True North Reports, a site that provides a conservative look at Vermont’s News, had an excellent article about Senator Bernie Sanders’ hypocrisy when it comes to campaign finance. If you know anything about Bernie, you probably know that one of his pet complaints is about “big money” corrupting our government. For him, the problem nearly begins and ends with money from the Koch brothers supporting conservative and libertarian positions. Senator Sanders is quoted from an article in the Washington Post last year as saying that the money donated by liberal billionaires such as George Soros and Tom Steyer is “not equivalent” to that spent by the Koch brothers. He goes on to say that the Koch brothers “Will spend as much as it takes.” The True North article proceeds to show that they indeed are not equivalent. Those who donate to liberal candidates such as Bernie give far more money than those who donate to the conservative ones, as I pointed out in this post. For example, Tom Steyer gave nearly ten times as much to leftist candidates as both Koch brothers combined did to conservative candidates.
The above fact likely isn’t the reason Bernie sees them as non-equivalent though. That reason is more likely to be “he disagrees with everything the Koch brothers stand for” and that they have been “extraordinarily successful.” In other words, a part of his distaste for “big money” is nothing more than a desire to suppress those who successfully communicate ideas he doesn’t like. Nothing more than an assault on free speech.
As valuable as it is to point out this fact about Senator Sanders, the article misses the essential point about campaign finance. That question is not who spends the most money, which is actually meaningless, but rather why individuals and organizations feel the need to spend such sums on elections in the first place, or who is selling what to whom.
The answer to that question is the fact that the government has taken upon itself the power to intervene in the economy.
No matter what form this intervention takes, and there are many, it distorts the marketplace with universally bad results. In some cases, the intervention is money in the form of direct subsidies, loan guarantees, or even things like tax credits for purchasing the some types of products over others (e.g. electric cars). Not only must the funds used in this way be taken from people and companies that are actually productive, these funds are also no longer available for investment elsewhere. Often these payments are wasted as the companies receiving them are not able to survive by producing value and so collapse when the government money runs out. Solyndra comes to mind as a good example of the resources which could have been productively used elsewhere being squandered.
Even when the company doesn’t collapse after receiving government money, this kind of intervention distorts the market by encouraging a misallocation of capital. The government’s thumb on the scales can result in profits that are not justified by the company’s production. Such artificial profits can lead to private capital being invested in this area when it could be better applied elsewhere. While such companies are not necessarily devoid of value, the capital invested in them would be more productively used elsewhere. How much less profitable would Tesla look if state and federal governments were not offering tax credits for people who buy its products?
Another way in which the government intervenes in the economy is via the every growing number of regulations with which businesses must comply. These regulations cover every aspect of business down to the smallest detail. They can include such things as minimum wages and other terms of employment, occupational licensing, zoning permits, labeling laws, inspection and quality standards, sales taxes that must be collected, and production methods to name just a few. You might feel that some or all of these things are a good use of government power, after all, who wants to eat tainted meat for example. Such thinking mistakes the idea that something is good to mean it is something that government should do. This is definitely not the case.
In his book Structure and Change in Economic History Douglass C. North discusses what happened after the first federal meat inspection laws were passed early in the 20th century after the publication of Upton Sinclair’s The Jungle.
But if quality standards were all that was at issue they certainly could have been realized by voluntary group action of the big meat packing firms. These firms’ vigorous support of government regulation suggests two other objectives: ridding themselves of the costs of inspection and reducing competition from the numerous small meat packing firms. While quality standards served as the ostensible reason, control of competition was at the very outset a key to the shift of rule-making decisions from Congress to the Department of Agriculture. The constituency of the Department of Agriculture continued to press for further shifts of rule-making powers from the Congress to the Deparment under various disguises, but the major thrust was to reduce or eliminate the competitive pressures of the market and to increase demand. Price supports, school lunch programs, Food for Peace, and milk marketing acts were just around the corner.
This power of the government to rig the economic system in favor of some at the expense of other is a powerful incentive for companies and individuals with significant economic assets to seek to use that power in their own favor. This lure of power is not the only factor, however. There have also been a series of Supreme Court decisions that have in essence gutted economic, i.e. property, rights. These decisions in effect say that if you feel your economic rights have been violated by a law don’t expect the courts to help you. Your only recourse is to change the law, i.e. to spend money to convince lawmakers to change the law. When these two factors are taken together, is it any wonder that people would spend large sums to protect or expand, or both, their interests?
Imagine you have spilled a sugary drink and left the spill unattended. It would not take long before you had insects such as ants and flies appear to enjoy the sudden bounty. What would you do? You would not spend your time debating with your friends which insect is more harmful, the ants or the flies. You would not claim that these ants are good, but those ants are annoying. Nor would you just brush the insects away, as others would simply take their place. You would just wipe up the mess and set the can upright on a solid foundation to prevent further spills.
The same essential solution will work for the perceived problem of money in politics. Clean up the existing mess by unwinding all the government intervention in the economy. A good first step would be to eliminate all subsidies to business. All of them. We could then tackle the problem of regulation. Once we have begun this process, we can set the government back on its proper foundation and limit it to its proper function – the protection of individual rights. Once the government is no longer a source of either unearned gains to be sought after nor of potential penalties that you must protect yourself against, how many people will spend millions of dollars in an attempt to affect their decisions?
It is worth noting this is precisely the opposite of what Bernie proposes. Cleaning up the mess of current government intervention in the economy, let alone restricting government to its proper function, is the furthest thing from his mind. He wants to increase the power of government while at the same time restricting the amount of money in politics, at least the amount of money used to advocate for ideas he doesn’t like. His “solution” is to take away the only means of defense left by the courts against harmful economic regulations. This same solution would have the effect of restricting the ability of all people to speak freely on political matters. As I wrote last summer, his solution to money in politics would have the effect of reducing the freedom of speech to the freedom to speak on the street corner to those within the reach of your own voice.