McCutcheon vs FEC, like Citizens United, could Curb Prosperity
|December 26, 2013||Posted by Staff under Editorials|
These two 2013 excerpts on rent-seeking are from (1) the Seattle Times, Oct 7, by Jon Talton and (2) Telefriden, Dec 17, by Rob Frieden at Penn State U and author of Winning the Silicon Sweepstakes: Can the United States Compete in Global Telecommunications.
The McCutcheon Case is Bad for the Economy, too
The next big campaign finance case, McCutcheon vs FEC, is at least as bad as 2010′s Citizen’s United, which struck down more than a century of restraints on corporate and union money in elections and affirmed “corporate personhood.” With McCutcheon, the plaintiff is asking that limits on individual contributions to candidates be struck down. Even under current law, an individual could spread up to $3.5 million among candidates.
Both Citizens United and McCutcheon carry economic consequences. They ensure that America will be less fair and capitalism will be less competitive.
Today’s inequality was purchased by the already unprecedented money in politics. The increasing phenomenon of “rent seeking,” where giant corporations use their power to extract government subsidies and laws that allow for massive executive compensation, is a near free ride while profiting from environmental destruction, taxpayer backing of a risky financial sector, and thwarting competition.
Rent-seeking, which happens in myriad ways and on a vast scale, is the redistribution of income from one part of society to another. Thus vast sums are gambled in world capital markets rather than be used to expand existing companies, seed new ones, and create jobs. It mostly comes at the expense of wage earners and lower-income Americans. Think of the big banks and the recession: They are more profitable (and bigger) today than ever, while the median household makes less than it did in 1989.
Joseph Stiglitz: “Rent seeking makes nothing grow. Efforts are directed toward getting a larger share of the pie rather than increasing the size of the pie. But it’s worse than that: rent seeking distorts resource allocations and makes the economy weaker. It is a centripetal force: the rewards of rent seeking become so outsize that more and more energy is directed toward it, at the expense of everything else.”
Big money in politics has also helped create highly concentrated industries in numerous sectors, from finance to media. For them, it is a profitable loop: Money buys lax antitrust enforcement which allows for greater size which infuses ever larger amounts of money into passing legislation favorable to these quasi-monopolies, cartels, and oligopolies. The price of entry for new competitors is prohibitive. Business formation suffers. And it’s much easier to hold down job creation and keep people desperate just to hang onto their stagnant-wage jobs if they have them.
Inequality and a fixed market will only grow worse if McCutcheon becomes the latest piece of judicial activism from the Roberts court.
Rent Seeking Across Party Lines
Stakeholders keen on working less hard and earning greater returns will resort to any political, legal and economic ideology and philosophy to support the desired outcome.
It is quite fine when the Federal Communications Commission (FCC) granted incumbent wireline telephone free spectrum for mobile services, but now denying these carriers the opportunity to bid for any and all spectrum is an abomination.
Let’s not underestimate the power of sponsored research where esteemed scholars grab lots of dollars for embracing a specific ideology and explaining how it serves the public interest. In a matter of days the very same economist might rail against the Herfindahl Hirschman Index (“HHI”) of market concentration as flawed and not predictive of anything. But when presented with an assignment and a generous retainer to show how robustly competitive a market is, that economist might quickly invoke the HHI to “prove” how competition can exist in a concentrated marketplace.
Ed. Notes: It’s encouraging that this sort of corruption gets covered by professors and in the biggest paper in the Pacific Coast Northwest. However, as usual, it’s almost all problem and no solution. The solution is not just to say “no” to rent-seeking but something far more fundamental. It’s as Abraham Lincoln said: “Nothing’s fixed until it’s fixed right.”
This sort of rent-seeking above won’t end until the classic sort of rent-winning — that is, absentee owners and lenders getting paid to permit others to use land — gets corrected. The correction to that basic injustice is to not pay them for a site or a resource but to pay your community. Nobody made land, everybody needs land, and all of us — the presence of community — is what gives locations their value.
We need to pay Land Dues into the public treasury and get Rent Shares back. But we don’t need to pay taxes on earnings, purchases, and buildings while getting bureaucratized “services”. Letting politicians decide how to spend public money only opens the Pandora’s Box of rent-seeking. Better to follow the basic principle of sharing Earth’s worth while de-legitimizing capricious taxation and subsidization — the geonomic reform.