London Student (Entitlement) Protests

A large number of British students protested (and a minority rioting) against, university tuition hikes, enacted by the government as part of their efforts to address England's growing debt crisis. While I am sympathetic to the financial burden that some of these students will face, the protesters are riddled with ethical and philosophical problems. Fundamentally, a subsidy is the transference of wealth from tax payers to a a select group, that allows them to enjoy a set of goods and services, without bearing the full costs. In other words, the students are protesting the fact that they will now have to pay a larger portion of a program that will, in most cases, increase their future incomes. Some will argue that this is a worthwhile subsidy, a wise investment in the future, because educated citizens economically and socially benefit the public, a position that I largely agree with. However, no individual or group is entitled to the wealth of another; it is the right of the citizens to determine, via their elected representatives, how they should invest public funds. This is true in the best of times and even more so when a nation is mired in debt.

http://www.youtube.com/watch?v=MmudJafnQh0

Big Business and Big Government

Far too many conservatives and progressives have adopted the narrative of large, uber capitalist corporations that opposed big government and regulation, when quite often the truth is more complex. A careful look at history and current events shows that many larger corporations are avid supporters of the interventionist state, because they seek to use subsidies and even regulations as means of limiting competition and maintaining their market monopolies. And not surprisingly, as the state has increased its influence in the workings of big business, big business has increased its influence in the state.

July 21, 2006

Big Business and Big Government
by Timothy P. Carney

Big business has too much power in Washington, according to 90 percent of Americans in a December 2005 poll.

Every week, headlines reveal some scandal involving politicians, lobbyists, corporate cash, and allegations of bribes. CEOs get face time with senators, cabinet secretaries, and presidents. Lawmakers and bureaucrats take laps through the revolving door between government and corporate lobbying. Whatever goes on behind closed doors between the CEOs and the senators can't be good or the doors would not be closed.

Just what is big business doing with all this influence? There are many assumptions about big business's agenda in Washington. In 2003 one author asserted, "When corporations lobby governments, their usual goal is to avoid regulation."

That statement reflects the conventional wisdom that government action protects ordinary people by restraining big business, which, in turn, wants to be left alone. Historian Arthur Schlesinger articulated a similar point: "Liberalism in America [the progression of the welfare state and government intervention in the economy] has been ordinarily the movement on the part of the other sections of society to restrain the power of the business community." The facts point in an entirely different direction:

Enron was a tireless advocate of strict global energy regulations supported by environmentalists. Enron also used its influence in Washington to keep laissez-faire bureaucrats off the federal commissions that regulate the energy industry.

Philip Morris has aggressively supported heightened federal regulation of tobacco and tobacco advertising. Meanwhile, the state governments that sued Big Tobacco are now working to protect those same large cigarette companies from competition and lawsuits.

A recent tax increase in Virginia passed because of the tireless support of the state's business leaders, and big business has a long history of supporting tax hikes.
General Motors provided critical support for new stricter clean air rules that boosted the company's bottom line.

The Big Myth

The myth is widespread and deeply rooted that big business and big government are rivals—that big business wants small government.

A 1935 Chicago Daily Tribune column argued that voting against Franklin D. Roosevelt was voting for big business. "Led by the President," the columnist wrote, "New Dealers have accepted the challenge, confident the people will repudiate organized business and give the Roosevelt program a new lease on life." However, three days earlier, the president of the Chamber of Commerce and a group of other business leaders met with FDR to support expanding the New Deal.

Almost 70 years later New York Times columnist Paul Krugman assailed the George W. Bush administration: "The new guys in town are knee-jerk conservatives; they view too much government as the root of all evil, believe that what's good for big business is always good for America and think that the answer to every problem is to cut taxes and allow more pollution." At the same time, "big business" just across the river in Virginia was ramping up its campaign for a tax increase, and Enron was lobbying Bush's closest advisers to support the Kyoto Protocol on climate change.

Months later, when Enron collapsed, writers attributed the company's corruption and obscene profits to "anarchic capitalism" and asserted that "the Enron scandal makes it clear that the unfettered free market does not work." In fact, Enron thrived in a world of complex regulations and begged for government handouts at every turn.

When commentators do notice business looking for more federal regulation, they mark it up as an aberration.

When a Washington Post reporter noted in 1987 that airlines were asking Congress for help, she commented, "Last month, when the airline industry found itself pursued by state regulators seeking to police airline advertising, it looked for help in an unlikely place—Washington." In truth, airline executives had been behind federal regulation of their industry for decades and had aggressively opposed deregulation.

In fact, for the past century and more big business has often relied on big government for support.

The History of Big Business Is the History of Big Government

As the federal government has progressively become larger over the decades, every significant introduction of government regulation, taxation, and spending has been to the benefit of some big business. Start with perhaps the most misunderstood period of government intervention, the Progressive Era from the late 19th century until the beginning of World War I.

President Theodore Roosevelt is usually depicted as the hero of this episode in American history, and his "trust busting" as the central action of the plot. The history books teach that Teddy empowered the federal government and the White House in a crusade to curb the big business excesses of the "Gilded Age."

A close study of Roosevelt's legacy and that of Progressive legislation and regulation, however, yields a far different understanding and shows that the experience with meat—big business calling in big government for protection—was a recurring theme. Roosevelt expanded Washington's power often with the aim and the effect of helping the fattest of the fat cats.

Today's history books credit muckraking novelist Upton Sinclair with the reforms in meatpacking. Sinclair, however, deflected the praise. "The Federal inspection of meat was, historically, established at the packers' request," he wrote in a 1906 magazine article. "It is maintained and paid for by the people of the United States for the benefit of the packers."

Gabriel Kolko, historian of the era, concurs. "The reality of the matter, of course, is that the big packers were warm friends of regulation, especially when it primarily affected their innumerable small competitors." Sure enough, Thomas E. Wilson, speaking for the same big packers Sinclair had targeted, testified to a congressional committee that summer, "We are now and have always been in favor of the extension of the inspection, also of the adoption of the sanitary regulations that will insure the very best possible conditions." Small packers, it turned out, would feel the regulatory burden more than large packers would.

Consider the story of one of the most famous "trusts" in American folklore: U.S. Steel.

In the 1880s and 1890s, rapid steel mergers created the mammoth U.S. Steel out of what had been 138 steel companies. In the early years of the new century, however, U.S. Steel saw its profits falling. That insecurity brought about a momentous meeting.

On November 21, 1907, in New York's posh Waldorf-Astoria, 49 chiefs of the leading steel companies met for dinner. The host was U.S. Steel chairman Judge Elbert Gary. The gathering, the first of the "Gary Dinners," hoped to yield "gentlemen's agreements" against cutting steel prices. At the second meeting, a few weeks later, "every manufacturer present gave the opinion that no necessity or reason exists for the reduction of prices at the present time," Gary reported.

The big guys were meeting openly— with Teddy Roosevelt's Justice Department officials present, in fact—to set prices.

But it did not work. "By May, 1908," Kolko writes, "breaks again began appearing in the united steel front." Some manufacturers were undercutting the agreement by dropping prices. "After June, 1908, the Gary agreement was nominal rather than real. Smaller steel companies began cutting prices." U.S. Steel lost market share during this time, which Kolko blames on "its technological conservatism and its lack of flexible leadership." In fact, according to Kolko, "U.S. Steel never had any particular technological advantage, as was often true of the largest firm in other industries."

In this way, the free market acts as an equalizer. While economies of scale allow corporate giants more flexible financing and can drive down costs, massive size usually also creates inertia and inflexibility. U.S. Steel saw itself as a vulnerable giant threatened by the boisterous free market, and Gary's failed efforts at rationalizing the industry left only one line of defense. "Having failed in the realm of economics," Kolko writes, "the efforts of the United States Steel group were to be shifted to politics."

Sure enough, on February 15, 1909, steel magnate Andrew Carnegie wrote a letter to the New York Times favoring "government control" of the steel industry. Two years later, Gary echoed this sentiment before a congressional committee: "I believe we must come to enforced publicity and governmental control . . . even as to prices."

When it came to railroad regulation by the Interstate Commerce Commission, the railroads themselves were among the leading advocates. The editors of the Wall Street Journal wondered at this development and editorialized on December 28, 1904:


Nothing is more noteworthy than the fact that President Roosevelt's recommendation recommendation in favor of government regulation of railroad rates and[Corporation] Commissioner [James R.] Garfield's recommendation in favor of federal control of interstate companies have met with so much favor among managers of railroad and industrial companies.

Once again, big business favored government curbs on business, and once again, journalists were surprised.

To cast it in the analogy of Baptists and Bootleggers, the muckrakers such as Sinclair were the "Baptists," holding up altruistic moral reasons for government control, and the big meatpackers, railroads, and steel companies were the "Bootleggers," trying to get rich from government restrictions on their business. Roosevelt was allied to the "bootleggers," the big meatpackers in this case. To get federal regulation, he found Sinclair a handy temporary ally. Roosevelt had little good to say about Sinclair and his ilk; he called Sinclair a "crackpot."

This preponderance of evidence drove Kolko, no knee-jerk opponent of government intervention, to conclude, "The dominant fact of American political life at the beginning of [the 20th] century was that big business led the struggle for the federal regulation of the economy." With World War I around the corner, this "dominant fact" was not about to change.

The men who gathered at the Department of War on December 6, 1916, struck a startling contrast. Labor leader Samuel Gompers sat at the table with President Woodrow Wilson and five members of his cabinet.

Joining Gompers and those Democratic politicians were Daniel Willard, president of the Baltimore and Ohio Railroad; Howard Coffin, president of Hudson Motor Corporation; Wall Street financier Bernard Baruch; Julius Rosenwald, president of Sears, Roebuck; and a few others. This extraordinary gathering was the first meeting of the Council of National Defense, formed by Congress and President Wilson as a means for organizing "the whole industrial mechanism . . . in the most effective way."

The businessmen at this 1916 meeting had dreams for the CND that went far beyond America's imminent involvement in the Great War, both in breadth and in duration. "It is our hope," Coffin had written in a letter to the DuPonts days before the meeting, "that we may lay the foundation for that closely knit structure, industrial, civil, and military, which every thinking American has come to realize is vital to the future life of this country, in peace and in commerce, no less than in possible war."

The CND, after beginning the project of government control over industry, handed much of its responsibility to the new War Industries Board (WIB) by July of 1917. That coalition of industry and government leaders increasingly took control of all aspects of the economy. War Industries Board member and historian Grosvenor Clarkson stated that the WIB strived for "concentration of commerce, industry, and all the powers of government." Clarkson exulted that "the War Industries Board extended its antennae into the innermost recesses of industry. . . . Never was there such an approach to omniscience in the business affairs of a continent."

Business's aims in the WIB were much higher than government contracts, and certainly business did not lobby for laissez faire. As Clarkson puts it, "Business willed its own domination, forged its bonds, and policed its own subjection." Business, in effect, shouted to Washington, "Regulate me!" Business called on government to control workers' hours and wages as well as the details of production.

A decade later Herbert Hoover practiced more of the same. Hoover's record was one not of leaving big business alone but of making government an active member of the team. As commerce secretary in the 1920s, he helped form cartels in many U.S. industries, including coffee and rubber. In the name of conservation, Hoover "worked in collaboration with a growing majority of the oil industry in behalf of restrictions on oil production," according to economic historian Murray Rothbard.

In the White House (where history books portray him as a callous and clueless practitioner of laissez faire), Hoover reacted to the onset of the Great Depression by pressuring big business to lead the way on a wage freeze, preventing the drop in pay that earlier depressions had brought about. Henry Ford, Pierre DuPont, Julius Rosenwald, General Motors president Alfred Sloan, Standard Oil president Walter Teagle, and General Electric president Owen D. Young all embraced the policy of keeping wages high as the economy went south.

Hoover praised their cooperation as an "advance in the whole conception of the relationship of business to public welfare . . . a far cry from the arbitrary and dog-eat-dog attitude of . . . the business world of some thirty or forty years ago."

Before FDR, Hoover got the ball rolling for the New Deal with his Reconstruction Finance Corporation. The RFC extended government loans to banks and railroads. The RFC's chairman was Eugene Meyer, also chairman of the Federal Reserve. Meyer's brother-in-law was George Blumenthal, an officer of J.P. Morgan & Co., which had heavy railroad holdings.

The New Deal and Beyond

After the groundwork laid by the Progressives, Wilson, and Hoover, the alliance of big business and big government continued throughout the 20th century.


Franklin D. Roosevelt implemented the same sort of government controls on the economy during World War II that Wilson had put in place during World War I, complete with rationing and price controls. Big business profited from the controlled economy in much the same ways that it had under Wilson.
President Harry Truman wanted his secretary of state's June 5, 1947, speech to Harvard's commencement to be a quiet one about the rebuilding of Europe. He didn't get his wish. The New York Times and the Washington Post both reported the story on the front pages. Within a day, the whole world knew about the Marshall Plan. But very few knew that a clique of mostly business leaders, called "The President's Committee on Foreign Aid," drafted the idea. Secretary of Commerce W. Averell Harriman, son of railroad magnate E. H. Harriman and former chairman of both Union Pacific Railroad and Illinois Central Railroad, ran the committee. Nine other businessmen joined him. "Throughout, business members—particularly Harriman— set the agenda and the tone for the group's work," historian Kim McQuaid writes. "Without the corporate politicians, Truman's effort would have failed. Men like [cotton baron Will] Clayton and Harriman arrayed foreign aid in procapitalist, anticommunist attire."
On Sunday night, August 15, 1971, millions of Americans watched President Richard Nixon lay out his New Economic Policy. Nixon had a reputation as a staunch conservative, but his New Economic Policy (a phrase borrowed, bizarrely, from Vladimir Lenin) showed Nixon to be a changed man. The federal government would prohibit any increase in wages, prices, or rents for 90 days. After that a "wage and price council" would dictate to businesses when and how much they could increase wages, salaries, and prices. The next day W. P. Gullander, president of the National Association of Manufacturers, declared that "the bold move taken by the President to strengthen the American economy deserves the support and cooperation of all groups." That reaction was typical among big businesspeople. The New York Times reported on August 17, 1971, "Business leaders applauded yesterday, with varying degrees of enthusiasm, the sweeping proposals announced by President Nixon Sunday night."
George W. Bush, in the name of "compassionate conservatism," has handed big business big favors in the form of a prescription drug benefit from Medicare, an energy bill full of brand new special tax credits and subsidies to energy companies, and a record loan guarantee to facilitate business with known nuclear proliferators in China. A report by the directors of the Health Reform Program at Boston University's School of Public Health found, "An estimated 61.1 percent of the Medicare dollars that will be spent to buy more prescriptions will remain in the hands of drug makers as added profits. This windfall means an estimated $139 billion in increased profits over eight years for the world's most profitable industry."

"The greatest trick the devil ever pulled," said Kaiser Soze in the film The Usual Suspects, "was convincing the world he didn't exist." In a similar way, big business and big government prosper from the perception that they are rivals instead of partners (in plunder). The history of big business is one of cooperation with big government. Most noteworthy expansions of government power are to the liking of, and at the request of, big business.

If this sounds like an attack on big business, it is not intended to be. It is an attack on certain practices of big business. When business plays by the crooked rules of politics, average citizens get ripped off. The blame lies with those who wrote the rules. In the parlance of hip-hop, "don't hate the player, hate the game."

This article originally appeared in the July/August 2006 edition of Cato Policy Report

http://www.cato.org/research/articles/cpr28n4-1.html

Misdiagnosis

In the last 15 years there has been quite a few protests against free trade. Progressives correctly point out that the importation of cheap American produce have significantly harmed the agricultural sectors in many poorer nations. However, their diagnosis of free trade as the source of this ailment is off. The author of this article believes that the billions of dollars in subsidies that the federal government provides large agro-corporatioons allows them to export food at below market rates, overwhelming local producers. I would like to see true conservatives and progressives work together to repeal this abominable example of corporate welfare.

Published on Monday, May 6, 2002 in the Philadelphia Inquirer

Why U.S. Farm Subsidies Are Bad for the World

They make it possible for us to export food so cheaply that farmers in poorer nations can't possibly compete.

by Andrew Cassel

Last year, I wrote about a documentary called Life and Debt that examined how globalization had affected ordinary people's lives in one poor country, Jamaica.

Much of the show, which aired on PBS, was devoted to showcasing the troubles of Jamaica's farmers, who find it tough to compete against cheaper food products imported from the United States.

Filmmaker Stephanie Black found it both ironic and outrageous that American imports could be sold on the island for less than home-grown Jamaican food. She blamed the problem on free trade.

As a condition for helping Jamaica service its large foreign debt, international lending agencies demanded that the country keep its tariffs low. The government was unable to bar American sugar, grain, and other food products from the island, so its own farmers were stuck.

But this analysis, which is typical of many "progressive" complaints about trade and globalization, seriously missed its mark. And if you were watching last week as the U.S. Congress moved toward passage of a massive new farm-subsidy bill, the real source of Jamaican farmers' problems became apparent.

The farm bill, which the House of Representatives has approved and which the Senate could vote on this week, calls for taxpayers to fork over some $180 billion to farmers during the next decade. That's a 70 percent hike above the cost of current farm-subsidy programs, most of which represent direct payments to wealthy farmers and agribusinesses.

Those subsidies make it possible to export millions of tons of food so cheaply that native farmers in places such as Jamaica can't possibly compete.

By guaranteeing U.S. farmers a minimum payment for commodities such as corn, rice and soybeans, the government encourages overproduction. That drives down the market price, forcing even higher subsidies and creating surpluses that can be shipped to Jamaica and elsewhere.

For a short time back in 1996, Congress recognized how nonsensical all this is, and passed a bill that was supposed to have begun phasing out the worst parts of the farm-subsidy program.
The idea was that farmers should decide what and how much to plant based on the market, as opposed to what many of them called "farming the program."

Both major political parties had reasons to support this idea - Republicans because they are supposed to favor getting government off people's backs, and Democrats because they are supposed to oppose corporate welfare.

There is no doubt, by the way, that farm subsidies are corporate welfare par excellence. Although the program began as a way to aid poor family farmers in the 1930s, by last year nearly three-quarters of the money went to the richest 10 percent of American farmers. Recipients of five- and six-figure farm subsidy payments included John Hancock Life Insurance Co., Chevron, banker David Rockefeller, and basketball star Scottie Pippen. Even former Enron chairman Kenneth Lay collected a few bucks.

But in an election year, with Congress closely divided, winning a few farm-state votes trumps everything. Political principle, fiscal prudence, rational economics are all out the window, not to mention the cost of all this rural largesse in urban and suburban America. (The Heritage Foundation estimates that tab at $462 billion over 10 years, or $4,377 per average household.) A good part of the problem is that we still buy the myth of the family farmer as somehow superior to the family grocer, employee-benefits consultant, or anyone else who struggles to make a living. That gives farm lobbyists a potent hook with which to demand public assistance.

But this myth is costly, and not only for the 97 percent of Americans who don't live on farms. Boosting farm subsidies here will be enormously damaging to the U.S. position in global trade talks, where our negotiators have been trying to get other countries to reduce their own agricultural subsidies.

Europe and Japan, for instance, would buy more American farm products if their own farmers weren't so heavily protected by tariffs and subsidies. And lowering such trade barriers in the world's richer countries would enable poorer nations in Africa, the Caribbean and elsewhere to grow by exporting more of their own products.

The current U.S. farm bill, however, is a big step backward. If it is passed - and signed, as President Bush has promised to do - the world trade climate will get worse rather than improving.

That's not good news for farmers in Jamaica, among many others, whose problems stem not from free trade but from the lack of it.

It would be great fodder for a documentary. Perhaps PBS will run a sequel.

Copyright 2002 Philadelphia Inquirer

Common Ground Between Progressives & Conservatives: Dr. Ron Paul

Dr. Ron Paul (R - Texas)

Even though my "progressive" surely disagree with many of Ron Paul's points, I hope that they can find common ground with Dr. Paul's criticism of our grossly irresponsible fiscal and foreign policy. As a staunch supporter of free market economics, Dr. Paul is vehemently opposed to subsidies and selective treatment of connected corporations, which "progressives" usually refer to as "corporate welfare." Although the reasoning of both sides may be different, there are points where they can work together.

http://www.youtube.com/watch?v=pSRvnXtrmtE

$60 Billion Dollar Subsidy?

Pictured above: One of the last

supporters of the Chicago Suntimes.

John Nichols and Robert W. McChesney of the Nation wrote an interesting piece about the decline of newspapers and its effect on civil society. As with most "progressives" they diagnose real illnesses, but propose treatments that at best will be ineffective or at the worst will engender unintended consequences that will be worse than the original ailment. And not surprisingly their solutions are quite costly:

"All totaled, the suggestions we make here for subscription subsidies, postal reforms, youth media and investment in public broadcasting have a price tag in the range of $60 billion over the next three years."

With Obama's fetish for failed companies something tells me that a newspaper bailout will be on the way. Only time will tell.

http://www.thenation.com/doc/20090406/nichols_mcchesney/single?rel=nofollow

Time Travelleler from 1907

April 9, 2009

Washington, DC

Cornelius Williams the 1st recorded time traveller issued the following statement during a press conference:

"Members of the press, I travelled from 1907 to meet with President Obama. In 1890, I found Standard Buggies International, which quickly grew to be the largest horse drawn carriage manufacturer in the United States of America. In 1896, at our peak we employed 70,000 out of the 200,000 workers in our industry. But, the ascension of the American automobile industry and stiff international competition spelled our doom. By 1906 we were on the verge of bankruptcy, yet our heartless government refused to bail us out. That same year I obtained a time machine and during my voyagers I learned about the multi-billion dollar bailouts that your great leader Barack Obama was providing failing businesses. So, I decided to meet with him and argue the merits of bailing out the horse drawn carriage industry. To my great surprise he enthusiastically agreed and tomorrow I will be returning to 1907 with $1.5 billion dollars. Oh if only we had this great change in our time!

Green Subsidies

The public bearing the burden of green subsidies.

I recommend that my readers check out the economist Max Schulz's article on the Obama administration's costly push for "green jobs."

The author doesn't doubt the need to address global warming, but he is skeptical of Obama's claims that government subsidized "green industries" will be a net producer of jobs.

He points out that in 2008 the government subsidized solar energy at $24.34 per megawatt-hour (mw/hr) and wind power at $23.37. Whereas natural gas generates energy at $ 0.25 mw/hr, coal at $0.44 and hydroelectricity at $0.67. Given the relatively low energy output of renewable energy sources, they currently provide 0.5% of our nation's energy needs. The economic implications of this are:

1. Barring aside exponential increases in energy output via wind and solar power, a government mandated shift towards renewable energy sources will dramatically raise the cost of production through higher energy costs.

2. Or, if the government makes the widespread use of renewable energy sources feasible through heavy subsidies, these subsidies will result in a higher tax burden of productive industries, which also will raise the cost of production.

3. Any economist will tell you that raising the cost of production will result in a loss of jobs. And the author does not believe that the loss in private sector industrial jobs will be offset by gains in heavily subsidized "green jobs."

4. The author correctly points out that locals with higher energy costs (such as California) drive out jobs to areas with lower energy costs (such as North Carolina) and even straight out of the country.

And I would like to ad that the history of government subsidies shows that:

1. Inevitably the prime determinant of which companies (in any given field) are the recipients of government subsidies are not which are the most innovation. Rather, political connections and influence via lobbying determines who receives public funds.

2. Government subsidies limit market competition and market entry for new companies. And in the case of agricultural subsidies we see that public funds are often used by large, corporate recipients to buy out their smaller competitors.

3. By reducing market competition, subsidies reduce incentives to innovate or become more cost and energy effective.

4. Government mandated social goals (minority ownership etc.) that usually accompany government subsidies further erodes the efficiency of subsidized industries.

5. In general, when private finance is not willing to provide capital for a company, we should be very skeptical of the soundness and sustainability of that company and its goods and services.

6. On the rare occasion in which a subsidy is wisely conceived and administered, it will inevitably outlive its economic and social usefulness. Just look at the farm subsidies that were introduced by FDR during the Great Depression to assist poor farmers - not only have they outlived their usefulness by over 60 years, they have continued to grow and skew towards larger agro-corporations.

So, while I see the merits of fighting environmental degradation, I am very skeptical of the power of government subsidies to produce positive economic outcomes, including the creation of jobs. Max Schulz believes that the best way to a greener and more prosperous future would be for the government to simply set goals and parameters for the private sector (such as carbon caps) and let market competition do the work. But, what can we expect from an administration that claims that birth control and bridges to nowhere are economic stimuli?

http://www.city-journal.org/2009/19_1_green-jobs.html

A Progressive Argument Against Big Government...

"Progressives" frequently lament "corporate welfare," or in more economical terms they oppose subsidies and tax exemptions granted to politically connected corporations. Amazingly, I am 100% in agreement with them.

In theory a strategic, temporary subsidy based on sound economic logic could yield a net benefit. The problem is that rarely, if ever the redistribution of tax payers money is based on sound economic logic.

In Washington DC there are over 30,000 lobbyists that disburse several billion dollars a year to a multitude of politicians. The pharmaceutical industry along disbursed over $900,000,000 between 1998 - 2005. Of course this had nothing to do with the Bush administration's passage of Bush's 2003 prescription drug plan...

The size and scope of lobbying indicates that without a doubt that the redistribution of tax payer money is based not on economic or social logic, but on political connections engendered by large campaign contributions. And we can be certain that the connected corporations receive a massive return on their political investment. In fact, the Carmen Group, a mid-sized lobbying firm claims that for every $1,000,000 that its clients spend on its services, it delivers over $100,000,000 in government benefits!

So, I find it absolutely puzzling how "progressives" can support big government when tax payer funds are redistributed not according to sound economic or social logic, but to the corporations and interests that are most politically connected. In other words money will inevitably flow towards the most wealthy and connected interests. And even "noble programs" like the prescription drug plan are inevitably organized to maximize the gain of large corporate interests, as seen by clauses that allow pharmaceutical firms to greatly increase the cost of their products.

"Progressives" should not view "corporate welfare" as an aberration, but as the inevitable outcome of a redistributive state. Until the magical day in which government is clean and organized for the benefit of the public, "progressives" should be extremely cautious about expanding the size and scope of the state.

http://www.washingtonpost.com/wp-dyn/content/article/2006/09/08/AR2006090801610.html

The Best Summary...

The best summary of the cause of our political and economic ills comes from the great economist and social critic, Dr. Thomas Sowell:

The first lesson of economics is scarcity: there is never enough of anything to fully satisfy all those who want it. The first lesson of politics is to disregard the first lesson of economics.

When an individual or a government lives within its means it must prioritize and make painful choices on the wisest use of limited resources. But when politicians utilize deficit spending they can satisfy "progressives" through expansive government programs and equally satisfy so called conservatives by maintaining artificially low (relative to expenditures) tax rates. This is a dangerously easy choice for politicians, because the political benefits are gained in their life time, but the full brunt of the costs will be incurred by the next generation.

I would not be opposed to Obama's pursuit of socialist health care and other lavish subsidies, IF it was in the context of a balanced budget. Even though I am not a socialist, I would have tremendous respect for Obama IF he said:

I can give you national health care, BUT we will have to dramatically cut other programs and raise your taxes. To increase government expenditures in the face of our already massive national debt will unduly burden the next generation of Americans.

I don't fully blame Obama for this, because if he spoke more like an honest economist and less like a slick politician, it's doubtful that he would have gotten elected.

Why the Crow Gets the Corn...

There once was a farmer with a beautiful, hard working wife; together they toiled in their fields from sunrise to sunset. They planned and planted, watered and weeded and finally their black fields turned green and gold from the corn that sprang from the soil and reached for the sun.

The farmer did his best to guard against the crows, always perched in the trees, eying his succulent corn. But, he would always awake to find several of his plants partially devoured.

The problem was that the crows had a far greater incentive to steal the corn, than the farmer had to guard it. A devoured plant could serve as a magnificent feast for the crow, but for the farmer it was only a small portion of his crops. The crow's raison d'être was to steal the farmer's corn, whereas the farmer divided his time between his roles as a farmer, father and friend. So, each night the crow would be victorious.

The farmer wasn't a greedy man and figured "it's my corn...but perhaps the crows are hungry...so I guess I could share some of my corn with them..."

But, with each passing day, the number of crows grew and grew and each one became greedier and greedier until the farmer awoke to find that half of his field...half of his time and labor...had been devoured.

The farmer turned to his wife and asked her "how oh how did those little bastards devour half our field?!?" His wise wife responded "each of them took so little that we barely noticed...but together they can devour half our crops..."

Substitute "hard working tax payers" for "farmer" and "crows" for the multitude of connected corporations, special interests and unproductive citizens and you have a good sense of how our redistributive state works.

When the government grants billions of dollars of direct and indirect subsidies (tarrifs, preferential tax breaks etc.) to connected company and industires, they are ultimately usurping the fruits of the labor of hard working individuals and successfull firms.

The fundemental problem is that each subsidy only costs each tax payer a few dollar, but the windfalls for the recipients are always great. So, those who benefit from subsidies have huge incentives to fight for them, whereas the mass of tax payers rarely have enough incentive to fight against them. For example, the steel industry can afford to invest $100,000 in lobbying politicians for tariffs, because they stand to gain millions. On the other hand, it's beyond the realm of reason for a tax payer to match the steel industries lobbying efforts, because individualls they stand to lose only a few dollars via costlier and lower quality services.

Not only are welfare programs a tremendous windfall for the unproductive citizenry who receive them, they also are a windfall for the rapidly expanding number of bureaucrats who manage them. The fundemental problem is that the benefits to the recipients are large, direct and immediate, whereas the cost of each program to tax payers are small, indirect and are incurred over time. Tax payers in Cook County will grumble about rising sales and property taxes, but few will connect this to the ever expanding size of the state. And even fewer have the time, energy or resources to fight for their interests.

Each instance of economic redistribution may be small, but when you ad them up, it becomes clear why the tax burden has grown for productive citizens. But most politicians have little or no reason to go against the great regimen of redistribution. After all, individuals and interests who depend on a subsidy will be beholden them. And even so called conservative politicians like Bush dare not fight against these subsidies out of the fear of losing a rapidly exanding electoral block: voters who are dependent on the state.

For all his faults, the crow is a cautious creature who knows that there's only so much he can take before the he is pushed too far. Now we encounter a new and far more voracious predator - the wolf who steals from the farmer in broad daylight. Instead of stealing indiscernible bits of corn, the wolf sweeps down and carries off the farmer himself.

Of course I am referring to Bushbama's massive, unprecedented transference of wealth popularly known as the "stimulus plan." This plan will increase our national debt by 1 trillion dollars, which comes to approximately $10,000 per family. The government will eventually have to pay this debt on the back of the public, in the form of higher taxes, less services, a dollar debased through the printing of money to pay for this debt. What makes this so insidious is that this debt is fundementally a transference of wealth from future generations to our own.

Initial figures show that a large portion of these funds will be directed towards programs that in no way constitute an economic stimulus. At best, Bushbama's bailout is a way to push through questionable, costly programs and policies without the public's scrutiny. And the $187,000 - $250,000 cost per job created indicates that a large portion of the bailout funds will be consumed by the bureaucracies that will manage and distribute the funds. So, fundementally the bailout is a massive transference of wealth from productive individuals, businesses and segments of the economy to the state and its dependents.

The farmer and wife gazed at their barren fields, turned to the crow and the wolf and said "it's all yours..." That winter the crow and the wolf starved.