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The Sausage Factory

Posted By Russ Roberts On January 10, 2006 @ 12:11 pm In Antitrust,Archaeological Economics,Politics | Comments Disabled

A number of people are glad that Jack Abramoff is headed to jail.  In this unintentionally funny Washington Post story [1] (rr), we discover one such group.  The story opens:

ELTON, La. — The dizzying downfall of lobbyist Jack Abramoff means
more than just another Washington political scandal in this rural
outpost of tin-roofed homes and fraying trailers.

It is a measure of vengeance.

Led on by what they say were his false promises of political access,
leaders of the Coushatta Tribe of Louisiana, which is based here, paid
Abramoff and his partners about $32 million for lobbying and other
services — more than $38,000 for each of their 837 tribal members. By
their accounting, they got very little in return.

I first read this story in the print version of the Post where it was a front page story.  That $38,000 figure gave me some pause.  Where does any group of 837 people find $38,000 apiece to pay for lobbying services?  Why would any group be willing to pay someone $32 million for lobbying services?  But the focus of the piece is instead the injustice of those fees:

It was thievery, tribal members said, that echoes the historic losses of Native Americans to European settlers.

"Abramoff
and his partner are the contemporary faces of the exploitation of
native peoples," said David Sickey, a member of the tribal council. "In
the 17th and 18th century, native people were exploited for their land.
In 2005, they’re being exploited for their wealth."

Pretty poignant, huh?  But where did that money come from to pay Abramoff?  And why did tribal leaders agree to it?  After a discussion of Abramoff’s insulting language in emails about tribe members and how the Tribe used to only deal with Democrats until Abramoff came along, we discover that the tribe did get something in return for their investment:

In some instances, the Coushattas got what they paid for: Abramoff was
able to help quash a rival tribe’s proposed casino, protecting the
Coushatta Casino Resort.

Okay, that’s something.  Just how valuable was that service?  A partial answer to that question comes about half way through the story and tells us what might have been worth mentioning nearer to the top of the piece:

Revenue from the operation is estimated to be about $300 million a
year, and each tribal member is given a quarterly sum from the profits.
Tribe finances are not disclosed publicly, but estimates of those
checks per member have ranged from $30,000 to $40,000 annually. Members
also receive free medical care and education, as well as financial aid
to buy a home. Many have used the money for better cars and better
homes.

That’s $30,000-$40,000 per member.  Does that mean that a family of four would get about $140,000?  The article doesn’t say, but it does tell us:

The per capita prosperity has also kicked off a baby boom, tribal
leaders said, and today 342 of the tribal members are under the age of
18.

I suspect it isn’t the prosperity that’s encouraging the baby boom but the incentives implicit in how casino revenues are divided.

Any time the government hands out monopoly rights, it’s not surprising that the beneficiaries will pay large sums of money to keep those rights intact and free from competitors.

I sure would like to know how the Coushattas rather than another tribe came to be chosen for the casino in that area.  I have a feeling it wasn’t a lucky spin of the roulette wheel or drawing the high card.

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