Wednesday, December 23, 2009

The Party of Big Business

It's easy to get so involved in the policy details, procedural battles, and daily vicissitudes in the positions of key players that we miss the bigger picture. The health care bill is proving a case in point. Almost no one seems to like this bill. It is polling in the low 30s. Markos Moulitsas of the powerful netroot site Daily Kos has called to "kill the bill". Conservatives have wanted to kill it for weeks. So why does it live on?

The bigger picture here is actually a simple one: when government gets involved in business, business reciprocates. Before the Department of Justice launched anti-trust investigations of Microsoft in the early 1990s, Microsoft did almost no lobbying. By 1998 it was spending over $1 million per year, and in 2008 it passed the $10 million per year mark. Tech firms as a group spend $120 million per year and rising.

A similar story played out during the "robber baron" days of the 19th century. This episode has long been misunderstood as a few monopolists being curbed by the populist hand of government. But a more accurate interpretation of those events is that a few connected companies encouraged regulation in order to curb competition. That is, the monopolies were created by the government, not stopped by it.

The progressives of the early 20th century saw this dynamic clearly. Their vision of the future involved, not nationalizing private enterprise, but co-opting it. The "public-private partnership" is a key element of the progressive agenda.

But partnerships involve two players. The government regulates companies; companies lobby the government. These tend to go hand in hand, since more regulation creates more value for the lobbying dollar both in defense (e.g., carving out exceptions for your company or niche) and offense (e.g., helping forge regulations that disproportionately harm competitors).

Progressives might argue that this is a great argument for shutting down lobbying altogether, "getting money out of politics" as they say. The only problem with that is that it offends several of America's foundational principles as identified in the First Amendment:

Congress shall make no law... abridging the freedom of speech, or of the press, or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

One might then argue that corporate lobbying is not an instance of the people petitioning the Government. But how would that hold water? Corporations represent the interests of stockholders, employees, officers, etc. Perhaps stockholders could hire independent lobbyists to represent their interests, but the results would quickly converge to the present situation.

I mentioned before that almost everyone is displeased with the bill that is being debated in the Senate. Who is pleased with it? The insurance companies who stand to gain, via government regulation, millions of new customers. Some of these customers will be positively harmed by this coercion; others, who are subsidized, will merely harm the taxpayers. Either way, the insurance companies win.

They will have to conform to some new regulations, yes, but as we have seen historically, such regulation serves more to entrench existing companies than to create the sort of competition that brings with it innovation. (The progressive "solution" to this problem, i.e. the public option, would certainly not have helped with innovation, and indeed would have been a direct path to a fully nationalized insurance regime. All the government would have to do is consistently undercut private insurance prices, in the name of "public interest", until they all went out of business.)

Progressives want to believe that, if only they could enact the reforms they wanted, they could design laws, regulations, and institutions that could further their aims. With Democrats controlling the Executive branch, a huge House majority, and a filibuster-proof Senate majority, they will rarely see a better opportunity than now to act as they please. And still we see progressives wringing their hands about the results, because their own members were (they say!) suborned by Big Business dollars.

But this is inevitable, predictable, and has in fact happened many times in our history. Maybe it's time progressives started taking this into account before attempting to radically change huge portions of our economy.

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