October 27, 2011
Leadership, Free to Lead And Campaign-Finance Reform: We need a government that’s free of the corruption of special-interest money
October 27, 2011
The article is edited from the transcript of a speech that Gov. Roemer gave at the Edmond J. Safra Center for Ethics at Harvard University.
I won election to Congress as a conservative Democrat the same night Ronald Reagan was elected as a Republican president. Today I would have been called a blue dog Democrat, but Tip O’Neill called us boll weevils because we attacked the entrenched Democratic majority just like they were a cotton field ripe for harvest. Tip had a way with words.
When I got to Washington, we signed up to rebuild America, and I was proud to work with President Reagan as he tried to remake our government. I remember well the fight for President Reagan’s first major legislative effort, a fundamental change to our tax system. I was a supporter of the change, one of the many Reagan Democrats who crossed party lines to give the Gipper his first important legislative victory.
Among the most important ideas in the Reagan tax bill was a critical supply-side component called the Research and Experimentation tax credit. This proposal cut taxes up to 20 percent for qualified research expenditures and was intended to incentivize investment that otherwise would not be made. There were some on our side of the aisle who were skeptical the change would work. They worried this cut would reduce revenues substantially without actually changing the incentives of business to invest. So at first the Democratic leadership opposed the idea.
But the Republican administration was so sure of this idea that they made an offer too good for even the Democrats to refuse. The administration suggested that the tax cut be temporary and that after a reasonable period, we would ask the economists of the nation whether it had, in fact, worked. If it had, we could then make the R&E tax credit permanent. If it hadn’t, it would fade away. After a few years, the reviews were in: the R&E tax credit was an unmitigated success.
But here’s the puzzle: in the almost 30 years since we enacted the tax credit, Congress has yet to make it permanent. Instead, every couple of years Congress brings it to the floor and votes it up again. Why is this? Why does a tax policy so obviously good for jobs and good for American competitiveness not become a permanent part of the tax code? Because any time there’s a permanent and wealthy interest on the other side, you can expect our tax system to make their benefits temporary so that each time there’s an election, there’s an endless list of people calling to donate to the campaign funds of members of Congress.
The tax code ought to be clear and simple and progressive and fair. It ought to reward job formation. It ought to reward small businesses, which create two out of every three new jobs. It ought to make America a tax haven to get capital from all over the world invested in our nation. It does none of these things. Instead, the tax code is thousands and thousands of unreadable pages. We craft an insanely complicated system of special favors to the richest and most powerful in our society so Congress can better collect campaign contributions and lobbyists can assure permanent clients. The tax system is about campaign financing. It’s about money.
Far more profound than the loss of civility within the halls of the Capitol is the fact that our Congress has become obsessed with raising campaign funds. It defines the devastating change that our Congress has undergone over the past 30 years since I walked those halls.
We don’t govern, we grovel. We don’t lead, we collect.
We need a government that’s free of the corruption of special-interest money. In my view, we won’t fix Congress, we won’t fix government, and we won’t regain the respect of the American people until we fix this. And thus all of us—Republicans, Democrats, Independents, Tea Partiers, and progressives—need to focus on how to fix this. There is no problem more important for us to solve—not a debt that’s mightier than a mountain on the chest of our children, not the loss of manufacturing jobs in an astounding percentage, not the existence of inequity and a playing field completely unlevel in the American landscape, not the business of alternatives to poverty, not our addiction to foreign oil or foreign credit—because until we confront money in politics, we won’t have the capacity to solve this almost endless list of critical problems. Leadership not free to lead does not lead, cannot lead, and will not lead.
The question Congress asks over and over is not what makes sense just for America but what makes sense for Congress. And not Congress the institution, Congress the jewel of the republic that our framers gave us. No, but Congress as in the 535 fundraisers who must find a way to raise revenues that the Congressional campaigns need. We tax or we don’t in order to inspire campaign contributions. We listen or we don’t in order to inspire campaign contributions. We regulate or we don’t in order to inspire campaign contributions. We don’t govern, we grovel. We don’t lead, we collect.
This is a government in which members of both parties spend the majority of their time raising money. This is not the republic our framers intended. A government that thinks first about how to secure campaign welfare, not general welfare, is not a government that can answer the challenges that the world is giving us day after day. We need a Congress that can afford to talk honestly and openly and seriously about the complex issues of our time. We need a Congress that can lead.
Nowhere is this point more obvious than when thinking about Congress leadership in my industry, the banking industry. As the founder and president of Business First Bank, I’m a community banker, a Main Street kind of guy. America has just suffered the greatest economic decline that we have known since the Great Depression. Within two years we lost $17 trillion in household wealth. Three-point-six million jobs disappeared in 2008 alone—the largest loss since 1940. The unemployment rate, when coupled with the underemployment rate, exceeds 20 percent. Non-farm payroll jobs total 131 million today. We had the same number twelve years ago in 1999.
The strongest share of this disaster, in my opinion, rests at the feet of the greedy and irresponsible financial executives basking in the moneyed sunlight of Wall Street. No doubt the not-so-rich wanted bigger houses and cheaper mortgages. But it was a slew of insanely risky financial innovations that delivered these cheaper mortgages at a price America could not afford. I’ve been told by a member of Fannie Mae that three million Americans had mortgages they didn’t make the first month’s payment on. Wall Street gave mortgage lenders a way to bundle their mortgages and remove them from the books, while mortgage lenders gave Wall Street the chance to charge hefty fees on each deal. Since Wall Street took the mortgages off their hands, mortgage lenders stopped caring much for whether the mortgages they issued could be repaid. Not surprisingly, more and more mortgages were issued that homeowners couldn’t repay. And when the defaults began, the house of cards that was our financial sector collapsed.
To avoid an even greater disaster, a Republican president had to direct his Secretary of the Treasury, a former Goldman Sachs CEO, to issue the largest bailout in anyone’s history: $700 billion. In fact, many, many trillions more—it’s been estimated as much as $13 trillion—were secretly loaned by the Federal Reserve to grab the economy before it fell off a cliff. According to Gretchen Morgenson, financial columnist of The New York Times, nearly interest-free borrowings by the Wall Street biggest nineteen banks averaged a hundred billion a day in the second half of September 2008. It was a gift that hardworking families didn’t get.
This operation was called the Primary Dealer Credit Facility and was the engine for the Fed quietly to get trillions to banks too big to fail. Goldman Sachs did 84 transactions of this type totaling $620 billion. The head of that same firm was telling America, and the company testified publicly, that they didn’t need any help from the Fed or the government. Goldman Sachs not only received 60 percent of a trillion dollars, they paid almost nothing for it; it was a subsidy to the tune of some $30 billion in taxpayer money. As Edward J. Kane, a professor of economics at Boston College, wrote, “Never have so few owed so much to so many and given them so small a return.”
Is it a surprise that campaign contributions from the financial sector are rising faster than those from any other industry?
Did the Dodd-Frank financial reform bill address these issues? Did it eliminate the too-big-to-fail phenomenon? No, of course not. In fact, the largest nineteen banks are set to become larger than before the financial crisis. The bill didn’t reduce their size or increase their capital ratio or make them safer. It rewarded them. Wall Street is unpunished, undisciplined, unregulated, unchanged. They own Washington. The government under Bush and Obama provided guarantees against failure, furnished capital at virtually no cost as needed, and assumed the moral hazard of unlimited and unrestrained growth and subsidized them to the tune of billions every month. As a result, the banks are again recording huge profits and lavishing their executives with bonuses.
That’s why the Wall Street banks fight any reform that might force them to be smaller or more prudent or raise more capital or reinstate the provisions of Glass-Steagall, the 65-year-old Franklin Roosevelt–era prohibition against mixing the risk of investment banking with the prudence of commercial banking. Wall Street banks were once a source of capital that enhanced American business. They financed genuine innovation. They made America more competitive. But over the past 30 years, Wall Street has incentivized neither manufacturing nor bona fide innovation nor engineering skill nor competitive edges. Instead, Wall Street has prized regulatory innovation. They looked at the system of prudence and control that we inherited from our grandfathers and they realized they could make more money if the system were less prudent. What Wall Street now invests in is the regulation it needs to protect the billions in fees it now charges…
October 27, 2011
One afternoon this summer, in a park beside the Ajmil River, I sat with seven residents of Shahabuddin, a collection of villages in northern Afghanistan’s Baghlan Province. It was the first week of Ramadan, and the park was almost empty, but still the men — some middle-aged, others stooped and gray-bearded — whispered conspiratorially and became silent whenever anybody walked close. Several minutes into our conversation, one of the younger men, who’d been mutely worrying at a piece of grass, rose and abruptly stalked off. The others, embarrassed, apologized for him. “If Nur-ul Haq finds out we spoke to you,” one of them explained, “he will kill us.”
Nur-ul Haq is the commander of the Afghan Local Police in Shahabuddin. Since last winter, he has been primarily responsible for the security of the several thousand families living there. As one of the elders warily eyed two men in turbans squatting under some nearby shade, he told me that Haq and his local police had been felling people’s trees and selling them as timber. Another of the elders joined in and named three men whom he accused Haq of murdering. “These three murders are known to everyone,” he said. “Nobody knows how many others he has killed.” The former principal of a local school said that he and his eight brothers were forced to leave their village after they reported to the government that the local police had seized their family’s land. “Nur-ul Haq threatened to come with tanks and take us all out of our home and kill us if we continued to complain about him,” the man claimed, adding that he and his brothers were considering moving to Pakistan.
The elders estimated that more than 100 families had fled Shahabuddin because of the local police. The people were defenseless, they said, and indeed they all seemed cowed and frightened. But before we parted ways, one of them, with a note of defiance, assured me: “Nur-ul Haq has no place in this province. As long as the foreign troops are here, he is king. The minute they go, he should leave the country.” Another agreed: “I bet he can’t stay for one night in Baghlan if there are no foreign troops.” Grinning at the prospect, the old man added, “The people will rise against him.”
Haq’s unit is one of 51 local police forces that have been established across rural Afghanistan over the last year, employing more than 8,000 villagers. Eventually, the force is expected to reach 30,000 in more than 100 sites. The rapid rollout reflects a spirited commitment to the program by the U.S. military, which claims that local police throughout the country have subdued insurgents and helped tip formerly ambivalent communities toward the government. Former Defense Secretary Robert Gates has called the Afghan Local Police “potentially a game-changer,” and Gen. David Petraeus described it as “almost the personification of counterinsurgency.” Every U.S. officer I spoke with considers it essential to achieving a measure of stability in Afghanistan that will be sustainable in our absence. “This is our last shot,” one major told me. “If this doesn’t work, we got nothing.”
Under the auspices of Afghanistan’s Interior Ministry, the A.L.P. is technically “Afghan-owned” — a point that American officials are keen to emphasize. It would be more accurate, though, to describe it as a collaboration between the government of Afghanistan and an elite branch of the United States military called the Combined Forces Special Operations Component Command (or Cfsocc, pronounced “SIFF-sock”). The origins of the A.L.P. truly began with its predecessor program, the Community Defense Initiative, which in the summer of 2009 embedded small teams of Green Berets in Afghan villages to mobilize resistance against the Taliban and other militants. The following year, when Petraeus assumed command in Afghanistan, one of his priorities was to formalize the effort and increase its scale.
Now districts that are chosen to be local police sites designate roughly 300 men to receive uniforms, salaries, AK-47’s, training from U.S. Special Operations Forces and a mandate to defend their home villages against insurgents. In theory, each local police recruit must be approved by community elders and vetted by Afghanistan’s domestic intelligence service, while each commander answers directly to a district chief of police. These safeguards, along with a strict limit on powers (the A.L.P. can’t make arrests, patrol outside their districts or possess any heavy weaponry) are intended to prevent local police from resembling the predatory militias so abhorred by Afghans for their rampant depredations throughout the 1990s.
But selectively arming portions of any given population, no matter the precautions, can be risky business in Afghanistan, and the question looming darkly over the military successes of the A.L.P. — which Petraeus credited to the fact that “no one protects their home like a homeowner” — is what other purposes might their American-supplied guns and training find, especially after foreign troops leave the country. One highly positioned Afghan official, speaking on condition of anonymity, was not optimistic. “When you have a headache, you take pills,” he told me. “Some pills will cure your headache but damage your stomach in the process. That is what we have with the A.L.P. The local police are a temporary solution. Long-term, they are poison…”
October 27, 2011
Barack Obama was not in office for more than a couple of minutes, it seemed, before conservatives began trying to cover him in muck. Yet for almost three years, the administration has been scandal-less, not scandalous. In a capital culture that over generations has become practiced at the art of flinging mud pies, Republicans and a few reporters have been tossing charges against a Teflon wall.
First there was the pathetic charge that Obama was born in Kenya and therefore ineligible to be president. The story was heavily stoked by the conservative media, aided by the non-denial denials of GOP leaders, and gave Donald Trump his fifteen minutes of presidential contender fame. It was never taken seriously by the mainstream press, but the president ended the story in April of this year by taking the unprecedented step of releasing his birth certificate, a tacit acknowledgment that the desperate effort to smear him had become a political distraction.
This came after two years in which Fox News and congressional Republicans tried to make the case that Obama had abused his power by hiring unaccountable “policy czars.” Though the agitation lead to the ouster of a low-level White House policy aide, the broader charge never passed the Washington laugh test—policy czars have been fixtures in every administration since Richard Nixon’s.
During the 2010 campaign, Representative Darrell Issa, who would later become chairman of a key congressional investigative panel, called Obama “one of the most corrupt presidents in modern times.” He then walked the charge back for lack of evidence. Since taking over the committee, Issa has launched a series of investigations into alleged political malfeasance—including, for instance, that DNC fundraisers held in the White House violated the Hatch Act—that have so far yielded nothing.
Conservatives had especially high hopes about allegations that the Department of Health and Human Services (HHS) was illegally doling out waivers to the Affordable Care Act mandates to politically connected businesses and insurers. The conservative columnist Michael Barone called the health waivers part of Obama’s “gangster government.” But when the House Republicans demanded a GAO investigation, the GAO came back with bupkes.
Finally, at the end of August, the collapse of the solar energy company Solyndra into bankruptcy after a half-billion-dollar loan guarantee from the Department of Energy seemed to offer the Republicans the answer to their prayers. For several weeks, the creaky machinery of scandal in the press and on Capitol Hill revved up, with stories detailing how Solyndra executives had been in close contact with White House officials and how some of the company’s investors were high-profile political donors, having raised funds for Obama’s 2008 campaign. It certainly did not help that the president and vice president both touted Solyndra as a stimulus and clean energy success story, Obama doing so in a speech at the company’s factory last May.
But complications soon emerged. Though approved under Obama, the process to secure the loan guarantee had, in fact, begun in 2007 under President Bush. George Kaiser, an Obama fund-raiser initially implicated as the main influence peddler, was only one of the key investors in the firm—so were members of the Walton family, of Wal-Mart fame, and they had given generously to Bush. And some claims in the initial press reports—for example, that the Bush administration Department of Energy had rejected Solyndra’s loan application in its final days in office—later turned out to be flat out wrong (the committee responsible for vetting the project delayed approval by two months, raising some concerns but also suggesting that “the project appears to have merit”).
As these wrinkles started to appear, Republicans did not help their cause when, predictably, they started overreaching. Instead of keeping a narrow focus on the events surrounding how the company obtained funding and then went bankrupt despite red flags, they began to use Solyndra’s failure to implicate the entire loan guarantee program as a socialist Obama boondoggle. But it soon came to light that many of the loudest GOP critics, such as Senator Jim DeMint, had actually voted to establish the loan guarantee program back in 2005.
Investigations are ongoing and questions remain—for instance, what pressure, if any, did the White House exert on the Department of Energy to approve and maintain the company’s loan guarantee—so it’s possible that “Solyndra-gate” could explode into a full category 5 scandal. But on the strength of the evidence so far, that seems highly unlikely.
Obama’s presidency is nearly three years old. It has been nearly four years since the furor over Reverend Jeremiah Wright. During this period, Obama has been reviled by conservatives to a degree matched only by the venom directed at Franklin Roosevelt and, later, Bill Clinton. But the vituperation, distortions, and outright lies have been mostly about policies, alleged policies, conspiracy theories, and ludicrous fantasies.
In all that time—a record span, according to scholars—there has been no major Obama scandal to speak of. Some potential scandals—like Tom Daschle’s back taxes—have been nipped in the bud. (Two weeks after the inauguration, Daschle asked that his nomination to be HHS secretary not be sent to the Senate.) Other stories that might have paralyzed earlier administrations just fizzled.
The question is why.
First, a definition of terms. We’re not talking here about conspiracy theories or self-evident partisan sniping. A true scandal, as Dartmouth political scientist Brendan Nyhan puts it, is a “socially constructed event” in which elites decide that a sufficient perception exists that “a public figure has acted in a manner that contravenes established moral, political, or procedural norms.” In other words, a story becomes a scandal when the mainstream press begins treating it as such. According to Nyhan’s criteria, it’s when news stories that use the word “scandal” in the reporter’s own voice start appearing on the front page of the Washington Post. (That hasn’t happened yet with Solyndra.)
The question is, have Obama and his administration objectively engaged in less scandalous behavior, or has some combination of external forces kept scandals from spreading through the public consciousness? And if Obama has managed to build a scandal-proof administration, is that purely a good thing, or has it come at a cost?
Here I humbly offer some theories about how the Washington scandal machine works, and why there has been such a dearth of scandals in the age of Obama. There is, as usual, no one answer; the explanation is likely to involve some combination of the factors cited below.
THE PATTERN-OF-BEHAVIOR THEORY
During the 2008 campaign, Senator Obama, after some prodding by aides, made the death of his mother a part of his stump speech. While delivering his pitch on reforming health care, he told the moving story of Ann Dunham, who died at age fifty-two of ovarian cancer after spending the last months of her life fighting with her insurance company…
October 27, 2011
This image has been posted with express written permission. This cartoon was originally published at Town Hall.