Venezuela Useful Idiots Reminder

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You don't see much news coming out of Venezuela these days.  The government there has stopped releasing most economic data, and then, what reporter wants to ferret out the facts by volunteering for the Venezuela beat?  But yesterday the Wall Street Journal ran a big front-page story with the latest economic news from Caracas.  Maybe you thought Venezuela had hit rock bottom a year ago, but as you will see, it has in fact gotten yet far worse.  Still, they probably have some ways to go before achieving the final end game of socialism, à la North Korea.

Today I'm going to combine some passages from the WSJ report with a reprise of a post I wrote a little over a year ago, December 2016, titled "Venezuela: Useful Idiots Roundup."   In that post I collected a good sampling of quotes from progressive idiots uttered between 2007 and 2015, each praising the great success of the Venezuela/Chavez economic model.  The quotees include the likes of Bernie Sanders (of course) and of Hillary's favorite economic advisor, Nobel Prize-winning economist Joseph Stiglitz.  Many of the quotees hold out Venezuela as a model for the U.S.  Really.  Nor have I seen a one of them later walk back their words.  They just move on to other causes and hope the whole thing will be forgotten.  In the New York Times and Washington Post and ABC/NBC/CBS/CNN/MSNBC, it will be forgotten.  But not at the Manhattan Contrarian.

The WSJ article, by Anatoly Kurmanaev and Kejal Vyas, is headlined "Venezuela's Oil Production Is Collapsing."   Start with the subject of the oil, the mainstay of the Venezuelan economy:

Crude oil production fell 12% in December from the month before, according to government figures released Thursday. Over all of 2017, output was down 29%, among the steepest national declines in recent history, driven by mismanagement and under investment at the state oil company, say industry observers and oilmen.

So what is wrong at the oil company that they can't just crank up the pumps and produce more of the stuff?  Maybe it's that socialist-style management:

The decline has been exacerbated by a management purge at state-run PdVSA by Mr. Maduro that has paralyzed the oil giant. Seventy senior managers have been jailed on graft allegations in the past three months. Generals with no industry experience have been named to run the firm.

And how's the rest of the economy doing?

Over the past four years, the country’s economy has shrunk by about 40% and inflation has surged—topping 2,600% last year, according to the National Assembly. Nearly one in four factories didn’t reopen after Christmas, according to a local industry association.

And the overall picture for the people?

Malnutrition is spreading among the young and elderly, while health officials report a resurgence of illnesses ranging from malaria to diphtheria. Meanwhile social stability is fraying. At least four people have died during outbreaks of looting in recent weeks.

By all means go to the link and read the whole thing.  Now, here's my useful idiots roundup from a year ago:

Linda Poon in Wired, April 25, 2016 (!) ("Venezuela's Economic Success Fueled Its Electricity Crisis"):

Earlier this April, . . . president [Maduro] called on women to stop using hairdryers, and to save them only for “special occasions.” He also asked citizens to hang their clothes instead of using dryers and to embrace the heat. . . .  The current crisis is essentially what [Professor Victor] Silverman [of Pomona College] calls a problem of the country’s own economic success. . . .  “The Venezuelan economy reduced poverty at one of the most rapid rates in the world, and certainly one of the most rapid rates in Latin America over the past 20 years,” he says. “That meant people had the money to buy refrigerators, air conditioners, and … hairdryers.”

Ben Norton in Salon, December 7, 2015 (!) ("13 years after failed U.S.-backed coup, right-wing opposition wins Venezuela election"):

For 17 years, the PSUV has enjoyed enormous popularity in Venezuela. Its economic and social programs drastically reduced poverty, created universal healthcare, and promoted widespread literacy and education. Compared to its Latin American neighbors, Venezuela has consistently led the region in reducing poverty.

Peter McLaren (of Chapman University) and Mike Cole (of University of East London) in Truth-Out.org, June 11, 2014 ("Austerity/Immiseration Capitalism: What Can We Learn From Venezuelan Socialism?"):

While democratic socialism may sound utopian in the European context, and positively unimaginable in the United States, there is [in Venezuela] a viable alternative to the neoliberal model in existence. It is incumbent on the left to think seriously about what can be learned from the Bolivarian revolution. That revolution can provoke us to imagine an alternative to capitalism, whether through forms of freely-associated producers planning and allocating the social wealth, syndicalist and Marxist forms of socialism, or self-governing popular assemblies or autonomous communities.

Mark Weisbrot in the Guardian, November 7, 2013, ("Sorry, Venezuela haters: his economy is not the Greece of Latin America"):

For more than a decade people opposed to the government of Venezuela have argued that its economy would implode. . . .  How frustrating it has been for them to witness only two recessions: one directly caused by the opposition's oil strike (December 2002-May 2003) and one brought on by the world recession (2009 and the first half of 2010). However, the government got control of the national oil company in 2003, and the whole decade's economic performance turned out quite well, with average annual growth of real income per person of 2.7% and poverty reduced by over half, and large gains for the majority in employment, access to health care, pensions and education.

David Sirota in Salon, May 6, 2013, "Hugo Chavez's Economic Miracle":

[A]ccording to data compiled by the UK Guardian, Chavez’s first decade in office saw Venezuelan GDP more than double and both infant mortality and unemployment almost halved. Then there is a remarkable graph from the World Bank that shows that under Chavez’s brand of socialism, poverty in Venezuela plummeted (the Guardian reports that its “extreme poverty” rate fell from 23.4 percent in 1999 to 8.5 percent just a decade later). . . .   Additionally, as Weisbrot points out, “college enrollment has more than doubled, millions of people have access to health care for the first time and the number of people eligible for public pensions has quadrupled.”

Richard Gott in the New Statesman, January 30, 2013 ("Hugo Chavez: Man against the world"):

[Chavez] brought hope to a continent. . . .  [H]e has not only helped to construct and project Venezuela as an interesting and important country for the first time, at ease with itself and its historical heritage, he has reimagined the continent of Latin America with a vision of what might be possible.

Sean Penn in the Huffington Post, August 5, 2011 ("A State Department That Can"):

The American people have grown accustomed to hearing the Venezuelan president referred to as a dictator, not only by media representatives but by members of the leadership in both parties. This is a defamation, not only to President Chavez, but also to the majority of Venezuelan people, poor people who have elected him president time and time again. This is not a dictator supported by the wealthy classes, but rather, a president elected by the impoverished and at the service of the Venezuelan constitution, a document not unlike our own. He is a flamboyant, passionate leader.

Bernie Sanders in Valley News (Vermont), August 5, 2011 ("Close The Gaps: Disparities That Threaten America"):

These days, the American dream is more apt to be realized in South America, in places such as Ecuador, Venezuela and Argentina, where incomes are actually more equal today than they are in the land of Horatio Alger. Who's the banana republic now?

Nobel Prize-winning economist (and economic advisor to Hillary Clinton campaign) Joseph Stiglitz, quoted in Venezuela Analysis, October 11, 2007 ("Joseph Stiglitz, in Caracas, Praises Venezuela's Economic Policies"):

Venezuela's economic growth has been very impressive in the last few years. . . .  Venezuelan President Hugo Chavez appears to have had success in bringing health and education to the people in the poor neighborhoods of Caracas, to those who previously saw few benefits of the countries oil wealth.

I have checked the links, and they are all still good.  

So how could it have been that everything seemed to be going so well for so long for the "Bolivarian Revolution," and then it all fell apart?  The short answer is that the government controls the economic statistics.  It can pretend for a decade or more that the economy is growing when it is not, generally by a combination of (1) hugely increasing government spending and counting that as a 100 cents on the dollar increase in GDP and (2) outright fraud.  When the collapse becomes too obvious to paper over any more, they just stop putting out economic information.  For a longer explanation of how the "socialist death spiral" works, see my post here.

New Jersey's New Governor About To Get Mugged By Reality

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At this blog, when not commenting on events in my home town of New York, I've tended to look more toward Connecticut than New Jersey.  But New Jersey has just elected a new Governor, by the name of Phil Murphy, in the off-year 2017 election; and he took office on Tuesday.  Here is a link to his inaugural address.  So perhaps it's time for a brief look to the West.  

In terms of major aspects of public policy, New Jersey's recent history bears a great resemblance to that of Connecticut.  When I first moved to New York in 1975, New York had top combined State and New York City income tax rates approaching 19%, while New Jersey had no income tax.  New Jersey was booming.  It seemed that on a weekly basis some securities firm was announcing its move to the Jersey City waterfront, right across the river.  But New Jersey had a budget shortfall, and in 1977 then (Democrat) Governor Brendan Byrne proposed a "temporary" 2% income tax to close the gap and avoid increases in already-high property taxes.  Forty years later, the property taxes are still just as high or higher, and New Jersey still has the income tax, with the top rate all the way up to 9%.  Meanwhile, New York's top rate, including the New York City tax, has been reduced to a little under 13%, but only on income over $1 million; for income between $500,000 and $1 million, New Jersey now has less than a 2% income tax advantage over New York.  I can't remember the last time I read about a business picking up and moving to New Jersey to save on taxes.

Also during the same period, a string of mostly Democratic governors and legislatures entered into a string of wildly overgenerous pension promises to the state workforce.  (Republican Governor Christine Todd Whitman, 1994 - 2000, bears a small portion of the responsibility.)  When the budget was tight, they "solved" the problem by just skipping the pension contributions.  Today New Jersey competes with the likes of California, Illinois and Connecticut for having the most irresponsible and worst-funded public pensions.  A report out in December from the American Legislative Exchange Council put the funding level of New Jersey's public pensions (at a risk-free interest rate) at 25.6%, 46th worst among the states.  This is way, way beyond the level where miraculous increases in the stock market or hedge funds can ever bail you out, and is deep into a death spiral.

And yes, like any decent blue state, New Jersey has a seemingly perpetual budget "crisis."  As not the least part of it, it has been underpaying its required pension contributions by up to about $3 billion per year -- this on a budget of about $36 billion per year.  And New Jersey's bond rating has been cut 11 times in the past 8 years, most recently to A3 by Moody's.  Hey, it's better than Illinois's rating!

Enter new Governor Murphy.  He is a Democrat.  And what credentials!  Harvard College!  Wharton Business School!  Goldman Sachs!  This guy is really, really smart!  And he may actually be "smart" in some sense.  I'll bet he had great SATs.  However, on the record of his campaign promises, you could be forgiven for inferring that he would have difficulty adding two plus two.

I should mention that Murphy is a complete standard-issue progressive, in the mold of an Obama or a Hillary.  Perhaps not quite as far off the scale as a Sanders or a Warren.  He is facing a nearly hopeless budget situation, with an immediate need for about $3 billion per year (almost 10% of the budget) to pay for past pension promises -- payments that will deliver absolutely nothing in the way of new or better services for the people.  What to do?  So far, his answer has been a collection of totally pie-in-the-sky promises of new and additional spending that can have no possible relation to reality.  Here is a list of just some of the items from his campaign web site:

And so forth.  And then, how about my perennial favorite -- infinite oodles of fresh cash to "Combat Climate Change & Make New Jersey A National Leader in Clean Energy"?  Yes, Murphy is pledging to wipe out all use of fossil fuels by 2050 -- not just the paltry 80% reductions promised by his confrères across the river and in California:

Murphy committed, within his first 100 days in office, to starting the process of creating a new State Energy Master Plan to set New Jersey on a path to 100 percent clean energy by 2050.  

This guy -- and remember, he went to Harvard and the Wharton Business School, and worked at Goldman Sachs for decades -- actually believes, or claims to believe, that spending oodles of government money to force a switch from less expensive to more expensive sources of energy somehow makes the people richer rather than poorer:

Murphy noted that moving to a clean-energy economy would encourage innovation and create jobs, as every $1 spent on early-stage clean energy research and development generates an additional $1.60 in output from other sectors of the economy. He said his plan would maximize this potential, in large part, supporting innovation and R&D in higher education.   

And don't forget the importance of "climate justice"!

Murphy said he also would ensure that the benefits of clean energy reach all communities as a matter of environmental and economic justice.  “Too often, conversations about climate change have ignored the disproportionate impact on lower-income and politically vulnerable communities, yet the environmental concerns in these communities are staggering,” said Murphy, noting that, in Newark, as many as one in four children have asthma. “We must ensure environmental justice as a core principle.”

Once you get into this groupthink, you're just not allowed to realize that tripling the cost of energy for the poor is the opposite of "climate justice."

All this (and lots more) with a budget already hopelessly under water.  Does he have any proposal to pay for it all?  Of course, there is the usual call for higher taxes on the top 1%.  ("In New Jersey, the wealthiest 1% continue to pay a far lower share of their income in state and local taxes than the lowest-income residents. Phil strongly believes that is unacceptable in 2017.")  Good luck with that.  Here's NJ Senate President Steve Sweeney on Fox Business today basically saying that the "millionaire's tax" is not going to work any more in the wake of the federal tax reform.  OK, the only other suggestion I can find in Murphy's stuff is the bright idea of getting the pensions out of investing in hedge funds in order to save on investment fees.  That might produce about 1% of the money Murphy is looking for.

New Jersey has come to the blue state dead end.  The new Governor, living in fantasyland, doesn't realize it yet.  Maybe he never will.  But he is about to get mugged by reality.  Meanwhile, his state will continue its long-term relative decline.  Maybe the voters will just keep voting for more and more of the free stuff while the decline continues and accelerates.

Surprise: Progressive "Anti-Poverty" Programs Increase Measured Poverty

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The Sunday Los Angeles Times on January 14 published an op-ed titled "Why Is Liberal California the Poverty Capital of America?"  The author is Kerry Jackson of the Pacific Research Institute.  I have seen the article picked up and/or cited at many locations.  

Mr. Jackson notes that liberal California -- home to more and more generous welfare and "anti-poverty" programs than just about anywhere else in the country -- somehow comes out with the very highest measured "poverty" rate of all the 50 states.

Guess which state has the highest poverty rate in the country? Not Mississippi, New Mexico, or West Virginia, but California, where nearly one out of five residents is poor.

Funny, isn't it?  Here at Manhattan Contrarian, my focus is more on my home turf of New York, but we have exactly the same phenomenon:  far more and more generous welfare and "anti-poverty" programs than other places, and yet a higher measured "poverty" rate.  The New York City official poverty rate was 18.9% for 2016, the latest year available.  the official full-U.S. rate for the same year was only 12.7%.  How could the most progressive places, the places that do the very, very most to "fix" poverty, end up with far more poverty as the government measures and defines it than those other places that do far, far less?

Here is Mr. Jackson's take:

[Despite the welfare reform of the 1990s] the state and local bureaucracies that implement California's antipoverty programs . . . resisted pro-work reforms. In fact, California recipients of state aid receive a disproportionately large share of it in no-strings-attached cash disbursements. It's as though welfare reform passed California by, leaving a dependency trap in place. Immigrants are falling into it: 55% of immigrant families in the state get some kind of means-tested benefits, compared with just 30% of natives.

Self-interest in the social-services community may be at fault. As economist William A. Niskanen explained back in 1971, public agencies seek to maximize their budgets, through which they acquire increased power, status, comfort and security. To keep growing its budget, and hence its power, a welfare bureaucracy has an incentive to expand its "customer" base. With 883,000 full-time-equivalent state and local employees in 2014, California has an enormous bureaucracy. Many work in social services, and many would lose their jobs if the typical welfare client were to move off the welfare rolls.

Well, first, I would like to welcome Mr. Kerry Jackson and the Pacific Research Institute to the small band of people in this country who have been pointing out the shocking counter-productiveness of our "anti-poverty" programs.  Also, Mr. Jackson makes some good points.  However, he is much too nice.

Self-interest in the social-services community "may be" at fault?  I'm sorry, but a far more accurate statement is that the whole idea of government anti-poverty programs is to increase measured poverty and make absolutely 100% sure that it can never go down.  If that were not the case, it would be completely impossible for the U.S. as a country to spend in excess of $1 trillion each year on "anti-poverty" efforts, year in and year out, and never see the rate of poverty decline by even a smidgeon.  And, indeed, go up in very the places that spend disproportionally large amounts of the money.

If you are somehow thinking that the "social-services community" can't possibly be that venal and cynical, I'll just give you a couple of points to ponder:

  • Nearly all "anti-poverty" handouts are provided to the beneficiaries either as in-kind distributions (housing assistance, food stamps, other nutrition programs, Medicaid, cell phones, clothing assistance, energy assistance) or as refundable tax credits (EITC).  But the official poverty measure only counts "cash income" in the definition, and therefore excludes all of these things.  A given family could get $100,000 or more per year in the in-kind benefits and tax credits (and many do, such as those here in Manhattan, where a spot in public housing in a desirable location can by itself be worth over $100,000 per year), and still be counted as "in poverty."
  • When critics demanded that the in-kind handouts and tax benefits be counted, the bureaucrats came up with an alternative so-called "Supplemental Measure" of poverty.  The Supplemental Measure does count most of the in-kind handouts, but at the same time it does away with any absolute standard of poverty, and substitutes a relative standard that keeps going up as the country as a whole becomes wealthier.  Today, the government reports both numbers.  (Note that the measure that Mr. Jackson cites in his article about California is the Supplemental Measure of poverty, rather than the traditional one.  Funny, but the two numbers are about the same.  Reverse engineering by cynical bureaucrats?  Definitely!)  Anyway, think about the Supplemental Measure for two minutes, and you will realize that the whole idea of a relative rather than absolute measure of poverty is to keep it from going down as the country gets richer.

What, were you expecting that hundreds of thousands of bureaucrats, given a trillion annual dollars to "fix" the problem of poverty, would come back after a year or two and say, "Problem solved, we fixed it.  We don't need the money any more, so go ahead and zero out our budget and we'll go off and work on solving something else"?  Of course, that has never happened in the history of government problem solving.

There is a serious collateral consequence of this situation.  As Mr. Jackson points out, the social service bureaucrats need the poor to remain poor in order for the budgets and the spending to continue at current levels and increase.  They have a tremendous incentive to trap the poor into dependency and keep them there as long as possible.  This is a huge problem in this country that needs far more attention.     

Climate Science And The Process Of Orthodoxy Enforcement

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Recently several of my posts on the subject of climate change -- including one last week titled "In Climate Science, Predictions Are Hard, Especially About The  Future" -- have attracted large numbers of comments.  Most of the comments have been supportive, but many have been critical -- which is not surprising.  Among the critical comments, several of the most thoughtful have raised similar questions, that go something like this:  If there is really nothing to this global warming scare, then how and why have so many people calling themselves climate scientists gotten together to conspire to promote this story to the public?  After all, how would such a conspiracy even work?  Do hundreds of them hold clandestine meetings where they recognize each other with some kind of secret handshake?

As examples of relatively balanced comments raising this point, there are two from a guy named Steven Wangsness.  Excerpts:

What I want to know is why 95 percent or more of the world's climate scientists, most of whom drive gasoline-driven cars and probably own oil stocks in their 401Ks and IRAs, are engaged in a massive, world-wide conspiracy to push the idea of global warming. What is the incentive for all these presumably normal, well-educated folks to engage in such a pernicious hoax? . . .  

You also assume that thousands of PhDs around the world are engaged in a massive conspiracy and not one of them has broken ranks and busted the hoax.     

It just seems implausible to Mr. Wangsness, and many others, that such a "conspiracy" could be formed.  And perhaps, if thought of as a conspiracy, they are right.  But now think about the processes by which orthodoxies are created and enforced.  There are many, many examples in human affairs of large numbers of people -- even into the billions -- agreeing on the precise details of a complex belief system, otherwise known as an orthodoxy.  What processes lead to such huge numbers of people to enter into such an agreement?  Clearly part of the process relates to specific rewards and punishments handed out by the people who run the orthodoxy system.  But I would suggest that a far bigger part of what makes orthodoxies work is the universal human desire for peer acceptance.  If you don't go along with our official belief system, we will ostracize you!

Consider what is undoubtedly the archetypical example of a strictly-enforced orthodoxy system, namely the Catholic Church.  As background, I should mention that I was raised as a Catholic.  I continue to have large numbers of friends who are practicing Catholics, and I respect them both as people and for their beliefs.  I also have great respect for the Catholic Church as an institution (less so for its current head).  I do not regard Catholics as stupid or evil for having signed on to the Church's orthodoxy.  But, here we have a perfectly clear and, you will have to admit, somewhat quirky orthodoxy to which some 1.2 billion people have subscribed in great detail.

The bishops of the early Catholic Church gathered in 325 AD in the city of Nicaea, and agreed upon something called the Creed that states the fundamental beliefs of the religion.  With some minor modifications made in later years (mostly in 384 AD), every Catholic recites this list of beliefs at every mass, under the leadership of a priest.  Do they really all deeply believe every detail of this statement?  They certainly say that they do, at least once a week.  It's a basic requirement of being a practicing Catholic.  

For those who are not Catholics, I'll give you some examples of what's in the Creed.  I'm including the relevant Latin text, as well as the English translation:

  • "I believe in one God."  (Credo in unum Deum.).  This is a monotheistic religion.  
  • Oh, but it is one God in three persons, the Holy Trinity -- Father, Son and Holy Spirit.  Is this a contradiction?  We all agree that it is not.
  • The Son was initially "born of the Father" (ex patre natum) at a time "before all ages" (ante omnia saecula), by a process described as "begotten not made" (genitum non factum).
  • Later, the Son "became flesh" (incarnatus est) by a process in which the Holy Spirit impregnated a virgin (de Spiritu Sanctu ex Maria Virgine).
  • The Holy Spirit "proceeds" not just from the Father, but also from the Son (Et in Spiritum Sanctum . . . qui ex Patre Filioque procedit).  The business about the Holy Spirit proceeding "also [from] the Son" (Filoque) is the basis of the rift between Roman Catholicism and the Eastern Orthodox religions.  The Eastern guys insisted that the Holy Spirit "proceeded" only from the Father.    

There are plenty of other items.  Does every Catholic actually fully understand and believe each of these precepts?  It doesn't really matter.  In return for regularly expressing these beliefs, they get to participate in the religion, which includes being part of a community of family, friends and peers, of ceremonies and sacraments, and of a promise of a happy afterlife.  The rewards are almost entire mental and spiritual, rather than material.  And on that basis some 1.2 billion people subscribe.  In the case of priests, adherence to the orthodoxy is further enforced by a hierarchy that controls access to the jobs, as well as promotions to positions of Monsignor, Bishop, Archbishop, and so forth.  If you demand a change to the Creed, you can't be a priest, period.

The Catholic Church is just one example of a detailed orthodoxy subscribed to by a huge number of people.  The Islamic religion is another example of comparable size, although I don't know the details of what they have agreed to as their orthodoxy.

Now apply the principles of orthodoxy creation and enforcement to the field of "climate science."  A commenter responding to Wangsness made this point:  "The answer is simple. Follow the money."  I'm not saying there's nothing to that, but note that in the case of the Catholic Church (and for that matter Islam and any other religion) money has little to nothing to do with why people subscribe; and yet huge numbers do.  The main factor is peer pressure and acceptance; the second major factor is the forcible exclusion of heretics.  So consider what surrounds you if you want to be in the field of "climate science" today:

  • In order even to start out, you need to get a job at an academic institution.  If you let it be known that you are even slightly skeptical about "climate science," you get branded as a heretic, and in all likelihood you will never get hired.
  • To advance in academia, you need to get articles published in prestigious academic journals.  The most prestigious journals in the fields of science are Science and Nature.  In recent years those journals have been controlled by global warming zealots who have made it their business to be sure that no even slightly skeptical article in the climate field can see the light of day.  From 2013 to 2016 the editor of Science was one Marcia McNutt.  McNutt published an editorial in her magazine in 2015 that said about climate science: "The time for debate has ended. Action is urgently needed. . . .  [D]eveloped nations need to reduce their per-capita fossil fuel emissions even further. . . ."   In 2016 McNutt was elected as the head of the National Academies of Science. As a young, skeptical climate scientist, how are you going to buck this?
  • For more examples of ruthless orthodoxy enforcement as to climate change in the academic world, see my posts here and here.

But here's the amazing thing:  given the relentless peer pressure to conform in climate science, and the ruthless exclusion of heretics from rights to publish and from awards and recognition in the field, in fact the level of subscription to the climate orthodoxy among people in relevant areas is far less than the 95% that Mr. Wangsness cites.  The frequently-made claim of a "97% consensus" among climate scientists famously originated in an article by Cook, et al., in 2013, that was then quickly debunked in multiple places, for example here and here.  

When Wangsness says that "not one of them has broken ranks and busted the hoax," he is wrong.  There are scores of top scientists in relevant fields like atmospheric physics and meteorology who have broken ranks and scream as loudly as they can on a daily basis that there is nothing behind this alarm.  Just last October I was involved in submitting a letter to EPA from 65 top scientists demanding a reconsideration of EPA's "Endangerment Finding" because of lack of scientific basis for climate alarm.  The list of skeptics among the very top people in physics includes the likes of Freeman Dyson ("My first heresy says that all the fuss about global warming is grossly exaggerated. Here I am opposing the holy brotherhood of climate model experts and the crowd of deluded citizens who believe the numbers predicted by the computer models.") and Will Happer of Princeton, Richard Lindzen of MIT, and Ivar Giaever of RPI.  It is truly an embarrassment to the profession of journalism that a relatively well-informed citizen like Mr. Wangsness can be unaware of this.

Do Justice And The FBI Investigate Crimes Or Manufacture Them?

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The big recent news in the fundamental corruption of the Department of Justice and the FBI is that various Congresspeople have now been allowed to see the FISA application submitted in 2016 seeking authority to surveil the Trump campaign, and multiple sources are now confirming that at least part of the basis for the successful application was the piece of Clinton campaign-financed  phony opposition research known as the "Trump Dossier."  However, although the FBI allowed a viewing of the FISA application, it did not allow the making of copies.  (Try that gambit next time the FBI subpoenas you for documents!)  So we are now all awaiting additional details.  My assumption is that there is lots more disgusting information to come about how our "law enforcement" agencies weaponized their powers to support the favored political candidate against the disfavored adversary.  But meanwhile, rather than making speculations that may turn out to be wrong about what is to come, let me take this opportunity to educate readers about some of the other fundamental corruption of our exalted law enforcement agencies that gets far less attention.

Just a few weeks ago, in a post titled "The Reputation Of The FBI -- And Of The Justice Department -- In Tatters," I advised readers that "you would be out of your mind ever to cooperate in any way with these guys."  Reasons included not only that they regularly misuse their powers for political purposes and prosecute things that are not crimes, but also "they are entirely likely to create an entrapment scheme to manufacture a crime to nail you."  

The word is that in the last few days Special Prosecutor Mueller has been seeking an interview with President Trump.  Does my advice to not cooperate apply equally to the President in these circumstances?  Sadly, it applies especially to the President.  Let's review the output of the Mueller investigation to date.  When you look at it, the effort appears to amount to little more than the manufacturing of crimes that did not previously exist in order to nail disfavored people.

First, some background.  There is something in the U.S. Code known as 18 U.S.C. Section 1001 that makes it a crime to "make[] any materially false, fictitious, or fraudulent statement or representation" in any matter "within the jurisdiction of the executive, legislative, or judicial branch of the Government of the United States."  Does that seem innocuous to you?  I mean, why would anyone lie to the government?  Unfortunately, it's not that simple.  Over time, the prosecutors, with the substantial acquiescence of the courts, have come up with more and more creative ways to use this statute.  By this time, it has become an all-purpose means to enable them to convict anyone they want to get, irrespective of whether an individual had committed any crime before the investigation of that individual began.  Prosecutors have also used this statute to substantially eviscerate the attorney-client privilege as it applies to lawyers for federal criminal defendants.  

Like many of the most obnoxious things about our government, this one does not have ancient lineage.  The common law tradition is that witnesses in judicial proceedings must swear an oath, the taking of which seriously notifies you that you must be careful not to lie.  This statute, enacted in 1948, upended all of that.  Yes, there were some predecessor statutes that made unsworn false statements crimes, but those statutes only applied in specific narrow contexts, such as claims for monetary compensation from the government.  From 1948 it became a crime to "lie" about anything at any time, whether or not under oath.

OK, what does it mean to "lie"?  Suppose, for example, an FBI guy comes up to you and says, "Have you committed any crime in the last ten years?"  You say "no."  They then go and figure out some crime that you have committed.  The fact is that you have committed many federal crimes in the last ten years.  Remember that there are 5000 or so of them, and you have no idea what they all may be.  Is simply denying that you committed any crime enough to get you convicted under 18 U.S.C. 1001?  The Supreme Court decided that one in a case called Brogan v. United States in 1998.  The answer is that the simple denial is sufficient to violate this statute.  Another reason why you must never talk to federal agents under any circumstances.

Now, let us apply this background to the Mueller investigation.  So far, Mueller has obtained guilty pleas or issued indictments against four individuals:  Manafort, Gates, Papadopoulos, and Flynn.  In each case, either the only crime, or the most important crime alleged is a violation of 18 U.S.C. 1001 regarding statements made to Mueller's people during the course of the investigation.  

Flynn and Papadapoulos entered into guilty pleas.  In both of those pleas, the only crimes pled to consist of lying to the FBI under 18 U.S.C. 1001.  The alleged "lies" took place during Mueller's investigation, meaning that Mueller found nothing to charge as a crime about anything either of these individuals did before being interviewed by Mueller's team.  And in both cases the "lies" are about minor things that were not themselves underlying crimes.

Here is the Flynn guilty plea.  Flynn's supposed "crimes":  (1) On December 29, 2016 (when working on the Trump transition) Flynn asked the Russian ambassador not to escalate things in response to sanctions imposed by the Obama administration that day; but when asked about that by the FBI, Flynn denied he had made that request on that day; and (2) On December 22, 2016, Flynn asked the Russian ambassador to delay or defeat a pending UN resolution; but when asked about that by the FBI, Flynn denied it.  That's it.  Obviously neither of the underlying conversations that Flynn is accused of having constituted a crime in any way, and indeed they were a core part of his job on the transition.  Nothing in the plea agreement mentions how inquiring about conversations with the ambassador that took place after the election is even a legitimate part of the Mueller investigation.  

So how does the FBI come to know that Flynn did in fact ask Kislyak on December 29 not to escalate things in response to the new sanctions?  Obviously, they (with the assistance of the NSA) have recorded all conversations involving Kislyak, and have had a transcript prepared.  But is it a legitimate part of an "investigation" to put someone like Flynn to a memory test of every statement he may have made in a particular meeting, when they already have a transcript of the meeting?  It isn't.  This is about one and only one thing, which is coming up with something that can be characterized as a "lie" so that they can nail Flynn under 28 U.S.C. 1001 if they feel like it.  You got a few details wrong about some conversations that were themselves completely non-criminal and non-controversial and that seem completely peripheral to the investigation?  Too bad -- jail for you!

How about Papadopoulos?  Again, the whole thing is supposedly about "lies" to the FBI.  I won't go into full detail, but some examples: Papadopoulos said a meeting with a Russian contact was before he joined the Trump campaign, but in fact it was after (a question of a few days one way or the other); Papadopoulos said that a professor he met with was "just a guy talk[ing] up connections or something," when in fact the guy had a real link to the Kremlin; Papadopoulos tried to use the connection of this guy to set up a meeting with Kremlin officials.  Oh, by the way, the meeting Papadopoulos was trying to set up never took place!  So did the guy have serious links to the Kremlin or no?  Doesn't matter -- Papadopoulos is guilty!

On to Manafort.  The Manafort/Gates indictment is here.  Both are charged with the same counts.  If you look at it, on first take you might think there is something more to it than the usual Section 1001 charges that appear here as counts 11 and 12 of a 12 count document.  Don't be so sure.  The core of the rest of it is failure to register as a lobbyist for foreign interests, a supposed crime that probably half of the swamp creatures in Washington are violating on a daily basis and nobody ever gets prosecuted for.  (From Politico, October 30, 2017: "The real news in the indictment of Paul Manafort on charges of laundering and failing to register as a foreign agent is that someone has actually been prosecuted under a foreign lobbying law that has existed for decades but has almost never been enforced.")  Then there is the "money laundering" count.  That just means you got paid for something that is a crime, namely the unregistered lobbying.  Then there's failure to file forms about foreign bank accounts.  All of this of course taking place well before any involvement of Manafort and Gates in the Trump campaign.  Really?  A team of sixteen top prosecutors and an unlimited budget and this is what they've got?  If they put that team of prosecutors on you, they could easily come up with a list of "crimes" at least as serious.  Thus, you can well understand the perceived need to manufacture a new crime or two.  Enter 18 U.S.C. 1001.

Manafort and his team appear to have sensed the risk at least in part, and came up with a strategy of having their lawyers do the talking to the government.  Turns out that that strategy only made things worse.  Manafort's lawyers sent letters to the FBI describing circumstances of Manafort's representation of some Ukrainian groups that supported the Russian position.  In the Section 1001 counts in the indictment, the government claims that some of the statements in those letters were false.  Whereupon the investigators subpoenaed Manafort's lawyer, and demanded that she testify before the grand jury.  When she asserted attorney-client privilege, the government said that it did not apply because the communications were in furtherance of a plan to violate 18 U.S.C. Section 1001.  The Chief Judge of the DC District Court (Howell) bought the government's argument and compelled the lawyer to testify.  

An excellent summary of this situation can be found in this piece by lawyers at the Morvillo Abramowitz firm.   As recently as a few decades ago, it was completely unheard-of for prosecutors to subpoena the defense attorney and demand that she testify about the preparation of the defense of the case.  But over time, prosecutors have taken more and more to this tactic.  The logic of Judge Howell's decision would make subpoenaing the defense lawyer a legitimate and standard tactic in pretty much every case.  Hey, there might be something in the communications with the government that is not 1000 percent accurate!  The effort to try to avoid Section 1001 problems by having the lawyer do the talking not only doesn't avoid the problems, it now exposes the whole defense strategy to the government's scrutiny, and probably also gets your lawyer disqualified and requires you to start over.  

Somehow our Justice Department and FBI think that all of this is perfectly OK.  As their fundamental corruption has gotten deeper and deeper, they have completely lost all perspective.

Having read this, what is your take on whether President Trump should agree to be interviewed by Mueller's people?

Exxon Starts To Push Back Against The Climate Mob

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The basic operating principle of corporate America is that you can't push back against the government, no matter how outrageous the campaign against you may be.  Fight the government, and they can put you out of business, either by indicting you, or maybe by holding up hundreds of regulatory approvals that you need to operate.  Your better bet is always to buy off the corrupt and predatory regulators and prosecutors by throwing shareholder money at them.  They get their headline and their career advancement, and you move on with life.  See my Phony Prosecutions tag for a few hundred examples of this phenomenon:  big banks making multi-billion dollar payments over and over again for the most preposterous of shake-downs; pharmaceutical companies paying multi-billion dollar amounts over and over for constitutionally-protected truthful marketing speech that is nevertheless prosecuted criminally; hedge funds making billion dollar payments over trading on market tips and rumors, something not prohibited by any statute; etc., etc., etc.  This is how the reputation of the Justice Department and FBI (as well as many state-level counterparts) originally got into "tatters," at least among those who follow the subject, long before these organizations were also revealed as corruptly advancing the interests of the favored political party over the adversary.

Over in the field of the climate wars, it has long been the same.  Might you think that companies in the business of producing and selling fossil fuels would make some effort to stand up for their products in the face relentless attacks that they are "destroying the planet"?  After all, even if there were something to the hypothesis that human CO2 emissions might be warming the atmosphere (I don't think so, but assume that hypothesis is true for these purposes), you would think that the purveyors of the fossil fuels would be loudly proclaiming that their products provide light and heat and electricity and transportation, and at far lower prices than anyone else can, and that they have enormously furthered human advancement.  But you would be wrong.  Instead, the major energy-producing companies have done their very best for years to lie low in the shadows and hope that no one notices them.  Who, us?

Well, as we all learned in history class, enough appeasement eventually gets you the invasions of Poland and France.  The analog to the invasion of Poland came back last summer, when a series of California municipalities, including the counties of Marin and San Mateo and cities of San Francisco and Oakland, sued five major oil companies (Chevron, ConocoPhillips, ExxonMobil, BP, Royal Dutch Shell) in multiple lawsuits, seeking billions of dollars supposedly to protect against rising sea levels projected to be caused by "climate change."  Not to be outdone, it appears that New York City has piled onto this bandwagon just as of yesterday, filing its own suit in federal court in New York.  (The New York suit is so new that I can't even find it on the court's public access system; but there is a WSJ report on the case here, probably behind paywall.)

Even if you believe in the basic global warming narrative, the idea that sea level rise will threaten to swamp San Francisco within anyone's current lifetime borders on the delusional.  Still, if these companies intended to follow the normal form of prior corporate capitulations, you would expect that after some decent interval (say one to two years) there would be settlements of a few billion dollars or so.

But wait!  Perhaps someone has recognized that further appeasement is not the right strategy in this case.  On Monday, Exxon filed a Petition in state court in Tarrant Count (Fort Worth), Texas, seeking "pre-suit depositions" of a list of people including environmental activist attorney Matthew Pawa (who appears to be the guy orchestrating this campaign against the oil companies) plus some fifteen of the attorneys for the various city and county plaintiffs in the California lawsuits.  This is not your usual lie-down-while-they-kick-you response.  In particular, the complaint accuses the plaintiffs of wrongly using governmental powers to suppress political dissent, and accuses the named attorneys, including government attorneys, of "dishonesty."  For example, from Paragraph 1 of the Petition:

A collection of special interests and opportunistic politicians are abusing law enforcement authority and legal process to impose their viewpoint on climate change. This conspiracy emerged out of frustration in New York, Massachusetts, and California with voters in other parts of the country and with the federal government for failing to adopt their preferred policies on climate change. But rather than focusing their efforts in the marketplace of ideas and adopting a strategy of persuasion, the members of this conspiracy chose to advance their political objectives by imposing unlawful burdens on perceived political opponents.         

The Petition describes the development of a strategy, led by Mr. Pawa, to "delegitimize" Exxon and the other oil companies from participating in the climate debate, through a series of lawsuits accusing them of harm to the climate and the citizenry.  For purposes of their complaints against the oil companies, the California municipalities cooked up wild projections of climate-change-driven sea level rise threatening to swamp them all.  Unfortunately, no one seems to have thought to check prior statements made by the same municipalities on the same subject.  Much of the Petition consists of contrasting the statements in the complaints to such prior statements, particularly statements made in prospectuses intended to sell bonds.

The stark and irreconcilable conflict between what these municipal governments alleged in their respective complaints and what they disclosed to investors in their bond offerings indicates that the allegations in the complaints are not honestly held and were not made in good faith. It is reasonable to infer that the municipalities brought these lawsuits not because of a bona fide belief in any tortious conduct by the defendants or actual damage to their jurisdictions, but instead to coerce ExxonMobil and others operating in the Texas energy sector to adopt policies aligned with those favored by local politicians in California. 

The Petition goes one-by-one through the statements of each of the municipalities.  For example, there is San Mateo County, home of Silicon Valley.  From the San Mateo Complaint against the oil companies:

[T]here is a 93% chance that the County experiences a devastating three-foot flood before the year 2050, and a 50% chance that such a flood occurs before 2030. Average sea level rise along the County’s shores are expected to rise by almost three feet by the year 2100, causing multiple, predictable impacts, and exacerbating the impacts of extreme events. 

But unfortunately there is then this from San Mateo County's 2014 and 2016 bond prospectuses:

The County is unable to predict whether sea-level rise or other impacts of climate change or flooding from a major storm will occur, when they may occur, and if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the County and the local economy. 

Or consider the City of Oakland.  This is from its Complaint against the oil companies:

[B]y 2050 a ‘100-year flood’ in the Oakland vicinity is expected to occur . . . once every 2.3 years . . . by 2100. . . almost once per week. 

And this is from Oakland's 2017 bond prospectus:

The City is unable to predict when seismic events, fires or other natural events, such as searise or other impacts of climate change or flooding from a major storm, could occur, when they may occur, and, if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the City or the local economy. 

Of course, having been caught red-handed, these California municipalities may now back down, or alternatively regroup and start some other more-carefully-vetted lawsuit.  But it does look to me like ExxonMobil is gearing up for a long, hard fight.  Welcome to the struggle, guys!  Now, what about those other four wimps who are also defendants in these cases?

Full disclosure:  I have never received a penny from Exxon, and I wouldn't take anything if they offered.