Identification of a problem

It may be one of the best lectures given this year, and thanks to the Daily Signal I got to read it.

Back in November, businessman and entrepreneur Bill Walton spoke at Hillsdale College on the subject “The Problem of Crony Capitalism Today.” It’s an excellent read, with definite length and gravitas within. But there was one passage I wanted to speak to in particular:

I don’t believe that American politicians, bureaucrats and businesses today are more venal or dishonest than politicians or businessmen of the past. There has forever and always been cronyism and people seeking special favors from the government. What’s changed is that the scope and reach of the federal government has dramatically expanded.

Before the 1930s, Court interpretations and the general consensus in America was that the Constitution severely restricted the power and scope of the federal government. Then a constitutional revolution occurred from 1937 through 1943 that dramatically expanded its powers. There is not enough time to get into the details but three Supreme Court rulings changed everything.

The first allowed Congress to delegate its powers to federal agencies.

The second gutted the Commerce Clause giving the federal government power over regulating virtually all manufacturing and agriculture in United States. Federal Judge Alex Kozinski calls this the “Hey-you-can-do-anything-you-feel-like” clause.

The third ruling, declaring Social Security constitutional, reinterpreted the “general welfare” clause to allow Congress to spend money on virtually anything.

Fast-forward to today. There is little chance that these rulings can be reversed. Charles Murray believes that there is no chance and observes, “To reverse any of these rulings would mean that about 90 percent of everything the federal government does is unconstitutional. That’s not going to happen.”

90 percent of everything the federal government does is unconstitutional? Sounds about right in this entitlement-addled era.

But the point Walton makes is that businesses of a certain size have figured out the money is in a perverse sort of innovation, one of figuring out unique ways of gaming the system through heavy lobbying and the right mixture of political contributions. Granted, interest groups representing small business also try and set a place at the table but these groups are themselves a big business.

Simply put, certain entities have figured out a way to tap into the rich pipeline of tax dollars constantly flowing into Washington, D.C. It’s a little like hitting the lottery day after day, while the rest of us poor suckers pay for the tickets that never win. Rigging the government’s lottery can get you sent to prison, but scamming the taxpayer lottery through favorable regulations and rent-seeking is just another day at the office for some.

While the rulings Walton cites are further proof that SCOTUS is far from infallible, I don’t quite think all is lost. As I said yesterday, though, being the adult in the room isn’t always popular. If a true reformer was ever elected the system would indeed act like a cornered bear, scratching and clawing back through an all-out assault by the media, interest groups, lobbyists, and members of Congress who also are enriched by the current system. It’s a process that could take decades; unfortunately, we don’t have years to waste. Even if a reform-minded president was elected, he or she only can serve a maximum of eight years – that’s nowhere near long enough to unwind the entitlement regime we have in place.

But the regulations and tax code can be addressed in a term or two, and addressing those problems may cushion the mistakes we’ve made with adopting all the government-dependence programs we have. It’s not to say those shouldn’t have a sunset date assigned to them, but we can go a long way toward fixing our economy with an aggressive approach at limiting the aspects of government that can be addressed in the relatively short window of time that a presidential term affords.

It’s reflected in the palette of solutions Walton gives:

So are their solutions to the pervasive and growing problem of cronyism? If so, they need to be big ones. Radical ones. Tinkering with things like term limits, revolving door government, campaign finance reform are not likely to change much in Washington so long as trillions of dollars are at stake.

Mancur Olson believed there is only one way to cure “advanced institutional sclerosis.” Be utterly defeated in a world war like Japan and Germany. They had to start over from scratch.

Charles Murray advocates “massive civil disobedience” underwritten by privately funded multibillion-dollar defense funds to sue government and cronyists.

George Gilder believes that one solution is to “zero base budget” every agency on a three-year budget cycle. Zero out their budget and make them show that they are doing something worthwhile. He would also sunset all regulations after 10 years.

I’d start with getting rid of the income tax code and replacing it with a flat tax or fair tax. This would eliminate tax code cronyism and ignite the economy.

Of the four, “lawfare” has a certain appeal, and I like Gilder’s idea because it sounds vaguely familiar – sort of like something in Chapter 7 here. But each of the three latter items are reasonably attainable in a short time window, beginning with the dawn of 2017. (That is if the first possibility doesn’t come to pass prior to that time.) Whoever we elect as President now has some agenda items for his or her to-do list – let’s see who has the intestinal fortitude to put the plans into action.