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Saturday, November 15, 2008

Obama's Non-Ideological Mission: End Corporate Welfare

I believe Barrack Obama was elected because of several reasons, but two were particularly important: he comes off as being personally above the ideological fray and he seems trustworthy. Although I am not so naive as to actually believe this about a politician before he proves it, I am extremely optimistic. In fact, one good thing about the recent election was that I felt both McCain and Obama were the two very honest men; in a race that was more likely to feature the opposite.

Although I believe this country needs a true Conservative-Libertarian Republican President to bring the country back to a free-market balance, more importantly, right now we just need genuinely honest leadership. Ideology is not the issue right now. Before that can be addressed, the new president needs to address a much more fundamental non-ideological issue: basic corruption and political favoritism. President Obama will have his chance come January.

The recent bailout, which Obama supported and voted for, has exposed a disgusting face of the federal government. There is nothing new about corruption or political favoritism, but the degree has gotten out of control and has become blatant. Washington's strategy is simple: further irresponsible policies for their own gain, claim there is a crisis resulting from them, and use the crisis response to benefit themselves further. The rhetoric of both the conservative and liberal ideologies have been hijacked and greatly abused by corrupt politicians to reach this end.

Since the founding of the United States, the industry which has always had the most political access is the banking and finance industry. Immediately upon the founding, the founding fathers began debating the role government would play in banking, including questions of whether to create a national bank and whether the federal government should acquire debt.

Thomas Jefferson and James Madison adamantly advocated for no federal central bank, Jefferson saying, "I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around [the banks] will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered. The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

Soon after the founding a national bank was created. Andrew Jackson later abolished it in the 1836. It was a move that made him a folk hero. Another central bank was created to finance the Civil War. In 1914 the Congress wanted to create a new central bank, but in order to avoid calling it a central bank, they called it a “Federal Reserve.” The ability to create and borrow money from abroad brought enormous power and was highly addictive. The banks played an enormous role in the United States entering World War I, despite the fact that the United States had no security interest in the war and the people of the country were extremely clear they did not want to be involved in that war. President Wilson had run on an anti-war platform and used propaganda techniques which would never be tolerated today (for example, the Espionage Act and Sedition Act).

Later, Henry Ford was quoted as saying, “It is well that the people of the nation do not understand our banking and monetary system, for if they did, I believe there would be a revolution before tomorrow morning."

Today, we are removed from the era where central banks are seen for the corrupting institutions that they are. All the while, the United States seeps deeper and deeper into debt. The Federal Reserve secretly spends obscene amounts of money (far into the trillions) on things which most U.S. citizens would never approve of. It cannot be audited, even by Congress. The key to getting this money is political access. If you have Washington's elite in your pocket, your industry gets money.

The pattern has become clear: the government props up an industry with this money, the industry begins to concentrate more on politics than doing business. It then, like a spoiled child, becomes an expensive failure which will not change until there is a crisis. And all this, because with government access comes easy - but not free - money. It is free for the recipients, but not free for we the tax-payers. We have to work to pay that money – either indirectly through inflation of our currency or directly through income taxes. For the government, the deal brings power; power to pick and choose economic winners and prop up political allies.

Furthermore, corporate welfare has the same effect as normal welfare: spending other peoples money is always easier than spending your own. It distorts incentives and encourages bad behavior. This is why so many American institutions are failing, including health-care, education and the Detroit auto industry.

Besides the obvious legal problems, the enormous moral problem with this is fairness. Sure, we love to hear politicians talk about how much they care and how they cant stand by and let millions of people (allegedly) lose their jobs. But the question is, if one business is propped up, why not another? When one business is propped up, it is inevitably at the expense of another. The U.S. system was based on the idea that the costs of picking favorites are greater than the costs of certain businesses going under.

The upside, is that centralization of banking and finance gave the government more power to give people access to money, because it could systematically eliminate much of the risk that would prevent private banks from loaning on their own. This was good in the short term, because it was used to help people get loans who normally would be too risky to get them. However, the centralization brought inevitable long-term problems - by their very nature, the loans were bad investments for the banks. Plus, the fewer banks you have, the bigger deal it is when they go under. This, in turn, seems to justify more government intervention (i.e. government bailouts). Of course, the government needs to tax, borrow and inflate to pay for all this.

It is income redistribution, but not Robin Hood’s style. It is taking from the middle-class and giving to the politically well-connected, also known as "corporate welfare." From this has come all the other problems. Now every lobbyist under the sun wants a piece of the pie. The government is secretly picking and choosing who gets money, based on who has political access. Amazingly, the powers in Washington believe they have a right to do this by virtue of being the powers in Washington. Right now, President Bush is racking up 8 billion dollars worth of personal favors.

The American people are being systematically lied to and robbed – and being told it is for their own good. Sec. Paulson has already admitted he has no plans to use the bailout money as he said he would.

This is Obama’s true mission: to end this. This is not about ideology. Any honest person can agree, this activity is morally and intellectually wrong on every level and by any definition. During the campaign, Obama was anything but clear on what he thinks the problem is. In fact, he supported the bailout and currently indicates he is in favor of giving money to one of his personal political interest groups, the Detroit auto industry. So it is difficult to be optimistic. However, the excesses of the Bush administration have become clear. Although he hijacked the rhetoric of a free-marketer, Mr. Bush is not ideological in any way. He is a purely political creature who actually believes in this corrupt system. In fact, Bill Clinton has more belief in free markets than President Bush. Lets pray that Obama has some integrity on this, the most important issue of our time.

Obama must take a stand on corruption and corporate welfare. He must end the picking of political favorites, including the ones he and his party like (i.e. unions, corporate farmers, the Detroit automobile industry and other liberal interest groups). He will make many people angry if he does this, just like President Andrew Jackson did. However, this is why our system removes the President from political influence, as opposed to, say, a parliamentary system in which a Prime Minister can always be removed from office. The President needs to be able to make the tough decisions without losing his job. President Bush thought the Presidency was somewhat removed from political oversight so that he could do politically reprehensible things without being questioned. He was wrong.

Traditionally, this is what Presidents do early in their terms, so that they positive effects are felt before the next election. In fact, one of Obama's closest advisers is Paul Volker, who has been down this road before with Reagan in the early 80's.

This is what President Obama should prioritize.


Anonymous said...

Now that the anti-science, superstition-based initiative presidency is coming to an end, we need several public works science Manhattan projects to make us great again and boost us out of this Grotesque Depression. First we must provide free advertising-based wireless internet to everyone. Then we must criscross the land with high speed rail. We must develop microorganisms that may be freely distributed like bread yeast and become commonplace to improve our future. Because bovine flatulence is the major source of greenhouse gases, we must develop microorganisms which can be grow in the home that will provide all of our nutrition. Then we must create microorganisms which turn our sewage and waste into fuel. Since paranoid schizophrenia is the cause of racism, bigotry, homelessness, terrorism, ignorance, exploitation and criminality, we must provide put the appropriate medications, like lithium, in the water supply. We must require dangerous wingnuts who refuse free mental health care to be implanted with drug release devices and microorganisms. Osama bin Laden and Timothy McVeigh were the ultimate superstition based initiatives. We should encourage international organizations to do likewise. In order to fund this we must nationalize the entire financial, electrical and transportation system and abolish the silly feudal notion that each industry should be regulated by its peers. Real estate and insurance, the engines of feudalism, must be brought under the Federal Reserve so we may replace all buildings with hazardous materials to provide public works. Insects, flooding and fire spread asbestos, lead and mold which prematurely disables the disadvantaged. Furthermore, as feudalism is the threat to progress everywhere, we must abolish large land holdings by farmers, foresters or religions and instead make all such large landholding part of the forest service so our trees may diminish greenhouse gases. We must abolish executive pay and make sure all employees in a company are all paid equally. We must abolish this exploitative idea of trade and make every home self sufficient through the microorganisms we invent.

The Right Guy said...

The New Deal didn't work then, and it won't work now. We don't need more government spending, we need less. If there was money in it, the private sector will do it. As far as a depression, we are not there yet.