[Continued from yesterday's Part 1.]

By:David A. Smith

Yesterday’s post, quoting extensively from Michael McLaughlin’s How-To-Steal-Big Manual, which I hope he writes in the extended jail time that I fervently hope he serves, we observed that stealing from a public agency requires three linked steps: Capture, Bleaching, and Exfiltration.

Sources for this post

Articles quoted in this post come from:

Boston Globe (February 24, 2013) 

Boston Globe (February 20, 2013) 

Boston Globe (January 28, 2013) 

Boston Globe (October 1, 2012)

Boston Herald (June 14, 2013) 

We also saw that How-to-Steal-Big highlights operating subsidy and modernization funds are plum pickings for Capture and Bleaching:

In the interview, [Executive Director Albert] Ewing [Mr. McLaughlin's hand-picked successor] said HUD has pressed the agency for documentation that would show how McLaughlin spent millions given to the Chelsea housing agency for new kitchens, baseboard heating, boilers, elevators, waterproofing, and other capital improvements.

“But the records do not exist and I can’t produce something that doesn’t exist,” he said.

The Mystery of the Disappearing Records becomes less mysterious with this news:

Federal probation officials had [reported] the claims of James McNichols alleging McLaughlin asked him to destroy evidence about his dealings at the housing authority as well as another unnamed witness who has also provided information.

When it comes time for him to write How To Steal Big, Mr. McLaughlin will be no rookie, for he’s been telling tall tales for years:

Don’t you believe me?

Michael McLaughlin, 1977

Friends call him a “warrior from the old school.” But others who watched Democratic power broker Michael E. McLaughlin at work over the last four decades, from Middlesex County commissioner to close ally of the current lieutenant governor, call him “a thug,” “a liar,” and now “a ­felon.”

Long before McLaughlin stood before a federal judge last Tuesday [February, 2013] and pleaded guilty to deliberately concealing his inflated $360,000 salary at the Chelsea Housing Authority, his integrity had been questioned in one job after another and he had repeatedly avoided criminal charges despite at least five previous investigations.

Mr. Laughlin’s whole career can be seen as a series of attempts to perfect the techniques he will bring to his must-read manual, arising from some marvelous qualities he demonstrated, even as a political youth:

The worst McLaughlin suffered was a missed opportunity after US Senator Paul Tsongas threatened to “puke in the waste basket” if McLaughlin became Lowell city manager.

Anyone got a wastebasker?

Lest there be any doubt regarding the late Senator’s feelings, he amplified:

“In all my life in politics, from the Lowell City Council to the US Senate, no one worries me more than Michael Mc­Laughlin,” Tsongas told the Eagle Tribune in 1990.

Michael McLaughlin may be going places, and that worries me

It’s the same path he had been following since his days as a Middlesex County commissioner.

“He’s a thug,” said S. Lester Ralph, a former Somerville mayor who served with McLaughlin on the County Commission in the 1970s. “If he can do something legally, or illegally, he’ll prefer to do it illegally. Because it’s his nature.”

Do you solemnly swear to employ Michael McLaughlin for life?  Or do you want to Ralph?

It seems virtually everyone who came into close contact with Mr. McLaughlin had the same views of his stellar qualities:

Eugene Brune, Somerville mayor from 1980 to 1990, said McLaughlin looked for ways to enrich his contract as housing director, even asking Brune to appeal to the Legislature to make the Somerville housing director a lifetime position.

There’s another precept straight out of How To Steal Big: “Never be content with the status quo; always strengthen your position, always be on the offensive.”

“I said, ‘Absolutely not. I wouldn’t care if you were my brother. I wouldn’t make the position tenured,’ ’’ recalled Brune. “He was always looking for a deal. … I wish him nothing but bad luck.”

“Nothing but bad luck.”

Even after he had been exposed, caught, and pled guilty to four felonies, Mr. McLaughlin was still using another How To Steal Big principle: Protect your downside by trading immunity for small tidbits of information – and always keep more secrets you can sell later.

The federal plea agreement does not describe the potential targets of the ongoing federal investigation, but investigators have been looking at a range of financial issues, including how the agency spent more than $7 million in federal grants that cannot be accounted for.

McLaughlin accepted that grant money with a commitment to use it to improve housing units, but the work was not done and much of the money was diverted to everyday expenses and salaries for McLaughlin and lieutenants.

Actually, until last Friday Mr. McLaughlin was within closing distance of walking away under-punished:

Federal prosecutor Theodore Merritt told the judge the U.S. Attorney’s Office was barred by court precedent from bringing in new evidence between their acceptance of McLaughlin’s plea agreement and sentencing.

U.S. District Court Judge Douglas P. Woodlock gave the job of presenting the evidence to the victims of the crime after federal prosecutors stepped back from the job.

Aside from representing poetic justice, it will enable the public to open up more pages from How To Steal Big:

A Globe review of almost $9 million in federal funding paid to McLaughlin’s agency since 2002 found that more than $3.5 million of it was slated for projects that were not done, despite written promises to use the money to pay for new kitchen cabinets, baseboard heating, boilers, elevators, waterproofing, and other capital improvements.

There is Capture – identifying money intended to be used for a legitimate purpose, such as maintaining and improving apartments that are anywhere from 37 to 64 years old. 

Scrivano Apartments, built in 1952

“Nothing works right,” said Jaileen Rivera, 24, a mother of two small children, standing in her living room in the 105-unit Scrivano development Sunday. “The heat makes loud noises and scares the kids. You can barely open the windows. There’s been nothing done to the kitchen whatsoever.”

We will still need to find Bleaching and Exfiltration – and we needn’t look far at all.

The biggest beneficiary of McLaughin’s creative accounting appears to be McLaughlin himself. Hired in 2000 at a salary of $77,500, McLaughlin’s pay, by the time he was forced to resign last year, was $360,000 –

There’s at least $200,000 a year Bleached and Exfiltrated. 

Asked by Woodlock what McLaughlin’s motive was, Merritt said it was money. McLaughlin’s pay was fifth-highest in the country for housing chiefs, he said. The others in the top 5 included the housing heads in Los Angeles and Philadelphia, much larger cities than Chelsea, which has only 35,000 residents.

It adds up to at least a million dollars of fraudulent overpayments:

If McLaughlin had been paid in line with state guidelines, his annual pay would never have topped $160,000, and his pay for his 12-year tenure would have been $1 million less than the $2.7 million he ­received in salary.

Here’s more, including a demonstration of another precept from How To Steal Big: Make them pay you to stop stealing from them.

That’s bad business! If he’d just pay me what he’s spending to make me stop robbing him, I’d stop robbing him.

– not counting three checks totaling $334,997 that he wrote to himself on the day he resigned for what he said was unused sick, vacation, and personal time. State officials managed to stop payment on two of the checks totaling $198,883 before McLaughlin could cash them.

More from How To Steal Big: Never be checked by shame.  Shamelessness is a virtue.

Another person to whom Mr. McLaughlin exfiltrated money was his aide (her title was Assistant Executive Director) and euphemism Linda Thibodeau (described by the Globe as his “close friend, deputy, and traveling companion“), who:

was paid more than $820,000 from 2002 to 2011, when she was forced to resign after a housing specialist appointed by the state concluded that Thibodeau had few duties.

Other than being a close friend and traveling companion of Michael McLaughlin, which sound like duties to me.

It’s all very innocent

Based on an examination of McLaughlin and Thibodeau’s cellphone records, the Globe reported last year that McLaughlin did not go to Chelsea at all on almost half the working days in 2011, spending 47 weekdays in Maine and Florida with Thibodeau and another 21 work days at out-of-state conferences, usually with Thibodeau.

The conferences to which Mr. McLaughlin and Ms. Thibodeau allegedly went are legitimate ones, but who’s to say that they actually attended any of the sessions?

1. Virally infect every counterparty and use them to Capture, Bleach, or Exfiltrate

Because Exfiltration is always public, it require cronies and henchmen to help with the Bleaching:

Merritt said McLaughlin made around $77,000 when he took over the 916-unit authority in 2000. By 2011, his salary had reached $360,000, Merritt said, after years in which the housing authority’s board of commissioners gave McLaughlin’s contract “little, if any, review.”

That’s roughly a 15% salary increase every year, much of which he could get away with only because he had gamed the inspection system to create the impression that Chelsea was in superb shape when in fact it wasn’t. 

They may want, a piece of our action

As it says in How To Steal Big: To sell a big lie, the more people you have repeating the big lie, the better – so let them have a piece of the action.

McLaughlin’s son Matthew also appeared to benefit, at least indirectly. Michael McLaughlin paid directly from the federal capital fund more than $165,000 to Roca, a Chelsea nonprofit social service agency that had newly hired Matthew, in 2006.

That’s bad Bleaching, because as a technical matter, I don’t understand how capital fund (modernization fund) moneys can be spent for ordinary maintenance or operating.  But bad Bleaching doesn’t matter if nobody notices, and it certainly facilitates the Exfiltration:

Matthew McLaughlin was hired as a $65,000-a-year project director overseeing services to his ­father’s agency that included painting, furniture moving, raking leaves, and other odd jobs.

Two months after Matthew McLaughlin’s hiring, the Chelsea Housing Authority signed the first of three contracts awarded to Roca for maintenance work at the authority.

How very neat – hire a pliant non-profit, have the pliant non-profit hire one’s son.  Roca, in fact, is probably an entirely legitimate non-profit, at least judging by its donors and board of directors (see page 24 of its annual report), and its executive leadership.  It might simply have been used – and often such entities are the best unwitting Bleachers.

Matthew McLaughlin cosigned a formal letter to his father thanking him for his support. “You and your staff are incredibly helpful,” the letter said.

Other Bleachers may be more witting:

McLaughlin paid more than $530,000 to the city [of Chelsea] from 2003 to 2011 for trash service, accounting for about 10% of Chelsea’s total trash-hauling payments even though authority residents represent just 5% of the population.

Aside from the potential Exfiltration of such sweetheart contracts, they also create opportunities for the next chapter in Michael McLaughlin’s How To Steal Big – and it’s a particularly juicy one.

Scrumptious corruption coming up

[Continued tomorrow in Part 3.]

 By:David A. Smith

Last week, depressed by his venality and contempt for the system, although having promised to detail how Mr. McLaughlin’s big theft could have occurred, I took a break from writing about Michael McLaughlin, now disgraced felon and ex-director of the Chelsea Housing Authority – but I had to return to it because of a story late Friday in the Boston Herald (June 14, 2013):

Sentencing stopped for ex-Chelsea housing chief

Gary J. Remal

The disgraced ex-Chelsea housing authority chief may face a tougher prison sentence after his plea agreement hung in jeopardy today amid bombshell allegations in federal court that he has destroyed evidence.

Don’t let him catch you destroying evidence: Woodlock

U.S. District Court Judge Douglas P. Woodlock … announced in court that federal probation officials had informed him about (x) the claims of James McNichols [The Chelsea Housing Authority staff senior account – Ed.], alleging McLaughlin asked him to destroy evidence about his dealings at the housing authority as well as (y) another unnamed witness who has also provided information since McLaughlin pleaded guilty in February to four felony counts of falsifying his true Chelsea Housing Authority compensation that reached as high as $366,000.

Don’t ask me about destroying evidence

Mr. McNichols is the former CHA accountant who, among other things, authorized Mr. McLaughlin’s last-day checks for what Mr. McLaughlin claimed was unused sick time and vacation time, and who:

… shredded weekly timesheets that would have shown the work schedule of McLaughlin and others.

Who does it reveal?

[I'll return to the shredding and its implications when this post ends in a few days. -- Ed.]

 The Globe began investigating the 67-year-old McLaughlin in late 2011 as he prepared to file for a state pension, which at an estimated $278,000 a year would have been one of the largest in the state. As an admitted felon, McLaughlin now is at risk of losing his retirement income.

Over the last six months, there have come to light many details of the horribly successful scheme he put in place to bilk taxpayers and poor people of as much as seven million dollars.

Sources for this post

Articles quoted in this post come from:

Boston Globe (February 24, 2013) 

Boston Globe (February 20, 2013)

Boston Globe (January 28, 2013)

Boston Globe (October 1, 2012) 

Boston Herald (June 14, 2013) 

I’d rather be in the shadows

Today, HUD lists Chelsea Housing Authority as a “troubled” agency, based on its 2011 performance, when McLaughlin was its top manager.

Even from the fragments published so far (see Sources above), Mr. McLaughlin’s story serves as a case study in how to capture, suborn, and then systematically loot a public authority, and how to parlay corrupt resources into more corrupt resources, and how embarrassingly easy it is to subvert HUD’s checks and balances.

Did you see any checks?  No, how about some balances?

Federal housing officials may demand that the Chelsea Housing Authority return $7 million in grants, charging that the agency filed false and deliberately misleading reports to obtain the money under disgraced former director Michael E. McLaughlin.

 During this post, I’ll come to the problem of economic human shields: how Mr. McLaughlin and his co-conspirators (of whom there must have been several) used the extremely poor residents in Chelsea Housing Authority properties to camouflage his larceny, deflect attention, and interpose the residents between him and any government accountability.  For now it is enough that he presided over decrepit housing that if private would have landed its owner in jail.

 Former Chelsea housing chief Michael E. McLaughlin appears to have diverted millions in federal money from construction projects for low-income family and elderly housing, records show, freeing up an enormous slush fund that benefited himself, his family, and his friends, while leaving tenants to make do in dreary apartments that have not been updated in fifty years or more.

 Fortunately – and by the serendipity of nemesis – Mr. McLaughlin was finally nabbed:

Not Michael McLaughlin

McLaughlin pleaded guilty to four felony counts of concealing his inflated salary from federal officials. He has not yet negotiated a plea deal with state investigators that, like the federal deal, would require him to provide evidence against others.

 Though it’s far from sufficient, it is very satisfying to see Mr. McLaughlin’s evil ego brought low:

 It may have been McLaughlin’s chutzpah that finally did him in just a few months from his planned retirement. Asked by a Globe reporter about reports of his high salary in Chelsea, McLaughlin confirmed that he made $360,000 and that he had deliberately concealed his salary from regulators, calling it “the rebel in me.”

 He boasted that he deserved the money, calling himself the Joe Montana of public housing, referring to the Hall of Fame quarterback.

 Certainly Mr. McLaughlin had Hall of Fame theft ambitions, for who else would look upon the Chelsea Housing Authority and see the potential for a vast and systematic theft right under the noses of HUD and Massachusetts’ DHCD?

We couldn’t focus on it

Based on the record, and to assist Mr. McLaughlin in documenting his legacy during his hoped-for incarceration, I’ve compiled Michael McLaughlin’s How-To-Steal-Big Manual:

Multiplied by at least seven

Mr. McLaughlin’s unpublished manual should be required reading for regulators, administrators, and accountants.

Essential to any theft of public resources are three activities, which as a mnemonic I’ve given grandiloquent names:

Capture.  Money intended for a legitimate purpose has to be diverted from that purpose and placed under the control of the big thief or his gang.

We have you now

Bleaching.  The captured money has to be redescribed as being for another purpose, one that looks superficially legitimate but disguises its true purpose. 

Soon it’ll be pure white

Exfiltration. Once ticketed for a bleached purpose, the money must be paid out of the government entity to the thief, his gang, his stooges, or his front entities.

Argo fuck yourself, I’m outta here

Michael McLaughlin’s How-to-Steal-Big Manual

the how-to manual that Mr. McLaughlin evidently followed, and what these principles say about the weaknesses

1. Steal big or go home

Always be stealing, Alec Baldwin would say in the Chelsea Housing Authority version of Glengarry Glen Ross – Always … be … stealing.

Always … be … stealing.  ALWAYS be stealing!

To steal big, one must identify the largest possible sum of money, and then start taking it.  For Chelsea Housing Authority, that comes in the form of modernization funds:

 Housing and Urban Development officials have been trying for months to document what happened to the millions in grants that were supposed to pay for modernization of low-income apartments from 2002 to 2009, but that McLaughlin apparently diverted to pay everyday expenses and higher salaries for himself and key lieutenants.

 As I’ve previously posted, public housing operates on an anachronistic legacy-funding approach that creates a dependency schema whose equation looks like this:

Public housing tenants’ share is never enough to cover even the operating costs

 The public housing operating subsidy formula

 + Resident shares (usually 30% of their income)

+ “Operating subsidy” (from HUD or DHCD)

– Operating expenses for the Authority’s properties

= Zero Net Operating Income

Because public housing residents are usually among the poorest of the poor, with incomes averaging 20% of area median or below, what they can afford as their resident share is never enough to cover even the basic costs of operations assuming no debt on the property.  As a result, public housing properties always need an operating subsidy, and under their regulatory agreements HUD or DHCD is required to provide enough subsidy to bring them up to zero NOI. 

If I were a rich man

Daidle deedle daidle

Daidle daidle deedle daidle dumb

All day long I’d biddy-biddy-bum

 Given that funding formula, housing authorities naturally want to show the highest budget possible, since that increases their claim for operating subsidy, and regulators naturally scrutinize operating expenses – but they’re handicapped in doing so because they are remote from the property, and the dimensions of variability (location, age, configuration, household size) are such that it takes more than just shaking the statistics to derive truth. 

[Back in 2006, DHCD recoded its computerized operating subsidy application forms to force reductions, and got quite properly sued for doing so: 

The DHCD’s computerized system is programmed to reject the completed budget if any line item entry exceeds an amount predetermined by the DHCD.

In 2005, the Boston Housing Authority hand-delivered its budget documents instead of fling them electronically, and crossed out the portion of the certification form that characterized the budget as establishing reasonable funding. 

The lawsuit was later settled, and DHCD changed its procedures.]

 In fact, Chelsea’s 2011 audited financial statements (prepared after Mr. McLaughlin’s pet accountant was fired and replaced by Hurley O’Neill and Company, who evidently know what they are doing) show the following breakdown of cash receipts:

(**) Likely to include, in addition to operating subsidy, modernization funds (to be covered below). 

Chelsea owns and operates 9 developments totaling 916 apartments (built between 1949 and 1976); the second column shows per apartment per month (PAPM), and is worth a bit of reflection.   The average resident pays $325 a month, equivalent at 30% of income for rent to an income of $13,000 annually –and the Authority receives $1,275 PAPM, which ordinary folk would think enough to operate attractive housing is one has no debt and no real estate tax payments due. 

 Now let’s examine the operating subsidy formula using the How-To-Steal-Big principles:

I don’t like how you’re using my name

 Capture is possible if one actually spends less on the Authority’s properties than one budgets.

 Bleaching requires converting the unspent money into payments for seemingly routine, boring payments (like accounting or rubbish collection).

 Exfiltration requires a kickback from the payee.

 According to my envisioned McLaughlin manual, How To Steal Big, “in the hands of a sufficiently ruthless operator, a public housing authority is plum pickings, because modernization funds are advanced without accountability and the residents will never know what was promised to whom.”

 [Go ahead and use the quote without attribution, Mr. Laughlin – I promise not to sue you for plagiarism.]

 [Continued tomorrow in Part 2]

By:David A. Smith

Yesterday’s Part 2 on the bureausclerosis choking France’s economy, using as source material a small-scale article in the Washington Post (April 16, 2013), zeroed in on the debilitating effects of excessive regulation from afar and identified some principles of regulatory balance that ought to be used in the EU and obviously aren’t, including principles of balancing the additional sunk cost of regulation against identifiable benefits:

What do you mean, no smoking?

1. All building-related regulations should have grandfathering provisions

Assets have lives, and residences are the longest-lived asset people have.  Housing is what makes cities, and because residents are continuously occupied (that is, every night), they cannot be easily taken off-line for out of service for municipal upgrade. 

Most housing lasts for forty years; many building structures will last seventy years or more.  (Historic structures, of course, can be preserved for hundreds of years.) 

Seventy years ago was 1945, a time when France wasn’t thinking about complying with accessibility directives.

We’re here to liberate your accessibility restrictions!

The structures that date from that time or before will not comply with modern accessibility or safety requirements.

What to do?  Any bureaucrat worth his salt knows: Issue a new directive.

Christophe Brunel, who runs the Hotel du Rocher Blanc across the road from City Hall here, said new regulations for wheelchair access, sanitation and fire prevention that come into effect in 2015 would cost him about $1.5 million to carry out –

By themselves wheelchair access, better fire prevention, and improved sanitation (upgrading the old kitchen) are all worthy goals – but at what cost?

– more than the century-old hotel is worth.

As I mentioned yesterday, if there’s a new mandate, the government should at least match-fund it (50% or more), preferably a higher percentage.  Thus, if the central government has a new mandate, it has to fund half or more.  That’ll concentrate their minds wonderfully.

The rules, he said, would require him to enlarge corridors and stairways, put in elevators, change doors, update rooms and remodel the kitchen, destroying the charm — and the budget.

The past was not handicap-accessible – and when accessibility and history clash, who wins?

You realize you’re obsolete, don’t you?

“Eighty percent of small independent hotels in France cannot meet these requirements,” he said –

We think of regulation as slowly nicking or bleeding healthy cows; imagine it slaughtering eight percent of a prized herd, especially of a kind distinctive to France? 

– suggesting that airport-style chain hotels will be the only lodgings left if such norms are applied.

Tres authentique

Personally, the Boss and I are happy with chain hotels – we’ve stayed in Ibises from time to time, and while they’re a bit small, they’re perfectly acceptable for what they are – but if they were the only hotel options available, France would be that much culturally poorer.  More relevantly, France would be economically poorer, because people don’t travel to Lozere or the Dordogne to stay in Ibises.  The precautionary principle needs to recognize the existence of cultural legacy, and even the value of anachronism.

You’ll want to modernize that

Perhaps more seriously, recently revised rules for building permits have imposed so many additional requirements that construction has been slowed to a trickle since the beginning of the year just as authorities are trying desperately to find jobs for the unemployed, Therond said.

Authorities aren’t trying desperately enough, because they’re not tackling the biggest obstacle to progress.

2. Precautionary prevention should be proportional to irreversibility

Earlier in this post I introduced the precautionary principle, which, like so many nostrums of the past (“from each according to his ability, to each according to his needs”) sounds cocktail-party-credible for a few seconds:

If an action or policy has a suspected risk of causing harm … the burden of proof that it is not harmful falls on those taking an act.

Its problems, as demonstrated in Albaret Sainte-Marie, include these:

We don’t know it’ll be harmful until it does something

1.     Proof is often hard to come by until something is actually done.

2.     It can be used as a cloaking device for NIMBYism or anti-innovation of every kind.

3.     It gives no weight to upside (counterbalancing benefits), so if an innovation could (say) save 1,000 lives on average but cost 1 life, the precautionary principle would reject it.  (This sort of false-sympathy is often used to argue against vaccinations and the like.)

4.     It presumes that the status quo is risk-free, when in fact the status quo not only has risks, those risks may be increasing.

These last two are implied in passing by Alain Lambert, whom we previously met as head of the French government’s Consultative Commission on Evaluation of Norms:

“We must temper the principle of precaution to restore to French people their right to risk,” he said on delivering his report.

Aside from having communes to make their own local decisions about matters that are purely local (such as whether a particular sidewalk needs to be the width of two wheelchairs), a balanced principle would allow a commune or similar level of government to decide that the cure is worth than the disease.

But that would give the communes too much autonomy, so the French government’s solution was characteristically dirigiste:

Towns and villages such as Albaret-Sainte-Marie were encouraged in recent legislation to form inter-communal committees to pool resources on such matters as water purification or recreational facilities. Despite the logic, all the new law did was add another bureaucratic layer, according to Herve Boulhol, who heads the OECD’s French desk.

Imagine our astonishment when it simply added to the governmental bodies

Naturally!  A committee of the tiny will never recommend that some of the ultra-tiny subjugate themselves to the wishes of the macro-tiny.

If one level of inter-entity committees fails, what can be done except … call in another!

Reacting to expressions of concern, President Francois Hollande promised last week that his government would carry out a “simplification shock” to reduce the overload of rules and regulations.

Simplify?  Is that pozzible?

Simplification would be a shock.

His prime minister, Jean-Marc Ayrault, called in ministers, formed a committee and pledged a purge.

A committee to simplify!  Brilliant!

But most French people only smiled, recalling that similar promises have come from all of Hollande’s predecessors since Charles de Gaulle.

You see me making the French government smaller?

Or me?

Or me?

Make it smaller, you say?

Well, why should I have to be the one to start?

Yet all of these imperious French presidents are or were intellectual prisoners of subtle anti-democratic constructs imposed on them going back through De Gaulle to Napoleon I:

Article I: These laws are executed in all French territory, by virtue of their promulgation from the First Consul

[Concluded tomorrow in Part 4.]

By:David A. Smith

Yesterday we saw, via an article in the Washington Post (April 16, 2013), that France’s centralized government (and behind it, the even-more-remote European Commission) so distrusts anyone it does business with that it has promulgated at least 400,000 norms and rules, all of them violating the next basic principle of regulation:

The Mayor of Albaret-Sainte-Marie has been ordered to rip out this sign and replace it because local bureaucrats require the sidewalk to be free of obstacles.

1. Purely local issues should allow local variation

 The United States has one national government, 50 states (and a handful of other units like the District of Columbia), 3,000 counties, and about 35,000 cities or towns.  In terms of government efficacy, this has proven to be a long-term national strength, because issues can be governed by whatever level of government best balances the need for scale (consistency) and touch (individual variation). 

[Housing policy, as I've previous written, straddles national through local government, which makes it among the most challenging public-policy interventions. – Ed.]

Not so in France, which has never met an activity that cannot be regulated from the Tuileries:

Good for the Third Empire, a model for the Fifth Republic?

A report prepared for the French government last month estimated that the country is squirming under 400,000 norms and rules, ranging from orders to school cooks on the amount of boiled egg a kindergartner can eat at lunch — half an egg —

That’s all you get, unless you’re Siamese twins

— to precise requirements on how far mailboxes can stick out from the wall.

You’ll pry the mail from my cold, dead box

In isolation, each of these things is worthy of a little common courtesy, but only the French would write a national rule about it.  Obviously they’ve never heard of mailbox baseball.

They do not play baseball in France

The directives have cost little towns in France, such as Albaret-Sainte-Marie, more than $2.5 billion over the past four years, the report estimated.

Assuming there are 37,000 communes in France, that’s $17,000 per commune per year. A typical commune is six square miles, and has the breathtaking total of 400 inhabitants (yes, I had to read it twice to believe it). 

“We have a territory that is layered like lasagna,” said Maurice Leroy, a rightist legislator who has joined the call for abolishing departments, “which is not an Italian specialty but a French specialty.”

Undoubtedly France has too many communes – Albaret Saint-Marie has basically the same population it had in Napoleon’s time – and they must by their nature be highly inefficient as instrumentalities of government. 

The OECD has recommended that just abolishing departments would produce substantial savings.  Such a move, in addition to boosting unemployment –

When writing about economic consequences of government downsizing, why is it obligatory to mourn the loss of municipal jobs as if jobs were something that can simply be created without cost or consequence? 

With various government bodies providing 23% of the jobs in France, talk of reducing the overlap is largely ignored.

The lard constituency has voting bloc power.

– would rob the central government of its major channel for exercising authority throughout the country since Napoleon’s time, anathema in a highly centralized system.

That’s a new one – blame Napoleon!

Sure, blame me, go ahead

Though the Emperor himself is long gone, Napoleon’s legal and administrative system lives on in France, as does the French tendency, which goes back before Napoleon to Louis XIV, for a dirigiste government administration, which is contrary to the next principle:

2. Infrastructure decisions should be made by the level of government that pays for them

 According to the Post’s sources, regulation as costing the French economy 3.7% of GDP annually, and the per-commune cost worked out to about $17,000 a year, against (in Mayor Therond’s case) an annual budget of $500,000, which is 3½% of his budget.  That’s a lot for a community of 600 people who have had no say whatsoever in its imposition.

Zoning and land use are predominantly local and should be local because locality creates connection between the taxes paid and the services provided.  Making these decisions local means that if the government wants to do them, the citizens have to pay the taxes, and the citizens have means of rising up and objecting to taxes they think excessive.

Paris, 1830

Localizing tax and services increases the likelihood of value for value, and of balancing the precautionary principle with the rule of common sense.

One day’s delivery brings a directive stipulating that the sidewalks must be widened to permit two wheelchairs to cross paths without bumping.

Please allow the crocodiles access

Who pays for all this, pray tell?

he’s going to tell, he’s going to tell

Certainly not those writing the directives:

Another source of overregulation is the “mille-feuille” of government, the layers that start with municipalities, then cantons, and on to inter-communal bodies, departments, regions, parliamentary representation and ministries. Each level plays a role in imposing norms, sometimes contradictory.

The result is pointless and static:

The rule-writers have no check on firing off paper salvos, which they can tell themselves are stamping out waste, fraud, and abuse.

The rule-readers have no input into the rules, no resources to implement them, and no way of avoiding the next one. 

Just as in China, the result is a tacit agreement for cognitive dissonance, where both the capital and the provinces know reality isn’t what’s on the papers, but both agree to pretend that it is.

Can’t we just go back to a shallow and meaningless relationship?

That might be all right except that:

3. The status quo is not zero risk

 Those who design new programs do so in response to a perceived market failure – something is missing where the government needs to take action – so naturally enough, they envision the current state as being empty – no programs, no activity, no infrastructure, no habits or practices or culture.  Add to this envisioned state of nature the precautionary principle, which presumes the status quo is perfect safety and any change represents potentially untold risk, and you get directives which may be mandatory but cannot be implemented:

The town’s activities center, for instance, is in need of renovation. But Therond is unable to fix it up because it is on a slope and wheelchair access — with the grade level minutely regulated — would be impossible without a ramp stretching out into neighboring property.

Though this is an extreme case of rule-writing hubris that overlooks the possibilities of:

1.     Pre-existing conditions.

2.     Abutters and adverse uses.

3.     Potential to do more harm than good.

My name is Ozymandias, rule-writer supreme

Thus the precautionary principle, if used at all, needs to be measured against the baseline situation, which may have some inherent risk arising not because of lack of rules, but through age, obsolescence, or the application of one of those 400,000 rules and directives:

Another regulation that brings a rueful smile to Therond’s face has to do with water.

The community, high in the Massif Central hills, is blessed with natural spring water. But inspectors found recently that the town’s main spring had absorbed too much salt from anti-snow treatment on a nearby highway.

We’ll have to test anything that runs through springs here: Puy de Dome, Massif Central

That’s absolutely classic – pursuit of one precautionary-principle intervention (reducing traffic accidents) has undermined a much more widely used benefit.

No problem, Therond said, we’ll just dig another spring. But wait, the bureaucrats said, experts have to test the new spring for a year before it can be used.

After all, locals who have lived near a spring for two hundred years couldn’t possibly be expected to know where to tap its fresh water.

Result: The salty spring water still flows into residents’ homes, and Therond has taken to drinking bottled mineral water to prevent hypertension.

Related to the administrators’ desire to treat everything as a clean slate is their desire to sweep away all that is old in favor of what is new:

 [Continued tomorrow in Part3]

When Yeats wrote Things fall apart, the center cannot hold, he could never envisioned the rise of the Bureaucratic State, which believes that lack of touch is no reason to loosen one’s grip on the capillaries – and so, unless the acquisitive tendency is checked, one reaches an end state such as that described in the Washington Post (April 16, 2013), where anything that does not exist now can never come into being:

France drowning in rules and regulations, critics say

Albaret-Sainte-Marie — Although he is rich with 25 years of experience as mayor of this little town in the wooded hills of central France, Michel Therond gets advice from the bureaucrats in Paris almost every time he opens the mail.

While generalizations are dangerous, many are the administrators I’ve met and worked with who operate from the presumption that everyone outside their agency has the maturity of an eight-year-old boy, the reliability of an amnesiac schizophrenic, and the ethics of a disbarred lawyer.

I’m a government partner

I’m just following the rules

I’m from the government and I’m here to erase your memory

Albaret, I discovered, prides itself on its tiny heritage, as illustrated by its claim to having the world’s smallest museum:

Ouverte toute la journee alors allez-y!

Even with Google’s fractured French translation, the place’s charm comes through:

On the green earth Lozere, in the village of Albaret-Sainte-Marie, is the World’s Smallest Museum, near the church.

In a space of about 20m ², you have all the history of the region and the village ahead of you. Created by Mr. Tuffery in the old bread oven, you will find a bit of everything … a little mess … but so much we do not know even where to look except a very special atmosphere emerges: You are in Gevaudan.

It is registered in the Guinness Book of World Records.  Admission is free, by the way the door is open all day, so go for it!

As we follow the story, ask yourselves, could such a museum possibly survive a visit from the accessibility police?

A republic founded on liberte, egalite, fraternite has become a nation of absurdite, complexite, et precaucite because it has lost sight of, or perhaps never acknowledged, the economic gravity and economic imperatives of all regulation, to wit:

Nothing funny about it

1. All regulation has entropy and monetary costs that apply to everybody, even those who are better off unregulated

As I’ve written before, succinctly if self-evidently, things cost money.  Government is not free, nor is regulation.

Trees must be trimmed of branches six feet up their trunks, the orders go, and only government-certified technicians can change a light bulb on city property.

How many bureaucrats does it take to change a light bulb?

We’re taking public comment on the issue.

It should have been labeled “Use common sense, idiot”

Worse, from an economic perspective, the creation of new laws or new regulations is a one-time event, but those laws and regulations go on indefinitely, even if they’ve outlived their usefulness, because they’re very hard to kill. 

In the past two decades, the number of legal do’s and don’ts has become so great that businessmen and economists warn that it is smothering growth just as the continent tries to dig out of its worst slump in a generation.

I’m always surprised how often people ignore what smacks them in the face:

What disagreement?

Smothering growth just as Europe is in a slump?  Maybe Europe is in a slump because of an excess of regulations that have stifled growth?

Comparisons are difficult, but among other advanced economies, the United States, Britain and the Scandinavian countries, which have more hands-off traditions of government, generally suffer less from such excessive regulation, according to assessments by the Organization for Economic Cooperation and Development (OECD).

Not only is there less ‘excessive’ regulation, America’s economic growth, tepid though it may be, is positively energetic compared with Europe’s more or less permanent shrinkage.

And by the way, Angela, your population’s way older than ours

Applied to business with equal bureaucratic fastidiousness –

Actually, probably more ardor, because businesses are perceived as somehow exploiting the public.

– such rules and regulations prove even more expensive in the private sector.

They cost the 27 European Union countries an average 3.7% of their gross domestic product a year, more than $10 billion in the case of France –

To put that in context, last year France’s aggregate budget deficit was 4.80% (or more), and the EU’s Stability and Growth Pact requires budget deficits no greater than 3.00%.  So France’s lost productivity is roughly equal to what it would take to balance the French budget.

– and hold back an incalculable amount of new investment, according to the OECD.

(Perhaps the French should simply issue a regulation to themselves not to run deficits over 3.00%.)

Why not do it?

The point is simple: regulation can kill the thing it regulates. 

“The country is in danger of paralysis,” warned Alain Lambert, head of the French government’s Consultative Commission on Evaluation of Norms.

We can’t move without bumping into each other

The culprit is known in political theory as the precautionary principle, which sounds great when first presented:

The precautionary principle … states if an action or policy has a suspected risk of causing harm … the burden of proof that it is not harmful falls on those taking an act.

Simplified even further, the precautionary principle requires new initiatives to be zero risk.  But life, it turns out, is hazardous to your health.

You know, I worry about that all the time

2. Mandates should be at least match-funded

I once joked that to a regulator, a rule is something he writes and we follow.  (America’s recent IRS scandal has provided us a nice illustration of one-way compliance.)  And they all have the same presumption – I mandate something, you pay to get it done.

The regulations almost always flow from a desire to meet recent and broadly accepted social goals, such as environmental protection, accident prevention or access for the disabled.

The goals are ‘broadly accepted’ because they sound good, we sympathize with the person or group being protected or assisted, and it’s no skin off our nose to support the goal.

You don’t mind supporting my goal, do you?

So we hear about a new initiative, we murmur positively, and life goes on – except, like those free magazines that clutter our mail slot, they pile up. 

As lawmakers pass more legislation and bureaucrats scribble more implementation orders, specialists say, the result looks like a vast straitjacket holding back economic activity at a time when Europe needs it most.

If new mandates are being introduced that raise the standards, the mandating agency should fund at least half the costs (preferably more).  This has two salutary effect s:

1. It gives the mandate-ee funds to do the work.
2. It slows down the regulator’s propensity for writing new rules regardless of the cost.

Mandate-ee, not manatee

In effect, Europe has been hoarding regulations. 

“We are being strangled,” Therond complained, sifting through a pile of rules and regulations on his desk that he largely ignores — and many of which he does not even understand.

France and its southern European neighbors, such as Italy and Greece, are increasingly being buried in such norms, rules and directives.

Prospero’s Europe is heading for terminal entrepreneurial sclerosis, and that in large part through constant violation of the most basic principle of multi-level government:

We’re here to help you

[Continued tomorrow in Part 2.]