These columns recently interrupted the coronation for Ron Binz to become one of President Obama’s key energy regulators, and apparently reporting on his record is a violation of Capitol Hill decorum. We’re happy to have the story to ourselves because there is so much more that Senators ought to scrutinize before they vote on his nomination this fall.
“Ron Binz’s Rules for Radicals” (July 30) questioned his fitness to lead the Federal Energy Regulatory Commission, or FERC, whose narrow mandate involves interstate energy transmission and protecting the U.S. electric grid’s reliability and affordability. The White House wants to conscript FERC for the climate wars—and now environmentalists and crony capitalists are teaming up to install their man inside this supposedly independent body.
Welcome to the buckraking phase of the Obama era. If the campaign was about hope, and the early presidency was about change, increasingly the administration has settled into a kind of normalcy in which it accommodates itself to Washington far more than Washington accommodates itself to Obama. That’s not necessarily a bad thing when the result is a bipartisan schmooze-fest at the Jefferson Hotel. But when it comes to the D.C. custom of trading a White House security clearance for a private-sector sinecure, there’s a lot to be said for not going native so easily.
Within Obamaworld, there are a few unwritten rules about how to parlay one’s experience into a handsome payday. There is, for example, a loose taboo against joining a K Street lobbying shop and explicitly trading on administration connections. And while joining a consulting firm is acceptable, those who do are reluctant to work for clients reviled by liberals: gun makers, tobacco companies, Big Oil, union busters. Above all, there is a simple prohibition against excessive tackiness.
Avoiding tackiness is a big virtue. Hope and change! Forward!
Washington’s `revolving door’ – the movement from government service into the lobbying industry- is regarded as a major concern for policy-making. We study how ex-government staffers benefit from the personal connections acquired during their public service. Lobbyists with experience in the office of a US Senator suffer a 24% drop in generated revenue when that Senator leaves office. The effect is immediate, discontinuous around the exit period and long-lasting. Consistent with the notion that lobbyists sell access to powerful politicians, the drop in revenue is increasing in the seniority of and committee assignments power held by the exiting politician.
“Revolving Door Lobbyists,” by Jordi Blanes i Vidal, Mirko Draca, and Christian Fons-Rosen, CEP Discussion Paper No 993, August 2010 (61-page PDF)
An investigation by Sen. Carl Levin and a grilling of Apple CEO Tim Cook on Tuesday by the Senate’s Permanent Subcommittee on Investigations were ostensibly about Apple’s low tax bill. But nobody accused Apple of breaking the law. The company moved money around to minimize the tax it owed and then paid the amount the law required. Apple didn’t write the tax law or even lobby very hard to shape it.
And that’s just the problem. The grilling of Apple is best understood as a shakedown by politicians upset with Apple for not playing the Washington game that yields contributions, power, and personal wealth for congressmen and their aides.
Apple doesn’t have a political action committee to fund incumbents’ re-elections. Apple doesn’t hire many congressional staff or any former congressmen as lobbyists. Apple mostly minds its own business — and how does that help the political class?
The Beltway Shakedown is an old game. Microsoft may be its most famous victim. In the 1990s, while the Federal Trade Commission investigated the software giant for supposed antitrust violations, the Senate Judiciary Committee, run by Republican Orrin Hatch of Utah, held hearings to beat up CEO Bill Gate
Apple CEO Tim Cook announced at a tech conference yesterday [May 28, 2013] that it was hiring President Obama’s EPA director, Lisa Jackson, as a VP for environmental initiatives.
“Increasingly CEOs are seeing the need to get engaged because the government more often than not is a business partner that can affect their bottom line positively, or negatively,” said Nick Calio, a Washington veteran who now heads the trade group Airlines for America.
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CEOs have also been welcomed with open arms by political leaders looking to take on major issues like immigration reform, tax policy and the deficit and debt [Ed., and campaign contributions, all for the public good of course].
The Obama administration has brought business leaders into the White House repeatedly in his second term on issues like cyber security, immigration and the economy [Ed., and campaign contributions, all for the public good of course].
Earlier this month Obama met privately with energy CEOs in preparation for hurricane season. Attendees included: Tony Alexander of FirstEnergy, Chris Crane of Exelon, Lew Hay of NextEra Energy and Joe Rigby of Pepco.
He also huddled in April with Wall Street execs in an effort to sell them on his fiscal policy plans. That group included Lloyd Blankfein of Goldman Sachs, JPMorgan’s Dimon, Brian Moynihan of Bank of America, John Stumpf of Wells Fargo, among others.
[As the federal government gets bigger and bigger, enabled by Congress] “I think there’s more to lose now than there has been in the past,” said Ivan Adler, a headhunter with the McCormick Group. “So losing a big legislative fight has more of an impact on the bottom line than it did in the past, and therefore there’s a higher cost for failure.”
Goldman Sachs, Facebook, GE, JPMorgan, Bank of America, Wells Fargo, Exelon, NextEra Energy, Pepco, FirstEnergy, GM, Airlines for America, T. Boone Pickens, Warren Buffet – special interests and crony capitalists all, and all TBTF.
Buck McKeon’s family is getting into the defense lobbying game.
A firm run by the California Republican’s brother and nephews has landed five lobbying clients, according to newly filed disclosure forms. Each one lists “defense” as an issue area.
As chairman of the House Armed Services Committee, McKeon has major influence over the Pentagon’s annual spending plan — not to mention a last name recognizable to almost anyone in the defense industry. So, the congressman says he’s trying to avoid even the perception of any conflict of interest.
It’s time for a free-market corporate social responsibility. Conservatives who rail against government hand-outs should also blast companies who seek shelter from Washington.
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The Republican attack on President Obama’s economic policy has changed subtly, but significantly, in the last three years. In 2009, he was allegedly a “socialist” and a “Marxist” who lusted for government control of the entire economy. But lately, that has given way to more nuanced charges of “crony capitalism” — of giving special, friendly treatment to certain companies and industries, or allowing powerful corporations to essentially write the laws, themselves.
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Voters despise government officials who get in bed with corporations. But what about corporations who cozy up to government? Are companies who use cronyism to grow their profit acting unethically?
The question makes some free-marketeers uneasy. After all, we not only tolerate the fierce pursuit of profit, but also we defend it against taxes and heavy-handed regulation. Milton Friedman famously said, “The social responsibility of business is to increase its profits.”
But in the age of crony capitalism, libertarians must declare that some means of pursuing profit are immoral and call on executives to reject them. This would create a positive case for capitalism — arguing that the pursuit of profit, in the context of fair and open competition, helps the whole society. The new corporate social responsibility, redefined for libertarians, must stand athwart crony corporatism yelling “stop.”
Crony capitalism is not the same as free markets, it is a politicized economy.
Cronyism diverts resources away from the wants and needs of consumers and toward political purposes. Cronyism occurs when an individual or organization colludes with government officials to create unfair legislation and/or regulations which give them forced benefits they could not have otherwise obtained voluntarily. Those benefits come at the expense of consumers, taxpayers, and everyone working hard to compete in the marketplace.
Would this be a money-making proposition, allowing an investor a piece of the upside as the companies use the power of the government to their advantage? Or would it be a money-losing proposition, because the companies whose CEOs are spending their time cultivating government relationships are doing so only as a desperate tactic because their firms are otherwise unable to compete successfully in the marketplace on the basis of the value they offer their customers?
So I spent some time running the numbers. Suppose one began this strategy at the beginning of the Obama administration, buying one share of each publicly traded company with an executive appointed by the president on February 6, 2009 to the President’s Economic Recovery Advisory Board. That would be UBS, GE, CAT, and ORCL. In the nearly two years since then (using the Monday February 7 closing prices, and using Yahoo! Finance historical price data that adjusts for splits and dividends), the gain would have been 145% — far outperforming the 52% return of the S&P 500 Index over the same period.
Suppose that later that year, you decided to buy one share of each American publicly traded company that had a top executive attend President Obama’s first state dinner at the White House, in honor of Prime Minister Singh of India. GE and CAT are on the list again, along with Honeywell, Pepsi (CEO Indra Nooyi) and Ethan Allen (ETH) CEO Farooq Kathwari.The return through day’s end February 7, 2011 would have been 46%, versus a 19% gain for the S&P 500 over the same period.
Or suppose you wanted to invest in the publicly traded companies whose executives President Obama appointed on July 7, 2010 to the President’s Export Council. Buying UPS, Boeing, Met Life, Disney, Pfizer, Dow Chemical, Ford, Verizon, United Airlines, ADM, and Xerox would have earned a 30% return over a period in which the S&P 500 gained 24%.
So far, it looks like a pretty good way of outperforming the market.
[T]he regulatory superstate depends on inflicting pain on the rest of the country, pain that only Washington itself can relieve—if you pay up and have the right connections, that is. Washington’s fortunes and America’s are increasingly at odds. The region is prospering because it’s becoming something that would have horrified the Founders: an imperial capital on the Potomac.
From time to time my colleague David Boaz posts about the many ongoing ways in which the economy of Washington, D.C. continues to outpace that of the rest of the country, thanks to a well-paid and layoff-resistant workforce of federal employees and contractors, a thriving lobbying sector, and so forth. Thus David noted this week [December 9, 2010] that the Washington, D.C. metro area has now attained the highest family median income of any major city, and last month [November 2010] that, according to Census Bureau figures analyzed by Newsweek, “seven of the 10 richest counties in America, including the top three, are in the Washington area.”
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