Washington Post: Refuse the Insider Rent-Seekers
|January 8, 2014||Posted by Staff under Editorials|
This 2014 excerpt of the Washington Post, Jan 6, is by Charles Lane, a Post editorial writer.
A large number of Washington DC’s top earners specialize in trading on their connections to DC’s biggest “industry,” the federal government. As of 2012, lobbying for tax breaks, contracts, exclusive licenses, subsidies, and the like was a $3.3 billion-a-year industry. The average salary of the CEOs — chief lobbyists — of the 30 biggest industry trade associations, including incentives and deferred compensation, was $2.34 million in 2010.
More than a few of these people used to be governors, senators, or members of the House, where they acquired the access that they now sell to the highest bidder. They are accompanied by a small army of former executive and legislative branch staffers who have gone through the revolving door from government to what Washingtonians euphemistically call “the private sector.”
Economists have a name for this sort of behavior: rent-seeking. In economic parlance, “rent” means the profit from gaining control over existing sources of wealth as opposed to creating new ones.
Many of our public institutions — from Congress to big-city school systems — have been captured by rent-seeking interest groups. Wall Street hedge funds have their carried-interest exemption in the tax code. Farmers are making record incomes yet still benefit from government incentives to grow corn for ethanol. Real estate agents defend the mortgage-interest deduction, even though the benefits go disproportionately to upper-income homeowners.
The good news is that, entrenched as special interests and their various special subsidies may be, it is probably more realistic to undo rent-seeking than it is to undo the global forces of trade and technology. Instead of worrying about how much money rich people make, we should focus more on how they make it.
Ed. Notes: Insider rent-seekers are actually rent winners, who continue a long tradition of the well-connected using government as a servant. The original rent-seekers — those insiders who sought and won the rent of land and locations — similarly won major favors from government, such as evicting squatters, building roads to or near their property, etc.
Such corruption is a good reason to repeal the discretionary spending by politicians and hand that power over to citizens. Let elected officials spend for war and emergencies but disburse the bulk of public revenue back to the citizenry as a dividend.
And to raise that revenue in a way to avoid favoritism, distinguish between private wealth and common wealth; don’t tax earned income but instead used taxes, fees, dues, etc, to redirect society’s spending for land, resources, ecosystem services, and other natural features into the public treasury. Minus tax breaks or subsidies, nobody will have a reason to seek rent and officials won’t have a way to deliver it. Former rent-winners will have to become one of those artists or inventors or entrepreneurs.