Thursday, December 11, 2008

Bloggers of the World, Unite!

John draws attention to an issue that has escaped the notice of virtually the entire public and ought to be a nightmare issue for not only free-market libertarians and conservatives, but - perhaps more importantly - also for ascendant liberals and progressives. It is an issue that bespeaks the results of regulatory capture by powerful and/or well-organized interests. As Scott Payne of the excellent site Politics of Scrabble writes in the comments to John's post, it is thus an issue that is "ripe for a little grassroots blogospheric activism."

It seems that earlier this year our Congress passed - and President Bush signed - its official response to the Lou Dobbs Toy Scare of 2007. In the rush to pass this legislation (which sought to solve a problem that was linked to shockingly few actual injuries and/or deaths), Congress imposed with little debate a set of requirements that will be extremely costly for small manufacturers and importers of childrens' products to comply with. Specifically, these requirements include mandatory testing by government certified "third parties" of just about every conceivable product that is designed "primarily for children under the age of 12." They also impose new labeling requirements that will mandate each unit be labeled with a date and batch number. This is, by the way, without regard to where the product was manufactured - domestic products, products made in China, products made in Hong Kong, and product made in Europe must all comply. While one must always be careful in trusting the data provided by interest groups, one group of affected small businesses says that the testing alone will likely run in the neighborhood of $4000 per product. Importantly, as far as I can tell, this testing needs to be conducted on each separate shipment of a product, meaning the business needs to pay the testing fee every time they bring in (or, if they are a manufacturer, send out) a new shipment.*

The marginal costs of these requirements are considerably smaller for larger - and more politically organized and powerful - companies, who can bring in larger shipments, and thus distribute the testing fees amongst a far larger quantity of products.

If my reading of the per-shipment testing requirements is correct, the currently proposed rules would also encourage even more importation of mass-produced childrens' products overseas: imported mass-produced products can come in larger shipments and only need to be tested upon importation. Meanwhile, domestically manufactured products must have every shipment to a distributor tested, which is likely to be a relatively small quantity for a variety of reasons. Obviously, small-run imported products will also be disproportionately affect (again, assuming my reading of the testing requirements is accurate, which it might not be).

But even if there is no per-shipment testing requirement, the proposed rules would require virtually any version of a product to be separately tested. If, for instance, a business makes three products that are identical in every respect except their color, then each of those products will need to be tested.

It's probably safe to assume relatively few legislators actually read the contents of this legislation. It's also entirely possible that these effects were mere oversights, or at least simply the result of a lack of organization by the groups most affected. Then again, it's also possible that this legislation (and more likely the resulting regulations) was more or less drafted by the very groups it was meant to restrict. Whatever the cause, the fact is that this is a law and set of regulations that only serves to hurt small businesses while granting big business an even stronger control over the relevant market.

Fortunately, there is time to at the very least pass some form of remedial legislation or seek the scaling back of the proposed regulations. For that reason, and because this issue unites the common interests of principled liberals, conservatives, and libertarians, I can't think of many issues better suited for an non-partisan, non-ideological activist campaign. I'm not looking for terribly much here - I'm no Kos or Michelle Malkin. But a few phone calls and letters to Congress couldn't hurt.

For the record, an outstanding summary of the problems with the new law and rules is located here.

*I may be wrong about this assertion, though, as there is an awful lot of ambiguity in the legislation and in the rules that have been put forth so far.

Wednesday, December 10, 2008

Blagojevich Complaint Reveals Much

There's been a lot of speculation of who informed on Rod Blagojevich, with the most popular contender seeming to be Rahm Emanuel. Clive Crook has suggested that whoever in the Obama campaign received the solicitation had an obligation to come forward with what happened.

I initially was going to agree that Emanuel was the most likely informant. I was also going to argue that the Obama campaign stood to lose a lot if it was not the informant. But then I actually read the Complaint and affidavit. It's pretty clear from the complaint that: 1. If the allegations are true, Blagojevich is startlingly corrupt - more so than has been reported; and 2. there is nothing to suggest that Obama or anyone closely affiliated with him was aware of what was going on. It's also pretty clear that the allegations regarding the Senate appointment are the least of the charges against Blagojevich since there's no evidence that the crime was ever completed, which can't be said about the other allegations.

It looks like a lot of this arose as an offshoot to the Rezko trial. The wiretapping and bugging began in October - before the election and before Emanuel was rumored as a Chief of Staff candidate, and it looks like Blagojevich has been under investigation for much longer than that - at least since April. According to the complaint, the wiretap and bug were placed after the prosecution was informed about some illegal (quid pro quo-type) fundraising activities that Blagojevich was conducting in an attempt to maximize his cash on hand before a change in campaign laws at the end of the year. The informant was someone who was "associated with" Blagojevich, "assisted in campaign fundraising for" Blagojevich, and is somehow connected with an investigation of the Illinois Health Facilities Planning Board.

Most of the complaint is concerned with allegations of bribe soliciting and illegal fundraising activities dating back for years. There's also a lengthy allegation that Blagojevich, for the last month, has been threatening the Chicago Tribune with political retribution for their recent criticism of him. The allegations about the Senate seat take up the last twenty or so pages of the affidavit/complaint. It's extremely clear from the complaint that the feds were already listening when Blagojevich started soliciting bribes for the Senate seat.

The complaint itself provides some startling insights into the inner workings of machine and interest group politics, to say the least. It also provides a pretty strong argument for raising salaries for politicians in order to make them more independent.

With respect to the President-elect, however, the Complaint makes pretty clear that there was no active wrong-doing on Obama's part or on the part of his campaign. As importantly, it is also very unlikely that the Obama campaign was actually aware of what Blagojevich was trying to do. To the extent the complaint discusses the allegations about the Senate seat, it's pretty clear that most of Blagojevich's efforts on the Senate seat were confined to internal strategy discussions about how best to use the Senate seat as leverage to improve Blagojevich's financial situation. Despite speculation to the contrary - and with the exception of the now-infamous "Candidate 5" (and, arguably, the Service Employees International Union) - it looks like Blagojevich did not follow through with his attempts at leverage.

Although the Complaint contains a statement from Blagojevich that the Obama campaign was "not willing to give me anything but appreciation," in the context of the complaint, this does not imply that the Obama campaign was ever explicitly approached with a quid pro quo. Indeed, not one documented conversation involves a person that can conceivably be construed as being affiliated with Obama, although I have little doubt that there was at least one conversation in which Obama's preferred candidate was made explicit. Below is a summary of the Complaint's allegations with respect to Obama as I interpret them:

  • It looks like Blagojevich was approached sometime in October by a fundraiser for "Candidate Five" (believed to be Jesse Jackson, Jr.) in which Blagojevich says that the fundraiser promised Blagojevich an immediate $500,000 in campaign donations, plus another $1,000,000 if Blagojevich would appoint "Candidate Five." I'm guessing here, but this is probably when Blagojevich started to understand the potential for a quid pro quo in connection with the Senate appointment.
  • Beginning the day before the election, Blagojevich started to plot, with his advisors and close political allies, ways to extort a quid pro quo from the Obama campaign for the Senate seat. He considered four primary possibilities that he would accept: an ambassadorship, an appointment to head an organization, "Change to Win," affiliated with SEIU and a few other unions, a Cabinet appointment, and donations to a planned 501(c)(4) organization that Blagojevich would control once he left the governor's office.
  • Almost immediately, Blagojevich saw the difficulty of seeking an explicit quid pro quo from the Obama camp, saying the “'trick . . . is how do you conduct indirectly . . . a negotiation' for the Senate seat." This suggests that he understood, without asking, the difficulty of obtaining a true quid pro quo from the Obama camp.
  • In trying to figure out which private sector organization he should seek to head, Blagojevich tried to figure out which organizations would be most heavily dependent on the support of the President and thus most subject to the President's influence.
  • On November 5, Blagojevich met with an SEIU official, who sought to lobby Blagojevich on behalf of "Candidate 1," believed to also be the Obama camp's preferred candidate.
  • On several occasions, Blagojevich leaked information to the Chicago media regarding potential Senate candidates in the hopes of getting the Obama camp to approach him about the possibility of a quid pro quo. There is no suggestion that the Obama camp ever contacted Blagojevich in this manner; Blagojevich also was insistent that the Obama camp not know that the leaks came from him (implying, again, that he did not think he could exert direct pressure on the Obama camp)
  • The day after the first leak, Blagojevich spoke with two of his associates, one of whom is a DC-based political consultant ("Advisor B") of some form (presumably not directly affiliated with Obama, though almost certainly still having personal connections to elements of the Obama camp), the other of whom was co-Defendant John Harris . During this call, the three discussed possible ways of turning the Senate appointment into money for Blagojevich. Harris told the consultant that "we wanted our ask to be reasonable and[sic] rather than. . .make it look like some sort of selfish grab for a quid pro quo." Again, this suggests that Blagojevich understood he needed to hide his intentions if he was going to get what he wanted from Obama. During this call, the three discussed the possibility of a three-way deal in which they would get Obama to use his influence over the SEIU to get Blagojevich appointed the head of Change to Win. This was believed worth considering because it would prevent the appearance of a quid pro quo such that the Obama camp might be more willing to consider it. It eventually became clear that Blagojevich would need to wait two years to take advantage of this, although he did consider the possibility of seeking an appointment for his wife during the interim.
  • Shortly thereafter, on Nov. 10, Blagojevich indicated in a lengthy phone call with Advisor B's firm that he did not think it was worth pursuing an ambassadorship or Cabinet position with Obama because of the taint around his name; he also considered naming himself to the Senate as a way of avoiding impeachment. Advisor B's firm made clear that Blagojevich was going to have to wait two years before getting any kind of a private-sector position. It is implied that they advised him it was not worth trying to explicitly extort financial help from Obama, particularly because Harris restated Blagojevich's "thoughts that they should ask the President-elect for something for [Blagojevich's] financial security as well as maintain his political viability."
  • At some point, probably on November 9 or 10, it seems likely that someone in the Obama camp (though not necessarily Obama himself) contacted Blagojevich to apply some level of pressure to appoint "Candidate 1." This is largely conjecture on my part, but it seems possible, even likley, that the Obama camp indicated it would be willing to provide a level of political support for Blagojevich if he appointed their preferred candidate (i.e., help "maintain his political viability"), or at least withdraw their political support if he did not*; there is no reason to think, however, that Blagojevich made any formal or direct "ask" in these conversations beyond perhaps suggesting an interest in a Cabinet position or ambassadorship, which was presumably rejected.
  • After this conversation, Blagojevich again tried to engineer a leak, this time suggesting that he was strongly considering "Candidate Five," but my research of the Chicago Sun-Times' archives suggests this leak never made the paper.
  • Around November 11, Blagojevich started considering the possibility of creating a 501(c)(4) non-profit that he would be guaranteed to control once he was no longer governor. At this point, he began considering the possibility of getting the Obama camp to persuade certain, uhh, wealthy friends of Obama to contribute to the 501(c)(4) as a reward for nominating Obama's preferred candidate.
  • Blagojevich apparently did not think he was likely to get Obama's assistance in raising money for the potential 501(c)(4), as he immediately began to consider the possibility of nominating "Candidate 6," under the belief that "Candidate 6" could relatively easily raise money for Blagojevich. Blagojevich apparently did not know "Candidate 6" and did not trust "Candidate 6" enough to make the "ask" himself. It doesn't appear that Blagojevich was ever able to find someone to make the "ask" of Candidate 6 or Candidate 6's associates. However, Blagojevich still thought the 501(c)(4) route was worth considering as a way of getting something from the Obama camp, the apparent belief being that all he would be asking for would be fundraising assistance. Blagojevich's Washington advisor thought the Obama camp would be more open to the "Change to Win" appointment than the 501(c)(4) fundraising., but Blagojevich still preferred the 501(c)(4) route.
  • On November 12, Blagojevich proposed his 501(c)(4) idea to the SEIU official, who was still lobbying on behalf of Candidate 1, suggesting that the 501(c)(4) could be used to finance Candidate 1's special election campaign - and also indicating that he had heard Obama was not insistent upon Candidate 1. The official agreed to "put that flag up and see where it goes." Given the context (ie, the hint that Obama was no longer supporting Candidate 1), it seems likely that the implication was that Candidate 1 and/or the SEIU would do fundraising for the new 501(c)(4) if he nominated Candidate 1.
  • The next day, Blagojevich came up with a strategy for his "ask" of the Obama Administration. Specifically his strategy was to call an Obama advisor (the Complaint strongly suggests this meant Rahm Emanuel) and begin by saying "'this has nothing to do with anything else we’re working on but the Governor wants to put together a 501(c)(4)' and 'can you guys help him. . . raise 10, 15 million.'" Blagojevich indicated that he wanted this "ask" to be in Emanuel's head when he then brought up the issue of who he would appoint to fill Emanuel's Congressional seat and/or Obama's Senate seat. However, Blagojevich made very clear that he did not want Emanuel to think that the 501(c)(4) request was intentionally connected to the Senate and Congressional seat issues. Again, the implication is that Blagojevich understood without asking that no one in the Obama camp would even consider a clear quid pro quo.
  • Between November 13 and December 4, the Complaint does not document any additional conversations. However, it does not appear that during this period Blagojevich is alleged to have followed through with any of his extortion strategies, although the Complaint says hecontinued to weigh potential personal benefits of appointing various candidates, including the possibility of appointing himself (which was viewed as the only solution to his looming legal problems). This says to me that he may have temporarily given up on the idea of an outright quid pro quo under the belief that it would be extraordinarily difficult and risky. Also, and this is pure speculation on my part, but I find it likely that he recognized that a 501(c)(4) issue advocacy group probably did not require a pre-appointment quid pro quo; instead, he may have realized that whoever he appointed was going to have a lot of motivation to fund-raise for his 501(c)(4) whenever he so requested.
  • On December 4 and 5, Blagojevich indicated that he was moving "Candidate 5" (again, apparently Jesse Jackson, Jr.) up the list because of that Candidate's fundraising ability. There was apparently an understanding that "Candidate 5" would fundraise heavily for Blagojevich if appointed, although there is no allegation that "Candidate 5" was directly involved with this understanding, only that some of his fundraisers were; Blagojevich believed that he could extort some of this money from "Candidate 5" up front under the pretense of "insuring" that "Candidate 5" would raise the money. Although Blagojevich intended to ask for the upfront money, the Complaint makes pretty clear that he never had the opportunity to do so. He did, however, tell one of his contributors to approach one of Candidate 5's contributors with an implicit "ask" for upfront money. On December 5, when he started getting wind of the investigation, Blagojevich had his fundraiser rescind the "ask," presumably before it reached Jackson's ears.

One final thing - in terms of the source who led to the wiretap, I think this Sun-Times article provides some pretty strong clues.

Anyways, the bottom line of all this is pretty simple - Blagojevich apparently believed Obama and Emanuel to be extremely "by the book" when it comes to this sort of thing, to the point that he does not seem to have ever actually made a explicitly quid pro quo offer. Instead, Blagojevich was insistent that the Obama camp not be aware - or even suspect - that he was seeking a quid pro quo. He did, however, try repeatedly to get them to offer him a quid pro quo - but they never took the bait. There was apparently some kind of quid pro quo offer with respect to one of Jackson's associates (there is little suggestion that Jackson was himself involved), but even that does not appear to be your traditional bribe, but instead a promise to engage in fund-raising activities on Blagojevich's behalf.

* Although I may have a problem with tactics like this, there is to my knowledge nothing illegal about them; instead, they seem to be pretty much standard "logrolling."

UPDATE: Much, much more at memeorandum.