How Big Government and the Permanent Political Class Facilitate Scandal

Yeah, the permanent political class – they’re doing just fine. Ever notice how so many of them arrive in Washington, D.C. of modest means and then miraculously throughout the years they end up becoming very, very wealthy? Well, it’s because they derive power and their wealth from their access to our money – to taxpayer dollars. They use it to bail out their friends on Wall Street and their corporate cronies, and to reward campaign contributors, and to buy votes via earmarks. There is so much waste. And there is a name for this: It’s called corporate crony capitalism. This is not the capitalism of free men and free markets, of innovation and hard work and ethics, of sacrifice and of risk. No, this is the capitalism of connections and government bailouts and handouts, of waste and influence peddling and corporate welfare. This is the crony capitalism that destroyed Europe’s economies. It’s the collusion of big government and big business and big finance to the detriment of all the rest – to the little guys. It’s a slap in the face to our small business owners – the true entrepreneurs, the job creators accounting for 70% of the jobs in America, it’s you who own these small businesses, you’re the economic engine, but you don’t grease the wheels of government power.  

  -Governor Sarah Palin, September 3, 2011

More than a year and a half later, prescient Palin is still right,and there's a reason she uses the phrase "permanent political class" rather than simply "D.C. politicians". The permanent political class does not just include elected officials, but also those who have become entrenched in the federal government in some manner due to government's constant growth. The permanent political class also include revolving door appointees who oversee various agencies, donors who get plum ambassadorships, and bureaucrats whose connection to government allow them to unethically pad theirs and others' pocketbooks. The expansion of government provides the perfect breeding ground for corruption, cronyism, and unethical behavior--compounding the scandalous assault on America's liberties.

Meet Mike McConnell. McConnell is the vice chairman of Booz Allen Hamilton-- the government contractor whom Edward Snowden worked for prior to fleeing to Hong Kong and informing the world that the government was seizing the phone records of Americans. McConnell has netted $1.8 million in Booz Allen Hamilton stock sales in 2013 and has secured over a billion dollars in government contracts. Of course, there is nothing wrong with making money off investments or profiting from your business's success. McConnell, however, is not simply a successful private sector businessman. McConnell was head of the NSA during President Clinton's administration before going to Booz Allen Hamilton in 1996. He has revolved back to the public sector when President Bush selected him as director of national intelligence in 2007 before returning to Booz Allen Hamilton in 2009. As the Daily Beast summarizes (emphasis added):

In 2007 he returned to government employment when President Bush selected him to be the second director of national intelligence (a bureaucratic position created out of the 9/11 Commission to manage bureaucracy). According to excerpts of Dana Priest and William Arkin’s Top Secret America: The Rise of the New American Security State posted by The Washington Post, as DNI, McConnell pushed for increases in intelligence contracting. After serving as DNI, McConnell returned to Booz Allen in 2009 as executive vice president in charge of the firm’s intelligence business. In 2011 he was named vice chairman of the company.

That revolving door sure is nice, huh, Mr. McConnell? While a government appointee he pushed for more contracting, then return to the private sector to reap the private sector fruits of his public sector lobbying.

Next, let's meet Howard Guttman. Guttman was a major donor to both President Obama's 2008 campaign and his 2009 inauguration (who also, as an Obama surrogate, bashed Governor Palin's parenting skills). President Obama returned the favor by giving him an ambassadorship in Belgium. It has recently been revealed that Guttman's security detail allegedly turned a blind eye when Guttman solicited underage prostitutes. Additionally, the investigation into these matters have been halted by the state Department. The is a prime example of the way things work for the permanent political class. Political donations lead to plush appointments, and wrongdoing is swept under the rug.

Additionally, a story broke earlier this week that scores of federal bureaucrats may have benefited financially or facilitated insider trading from having foreknowledge of changes in Medicare policy:

The surge of trading in Humana’s and other private health insurers’ stock before the April 1 announcement already has prompted the Justice Department and the Securities and Exchange Commission to investigate whether Wall Street investors had advance access to inside information about the then-confidential Medicare funding plan. 

Sen. Charles E. Grassley (R-Iowa) told The Washington Post late last week that his office reviewed the e-mail records of employees at the Department of Health and Human Services and found that 436 of them had early access to the Medicare decision as much as two weeks before it was made public. 

[...] 

Grassley’s investigators have interviewed Hayes and private-sector political-intelligence consultants. But Grassley made clear Friday that while the SEC continues to investigate who made large trades in advance of the Medicare announcement, he will focus on adding transparency to the political-intelligence-gathering process, including asking more about “how the government handles market-sensitive information.” That kind of data, he said, “should be available to everyone at the same time, not handled loosely in a way that allows special access to some individuals.”

In mid April, just a few weeks after this trading spike and just ahead of the reporting deadline, Congress and the President overturned a provision of the STOCK Act that, in part, removes the requirement for some government officials to report their stock trades and other financial information. It has not been revealed if these hundreds of federal employees made trades with foreknowledge of the policy change, and it is unclear if any of these individuals were among those "senior officials" who would have been required to report their financial information if the STOCK Act provision would have remained.  Whether it was the bureaucrats themselves or others who benefited, this proves to be yet another example of the permanent political class benefiting at the expense of the American people.

Additionally, such unethical activity points to the concern with the burgeoning $100 million industry of political intelligence (an oxy moronic phrase, of course) where these consultants provide information to Wall Street based upon action in Washington D.C.. The bigger government becomes, the bigger this industry becomes and the greater the opportunity for the permanent political class to benefit at the expense of taxpayers. Legislation has been proposed to require political intelligence consultants to register,similar to the way that lobbyists do. However, such proposals were shot down by people like Congressman Eric Cantor, whose wife works in securities and investments and who received a lot of campaign donations from the industry, as Peter Schweizer detailed in a Forbes article in April:

But the Grassley provision was struck down. Leading the charge to kill the political intelligence language were House Majority Leader Eric Cantor (R-VA) and Sen. Joseph Lieberman (D-CT). When Rep. Cantor introduced the House version of the bill, it lacked provisions to regulate the political intelligence industry. Asked why the measure had been omitted, Rep. Cantor’s spokesperson Laena Fallon said the language was “extremely broad” and that the “unintended consequences on the provision could have affected the first amendment rights of everyone participating in local rotaries to national media conglomerates.” 

[...] 

What Cantor and Lieberman failed to mention were their relationships to the financial services industry. In the 2012 election cycle, Cantor raked in $896,900 from securities and investment firms. And his wife, Diana Cantor, is an investment committee member for an investment adviser that manages almost $900 million in private fund assets. During the 2010 election cycle, Sen. Lieberman bagged over $2 million in campaign donations from securities and investment firms, the most of any industry.

As government grows, more opportunities arise for the permanent political class--be they politicians, political appointees, donors, or bureaucrats--to benefit at the expense of taxpayers and to engage in scandalous activity. These is the result of one party's policies or leadership, it is the result of an ideology where the hand-in-hand relationship of  "big business" and  "big government" is seen as preferable to the invisible hand of the free market.

Crossposted here and here.