H/T to Joey “Accordion Guy” deVilla for the link.
If North American cable-and-internet providers were honest, they’d produce an ad that went like this. Note that there’s some swearing involved, as is often the case with cable-and-internet providers.
March 29, 2013
If cable company ads were honest, we’d see something very similar to this
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March 25, 2013
Still “a riddle, wrapped in a mystery, inside an enigma”
Strategy Page on the psychological state of Russia:
Westerners are puzzled at the way Russian politicians are growing increasingly hostile to foreigners in general and the West in particular. Then there is the feud going on within the Defense Ministry over whether to import more Western weapons or rely instead on what Russian defense firms produce.
Scrounging up details from Russian media, discussions on the Internet and statements by the many members of the Duma (parliament) with access to the inner circle reveals a rather bizarre (to Westerners, and some Russians) state of affairs. Put simply, most of those currently running Russia really believe that the United States has formed an anti-Russian coalition that is surrounding Russia in preparation for an invasion. The motive behind this plot is the Western need for Russia’s many natural resources. The U.S. has been using pro-democracy and reform minded NGOs (Non-Governmental Organizations) within Russia to cause turmoil and weaken the government and military.
[. . .]
Creating the idea that Russia is surrounded by enemies, led by the old Cold War arch foe America is something older Russians were exposed to most of their lives. It persuades Russians to keep electing Vladimir Putin and his cronies. But a growing number of Russians are noting that there’s no sign of this conspiracy in the West, only bewilderment over what the Russians are saying. Over time, the Putin paranoia program becomes less believable to more Russians. There is growing fear that, rather than face a majority of Russians who don’t believe in the conspiracy, the current rulers will try to turn Russian into a strict police state, without the trappings of Soviet–style communism or any other ism besides the greed of the small ruling class.
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March 15, 2013
Is Lockheed’s C-130 Hercules the all-time champion in US pork barrel politics?
Ian Geldard linked to this rather interesting history lesson on the Lockheed C-130 transport aircraft (the RCAF is also a user of this type of plane, along with a large number of other air forces):
USAF Lockheed Hercules C-130 at Yokota Air Base in Tokyo (Photo from Wikimedia)
Here’s where the story starts to get interesting. After 25 years, the Pentagon decided that it was well stocked with C-130s, so President Jimmy Carter’s administration stopped asking Congress for more of them.
Lockheed was in trouble. A few years earlier, the Air Force had started looking into replacing the Hercules with a new medium-sized transport plane that could handle really short runways, and Lockheed wasn’t selected as one of the finalists. Facing bankruptcy due to cost overruns and cancellations of programs, the company squeezed Uncle Sam for a bailout of around $1 billion in loan guarantees and other relief (which was unusual back then, as William Hartung points out his magisterial Prophets of War: Lockheed Martin and the Making of the Military-Industrial Complex).
[. . .]
So what did Lockheed do about the fate of the C-130? It bypassed the Pentagon and went straight to Congress. Using a procedure known as a congressional “add-on” — that is, an earmark — Lockheed was able to sell the military another fleet of C-130s that it didn’t want.
To be fair, the Air Force did request some C-130s. Thanks to Senator John McCain, the Government Accountability Office (GAO) did a study of how many more C-130s the Air Force requested between 1978 and 1998. The answer: Five.
How many did Congress add on? Two hundred and fifty-six.
[. . .]
The Air Force’s approach of passing unwanted Herks off to the Air Guard and Reserves worked out nicely for Lockheed. The company allied with Air Guard and reservist advocacy groups to lobby Congress further. In an era of base closures, heavily lobbied governors would use the arrival of new planes to argue for the continuing life of bases in their states. In turn, states and their congressional delegations would fight to get new planes or hang onto existing ones. It was a veritable Lockheed feedback loop. Washington Post reporter Walter Pincus quoted a Pentagon official as seeing C-130 politics as a twist on the old military-industrial complex: “a triangle of the Guard, Lockheed, and politicians.”
The result: the military was often prevented from retiring the oldest Herks, the ones that really needed to be put out to pasture. For example, as Pincus reported, the Joint Chiefs and the Air Force concluded in 1996 that they had 50 more C-130s than they needed, but Congress stymied efforts to retire any of them. One tactic used was to hold nominees hostage: a Kentucky senator repeatedly held up Air Force promotions until four Kentucky Air Guard C-130s were taken off the chopping block.
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March 6, 2013
QotD: Canada Syndrome
It’s one of the marvels of the Canadian electorate. Show Canadians a special interest group that uses its government-granted privileges to fleece consumers, and they’ll embrace it as a “national champion,” a “uniquely Canadian way of life” or some equally vapid catch-phrase.
This is from the Wikipedia entry for Stockholm Syndrome:
Stockholm syndrome, or capture–bonding, is a psychological phenomenon in which hostages express empathy and sympathy and have positive feelings toward their captors, sometimes to the point of defending them.
What we suffer from is the economic policy equivalent. Call it “Canada Syndrome”: a tendency for consumers to identify with the producer interests that are holding them hostage.
Stephen F. Gordon, “Our Stockholm Syndrome about supply management”, Maclean’s, 2013-03-05
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February 26, 2013
Defence industry lobbyists versus actual USAF needs
Strategy Page talks about the ongoing drama of the Global Hawk UAV and the US Air Force’s attempt to get rid of the weapon:
The U.S. Air Force recently disbanded a Global Hawk UAV squadron. The reserve unit contained 200 personnel and operated an aircraft the air force is getting rid of. This is in spite of political opposition to the move (helped along by the manufacturers many lobbyists).
This all began last year when the U.S. Air Force cancelled all orders for the Block 30 Global Hawk because of reliability issues. This renewed Department of Defense threats to cancel the Global Hawk program entirely. In response Northrop Grumman (the RQ-4 manufacturer) lobbyists made sure that key members of Congress knew where Global Hawk components were being built and how many jobs that added up to. Elected politicians pay attention to that. This move delayed the RQ-4 Block 30 until there was enough political support to convince Congress to order the air force to accept the Block 30 RQ-4s and shut up.
The air force can take some comfort in the fact that Northrop Grumman fixed some of the problems (some of which the manufacturer said don’t exist or didn’t matter). The Block 30 was supposed to be good to go but the air force was not convinced and decided that Block 30 was just more broken promises. Congress was also tired of all the feuding and being caught between Northrup lobbyists and exasperated air force generals. The lobbyists, as is usually the case, eventually won. But the air force is not required to pay for operating the Global Hawks, thus the disbanding of the Global Hawk unit.
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February 25, 2013
Hollywood’s addiction problem
It’s not addiction to drugs — although we can be sure there’s more than enough of that — it’s addiction to government subsidies, tax credits, and special privileges not available to ordinary businesses:
With campaign season over, you’re not likely to hear stars bringing up taxes at [the] Academy Awards show. But the tax man ought to come out and take a bow anyway. Of the nine “Best Picture” nominees in 2012, for example, five were filmed on location in states where the production company received financial incentives, including The Help (in Mississippi) and Moneyball (in California). Virginia gave $3.5 million to this year’s Oscar-nominated Lincoln.
Such state incentives are widespread, and often substantial, but they don’t do much to attract jobs. About $1.5 billion in tax credits and exemptions, grants, waived fees and other financial inducements went to the film industry in 2010, according to data analyzed by the Center on Budget and Policy Priorities. Politicians like to offer this largess because they get photo-ops with celebrities, but the economic payoff is minuscule. George Mason University’s Adam Thierer has called this “a growing cronyism fiasco” and noted that the number of states involved skyrocketed to 45 in 2009 from five in 2002.
In its 2012 study “State Film Studies: Not Much Bang For Too Many Bucks,” the Center on Budget and Policy Priorities found that film-related jobs tend to go to out-of-staters who jet in, then leave. “The revenue generated by economic activity induced by film subsidies,” the study notes, “falls far short of the subsidies’ direct costs to the state. To balance its budget, the state must therefore cut spending or raise revenues elsewhere, dampening the subsidies’ positive economic impact.”
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February 21, 2013
Looming cutbacks to US military include general officers scrambling for a soft landing
It’s a tough world out there. It looks like it’ll be getting tougher for soon-to-be retired US military leaders:
Sources revealed today that a top U.S. Marine General is “extremely hesitant” about plans for his possible retirement, indicating a greater problem with military transition assistance programs.
General John Murphy, the former commander of Fleet Marine Forces-Pacific, is looking toward a future in the private sector, but he says he may have to lower himself to take any position in order to support his family.
“It’s scary out there with the economy the way it is,” said Murphy in a telephone interview with The Duffel Blog. “I’m certainly hoping that I can secure a job as a D.C. lobbyist or a consultant to a defense contractor. But shit, I’m just not sure anymore. I might have to degrade myself and be a military analyst at Fox News just to feed my goddamn kids.”
Murphy’s worries underscore a major problem of assisting military members on their way out of the service. Junior enlisted personnel usually go through a weeklong Transition Assistance Program, or TAP, but the classes for general officers have serious drawbacks.
“The enlisted classes set the guys up for everything. They basically pave the way for them to go college, give them job placement, the whole nine yards,” said Michael Phillips, a counselor with the TAP program. “But for Generals, they need to do a lot of the work on their own. Most of them have to search for at least a few minutes in their rolodex to find a contact at BAE Systems or Lockheed before they have an executive position.”
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February 14, 2013
Crony capitalists make pitch for industrial policy in defence purchases
Canada doesn’t really have a defence industry — certainly not in the sense of Britain, France, or the United States. We have some companies which happen to make products of use to the military (armoured vehicles, for example), but our government is not tightly tied to the fortunes of these companies in some sort of maple-flavoured Military-Industrial Complex. Some movers-and-shakers want to change that:
It goes without saying that the proposal to siphon funds to defence contractors is gussied up in industrial-policy jargon. For instance, we’re told how defence industries are “important sources of technological dynamism and innovation [and] leading-edge participants in global value chains.” (Who today isn’t part of a global value chain?) Also in keeping with current industrial-policy trendiness, the government is instructed to be strategically selective in KIC-starting the sector. “KIC,” you see, stands for “Key Industrial Capabilities,” which is what we’re told we should focus on.
But despite the alluring bells and whistles, the message to firms selling to the government is clear: Either pay up or forget about getting the contract. From now on, if the committee gets its way, how you plan to spread the industrial booty around the Canadian economy will weigh directly in the balance with how your product performs. The new fighter jet doesn’t accelerate quickly enough to elude missiles? Well, never mind that, it comes with a new plant in Mississauga. Shells pierce the new tank’s armour? Too bad. But the innovation spinoffs for Thunder Bay are just too good to pass up.
You might think that interpretation extreme. Surely safety for our soldiers and value-for-money for our taxpayers come first. But what else could be meant by the recommendation that bidders specify the industrial benefits they’re offering as part of their bid itself, rather than as an add-on after the performance characteristics of their product or service have won them the contract?
Suppose that instead of causing defence contracts to be inflated with offsets for Canadian industry, this committee consisting of a high-tech CEO, a former chief of staff at national defence, an IP specialist in a defence company, a retired general and Paul Martin’s one-time policy guru recommended levying a 5% tax on all government defence purchases and using the revenues thus generated to subsidize Canadian defence contractors?
I sent the original Globe and Mail URL to Jon saying, “The very last thing Canada should be attempting is to use government money to build a ‘defence industry’. Let the military buy what they need on the open market — regardless of country of origin — at market prices. The fetish to have a domestic defence industry is pure crony capitalism clothed in a “patriotic” fig leaf.”
February 6, 2013
Why does every infrastructure project cost more?
In his nominally NFL-related column, Gregg Easterbrook usually manages to insert interesting topics that are not in the least related to football:
Where Is the Bridge to Nowhere When You Really Need It? Another reason unprecedented increase in the national debt is not resulting in newly built infrastructure to help the economy grow is that government projects keep taking longer and costing more. Two years ago on Reuters, your columnist opined, “A combination of top-heavy bureaucracy, union rules, cost-plus profits and graft have made recent federally funded construction projects insanely expensive and slow. When the funding comes from borrowing by Washington, then businesses, unions and local petty officials have a self-interest in running up the cost while dragging their feet.”
That column ended by noting the slow pace and cost overruns in plans to replace the Tappan Zee Bridge on the Hudson River north of New York City.
Now two years have passed, and guess what’s happened to the Tappan Zee Bridge replacement project? It’s no closer to beginning. New York Magazine reports that $88 million has been spent just to study a bridge replacement — not for architecture drawings, just study. The original Tappan Zee Bridge, completed in 1955, cost $675 million in today’s dollars and required three years to complete. New York State officials are saying the replacement will cost at least $3 billion and take five years to build. New York Magazine warns the price is lowballing for an expected cost much higher.
New York is demanding that the federal government fund most of the new bridge. Borrowed funny-money would be used; contractors and unions would have every incentive to drag their feet, running up the bill, while corrupt politicians would want the project to last as long as possible, so there was more funny-money to steal.
Meanwhile the existing Tappan Zee Bridge continues to crumble and nothing’s being done. At the current snail’s pace, a new bridge is many years away. What if the existing bridge collapses? Politicians will claim they were never warned, just as they claimed they were never warned before storm surge from Hurricane Sandy smashed up lower Manhattan, Long Island and Hoboken, N.J. Running up the national debt is bad enough; not building what the country needs is even worse. But politicians observe that behaving recklessly, then blaming others, is what advances their careers. Barack Obama acted recklessly with the nation’s finances, and was re-elected. Chris Christie did nothing to prepare New Jersey’s low-lying city from storm surge, then blamed others, and made the cover of Time magazine. Where is the political leader who will place acting responsibly ahead of self-promotion?
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January 20, 2013
Corporate welfare — it’s the American way
Sheldon Richman on the amazingly inefficient US tax code and some of the ways it got that way:
When Congress and President Obama came up with their beyond-the-last-minute deal to put off addressing the coming fiscal crisis, The Wall Street Journal turned the spotlight on a little-noticed, yet too typical aspect of Washington’s machinations: “The bill’s seedier underside is the $40 billion or so in tax payoffs to every crony capitalist and special pleader with a lobbyist worth his million-dollar salary. Congress and the White House want everyone to ignore this corporate-welfare blowout,” the Journal reported.
So a bill that was represented as the first steps toward fiscal responsibility (try not to laugh too hard) contained billions of dollars in corporate welfare. And it was a bipartisan affair.
[. . .]
Manipulating the tax code to benefit particular interests has obvious appeal for politicians — it’s a source of power and influence — and a code that did not permit such manipulation would be much less attractive to them. Outright cash subsidies from the taxpayers, while not unheard of, smacks too much of cronyism and is more likely to alienate taxpayers. But complicated exceptions written into the tax laws can be presented as creative governance on behalf of the public interest. But it is cronyism as offensive as outright subsidies.
[. . .]
Corporate welfare is not primarily about lowering taxes. That would be a worthwhile goal, of course, and could be achieved simply by slashing tax rates and simplifying the code. But when taxes are lowered selectively by writing complicated exceptions into the law, the goal is to bestow privileges on cronies, not to reduce the burden of government on all. Corporate welfare, among its many sins, violates equal protection under the law.
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January 11, 2013
January 3, 2013
Rhode Island’s 38 Studios the new poster child for crony capitalism
The 2012 bankruptcy of Rhode Island-based video-game developer 38 Studios isn’t just a sad tale of a start-up tech company falling victim to the vagaries of a rough economy. It is a completely predictable story of crony capitalism, featuring star-struck legislators and the hubris of a larger-than-life athlete completely unprepared to compete in business.
Former Boston Red Sox pitcher Curt Schilling, an iconic figure in New England after anchoring a historic playoff comeback which ended a legendary 86-year title drought, founded 38 Studios near the end of his baseball career in the hopes of becoming a big shot in the intensely competitive multi-player gaming world.
Since 2006, Schilling invested millions of his own fortune into 38 Studios, and with the self-assured bravado he exhibited as a major league baseball player, set out to find investors to infuse his company with the roughly $50 million needed to complete 38 Studios’ first game. Although Schilling is the kind of local legend who could get a meeting with every venture capitalist in New England, Massachussets VCs passed on 38 Studios. WPRI-TV’s Ted Nesi reported that one such potential investor said “it would have taken a lot of babysitting to do a deal with Schilling because he was inexperienced and the management was inexperienced.”
Enter Gov. Donald Carcieri (R-R.I.), term-limited and searching for a legacy after presiding over one of the worst state economies in the U.S., featuring long spells of double-digit employment and frequent last-place finishes in rankings of business friendliness. In a classic spasm of “do something, anything” government desperation, Carcieri made it his mission to lure 38 Studios from its headquarters in Maynard, Massachusetts to Rhode Island.
Using his bully pulpit as both governor and chairman of the Rhode Island Economic Devlopment Corporation (RIEDC), a quasi-public agency whose mission is to promote business in the state, Carcieri pushed hard for 38 Studios to receive a $75 million taxpayer-guaranteed loan.
Each loan guarantee must be approved by the Rhode Island legislature, and when the votes were cast in 2010, only one lawmaker voted against it. Rep. Bob Watson (R-Greenwich) noted “a lot of red flags” in a “very risky” deal that was “too fast, too loose, and frankly, a scandal waiting to happen.” Watson added “more often than not, politicians are very poor when it comes to making business decisions.”
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December 28, 2012
The Military-Industrial Complex leads to “a bloated corporate state and a less dynamic private economy”
An older article from Christopher A. Preble, reposted at the Cato Institute website:
The true costs of the military-industrial complex, they explain, “have so far been understated, as they do not take into account the full forgone opportunities of the resources drawn into the war economy.” A dollar spent on planes and ships cannot also be spent on roads and bridges. What’s more, the existence of a permanent war economy, the specific condition which President Dwight Eisenhower warned of in his famous farewell address, has shifted some entrepreneurial behavior away from private enterprise, and toward the necessarily less efficient public sector. “The result,” Coyne and Duncan declaim, “is a bloated corporate state and a less dynamic private economy, the vibrancy of which is at the heart of increased standards of living.”
The process perpetuates itself. As more and more resources are diverted into the war economy, that may stifle — or at least impede — a healthy political debate over the proper size and scope of the entire national security infrastructure, another fact that Eisenhower anticipated. Simply put, people don’t like to bite the hand that feeds them.
And that hand feeds a lot of people. The Department of Defense is the single largest employer in the United States, with 1.4 million uniformed personnel on active duty, and more than 700,000 full-time civilians. The defense industry, meanwhile, is believed to employ another 3 million people, either directly or indirectly.
What’s more, these are high paying jobs. In 2010, when the average worker in the United States earned $44,400 in wages and benefits, the average within the aerospace and defense industry was $80,100, according to a study by the consulting firm Deloitte. And 80 percent of that industry’s revenue comes from the government.
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October 17, 2012
Dalton McGuinty’s “legacy”
All the media chatter about Premier Dalton McGuinty running for leader of the federal Liberals must be coming from folks who want to watch a national train wreck, says Michael Den Tandt:
Set aside that, with nine years as premier of Canada’s most populous province, constituting more than one-third of the national population, McGuinty would be past his best-before date at the best of times.
And let’s ignore his long track record of broken promises, beginning shortly after he was elected on a solemn vow to run balanced budgets and hold the line on taxes. He made that promise in writing. He broke it without a shred of visible remorse, blaming the other guys.
Let’s set aside the e-Health scandal, the Ontario Lottery and Gaming Corp. scandal, the eco-tax affair, and the continuing Ornge air ambulance scandal. While we’re at it, let’s wave off the abrogation of the rule of law in Caledonia. That’s all old news.
Forget the voluminous independent study by economist Don Drummond, who found, in a nutshell, that McGuinty’s entire approach to government in the previous eight years had been wrong-headed, slipshod and ruinously wasteful. Drummond recommended a radical course correction. McGuinty nodded sagely, kindly even, and ignored him.
We could even try — come on now, let’s do this — to ignore the Green Energy Act. This was the ideologically driven plan, still in place, to create an artificial market for “green” energy and erect thousands of 50-storey industrial wind turbines across Ontario, destroying the landscape for the sake of energy that only flows when the wind blows — that is, intermittently.
[. . .]
Let’s set aside, also, the cloying, nanny-state condescension of McGuinty’s approach to leadership — never a principle too firm to be melted into formless goo, never a controversy too sharp to be smothered in a warm quilt of apple-pie hokum. Never mind that, temperamentally, McGuinty is Mitt Romney without the millions. These are intangibles.
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October 15, 2012
Crony capitalism: a bipartisan plague
Veronique de Rugy writes about the problem both major US political parties have (and neither really wants to get rid of):
In his 1986 memoir The Triumph of Politics, former Reagan administration budget director David Stockman wrote: “I had long insisted, to any liberals who would listen, that the supply-side revolution would be different from the corrupted opportunism of the organized business groups; that it would go after weak [corporate welfare] claims like Boeing’s, not just weak clients such as food stamp recipients. Giving the heave-ho to the well-heeled lobbyists of the big corporations who keep the whole scam alive would be dramatic proof that we meant business, not business-as-usual.”
After four years as the Reagan administration’s fiscal whiz kid, Stockman left, objecting to the president’s inability or unwillingness to make good on his promises to cut government spending. Crony capitalism, having avoided a showdown with a principled adversary, has thrived ever since.
Cronyism is the practice by which government officials — Democrats and Republicans, liberals and conservatives — give preferential treatment to particular firms or industries in exchange for votes, campaign contributions, or the pleasure of promoting pet projects. Favored companies reap financial rewards, reduce their exposure to risk, and gain an advantage over rivals who don’t get the same government help.
[. . .]
Corporate double dipping isn’t new. Bipartisan federal, state, and local support for the “weak claims” of corporations has been going on for far more than 30 years, and not just in new and exotic industries such as alternative energy. The target of David Stockman’s ire, aerospace giant Boeing, continues to receive almost unfathomably huge direct and indirect subsidies from the federal government. Ninety percent of the value of the loan guarantees issued by the Export–Import Bank in 2011 went to subsidize Boeing. As a result, Carney reports, Boeing “accounted for 45.6 percent, or $40.7 billion, of Ex-Im’s total exposure in fiscal 2011.” With the help of federal guarantees, the company gained contracts from the likes of Air China and Air India.
Boeing shows its gratitude to taxpayers by overcharging them at every turn. The nonprofit Project on Government Oversight recently reported that “Boeing charged the U.S. Army $1,678.61 for a plastic roller assembly that could have been purchased for $7.71 internally from the Department of Defense’s own supplies. In another transaction, a thin metal pin worth 4 cents that the Pentagon had on hand, unused by the tens of thousands, ended up costing the Army $71.01 — a markup of more than 177,000 percent.” The watchdog group’s investigation found that Boeing overcharged the Army nearly $13 million in dozens of transactions, jacking up the price on small, mundane parts and in some cases charging thousands of times more than they were worth. What Stockman called the “corrupted opportunism of the organized business groups” has become business as usual.
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