s the point that our Dear Paul will never admit, never allow himself to consider. Corruption like this is inherent in any form of large scale governance. When there’s $2 trillion a year going through the system then there will always be those lining up to dip their ladle into the gravy.
Abramoff the lobbyist? Wouldn’t exist if the laws were simpler.
In order to shrink the amount stolen from the government coffers one simply has to make the amount in those coffers smaller. In order to shrink the amount thrown about to gain privileges one has to shrink the privileges available. In order to stop conflicts of interest you need to reduce the number of things that politicians attempt to regulate.
In short, you need to shrink government.
Which is not what Dear Paul suggests of course. Despite the knowledge that 10% of Medicaid dollars are spent on fraudulent claims and another 20-30% wasted, our distinguished Professor of Economics wants to increase the amount of the economy subject to such depredations from 17% to 27% or so.
What a wonderful idea don’t you think?
There’s a very interesting litte report called "Beyond DeLay" which is worth a look (.pdf).
Roy Blunt for example:
In 2003, Rep. Blunt also helped his lobbyist son Andrew by inserting a provision into the
$79 billion emergency appropriation for the war in Iraq to benefit U.S. shippers like United
Parcel Service, Inc. and FedEx Corp.8 The provision required that military cargo be carried only
by companies with no more than 25% foreign ownership.9 The two companies were seeking to
block the expansion of a foreign-owned rival’s U.S. operations.10 Andrew Blunt lobbies on
behalf of UPS in Missouri, (in addition to Philip Morris)11 and UPS and FedEx have contributed
at least $67,500 to Rep. Blunt since 2001.
Rep. Waters’ husband, Sidney Williams, has also benefitted financially from his wife’s
political clout, working as a part-time consultant for a bond underwriting firm, Siebert,
Brandford, & Shank.11 Despite having no apparent background in the bond business prior to his
work as a consultant for the company, Mr. Williams has collected close to $500,000 by making
valuable introductions for Siebert to politicians who have received his wife’s support.12
Government bond deals are awarded based on negotiations, allowing Mr. Williams to capitalize
on his wife’s connections to close many lucrative business deals for Siebert, from which he has
personally profited.13 For example, when school board members in Inglewood, a city in Rep.
Waters’ congressional district to which she guaranteed a $10 million loan from the Department
of Housing and Urban Development, needed a bond underwriting firm to handle a $40 million
school bond sale, they chose Siebert. Mr. Williams earned $54,000 in commission from the
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It's an interesting question, but I wonder whether you aren't making a very big assumption that government everywhere and in all places is pretty much equally ineffective and wasteful. I have my doubts about that. Casual empiricism suggests you can have relatively successful economies with big government (the scandinavians spring to mind), and relatively successful economies with small government (the USA is an obvious example).
The major factor it seems to me is not necessarily the size of government, but its quality. Therefore I think the deeper question is what shapes whether government spending is relatively efficienct or inefficient.
For example, one factor that might matter here is the degree of federalism in the budget process. For instance, with federal systems you seem to get a lot of pork barrel style spending, as people from specific regions need to be bought off in the legislative process to agree on an overall package (this mechanism seems to be getting quite out of hand in the US right now). Similarly, this is one reason why I think the EU has problems spending money efficiently. It's not so much that there is no scope to add value with EU level spending - there is - the problem is that efficiency is not what drives the allocation of respources, as distributional politics takes precedence.
(Of course - no doubt one could come up with reasons why a centrally driven allocation process such as in the UK, where there is no explicit federalist lobbying for funds, may be inefficient. For example - there may be less scrutiny than if you have representatives from many regions watching how funds are disbursed. And all sorts of in-between arguments.)
A second factor shaping efficiency might be the extent to which spending is driven by relatively stable and objective criteria and the extent to which discretion can be used to distort spending towards favoured clients. I suspect that where there is more discretion in the allocation process there is often more scope for short term political imperatives to distort resource allocation. By contrast, where spending is driven by reasonably objective crieteria (such as in the UK's local government resource allocation processs) then I suspect that there is much less waste. (And the counter argument of course is that discretion allows spending to be tailored to changing needs).
Basically, I think that this is a richer vein to mine than the knee jerk reaction that smaller government is invariably better government. That seems to me to be an easy line to peddle, but avoids the really tough questions.
Posted by: rjw | Sep 30, 2005 2:33:04 PM
I have to agree with RJW. This seems to be the mantra of the libertarians and many right wingers as well, that diminishing the role of government is somehow going to magically ease the egregious social problems that the U.S. faces. Oh, I have no doubt that the world of insignificant government that you envision will make life wonderful for the 1% of the population who will be able to afford a private police force to patrol their fortressed communities. Do you really believe that large corporate entities would suddenly enjoy an ethical renaissance the moment that the yoke of all government regulation is lifted from their backs? There is a much more fundamental issue at the heart of the malaise that you and most domestic right-wingers refuse to see. We have gleefully accepted a culture of greed in this country that has destroyed our sense of community. Americans by and large will tolerate anything as long their acquisitiveness and material avarice can continue to be fed by a consumption driven economy that is ever ready to provide newer, flashier toys and the credit to purchase them. This, coupled with a preternatural ability to delude ourselves (with the complicit cooperation of our corporate media) will sadly lead to the unravelling of the nation. It is already happening.
Posted by: Avram Mirsky | Oct 6, 2005 10:58:18 PM