Monday, April 14, 2008

Golden Rules & Revolutions: A Series - III

April 14, 2008, 7:00 a.m.

Today is the third in a series, "Golden Rules & Revolutions." Here are the prior entries:

I - Income Disparity & Revolution
, April 12, 2008
. "Series Introduction," "Increasing income disparity, despair. . .," ". . . and Revolution"

II - Golden Rules & Fascism, April 13, 2008
. "The Golden Rule," "Fascism"

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Money and Lobbyists in Politics: Washington.

Part I of this series noted not just the gap in income between the rich and the poor, but the fact that this gap is continuing to grow ever wider, and that history -- as well as the daily news -- provides ample warning that this condition often produces revolution.

Part II began the exploration of the forces that may be shaping these potentially dangerous conditions -- including the ties between business and government eerily reminiscent of the early stages of what we used to call "fascism."

Part III takes us to Washington for some general observations and a columnist's description of one case study.

There are many ways that government can enrich business generally -- and its corporate leaders personally -- not all of which involve taxpayers' money, though the most dramatic do. Earmarks, subsidies, contracts, bailouts and cost-avoidance programs such as tax breaks or radically reduced costs for grazing, drilling or timber cutting on "public lands" -- to name a few. But there are also ways the government can further enrich the wealthy by increasing what we pay as consumers rather than what we pay as taxpayers: price supports, tariffs and "anti-dumping" prohibitions, government-approved monopolies and oligopolies (and exercising the discretion not to enforce the antitrust laws), licensing, standards-setting -- the list is seemingly endless. Put it all together and we're talking trillions -- not merely millions or billions of dollars.

That being the case, money spent by special interests to obtain such largess can earn one of the highest "returns on investment" to be found anywhere in the marketplace. I once ran the numbers that seemed to document that in exchange for campaign contributions in the $100,000-to-$1,000,000 category the donor usually gets something in the range of a 1000-to-one to 2000-to-one return on "investment." Give a million, get a billion in return. (For backup data on the 1000-to-1 or 2000-to-1 payback on contributions see Nicholas Johnson, "Campaigns: You Pay $4 or $4,000," Des Moines Register, July 21, 1996.)

In addition to the legalized bribery called "campaign contributions" there's another expense: the cost of lobbyists (plus, of course, lawyers, publicists and others).

The special interests' lobbyists were paid some $2.79 billion last year. "Kevin Drawbaugh, "Washington lobbying sets record in 2007," Reuters, April 10, 2008, 5:45 p.m. EDT.

When, of that $2.79 billion, "Drug and health care product companies spent $227 million on lobbyists" it gives you a little sense of what we are up against in trying to get the "universal, single payer" health care President Harry Truman was talking about over 50 years ago.

Did you ever stop to wonder why all those so-called "liberals" running for office seem fearful of even whispering that such an approach should be explored as one of our options -- the option that has been choice of all the other major industrialized nations in the world? (Or why, with the most expensive health care in the world we have 40 million uninsured and among the worst statistics regarding infant mortality and life expectancy?) Think about it.

Why can't our government negotiate pharmaceutical prices with drug companies like other countries' governments do? Because our Congress voted to forbid such cost savings (and reduction in pharmaceutical companies' profits).

And don't get me started on the deafening silence out of Washington regarding the increase in oil prices from $25 to $110 a barrel. (Not to mention the $3 trillion we will have spent trying to get "our oil" out from under the Iraqis' sand.)

Now consider, for example, these excerpts from Robyn Blumner's description of Washington's approach to the recent mortgage crisis.

If you had any doubts that our nation’s financial overseers are working for those with wealth, the evidence was on full display when the Federal Reserve rode to the rescue of Wall Street. While American families facing foreclosure are told by Washington (and John McCain) to try to renegotiate terms with their mortgage holder — if they can figure out who that is — those in the private investment world who raked in wild riches by taking irresponsible risks are being bailed out of their liquidity crisis by the taxpayer. . . .

[W]hat a sweet gig it is to be a member of the master-of-the-universe class. First, you are awash in money created by risk-laden investments that disregard all warning signs; meanwhile, the rest of working America lives with stagnating wages even as the economy expands. Then, when all those investments collapse, you are considered too big to fail and the government swoops in to keep you afloat.

Socialized risk is what this is called. Heads they win, tails we lose.

If this credit crunch and the pain to come teaches us anything, it is that when the market is allowed to operate without supervision and regulation, insuperable greed will overcome rational, prudent behavior. Josef Ackermann, chief executive of Deutsche Bank, said it straight out in a speech this month: “I no longer believe in the market’s self-healing power.” He’s in good company. . ..

What I can’t get out of my head is the way we’ve been suckered again into believing the malarkey sold by Milton Friedman, Ronald Reagan, Alan Greenspan and a long list of conservative think tanks, that the market is our savior. It is so convenient to make government the bad guy, the one who interferes with everyone’s pot of gold, and make open markets the answer to what ails, as Reagan did so often. But the historical reality is that the free market has a dark side that causes social displacement and instability, and by its nature it is an uncaring thing.

The free market does not raise an eyebrow when investor obsession with short-term profits results in outsourcing for cheap, exploitable labor overseas and the abandonment of health benefits or pensions for whatever American employees remain. Rather it cheers. . . .

The market wouldn’t have . . . provided free public education. It wouldn’t have guaranteed minimum wages or insisted on safe workplaces. . . . And without the government’s backstop of depositor money, we would still have bank runs.

But somewhere along the way, we started to buy Reagan’s line that the 10 most dangerous words are, “Hi, I’m from the government, and I’m here to help.” Funny, Goldman Sachs and Lehman Brothers didn’t think those words were so scary.
Reagan and his ideological partners steered us wrong.

They persuaded the middle class to mistrust the only friend it has that is bigger than the free market bully. . . .

When the government stopped helping the middle class, the prosperity of this land stopped getting shared.

So after the government’s done rescuing Wall Street, the rest of us could use some kind attention too. But we’d need a different government for that — a very different government.
Robyn Blumner, "Socialism Bails Out a Big Bank," St. Petersburg Times, March 30, 2008, p. P6; reprinted as "Socialized risk for Wall Street: Heads it wins, tails we lose," The Gazette, April 5, 2008, p. A4 (and copy available from Salt Lake Tribune).

Part IV will begin an exploration of the extent to which lobbyists not only rule Washington, but -- hopefully to no one's surprise -- presidential candidates' campaigns as well.

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