Friday, March 23, 2012

Mises: The Seven Rules of Bureaucracy

Excellent article from the Mises Institute: (click for the whole thing, it's long but worth it):

Rule #1: Maintain the problem at all costs! The problem is the basis of power, perks, privileges, and security.

Examples: The War on Poverty, The War on Drugs

Rule #2: Use crisis and perceived crisis to increase your power and control.

Rule 2a. Force 11th-hour decisions, threaten the loss of options and opportunities, and limit the opposition's opportunity to review and critique.

Example: In the first year of the Obama presidency, the fact that approximately 12 to 32 million Americans, depending on whose numbers were believed, were without healthcare coverage was turned into a crisis that the US Congress rushed in to fix. Little if any attention was given to the fact that millions of Americans didn't have health insurance when they could afford it simply because they chose not to purchase it (Wall Street Journal, 2011). It turns out that emergency rooms across the United States treat a great many of these people when sick.

By all accounts of the legislative process, few if any members of Congress had fully read the bill before being forced to vote it into law. Congress and President Obama chose to ignore the pending collapse of Social Security and Medicare, both well-studied and acknowledged crises, to spend a trillion dollars on universal health coverage that the majority of Americans didn't want or need.

Rule #3: If there are not enough crises, manufacture them, even from nature, where none exist.

Example: Man-made global warming.

We do know that under President Obama the power of the EPA is at a zenith, growing in size and power as a regulatory agency with all the prosecutorial powers to fine and even imprison violators (and the latitude to ignore violations as fits their interest). Alternative and renewable fuels have become a lightning rod for the EPA. Bill Gates was quoted recently in the Wall Street Journal as saying this about EPA solar-energy subsidies:

I think people deeply underestimate what a huge problem this day-night issue is if you're trying to design an energy system involving solar technology that's more than just a hobby. You know the sun shines during the day, and people turn their air conditioners on during the day, so you can catch some of that peaking load, particularly if you get enough subsidies. It's cute you know, it's nice. But the economics are so, so far from making sense.… And so unfortunately you get technologies that, no matter how much of them you buy, there's no path to being economical.

The EPA has also teamed up with the Justice Department and Fish & Wildlife in prosecuting musical-instrument manufacturers and musicians deemed to have endangered hardwoods in their instruments. Musicians who play older instruments that used such hardwoods before it was illegal can no longer safely take their instruments across US borders without "adequate" documentation and hope to return with the instruments back in to the United States without Customs agents seizing their instruments and fining or even imprisoning them. Gibson Guitars, makers of classic instruments, has been singled out in federal raids, and there is now a criminal case, "United States of America v. Ebony Wood in Various Forms" (Felten, 2011). The EPA has enlisted US Customs to enforce problematic environmental policy.

Diversity is another example of creating a social crisis where none had existed. The ongoing need for diversity, never explicitly defined, haunts government bureaucracies particularly. James Taranto (2011) points to a "Diversity bureaucracy" that state universities continue to populate when teachers are laid off. No matter how much progress is made, there are new groups that emerge representing the nation's continued failure to embrace the crisis of diversity. On campuses these days we must spend scarce resources on glorifying the transgendered; international students (particularly graduate students, because they bring greater monetary reward); gays, lesbians, and bisexuals; Muslims, etc. Like political correctness, diversity has become a primary orthodoxy and a perpetual goal of government that simply cannot be achieved. Once crises are created, they become self-sustaining.

Rule #4: Control the flow and release of information while feigning openness.

Another example of government information control comes from the economic recession that began in 2007. While President Obama certainly inherited the recession from President Bush, his administration's efforts to control the information about it and our progress through it are instructive. As employment continued to decline, the government's Bureau of Labor Statistics continued to release optimistic monthly reports that would subsequently prove to be wrong. What many people don't know is that government methods of data gathering are skewed to be much more positive that they ever are. For example, employed persons are anybody 16 years of age or older who did any work for pay or profit during the survey week and all persons who did at least 15 hours of work in a family-owned enterprise operate by someone in their household. Unemployment data from the Bureau of Labor Statistics (2012) do not include retirees reentering the workforce, new college graduates looking for a job, nondeployed military personnel, or people who have been out of work for five months or more. It is instructive that the Department of Labor's little-known measure of unemployment, U-6, is ignored by the president, Congress, and the media in favor of the rate presented monthly. The U-6 unemployment rate is currently 16 percent.

Rule 4a: Deny, delay, obfuscate, spin, and lie.

Bill Clinton, whose administration had honed the fine art of spin doctoring into a science, also spoke to the American people as well as Congress and his cabinet and said, "I did not have sexual relations with that woman, Miss Lewinsky." Hillary Clinton stood by him and attributed the commotion to the "vast right-wing conspiracy." After DNA evidence was presented by Miss Lewinsky to the federal prosecutor, most of Clinton's cabinet resigned (presumably for having been lied to by the president). Lying, cheating, obfuscating, and spinning are all tools of the accomplished bureaucrat who is caught doing something wrong.

Rule #5: Maximize public-relations exposure by creating a cover story that appeals to the universal need to help people.

Government bureaucracy is honed on populist rhetoric. Bureaucrats have become skilled at using the "helping the people" angle when making speeches, and especially when dealing with the press. It is a variation of the "people angle" taught in media relations training programs as the best method to attract media attention and promotion. Almost any government program, no matter what its cost in money or personal liberties, can be sold through the media by claiming it is for (1) the children, (2) the environment, (3) the elderly, (4) the poor, (5) the homeless, (6) the national defense, (7) homeland security, or (8) the sick.

When bureaucrats of any ilk promote their new law or program as being "for the people," it is important to first look behind the curtain. "Social justice" is the veneer used by bureaucrats to gain positive media exposure while pursuing the building of more bureaucracy. It is so pervasive that your child can even pursue a major in social justice at institutions of higher learning like the University of California, Santa Barbara. Sowell points out in his book The Quest for Cosmic Justice that all justice is, by definition, social, and "social" is most often used in the populist sense of everyone but the wealthy. A cover story that seeks social justice or to right the wrongs of an unjust society is guaranteed media attention, yet very few in the media or the public are inclined to look beneath the veneer of social justice to examine the costs and the unintended consequences.

Rule #6: Create vested support groups by distributing concentrated benefits and/or entitlements to these special interests, while distributing the costs broadly to one's political opponents.

The Community Reinvestment Act of 1977, signed into law by President Carter, established the federal government's role in providing affordable housing to the needy. Over the 33 years it has been in existence, its force has grown the size and reach of the Federal Housing Administration, the Federal Deposit Insurance Corporation, the Federal Reserve, and the Departments of Justice and Housing & Urban Development. It has also given rise to the Federal National Mortgage Association ("Fannie Mae" and "Freddie Mac"). While the initial goal was to provide the less economically advantaged with an opportunity to purchase a home, no one bothered to look at the possible unintended consequences of helping people whose personal credit wouldn't qualify them to buy a home.

As Sowell (2009, pp. 31–56) points out, "affordable" became the ability for people to buy the home they wanted in the area they wanted and the government's role was to make it financially possible to purchase it. The Community Reinvestment Act ultimately led to the biggest financial crisis since the Great Depression, yet many of its proponents and even the media failed to see or understand the real problem or the long-term costs and market dislocation that would result.

Even more insidious are government laws that benefit for-profit corporations. These are the recipients of corporate welfare. The poster child of corporate welfare is Archer Daniels Midland (ADM), having received billions of tax dollars from more than 15 federal agencies over the past 50 years. As James Bovard (1995) and Chip Krakoff (2011) point out, to return the favor to the federal bureaucracy, ADM has also been funding reelection campaigns on both sides of the congressional aisle and for both Democratic and Republican presidential candidates. As a testament to ADM's political ecumenicalism, it has been a long-time sponsor/advertiser of National Public Radio, which attracts a large portion of the left-liberal minded. The EPA is planning to issue an edict to allow 15 percent ethanol to be blended into gasoline, which will result in a 50 percent market gain for ADM's ethanol-production facilities and a similar market grain in the sale of their dominant field-corn holdings used to make ethanol.

Our last example of Teasley's sixth rule of bureaucracy is Solyndra, one of three green-energy companies that received nearly $700 million in federal-government money and filed bankruptcy in the past two years. Solyndra is a photovoltaic-solar-energy-systems manufacturer in California. It has received huge loan guarantees ($535 million) through the American Recovery and Reinvestment Act (itself a huge and expensive federal program to fix the mistakes of the Community Reinvestment Act) and the Federal Financing Bank, as well as being the beneficiary of federal and state policies mandating the use of renewable energy sources (US Department of Energy's ENERGY STAR Program and by the requirements of the California Title 24 Energy Standard, which prescribes cool roofs to be employed whenever low-slope commercial roofs are constructed or replaced).

The Wall Street Journal (2011) indicated that the company was also backed by the George Kaiser Family Foundation and, along with its founder, were big financial supporters of the Obama presidential campaign as a bona fide for his "green" stand. An additional $75 million loan was made to Solyndra, but the agreement with private investors, including Kaiser, placed them ahead of American taxpayers in case of default. Until the company announced its bankruptcy in August 2011, President Obama had hailed the company as "leading the way toward a brighter and more prosperous future" (Ibid). More than 20 trips were made by company officials, investors, and George Kaiser to the White House between March 2009 and April 2010, and despite reports from industry insiders about Solyndra's financial health, administration officials dismissed these reports as "B.S."

Rule #7: Demonize the truth tellers who have the temerity to say, "The emperor has no clothes."

There were plenty of people sounding alarms as early as 2003 about the housing bubble and growing deficits that led directly to the devastating economic downturn that lingers today, not only in America but around the world. Most in Washington, including Fannie Mae, Freddie Mac, HUD, the Federal Reserve, Congressman Barney Frank (head of the House Financial Services Committee) and Senator Dodd (head of the Senate Banking Committee), all refused to pay attention to the growing signs of the housing-market collapse and its risk to the US economy, railing against any warnings that Fannie and Freddie were in financial trouble.

Stephen Labaton (2003) of the New York Times quoted Mr. Frank as saying, "These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis."

In the House of Representatives on June 25, 2007, Congressman Frank stated,

We have, I think, an excessive degree of concern right now about home ownership and its role in the economy. Obviously speculation is never a good thing. But those who argue that housing prices are now at the point of a bubble seem to me to be missing a very important point. Unlike previous examples we have had where substantial excessive inflation of prices later caused some problems, we are talking here about an entity, home ownership, homes, where there is not the degree of leverage that we have seen elsewhere. This is not the dot com situation.… Homes that are occupied may see an ebb and flow in the price at a certain percentage level but you're not going to see a collapse that you see when people talk about a bubble. So those of us on our committee in particular will continue to push toward home ownership.

In 2010 Mr. Frank implicated foreign central banks, particularly China, when attacking a letter written by Republican economists to the Federal Reserve for joining a broad attack by the foreign central banks who insist that America somehow must subordinate our own legitimate economic needs to their currency requirements. What did disappoint me was to see conservative economists, high-ranking officials of previous Republican administrations, and Republican congressional leaders share the attack by these foreign banks not simply on the Federal Reserve's proposal, but on the very notion that America has a right to give a primary focus to our own economic need for growth at this time. (McDonald, 2010)

Of course, both political parties demonize the truth tellers who speak out against costly and wasteful policies and their unintended consequences. During the invasion of Iraq, Vice President Dick Cheney, Donald Rumsfeld, and even President Bush frequently took critics to task, asserting that there was "incontrovertible" evidence that Saddam Hussein had weapons of mass destruction.

Rule 7a: Accuse the truth teller of one's own defects, deficiencies, crimes, and misdemeanors.

One wag said, "Gall was divided into three parts and politicians have all three of them." We habitually find government bureaucrats, particularly politicians, trying to turn the tables of their accusers in misdeeds. Glen Johnson (2008), Associate Press writer, quoted Congressman Barney Frank, who attended a foreclosure symposium in Boston and challenged the critics of Fannie Mae, implying racism as the motive for the criticism:

They get to take things out on poor people. Let's be honest: The fact that some of the poor people are black doesn't hurt them either, from their standpoint. This is an effort, I believe, to appeal to a kind of anger in people.

Former representative Charles Rangel was ultimately accused of 13 ethics infractions by the House of Representatives. Washington Post reporters Leoning & Kane (2010) reported that, after a news conference Mr. Rangel held about the ethics violations, he responded about the possibility of being removed as chairman of the House Ways and Means Committee:

"I don't see what purpose that would serve, I don't think reporters should be in the position to remove chairmen, not even temporarily, especially when the reporting is false." When asked specifically about nearly $80,000 his son had received from his campaign to design a website, he replied, "The reporter should really crawl from under his rock and apologize to my son, a veteran, my friend, my son and a great American," Mr. Rangel said. "It's one of the crummiest deviations from the truth that I've seen in these recent stories."

If Congress comes up with a new "war against," we should fight it, no matter what the war is against. The federal government's track record is abysmal and the equivalent of a taxpayer boat — a hole in the water that you sink your money in.


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