Secrets of the American Nomenklatura

November 20, 2011 

By Clarice Feldman

With the rise of independent media, the secrets of the American nomenklatura are coming into clearer focus, the shameless exploitation of the good will and treasure of the people increasingly put on view for all to see.

1. The media and the Democrats are joined at the hip and have created a "hereditary celebrity class"

One of the fastest ways to celebrity and fortune (besides perhaps going on Dancing with the Stars, being adopted into the Hilton or Kardashian families and making a porn video) is to be the child of a politician or a well connected political operative.

If your father is a Republican this route is generally available to you only if you are very stupid like Meghan McCain or perfidious like Ronald Reagan Jr and his sister Patty Davis, someone who can be counted upon to trash your father's party until the novelty wears off. (Jenna Bush is a rare exception to this rule.

If you are a Democrat, like JFK, Jr, Mika Brzezinski, or Maria Shriver who can be counted to toe the party line, the door is wide open.

The capper was the announcement this week, that Chelsea Clinton has been hired by ABC. Walter Russell Mead could barely contain his contempt:　

"In another win for the famously blind meritocracy that rules American life, rewarding the ultra-talented and pushing the less brilliant and skilled into the outer darkness, Chelsea Clinton has landed a coveted position at NBC News. This was almost as much a surprise as her admission to Stanford; one can only marvel at the sheer guts and talent that have enabled her to overcome our society's fixed aversion to giving a chance to the relatives of the rich and the prominent.[snip]

The increasing sense that this country is run by a hereditary celebrity class is one of the most corrosive and dangerous forces eating away at our common life. The children of famous politicians could do our country an immense service if they sought out ways to serve that were more low profile. This would be particularly true for the children of extremely rich politicians."

TV news is now officially entertainment and if you are looking for journalism turn it off and look elsewhere. 

2. The political class views the taxpayers as cash cows to be milked for their own benefit and the benefit of their friends , children and contributors

Just days after Mead's plaint, we learned that the Department of Energy blew even more money on a Robert Kennedy Jr. project, than it did on the already well-known Solyndra fiasco.

Kennedy's company Vantage Point Partners was the major shareholder in a solar energy company, Bright Source. One of Vantage's former principals, Sanjay Wagle, left to work at the Department of Energy, advising on energy grants. In that position he advanced through a $1.4 billion loan guarantee to Bright Source. It was a risky loan and any new jobs the project would have created would have cost us $1 million per job.

Whether the companies survive depends on the success of a solar project known as Ivanpah, and that is far from certain as is who will get paid what if the project fails: 

The Ivanpah project, along with four other licensed solar projects to be built in the Mojave Desert, are facing numerous lawsuits filed by environmental groups and Native Americans as biologists have discovered the site is home to the desert tortoise and cultural artifacts.

In 2010, when the DOE granted the 7-figure bailout, BrightSource was admittedly already on shakey (sic) ground financially with $1.8 billion of debt.

According to company filings with the Securities and Exchange Commission, "Our future depends on our ability to construct Ivanpah, our first utility-scale solar thermal power project, in a cost-effective and timely manner.　 Our ability to complete Ivanpah and the planning, development and construction of all three phases are subject to significant risk and uncertainty."

It will be interesting to see if BrightSource becomes another black hole for taxpayer money from the Stimulus, or if we will see a positive return on our tax dollars.　 If we never hear of　BrightSource again I guess we'll all know the answer to that question.

If you aren't thrilled to learn that over a billion dollars of your money was spent to bail out wealthy investors who'd made a risky investment that apparently continues to bleed money, the news about GE's tax payments and the GM auto bailout losses aren't likely to make you any happier.

Tuck enough money in Obama's fundraising g-string, and like casting crumbs on the water, lots of bread will come floating back your way.

Another way to get whatever you want is to be a CEO or billionaire who speaks out for the Administration. General Electric's Jeffrey Immelt has done more than contribute money in the Obama fundraising, he has been an outspoken yes man to all of the President's lunatic economic plans and policies. Timothy P. Carney in the Examiner:

Obama wants cap-and-trade, GE wants cap-and-trade. Obama subsidizes embryonic stem-cell research, GE launches an embryonic stem-cell business. Obama calls for rail subsidies, GE hires Linda Daschle as a rail lobbyist. Obama gives a speech, GE employee Chris Matthews feels a thrill up his leg. I could go on.

Then there's the personal connections: CEO Jeff Immelt sits on the President's Economic Recovery Advisory board and was asked by Obama's Export-Import Bank to the opening act for the President at the most recent Ex-Im conference.

Finally, there's the philosophical similarities. Days after Obama promised in his inauguration to "remak[e] America," Immelt wrote to shareholders:

The interaction between government and business will change forever. In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.

Crony capitalism has its rewards and they are damn near priceless as the president and Congress work the economic throttles. John McCormack in the Weekly Standard:

"General Electric, one of the largest corporations in America, filed a whopping 57,000-page federal tax return earlier this year but didn't pay taxes on $14 billion in profits.　The return, which was filed electronically, would have been 19 feet high if printed out and stacked."

Paul Ryan made the size of the return public as he attacked the inconsistencies of corporate taxation:

Ryan used the data point to underscore the irrationality of the corporate income tax code. He also contrasted GE with UPS to make the point that the corporate income tax code doesn't make sense. "UPS　paid a 34 percent effective tax rate," while its biggest foreign competitor, DHL, paid a 24 percent tax rate, Ryan said.

The problems with the corporate taxes occur because "Republicans and Democrats, both parties, sit in Congress and they're picking winners and losers," Ryan said.　The solution, according to the Wisconsin congressman: "Get rid of those loopholes and lower tax rates by a corresponding amount. Don't lose revenue, but for every loophole you pull out, and deny a company from being able to get this little carveout,　you can lower the rates so we can be more competitive with our competitors overseas. We want to stem the bleeding of jobs going overseas, of foreign companies buying U.S. companies and taking headquarters overseas."　

Immelt is not the only pay-to-play executive puppet for Obama. This week we saw more billionaires racing to Washington purportedly to seek higher income taxes. Of course, most have shielded their income using every tax dodge available to them, but unavailable to those of you cash cows who sustain themselves on ordinary earned income. And their hypocrisy was evident in this Jon Stewart video where when shown how easy it would be to simply contribute to the US Treasury, each of them pointedly refused the offer.

Unions, too, have gained enormous economic and strategic benefits in exchange for  their contributions of men and money to Obama and the Democrats. It's not always evident how much that's costing us, but the auto bailout, which turned the law on its head to deprive secured creditors of their rights and save GM officials' jobs and UAW members their perks without requiring any sacrifice from them, is costing us even more than the huge sums we were told it would. Shikha Dalmia in Reason: 

The Treasury Department yesterday revised its loss estimate for the Government Motors bailout from $14.33 billion to $23.6 billion, thanks to the company's sinking stock price. GM's Sept. 30 closing price, on which the new estimate is based, was $20.18, about $13 less than its December IPO price and $35 less than what is needed for taxpayers to break even.

The $23.6 billion represents a 25 percent loss on the feds $60 billion direct "investment" in GM. But that's not all that taxpayers are on the hook for. As I explained previously, Uncle Sam's special GM bankruptcy package allowed the company to write off $45 billion in previous losses going forward. This could work out to as much as $15 billion in tax savings that GM wouldn't have had had it gone through a normal bankruptcy. Why? Because after bankruptcy, the tax liabilities of companies increase since they have no more losses to write off.

This means that the total hit to taxpayers, who still own about a quarter of the company, could add up to $38.6 billion.

The costs of these improvident crony capitalist bailouts exceeds the actual individual project losses, as the Director of the Congressional Budget Office admitted this week. We are not only in huge debt for these crazy bailouts but the debts themselves are a huge drag on the economy going forward . Peter Suderman in Reason:

Elmendorf says that, according to CBO's estimates, with the stimulus legislation in place, "the level of GDP would be a little lower at the end. That is, a net negative effect on the growth of GDP over 10 years." Elmendorf then confirms that CBO estimates that the economic drag will continue in the following decade:

SESSIONS: And in the next 10 years, since you're carrying that debt and paying interest on it and the stimulus value is long since gone, it would be a continual negative of some effect?

ELMENDORF:　Yes, it would represent a drag on the level of GDP beyond that, if no other actions were taken.　

As with all CBO's projections, you have to take these with a grain of salt, especially when you start looking out two decades into the future. I've been critical of the way folks have used the CBO's stimulus job-creation numbers in the past, and this sort of long-term economic forecasting is not the most precise tool either, to say the least. Counterfactuals-like asking what economic growth would have looked like the absence of the stimulus-probably tell us more about our current economic assumptions than about alternate economic timelines.

Still, it's worth noting, if only because even the mildly Keynesian congressional scorekeeper agrees that borrowing $800 billion dollars ultimately creates a drag on the economy and a net loss in economic performance relative to what otherwise might have been. And yet the administration went ahead with the legislation anyway, arguing that it would be more or less a free lunch in the long run.

3. The Supreme Court action on the three ObamaCare Cases it granted certiori on this week might well encapsulate the principle that we citizens are, in fact cash cows there for the federal government to milk.

James DeLong in a brilliant article explains this development.

Susan Seven-Sky v. Holder, the D.C. Circuit Court opinion earlier this month upholding the individual mandate in ObamaCare, took the path of brutal candor. If any limits on congressional power exist, they are invisible to the naked eye, and the activity/inactivity distinction that the law's opponents are pushing does not stand up against the precedents of Wickard, Raich, and Heart of Atlanta, all of which regulated activities with only tenuous links to interstate commerce.

An interesting dimension of the case received no attention, though. The government's requiring an individual to purchase health insurance is based on two rationales. The first is that we are a soft-hearted people, so when someone needs healthcare, we want to provide it, even if the person has no insurance. The court's opinion put the price of this compassion at $43 billion per year, which is shifted to others in the system since the health industry must cover the cost somehow.

The second rationale is that the law's subsidy and special interest provisions, such as community ratings and coverage of pre-existing conditions, cannot work unless we force the healthy young to subsidize the sick by joining the system and paying premiums that exceed the young's actual demand on the resources.

The two rationales present different moral and constitutional issues. Forcing someone to buy insurance because we are soft-hearted might be a trivial imposition, if the mandate were to buy a policy tailored to his/her own circumstances, as offered by a company operating in a free market. Forcing someone to buy insurance so they can serve as a cash cow for favored interests is another thing entirely.

Conservatives usually have sport with Justice William O. Douglas's 1965 opinion in Griswold v. Connecticut "that specific guarantees in the Bill of Rights have penumbras, formed by emanations from those guarantees that help give them life and substance." He found emanations from the First, Third, Fourth, Fifth, and Ninth Amendments that invalidated Connecticut's ban on contraceptive devices.

Actually, Douglas had an arresting point, though perhaps better cast in terms of Venn diagrams than penumbras and emanations. But if the specific amendments are emanating, let us count how many of these irradiate a "you are a cash cow" mandate:

First (Freedom of association should extend to commercial associations)

Third (Quartering troops-the principle is no imposition on one person of burdens that should be shared. Besides, if Douglas can use it, so can I.)

Fifth (Takings cases specifically say that burdens that should be borne by the community as a whole should not be put on one person-why is subsidizing the sick not something to be borne by the whole community?)

Ninth (Rights retained by the people)

Tenth (Federal government has no power not delegated to it by the Constitution)

Thirteenth (No involuntary servitude)

Fourteenth (Privileges, immunities, and due process of law)

That is a lot of emanations, which makes it a bit depressing that nowhere in any of the cases on ObamaCare does there seem to be a serious argument that the individual mandate is an intolerable intrusion on economic liberty, imposed for the benefit of whichever interests capture the healthcare regulators.

The extent to which the political class has used insider information to enrich itself (over and above the gifts to its friends, contributors and family) is detailed in a recently released book.

Only one political figure has spoken out against the nomenklatura and its corrupt actions, and too many stood silent while the nomenklatura nailed her to the wall. If you didn't understand this before, this op ed in the Wall Street Journal makes clear why Sarah Palin aroused their considerable enmity:

I've learned from local, state and national political experience that the only solution to entrenched corruption is sudden and relentless reform. Sudden because our permanent political class is adept at changing the subject to divert the public's attention-and we can no longer afford to be indifferent to this system of graft when our country is going bankrupt. Reform must be relentless because fighting corruption is like a game of whack-a-mole. You knock it down in one area only to see it pop up in another.

What are the solutions? We need reform that provides real transparency. Congress should be subject to the Freedom of Information Act like everyone else. We need more detailed financial disclosure reports, and members should submit reports much more often than once a year. All stock transactions above $5,000 should be disclosed within five days.

We need equality under the law. From now on, laws that apply to the private sector must apply to Congress, including whistleblower, conflict-of-interest and insider-trading laws. Trading on nonpublic government information should be illegal both for those who pass on the information and those who trade on it. (This should close the loophole of the blind trusts that aren't really blind because they're managed by family members or friends.)

No more sweetheart land deals with campaign contributors. No gifts of IPO shares. No trading of stocks related to committee assignments. No earmarks where the congressman receives a direct benefit. No accepting campaign contributions while Congress is in session. No lobbyists as family members, and no transitioning into a lobbying career after leaving office. No more revolving door, ever.

This call for real reform must transcend political parties. The grass-roots movements of the right and the left should embrace this. The tea party's mission has always been opposition to waste and crony capitalism, and the Occupy protesters must realize that Washington politicians have been "Occupying Wall Street" long before anyone pitched a tent in Zuccotti Park.

No wonder all those Congressional figures who have grown fat at the public trough, in large part through insider trading and sweetheart deals with contributors view her with alarm.