Saturday, January 27, 2007

Why the election spending scandal?

Unfortunately the United States is already moving into silly season. The next presidential campaign has already begun. Democrats are lining up for the nomination. No surprise really since they all think the Republicans are in deep trouble. George Bush has destroyed the credibility of his own party.

Already millions of dollars are pouring into the campaign accounts of prospective candidates. And in the November elections we saw candidates for the House of Representatives spending vast sums of money to win office. Over a billion dollars was spent in the last presidential election.

Now consider that the president is paid a salary of $400,000 per year. A member of the US Congress is paid $162,100 per year. So billions of dollars are spent by individuals seeking jobs that pay only a fraction of the cost of winning the position.

Now there are a couple of reasons for this. One is that the money they spend is other people’s money -- money donated to the campaigns. And the salary is their own. For some that is motivation. Others give up incomes greater than what they receive in office. Power, prestige and perks no doubt inspire many of them. And there actually might be a couple inspired by some idea of community service but they would be hard to find.

Now why is it that billions are spent by other people in order for these individuals to secure office? And why is it that the amount of money spent for election is increasing year after year?

There are a lot of complaints on the Left as to increased spending on elections. And while their solution is the same solution they offer for every other problem in life -- give control to the State to run things -- they never ask why it is that spending is constantly increasing?

The issue is not that hard to understand. People spend millions because the office is worth far more than that. It is not the value which determines the office. It is the power which determines the value of the office.

In modern day America most legislation has nothing to do with protecting people from violations of their rights. Most legislation is not a measure to protect but to redistribute rights and wealth from one group to another. Modern day politics is almost entirely about transfers.

There are two ways this is done. For instance one kind of business may wish to approach government and have them use force against competitors from overseas. They may lobby for restrictions on trade which will drive up the price of their goods. The net result will be a redistribution of wealth from consumers to wealth businessmen and from overseas producers to local producers. Most protectionist measures do precisely this.

Another means wealth businessmen transfer wealth to themselves is that they lobby for various regulations over their own industry. For instance you will often find that Big Business in particular loves such regulations since the cost of regulations impact smaller and medium size competitors the most.

Consider three companies: one has income of $5 million, one has income of $1 million and the third has income of $200,000. The big boy in the field has access to his congressman since he is a reliable contributor to the campaign and the party. Some well-meaning but naive consumer or environmental group comes along and proposes regulations which will add $100,000 to the cost of operating in this field. Big Boy enthusiastically supports the new regulations with slogans about “responsibility” and “community service” and slogans. The measure passes.

What are the results? Well the smallest business can’t face an increased cost of $100,000 and goes out of business. The medium size business is also having problems when costs go up by 10% over night. They can limp along but they have to raise their prices. Big Boy, having a much bigger income, spreads the increased cost out over more customers. So while his prices increase a bit they increase minimally compared to the one competitor they have left. The net result is that they pick up most the $200,000 in business from the smaller company that has gone under. And they start attracting business from the medium sized competitor who has trouble competing on prices.

They realized that regulations reduces competition which is conducive to higher profits for themselves. The big boys can spread the higher costs over more customers and their competitors are thus at a disadvantage. The increased profits often easily pay for the increased costs of regulations. And if they are lucky then some foolish consumer group will point out that average profits have increased (true since the smaller guy went under) and this indicates that more regulations are required.

And if the regulations reach a stage where they impeded on the industry severely it would mean that the medium sized business may go under. Then the same groups would lobby for subsidies and tax breaks to save the “endangered” business especially from foreign competition.

Special interest groups, be they big business or not, find it worthwhile to purchase the good will of politicians. Election costs reflect the potential profits that can be gained through political means. As politicians accumulate more powers the cost of elections will rise further.

What solution does the Left offer? Why, state financing of elections of course. But who benefits from that? Incumbents. The ability that politicians have to hand out favors and redistribute wealth give them a huge amount of “campaigning” ability which challengers do not possess. Incumbents are already receiving public financing by the billions. Every highway they build in their district wins them votes. Every grant they can hand out to some group wins them votes. They spend their entire term of office campaigning with funds from the public treasury. With that advantage it is very difficult for a challenger to win an election against the incumbent. About the only way to do it is to outspend them in the campaign itself.

But what does public financing do? It sets limits on spending thus making it impossible to outspend the incumbent. Public financing is a protection scheme benefiting incumbents.

Is there a real means of solving these problems? There is! The solution is to restrict the powers of politicians. If you reduce the ability of political hacks to hand out favors from the public treasury you will reduce the demand for electing such hacks. The net result would be a reduction in campaign spending.

The corruption, the massive spending, the promises, are all the result of amassing unconstitutional powers in the hands of the political elite. Reduce their powers and the value of electing them will drop dramatically along with all the problems associated with this scandal.