Washington is a criminal enterprise, which is not news. Politicians regularly dole favors to their donors in the form of grants and loan guarantees (Solyndra), theft of private assets for bailouts (Chrysler), and mandates for the use of worthless commodities (corn ethanol). The corruption is endless and goes back to Byzantium; governments are always corrupt because men are corruptible. Due to its size, however, Washington is the greatest criminal enterprise ever assembled. Still, what manner of thief has Washington become? The worst kind.
Popular culture lionizes certain classes of criminals, such as jewel thieves and bank heist masterminds, while it demonizes dirty crimes like armed robberies. Why the difference? Isn’t a thief a thief? Not entirely, and for good reasons. A jewel thief takes from the rich, who by popular belief can afford a loss. He sneaks into a mansion, barely breaking a single window, removes the jewels, and disappears. Nobody is injured, nothing much is damaged, and the jewels go on to flatter another wealthy owner; at least in the movies. Economically, this theft is highly efficient. Wealth is transferred from one person to another with little collateral impact. It is as if the rich victim just handed a stack of cash to the thief.
Dirty crimes involve a high degree of collateral damage as a part of the transfer of wealth. When an armed robber steals a few hundred dollars from a convenience store, the collateral damage is tremendous. People are often murdered, and customers lose faith in the store’s safety, so they shop elsewhere. The damage caused by dirty and unpopular crimes greatly exceeds the value to the thief; people instinctively say “what a waste” when they hear of these crimes.
A particularly wasteful crime trend is copper thieves. Copper thieves steal from construction sites by cutting down installed copper wires and pipes in order to sell the valuable metal as scrap. In doing so, they destroy the value of the labor that installed the copper as well as the finished value of the wire and pipe. Stealing copper whose scrap value may be a few hundred dollars can cause hundreds of thousands of dollars in collateral damage. Economically, copper thieves are among the worst criminals because they cause so much harm for a relatively small personal gain.
So, is Washington’s culture of corruption more like a jewel thief or a copper thief? Washington causes incalculable collateral damage while directing wealth to its friends. As Peter Schweizer’s Throw Them All Out documented, a few hundred thousand dollars thrown at a politician results in tens of millions in graft in return. From the investor’s (i.e. donor’s) point of view, political gamesmanship is the best investment of all. From the taxpayer’s perspective, Washington corruption is nearly a crime against humanity.
Consider corn ethanol. Because each State is equal in the Senate, a swath of low population states that grow corn wield extreme power over Congress’s appropriations. These corn states have forced politicians to mandate ever more corn ethanol in gasoline because it drives up prices and demand for corn. Congress has outlawed the importation of Brazilian sugar and ethanol because it is too competitive. If the goal were to reduce CO2 emissions, Brazilian sugar and ethanol would be the choice, but the goal is to benefit comparatively rich plain state farmers. The result is world hyperinflation in food prices. Corn prices rose from under $2.50 per bushel to $6 thanks to Washington mandates. Since cattle feed on corn, steak prices are rising at 10 times the rate of general inflation. Worldwide prices of substitute staples like rice also rose, causing a food crisis where most people spend most of their income on food. Just like copper thieves, Washington politicians, largely Republican in this case, do not care how many people they hurt to get a few thousand campaign dollars.
On the Democrat side, consider Pres. Obama’s harassment of Chrysler bondholders. In order to bail out his UAW base, Obama stole from the bondholders whose rights were senior to those of the labor union. Obama called on the bondholders to “sacrifice” to benefit the greater good, but his version of the greater good was the UAW, which represents a tiny wealthy sliver the US’s workforce. The greater cost for Obama’s theft is hidden in the revelation that politics trumps property rights. The Chrysler bondholders were prepared to sue the Government, but they were convinced by Obama’s operatives that they would be beaten down long before prevailing in court. Until this moment, an investor felt he knew his rights, but now any investment can be taken without cause or compensation if the President so wishes. In order to transfer a few million dollars to his cronies, Obama permanently damaged an $8 trillion engine for capital formation and economic growth.
If only Washington acted as the gentlemanly jewel thief, simply giving its stolen cash to its friends. Instead, Washington is like the copper thief, callous to the incidental damage its thievery causes. The next time someone exposes the latest episode of Washington corruption, remember to scale-up the reported graft to include the collateral damage.
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