Monday, July 13, 2009

The difficulty of governing with pervasive collusion and corruption

So I was reading this article about the impending financial meltdown (and probably taxpayer bailout) of CIT, and reflecting on the problems inherent in the government trying to be fair, impartial, and governing in the people's interests. I don't mean to imply that I think our current government is trying to do any of those thing, as they are clearly not interested in any of them, but rather the difficulty in doing so for a government which was interested in doing so.

You see, I think the founding fathers of this country were pretty smart, in a lot of fortuitous ways. For example, they forbade intermingling of government and religion; and although that has not always been followed in literal terms ("under God", Christian remnants in the government, preferred tax statuses, etc.) or in conceptual terms (pseudo-religions like Global Warming, etc.), it has generally been very good for the development of the country. One could make a strong argument that we don't have a repressive theocracy (like Iran) primarily because of this one provision, and I think most people in the US would consider that a good thing.

Another thing the founders and early governors were pretty smart about was establishing the sanctity of private contracts, and establishing that it was the government's job to provide basic protections and a level playing field, and otherwise explicitly not to interfere in private business as much as possible. This turns out to be a very good policy for prosperity and freedom, as 200+ years have demonstrated. Moreover, if the government was interested in doing its Constitutional job, it is much easier if they are not entangled in private businesses, as the article points out.

Apparently, the primary problem with bailing out CIT is the perceived conflict between the government's desire to "stabilize" the economy (read: pretend like everything's okay by shoveling newly-printed money at the problem), and not appear to be rewarding the "fat cats" who "caused" the problem (which is all a problem of appearance, since in reality the government primarily caused the problem, and the "fat cats" just capitalized on the situation). Of course, this is just one of the many people who will soon be clamoring for bailouts; I suspect California will get a bailout before it makes any meaningful progress resolving its budget problems, more large financial companies have systemic problems, the Fed continues its efforts to pay off gambling debts with taxpayer money, etc. But as atrocious as these problems are, bailouts are only part of the problem.

When the government is so pervasively corrupt, it becomes nigh-impossible to do anything in an unbiased manner, and/or to convince the people you're trying to operate in such a manner. Financial bailouts? Rewarding the "fat cat insiders", or an attempt to seize government control of the entire financial sector, take your pick. Universal health care? It's a spending contest between the medical insurance industry and the government bureaucracy proponents, or the largest expansion of government spending and control in US history. Energy bill? A spending contest between the environmental and clean energy lobbies (who stand to profit big) and the oil, coal, transportation, and producing businesses. Is the government entirely for sale, or are there any politicians left with any shred of integrity who are working for the peoples' interests? How could you tell?

Maybe some of these things are not malevolent in purpose, but the point is that once the government has started down the path of bailouts, interference, market manipulation, and overt control, not only is it hard to reverse the damage, but it's equally or more difficult to regain the public's trust that the government is operating in their interest, and not just beholden to all the special-interests they have gladly and openly served in the past. Is there anyone at all in the country who believes that the government is operating primarily in their interest in any/all the above matters, and not just for sale to the highest bidders? If so, I have some houses in California to sell you at 2006 prices; it has become preposterous to think that the government operates with integrity, and that permeates everything that they do. The current government has almost stopped even pretending they are operating in the people's interest; the last bastion of make-believe adherence to the principles of the country, teetering on the edge.

How much damage will the Obamanation do, and how much of America as we remember it will be left when he's done? Only time will tell... but if it were a private enterprise, it would be in line for a corrupt bailout right now like everyone else, like a great big blood-stained warning against moral hazard, government collusion, and the siren call of government "assistance".


  1. Simple fix to that: Term limits. 2 terms All the way around. Even the supreme court. Also referendums at a representative's midpoint of their term. If they do not pass, they cant run twice.

    Getting rid of the Federal Reserve that owns both parties and decides the presidency will be the hard part. Not to mention the groups that the Fed actually answer to.

  2. I agree, except a) I wouldn't try to pin the problem on a single politician and b) I think the problems are nothing new and not a threat to the existence of democratic gov't in the US.