The Libertarian Temptation
Having authored an outstanding series of posts at Slate’s Convictions blog, Doug Kmiec today reflects on the following choice quote from a tycoon well-accustomed to enjoying easy access to Congress:
“I think [land deals are] what Congress people are supposed to do for constituents. When you have a big, significant businessman like myself, why wouldn’t you want to help move things along? What else would they do? They waste so much time with legislation.”
Fortunately for [Bear executive] Schwartz, he had a sympathetic audience in the banking committee, whose members have received more than $20 million in campaign contributions from the securities and investment industry, according to the Center for Responsive Politics. “I want the witnesses to know, and others, that as a bottom-line consideration, I happen to believe that this was the right decision,” Chairman Chris Dodd (D-$5,796,000) said before hearing a single word of testimony.
“You made the right decision,” Sen. Evan Bayh (D-$1,582,000) told the regulators who worked out the loan guarantee.
“The actions had to be done,” agreed Sen. Chuck Schumer (D-$6,162,000).
Only a minority of senators, particularly those with smaller pieces of the campaign-cash pie, dissented. “That is socialism!” railed Sen. Jim Bunning (R-$452,000). “And it must not happen again.”
And consider the recent “$6 billion tax break for money-losing home builders — who threatened not to give any more campaign money when they got shut out of the economic stimulus bill in February”. . . inserted into a bill that offered precious little direct relief to troubled homeowners. Or the private equity tax dodge.
A string of stories like this help me understand the appeal of libertarianism–the sense that the state needs to be minimized because of all-pervasive rent-seeking, public choice problems, and corruption. If the US is culturally “tracked” to stay on its current course, I might well become a libertarian myself. But as a I try to argue (albeit too briefly) toward the end of this paper, there are other models for controlling the interface between the state and centers of economic power. As in the health care debate, studying the campaign finance systems of other countries might broaden our horizons.
UPDATE: Along these lines, this perspective from Dean Baker is fascinating:
The prospect of investment banks moving overseas in response to more stringent regulation has been raised repeatedly by opponents of such regulation. This raises an obvious question: Why should we care?
We buy shoes, toys, cars, and steel from abroad; why should anyone be bothered by the prospect that we would be getting our investment banking services from other countries?
There could even be an important fringe benefit from getting our investment banking services from England: We wouldn’t have investment bankers intervening in our politics. I’m thinking of course of Peter Peterson, a top executive at the Blackstone Group, who has gotten incredibly wealthy from the income from his banking business and the fund managers’ tax subsidy.
Mr. Peterson has spent much of the last two decades trying to cut funding for Social Security and Medicare. He founded the Concord Coalition in 1992 to advance this end. This group has put out hundreds of papers and held numerous conferences, the vast majority of which covered the supposed need to cut Social Security and Medicare. More recently Mr. Peterson announced the creation of a new foundation dedicated to restoring fiscal soundness, which to his mind means cutting Social Security and Medicare. If we had better regulations of investment banks, perhaps Mr. Peterson would be living in England and trying to dismantle its Social Security system.