Tag: conflict of interest

Conflicts of interest in government

I want my government to be run as efficiently as possible for the benefit of all of us. Appointing people to run it with experience in what they oversee contributes to that objective. Conflicts of interest–serving the interests of friends and former associates rather than the interests of the general public –detract from that objective. Hiring bankers to supervise banks, for example, draws on those most knowledgeable about the banking risks needing supervision, but they are also the most vulnerable to conflicts of interest. What should we do about this dilemma?

President elect Joe Biden’s choice to run his Office of Management and Budget: “’Neera Tanden has spent the last decade raising money from the top companies and highest-net-worth individuals in the country, which is a bit at odds with what Biden pitched during the campaign,’ said Matt Bruenig, president of the People’s Policy Project, a left-wing think tank that accepts only small donations.”  On the other hand, “Tanden’s experience leading CAP, which publishes policy recommendations for many domestic and foreign issues, has given her the policy chops needed to lead OMB, Ettlinger said.” Michael Ettlinger, is director of the University of New Hampshire’s Carsey School of Public Policy and a former vice president for economic policy at CAP.  “Neera Tanden-Biden-OMB-CAP”

The authors of the above Washington Post article note with alarm that CAP (Center for American Progress) has received contributions from the likes of Facebook, Bain Capital, Blackstone, Evercore, Walmart, CareFirst BlueCross BlueShield, defense contractor Northrop Grumman and for-profit college operator DeVry Education Group. Though I have not checked, I would not be surprised to find the same author’s urging such companies to shift from seeking shareholder value to stakeholder value by making just such contributions.

How can we maximize the benefits while minimizing the risks of appointing experienced people to positions in government? Our constitution provides one element of a resolution of this conflict by dividing the legislative function from the administrative function between Congress and the White House.  The administration’s regulators are implementing the laws passed by Congress, which provides some checks and balances. Nonetheless, the programs and financing approved by Congress can potentially benefit the friends of congressmen and women. Boeing moved its headquarters from Seattle to Chicago and disbursed its manufacturing facilities from the Seattle area to as many congressional districts as possible to increase congressional votes for its projects not because of economic factors.

Another element of protection is the adherence to transparent bidding and contracting standards when awarding government business to private firms. When designing the taxes to finance government, economist push the principle of economic neutrality (not favoring one market activity over another). Though the tax reforms of 2017 (the so-called Tax Cuts and Jobs Act of 2017) made our income taxes more neutral, many special subsidies remain in our tax laws and the special interests that benefit lobby hard to keep them. “Next up-tax-reform”  “Tax reform and the press”

But regulation potentially offers the most corruptive powers of government to deliver favors to the private sector. We benefit from regulations that help keep products and working conditions safe. But it is easy for regulations to slide into protecting incumbents from competition from challengers. This is a pronounced feature of professional licensing. “Cato: Professional Licensure and Quality”

In short, keeping government activities in the service of the public interest is challenging and requires constant vigilance. By far the most effective approach is to tightly limit government involvement in the economy to the minimum truly necessary for a well-functioning free society. Hire people with the experience to know what they are doing and to do it efficiently but limit the government’s role in the economy to what only government can effectively do.  In establishing the legal and regulatory foundation for private economic activity, limit it to the essentials–the foundation–so that the superstructure can be competitively built by innovative private individuals.

Our national defense is clearly a necessary government responsibility. Thus the “military/industrial complex” is and will remain a problem. The incentives for this industry are particularly dangerous because these firms benefit from the wars we have been fighting all over the place.  It is rather like keeping off those extra pounds that those of us who enjoy good food must struggle with eternally. It is a never ending battle, but losing it would be the death of us.

The Abuse of Civil Forfeiture

The price of liberty is eternal vigilance

We need to repeat this warning twice every day. Today’s example comes from a three-part series in The Washington Post on the use and abuse of civil forfeiture by the police. Our free press is an essential pillar of our liberty.

The police, whose job is to protect us and enforce the law, can catch criminals more easily if they can freely search our private properties (our homes, cars, email, etc). It is more difficult to get away with unwanted crimes in a totalitarian state than in a liberal democracy that respects privacy as an important protection against the abuse of state power. We have wisely chosen not to live in a totalitarian state and have struck a balance between privacy and state/police intrusiveness that favors privacy. This makes it more difficult for the police to find criminals, but reduces the number of innocent citizens falsely accused. This is the way we like it, and we need to remain vigilant to keep it that way.

We also understand the importance of incentives for influencing and motivating behavior. If we want to encourage more of a particular activity, rewarding it financially can be effective. If those who find stolen (or illegally earned) money get to keep some of it, more will be found. That is what bounty hunting was (is) all about. But what if those finding the money are also given the authority to judge its legality? That would constitute a clear-cut conflict of interest. A bounty hunter could increase his financial take by declaring money illegal in questionable cases without due process to protect the innocent.

Our sacred principle of “innocent until proven guilty” is being undermined by the civil forfeiture of private property by police who are allowed to keep part of what they take. “Civil forfeiture is the government power to take property suspected of involvement in a crime. Unlike criminal forfeiture—used to take the ill-gotten gains of criminal activity after a criminal conviction—with civil forfeiture, police can take property without so much as charging the owner with any wrongdoing.” http://www.ij.org/inequitablejustice

“Cash seizures can be made under state or federal civil law. One of the primary ways police departments are able to seize money and share in the proceeds at the federal level is through a long-standing Justice Department civil asset forfeiture program known as Equitable Sharing. Asset forfeiture is an extraordinarily powerful law enforcement tool that allows the government to take cash and property without pressing criminal charges and then requires the owners to prove their possessions were legally acquired.” http://www.washingtonpost.com/sf/investigative/2014/09/06/stop-and-seize/

The practice of “equitable sharing” encourages police to circumvent state laws on civil forfeiture in order to share in the proceeds of property confiscated under federal law. This financial incentive encourages the police to seize more private property but suffers from an unacceptable conflict of interest. The results, as revealed in The Washington Post’s three article series, can be ugly. We should not be surprised, but we should be indignant.

Here is one of many examples: “Mandrel Stuart, a 35-year-old African American owner of a small barbecue restaurant in Staunton, Va., was stunned when police took $17,550 from him during a stop in 2012 for a minor traffic infraction on Interstate 66 in Fairfax. He rejected a settlement with the government for half of his money and demanded a jury trial. He eventually got his money back but lost his business because he didn’t have the cash to pay his overhead.
“I paid taxes on that money. I worked for that money,” Stuart said. “Why should I give them my money?”” http://www.washingtonpost.com/sf/investigative/2014/09/06/stop-and-seize/

“Last year, equitable-sharing agreements funneled $600 million to police budgets. Clearly, with the size of the federal Asset Forfeiture Fund exceeding $2 billion in 2013, civil forfeiture is big business for the government.” http://www.washingtonpost.com/opinions/tim-walberg-an-end-to-the-abuse-of-civil-forfeiture/2014/09/04/e7b9d07a-3395-11e4-9e92-0899b306bbea_story.html

“The Post found:
• There have been 61,998 cash seizures made on highways and elsewhere since 9/11 without search warrants or indictments through the Equitable Sharing Program, totaling more than $2.5 billion. State and local authorities kept more than $1.7 billion of that while Justice, Homeland Security and other federal agencies received $800 million. Half of the seizures were below $8,800.
• Only a sixth of the seizures were legally challenged, in part because of the costs of legal action against the government. But in 41 percent of cases — 4,455 — where there was a challenge, the government agreed to return money. The appeals process took more than a year in 40 percent of those cases and often required owners of the cash to sign agreements not to sue police over the seizures.
• Hundreds of state and local departments and drug task forces appear to rely on seized cash, despite a federal ban on the money to pay salaries or otherwise support budgets. The Post found that 298 departments and 210 task forces have seized the equivalent of 20 percent or more of their annual budgets since 2008.

“Since 2001, police have seized $2.5 billion in cash from people who were never charged with a crime.”  http://www.washingtonpost.com/blogs/wonkblog/wp/2014/09/08/civil-asset-forfeitures-more-than-double-under-obama/

This has gone much too far for the health of our Republic.