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04 December 2011

Politicians Use Big Government to Enrich Themselves

For a politician, the temptation to increase the power of government is huge.  The more power the government has and the wider the range and scope of its activities, the more power the politician has both to acquire wealth and to satisfy his growing lust for power.  Absolute power corrupts absolutely.  Absolute power makes a man wealthy.

Presidents, Senators, and Congressmen can threaten an industry, or an entire sector of the economy, or even a single business with legislation which will hurt its profitability.  This threat may go no further than talk, or it may be approved by a committee of Congress, or it may become law.  At any stage of the process of producing a potential law, politicians can line up as saviors of those threatened and hold out their hands for campaign rewards or they can wait for a company or industry to approach them asking how the industry or company can save itself.  Savvy companies and industries often shower politicians with benefits such as hiring a relative or providing campaign contributions to head off any such attack upon them.  Politicians are very wily about using this process to extort money from private companies and the wealthy.  The Democrats have been very effective in using their power to hurt Wall Street to extract huge campaign contributions from Wall Street financial firms using this technique, resulting in Obama's huge contributions in 2008 and further large contributions to many of  the Democrats in the 2010 election.

Alternatively, a company or industry may be seeking to use its relationships with politicians to win subsidies or to win protections from competition.  Immoral companies and industries will pay for this.  For instance, many health insurance companies and drug companies were eager for ObamaCare to pass, since it would bring more business to them if many more people were to use more medical benefits.  There are large agricultural businesses eager for farm crop and land use subsidies.  Corn growing farmers and ethanol refiners are often strong lobbyists for the ethanol subsidies that make no environmental or energy sense.  The so-called green energy companies stand in line for billions of dollars of grants from the Department of Energy.  Peter Schweizer's book Throw Them All Out shows that a number of wealthy Obama supporters won $16.4 billion of Department of Energy green energy grants as a huge return on their campaign contributions.  Wall Street companies are eager for special assess to Federal Reserve money or for protection against losses under Too Big to Fail.  Congress' and the President's ability to change the rules of business also entice labor unions to make huge contributions in exchange for favors.

There are other ways this process of stirring the pot with threats against industries and companies can yield wealth for our legislators.  If they simply talk about making a change of law that will hurt or help a company or industry, they can drive that industry's or company's stock prices up or down or they may affect the cost of a commodity.  Knowing that they are about to talk down or talk up a company, they can use that information to make almost certain money on purchases or short trading of its stock.  They can talk about taking harmful action, but then back off, having bought much stock when the price was depressed.  A last minute provision or even a last minute complete bill such as ObamaCare or the Dodd-Frank financial industry control bill may have stock value implications that Senators and Congressmen or a select few of them know about.  They can use this information to make a stock investment killing.  In the case of bills that give major rule-making power to executive agencies, those government insiders with information on those rulings can make a killing.  For members of the Executive Branch, this is illegal, but it is also commonly not discovered.  Congressmen are often informed about how these rulings are going and there are no laws against their using this insider information.

Now, it is not the fact that they are becoming rich men and women which is the worst of this.  It is the fact that each of these possibilities to become rich are actual incentives to cause them to do harm to others that goes way beyond their having campaign advantages or having an advantage in making money that most investors do not have.  These power and wealth incentives mean that bill after bill that is claimed to be passed for the general welfare is actually passed despite its hurting most Americans.  Or, if it is not passed, it is only because companies or industries or wealthy people have been successfully extorted.

We need to bear in mind that all of these nefarious activities are the result of big government.  They are inherent in the size and scope of government which allows it to be such a business and labor market threat that such activities are not just enabled, but they are inevitable.  One hears talk of campaign finance reform, but that inhibits freedom of speech and has rightly been ruled by the Supreme Court to be a violation of the Constitution.  There is now talk of banning Congressional insider trading either entirely for serving members of the Congress or at least when Congress is in session.  There is also talk of making Congressmen set up blind trusts.  Congress has to pass any such reform bill and history tells us that they will only pass a bill with many loopholes and that will only happen if there is a major popular outcry.

All this mischief and grief occurs because we have allowed the government to greatly exceed its very limited constitutional powers.  This is why we have a government that panders to special interests and which has every incentive to ignore the general welfare.  The General Welfare is served by protecting our equal, sovereign individual rights to life, liberty, property, and the pursuit of happiness.  Government is the problem, because it has become gigantic government.  While the People retain the nominal control of this government, the reality is that its activities are too complex and too all-pervasive in our society for most of the voters to follow them and to understand them.  Government by the People can only be effectively managed by the People when that government is of highly limited power and scope.  That was the condition that the People wisely mandated with our Constitution.  Because we have ignored these wise limits, we now have a government of the special interests, by the special interests, and for the special interests.  Abraham Lincoln's description of our federal government, while much preferred, has become a practical lie.


Jon said...

Please also consider the amount of drug money created and laundered and of course compounded since 1949 or so. Start at $500 million a year.

I'm not sure whether the drug kingpins own wall street and the corporations and the banks or viceversa or if they are all in cahoots with all of our politicians from the local dog catcher on up.

'Tis a very sad situation

Charles R. Anderson, Ph.D. said...

No doubt they own a part of many companies. They are better off not making a spectacle of themselves if they spread their money widely over markets. There have been many instances in which banks have helped them launder their money, though that is perhaps a bit harder now than it used to be. On the other hand, on can imagine one time and big drug dealers liking laws that make laundering money harder so they can keep down the competition, just as some big companies like regulations in other industries.