The Government Problem

Some believe the central political issue of our era is the size of the government. They’re wrong. The central issue is whom the government is for.

Consider the new spending bill Congress and the President agreed to a few weeks ago.

It’s not especially large by historic standards. Under the $1.1 trillion measure, government spending doesn’t rise as a percent of the total economy. In fact, if the economy grows as expected, government spending will actually shrink over the next year.

The problem with the legislation is who gets the goodies and who’s stuck with the tab.

For example, it repeals part of the Dodd-Frank Act designed to stop Wall Street from using other peoples’ money to support its gambling addiction, as the Street did before the near-meltdown of 2008.

Dodd-Frank had barred banks from using commercial deposits that belong to you and me and other people, and which are insured by the government, to make the kind of risky bets that got the Street into trouble and forced taxpayers to bail it out.

But Dodd-Frank put a crimp on Wall Street’s profits. So the Street’s lobbyists have been pushing to roll it back.

The new legislation, incorporating language drafted by lobbyists for Wall Street’s biggest bank, Citigroup (C), does just this.

It reopens the casino. This increases the likelihood you and I and other taxpayers will once again be left holding the bag.

Wall Street isn’t the only big winner from the new legislation. Health insurance companies get to keep their special tax breaks. Tourist destinations like Las Vegas get their travel promotion subsidies.

In a victory for food companies, the legislation even makes federally subsidized school lunches less healthy by allowing companies that provide them to include fewer whole grains. This boosts their profits because junkier food is less expensive to make.

Major defense contractors also win big. They get tens of billions of dollars for the new warplanes, missiles, and submarines they’ve been lobbying for.

Conservatives like to portray government as a welfare machine doling out benefits to the poor, some of whom are too lazy to work.

In reality, according to the Center for Budget and Policy Priorities, only about 12 percent of federal spending goes to individuals and families, most of whom are in dire need.

An increasing portion goes to corporate welfare.

In addition to the provisions in the recent spending bill that reward Wall Street, health insurers, the travel industry, food companies, and defense contractors, other corporate goodies have been long baked into the federal budget.

Big agribusiness gets price supports. Hedge-fund and private-equity managers get their own special “carried-interest” tax loophole. The oil and gas industry gets its special tax subsidies.

Big Pharma gets a particularly big benefit: a prohibition on government using its vast bargaining power under Medicare and Medicaid to negotiate low drug prices.

Why are politicians doing so much for corporate executives and Wall Street insiders? Follow the money. It’s because they’re flooding Washington with money as never before, financing an increasing portion of politicians’ campaigns.

The Supreme Court’s decision this year in McCutcheon vs. Federal Election Commission, following in the wake of Citizen’s United, already eliminated the $123,200 cap on the amount an individual could contribute to federal candidates.

The new spending legislation, just enacted, makes it easier for wealthy individuals to write big checks to political parties. Before, individuals could donate up to $32,400 to the Democratic or Republican National Committees.

Starting in 2015, they can donate ten times as much. In a two-year election cycle, a couple will be able to give $1,296,000 to a party’s various accounts.

But the only couples capable of giving that much are those that include corporate executives, Wall Street moguls, and other big-moneyed interests.

Which means Washington will be even more attentive to their needs in the next round of legislation.

That’s been the pattern. As wealth continues to concentrate at the top, individuals and entities with lots of money have greater political power to get favors from government – like the rollback of the Dodd-Frank law and the accumulation of additional corporate welfare. These favors, in turn, further entrench and expand the wealth at the top.

The size of government isn’t the problem. That’s a canard used to hide the far larger problem.

The larger problem is that much of government is no longer working for the vast majority it’s intended to serve. It’s working instead for a small minority at the top.

If government were responding to the public’s interest instead of the moneyed interests, it would be smaller and more efficient.

But unless or until we can reverse the vicious cycle of big money getting political favors that makes big money even bigger, we can’t get the government we want and deserve.

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