Thursday, January 25, 2018

Now, that's what I call a bargain

According to the International Business Times, the 2017 tax bill may cause the Koch brothers to clear an extra $1 billion after-tax each year that it remains in force.

Given that point, what a bargain for them to have paid Paul Ryan's fundraising committee a mere $500,000 shortly after the tax act passed. That's only about 0.05% of a single year's yield - although it's obviously true that they've paid off plenty of other people as well.

Ryan of course also benefited, and got paid by, plenty of other very rich people by helping to ram through the tax bill. But still, without needing to compute who paid him how much in exchange for how much (and express, criminally punishable quid pro quos are wholly unnecessary to this), it is an interesting question, which the public choice literature has studied over a period of decades, why he and others like him can't clear even more from their largesse than they already do.

Gordon Tullock wrote a number of interesting works, including this one, on why the Washington rent-seeking industry, although we think of it as large, is actually so small (and poorly paying for the government actors who provide the payoffs) relative to the benefits they provide. He noted that this suggests the industry is highly "inefficient" - a fact of which we should be glad, since if it were more "efficient" at rent extraction this would probably cause the collapse of the U.S. economy and immiserate (or further immiserate) the hundreds of millions of Americans who are not in a position to reap the fruits of perverting government processes.

One of the key factors Tullock identifies is that both legal constraints and informal norms, by making it harder to pay really large amounts and have explicit quid pro quo deals without courting jail time, help to make the industry so "inefficient." But the rise of partisan norms, decline of democratic accountability, and decline of prosecutorial independence from the presidency (if sustained) could certainly move towards making the rent-seeking / corruption market increasingly "efficient."

Forget draining the swamp; the question now is to what extent the swamp will start draining us.

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