Hostile Takeover: Resisting Centralized Government's Stranglehold on America (18 page)

The Tea Party Debt Commission was, in a sense, our answer to the “supercommittee,” that unique and remarkable creature of the Beltway debt ceiling deal. While the supercommittee was composed of twelve powerful Washington insiders charged with trimming the budget around the edges, the Tea Party commission would be a dozen shirtsleeve Americans—volunteer activists and leaders from across the country—who would come together to help save our country from a Greek-style debt collapse. Whereas the supercommittee would be superprivileged—its work product would receive fast-track consideration, a guaranteed up-or-down vote in both houses, no amendments, no extended debate, and no filibusters (in other words, it would be one of the most powerful congressional committees in the history of the republic)—the Tea Party Debt Commission would succeed or fail based solely on the merits and appeal of its ideas.

As we noted earlier, the supercommittee failed to reach any agreements, and quietly slipped into obscurity. Even if it had succeeded, it would have reduced spending by a mere drop in the bucket, just $1.2 trillion over ten years, from a steeply rising baseline. The Tea Party Debt Commission, by contrast, had set for itself the much more ambitious goal of reducing spending by $9 trillion—nearly eight times as much. Why that particular target? Because that’s the amount that lets you balance the budget in less than ten years while also stopping the national debt from growing as a share of the economy. Right now, the nation’s accumulated debt is equal to nearly 100 percent of one year of economic output. Merely $1.2 trillion in savings does nothing to keep the debt from growing to disaster levels (for Greece, it was around 150 percent of the economy) within the next decade. Or, to put it another way, the supercommittee would have merely reduced ten-year spending from $44 trillion to $43 trillion, a mere 2.3 percent. Our $9 trillion goal, by contrast, would reduce ten-year spending from $44 trillion to $34 trillion, a
23 percent
reduction.

After four months of field hearings around the country and a massive online survey, the TPDC released its proposal, which it dubbed the “Tea Party Budget.”
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The plan achieves all its goals, and then some, incorporating good ideas from thousands of activists and survey participants, as well as some of the best ideas in the budget plans of Mulvaney, Ryan, Toomey, and Paul.

The Tea Party Budget builds on a compellingly simple framework popularized by Representative Connie Mack of Florida, who saw that by cutting federal spending by 1 percent a year in real terms, we can balance the budget within a decade. Mack’s “One Percent Spending Reduction Act,” also known as the “One Cent Solution” or the “Mack Penny Plan,” does just what its name implies. It reduces overall federal outlays minus interest by 1 percent a year until the budget is balanced, and then caps total spending at 18 percent of national output.

Building on this simple framework, the Tea Party Budget spells out a detailed, year-by-year path to balance. The plan:

• Reduces federal spending by $9.7 trillion over ten years, as opposed to the president’s plan to
  increase
  spending by $2.3 trillion.
  
• Closes a historically large budget gap, equal to almost one-tenth of our economy.
  
• Balances the budget in just four years, and keeps it balanced, without tax hikes.
  
• Shrinks the federal government from 24 percent of the economy—a level exceeded only in World War II—to about 16 percent, in line with the postwar norm.
  
• Stops the growth of the debt, and begins paying it down, with a goal of eliminating it within this generation.
  

To achieve those goals, the plan:

• Repeals Obamacare in total.
  
• Eliminates four cabinet agencies—Energy, Education, Commerce, and HUD—and reduces or privatizes many others, including EPA, TSA, Fannie Mae, and Freddie Mac.
  
• Ends farm subsidies, returns student loans to the private sector, and stops foreign aid to countries that don’t support us.
  
• Saves Social Security and greatly improves future benefits by shifting ownership and control from government to individuals, through new personal saving accounts.
  
• Gives Medicare seniors the right to opt into the congressional health care plan.
  
• Suspends pension contributions and COLAs for members of Congress whenever the budget is in deficit.
  

“In short,” write the citizen commissioners, “the Tea Party Budget enables us to end chronic deficits and pay down debt, while moving us back toward the kind of limited, constitutional government intended by our Founding Fathers. And it does all this without raising taxes. With these reforms,” they continue, “we can unburden the productive sector and get back to robust economic growth and rising living standards for all. With this plan, everyone benefits.”

How far we’ve come from 2009.

But for all these successes, it is painfully clear that the fight is before us, that the forces of centralized government are still playing the game in Washington from a position of strength.

All the solutions laid out in the following chapters share a common foundation: they reflect the philosophy of decentralization that will restore America as an exceptional nation based on free individuals. We need to replace top-down dictates with bottom-up control. But beating Washington is not a onetime event. If you understand and believe in the power of smaller government and more individual freedom, you know that the hostile takeover of Washington requires continued vigilance of the people, for the people.

CHAPTER 7
L
OOTERS AND
M
OOCHERS

When you see that money is flowing to those who deal, not in goods, but in favors—when you see that men get richer by graft and by pull than by work . . . you may know that your society is doomed.

—Ayn Rand,
Atlas Shrugged

O
NE OF THE MOST PERSISTENT MYTHS IN MODERN POLITICS, CONSIDERED
by the mainstream media to be as reliable as the laws of gravity, is the belief that corporate America is a staunch defender of free markets and unfettered entrepreneurship. A corollary of this lie is a second one: Republicans, as advocates of limited government, are “pro-business,” and Democrats, as defenders of the common man, are populist watchdogs against corporate greed.

These lies may be politically convenient to those who employ them, but they are lies nonetheless.

Do you believe these lies? I wouldn’t really blame you if you did, because they are reinforced daily in the news. Today, this preconceived storyline substitutes for hard-earned investigative journalism. Likewise, you would be hard-pressed to find a single speech by Barack Obama that did not set up these caricatures and then knock them down. For our progressive president, public policy always involves more benevolent government, selflessly implemented by better bureaucrats, to stop the greed and excesses of corporations in unregulated markets. But for Republicans in bed with business interests, the story goes, President Obama would lead us to the promised land of limited corporate power and honest government guardians of “the little guy.”

Great story, but it’s never true.

I learned the hard way about my own naïveté when I worked as a budget economist at the U.S. Chamber of Commerce in the early 1990s. When I took the job, I assumed that the world’s largest business organization, with “The Spirit of Enterprise” emblazoned across the top of its logo, was just that: an unwavering defender against the encroachments of big government on free enterprise. I suppose I knew better going in, but conventional wisdom sometimes gets the best of all of us. I left the Chamber several years later with a more realistic view of how the world works, soon after that supposedly staunch defender of free enterprise endorsed President Bill Clinton’s attempted government takeover of the health care system. As I watched in disbelief, many of the biggest member corporations saw an opportunity to shift their costs onto someone else—consumers, taxpayers, and smaller upstart competitors. Pharmaceutical interests and health insurance companies saw a competitive advantage in rewriting the rules of the game to their advantage. All this was a noxious stew of “rent protection” and shameless “rent-seeking.” These interests dominated the Chamber’s health care policy-making process, pushing the “spirit of enterprise” to endorse a government takeover of one-sixth of the U.S. economy.

In 2009, those same corporate interests would shift their policy-making influence from 1615 H Street, the Chamber of Commerce headquarters, and migrate across Lafayette Park to 1600 Pennsylvania Avenue, where they would help a Democratic president write the provisions in Obamacare to their own benefit.

In truth, the struggle of individual freedom against the power of big government has never been about Republicans versus Democrats or big corporations versus the public good. It has always been about Them versus Us: insiders in charge, ensconced behind closed doors, versus the shareholders, outside. From the time of the East India Company and entrenched New York business interests in bed with the British Empire in the 1770s, it has been a struggle between the insiders who conspire against our freedoms, and the working folks on the streets of Boston, who will always pay the price.

The Founders were keenly aware of these facts of life. Sam Adams had targeted the New York delegation of the Continental Congress with grassroots pressure from their constituents, literally goading them into signing the Declaration of Independence. They didn’t want to, because New York had made its comfortable accommodations with the British Parliament, but grassroots power from the bottom up made them feel the heat of accountability. They were the crony capitalists of the day, growing fat on government-granted monopoly power.

Adam Smith, ably representing the ethos that defined America’s founding in 1776’s
The Wealth of Nations
, wrote of the tendency of those in business to conspire. It’s human nature. But the real danger, he warned, was the potential of “the law” to “facilitate” the collusion of businesses:

People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices. It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty or justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.
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AN OFFER YOU CAN’T REFUSE

W
ASHINGTON,
D.C.,
IS THE TOWN OF “GRAFT AND PULL,” AND ITS
reach is expanding. What Ayn Rand understood, and what the Left would rather have the masses forget, is that when government becomes a favor factory—doling out exemptions, stimulus funds, and tax breaks—the private sector will come. As long as government remains in the business of redistributing wealth—hurting other people and taking their stuff—business interests will find it irresistible to come to the seat of power, find “a man in Washington,” and compete through the political process instead of delivering the best product to consumers.

Rand called those who engaged in these cozy relationships “looters and moochers.” The moochers are the corporate bigwigs who feed from the public trough of political largesse that the looters in government have stolen from the people. In other words, while the heroes in
Atlas Shrugged
are indeed the entrepreneurs who “carry the world,” the villains are also industrialists who know that the best way to beat their competition when they fail to meet the demands of consumers is to go to Washington.

Like characters in Rand’s novel, modern-day corporate executives ply their trade in the political arena, beating a path to Washington, D.C. Once inside the Beltway, CEOs and their armies of lobbyists collude with committee chairmen for mutual gains, writing regulatory barriers to entry to boost both the bottom line and government power. And while I’m about to blast them for doing so, why shouldn’t they? Washington politicians—in both parties—have essentially put up an Open for Business sign to companies willing to deal. There are strings attached. A partner in Washington is like a business partnership with Don Vito Corleone in
The Godfather
: sometimes the committee chairman comes calling on you and sometimes you go, hat in hand, to see the chairman. Either way, expect someone to make an offer you can’t refuse.

IMAGINATIVE MOOCHING AT WORK

E
XHIBIT 1:
J
EFF
I
MMELT,
CEO
OF
G
ENERAL
E
LECTRIC,
P
RESIDENT
Obama’s “jobs czar,” and corporate rent-seeker. Soon after Barack Obama was sworn in as president in 2009, Immelt informed his shareholders that the economics of the future had shifted fundamentally, away from freedom and the accountability of competition to serve consumer needs, toward something else entirely. “The interaction between government and business will change forever,” said the CEO. “In a reset economy, the government will be a regulator; and also an industry policy champion, a financier, and a key partner.”
2
This from the storied American company founded by Thomas Edison, inventor of the incandescent lightbulb. In 2007, the struggling corporation had successfully lobbied for a government ban of that ubiquitous bulb. The company wanted to shift consumer demand to its compact fluorescent bulbs made in China, which was part of its big political bet on green energy—or as its message shop put it, GE’s “ecomagination.” Eventually, the company hoped to force consumers to buy a far more expensive, higher efficiency incandescent bulb.
3

The “reset” GE business model includes a staff of over 900 tax experts and corporate lobbyists, who scour the tax code, support expansive new government regulations, and pursue lucrative government contracts to fatten their bottom line. Judging by the results, all those extra paychecks pay for themselves.

A 2011 ABC News report noted that GE had spent over $238 million on lobbying since 2000, more than any other company: “money that has helped GE gain access to the corridors of power and some of the most remote crevices of the governing process.”
4
Between 2008 and 2010, GE was the top spender on lobbying, at over $84 million.
5
And like so many companies, many GE employees have gone through the “revolving door” between lobbying and politics. Interestingly, a number of their employees made the somewhat more unusual move of leaving GE to take lower-paying public-sector jobs. What are they doing there?

And what does GE get for all this money and influence in the nation’s capital? More business and a competitive edge in the marketplace. GE received more than $140 million in stimulus funds under 88 separate contracts.
6
And one-third of the 100 initial “smart-grid” grant recipients under the stimulus were GE clients.
7
As
Washington Examiner
columnist Tim Carney has noted, “Look at any major Obama policy initiative—healthcare reform, climate-change regulation, embryonic stem-cell research, infrastructure stimulus, electrical transmission smart-grids—and you’ll find GE has set up shop, angling for a way to pocket government handouts, gain business through mandates, or profit from government regulation.”
8

In 2008, the GE political action committee contributed more than $1.5 million to federal campaigns, with 60 percent of it going to Democratic candidates.
9
This bias has nothing to do with ideology or party affiliation. What it means is that in 2008, GE made the smart bet that Democrats, and in particular Barack Obama, had a good chance of gaining power. And if you want a place at the table, you’d better put your money down.

All told, in 2010 corporate America spent more than $3.5 billion on hiring nearly 13,000 lobbyists,
10
whose main job is to secure tax breaks, regulatory waivers, contracts, and congressional investigations to tilt the market for those who hire them: Wall Street, Big Pharma, Big Insurance, and Big Business. For all these industries, good business leads through Washington. Rather than create products that better serve consumers, these companies spend valuable resources trying to sway policy in ways that hurt their consumers and their competitors while boosting their own position in the marketplace. Economists call this behavior rent-seeking. But let’s call it what it is: crony capitalism. If you wonder why young people hold “capitalism” in such low regard, perhaps it’s this low life trough feeding that the word now invokes in people’s minds. Americans rightly hate what capitalism in America is becoming: an unholy alliance between big government and big business.

DUDE, WHERE’S MY BAILOUT?

T
HE
T
ROUBLED
A
SSET
R
ELIEF
P
ROGRAM BAILOUT WAS PERHAPS THE
most egregious example of this behavior, with the big banks foisting their losses onto taxpayers. This hit a nerve with the American public, waking them up, and ultimately creating the movement that became the Tea Party. Indeed, if one looks at the more recent protests of Occupy Wall Street, the root frustrations are the same—namely, Wall Street’s cozy relationship with the government and the multimillion-dollar bonuses for corporate executives who have used Washington to force taxpayers to subsidize their losses.

The problem is that Occupy Wall Street learns the wrong lessons from this arrangement. What they don’t see is the root cause of the problem: too much government. As monetary economist Gerald O’Driscoll argues, there is now an incestuous relationship between the two: “Business succeeds by getting along with politicians and regulators. . . . We call that system not the free-market, but crony capitalism. It owes more to Benito Mussolini than to Adam Smith.”
11
The trend is global.
The Economist
calls “State Capitalism” the new way of economic organization, one that squeezes individual freedom out of the equation. How ominous is this trend? “A striking number of governments, particularly in the emerging world, are learning how to use the market to promote political ends. The invisible hand of the market is giving way to the visible, and often authoritarian, hand of state capitalism.”
12

The proliferation of words to describe what’s going on is bewildering, but also enlightening. Mussolini sought government control of the means of production, a textbook definition of “fascism.” One man’s “state capitalism” is another’s definition of “progress.” “Socialism” replaces private ownership with government ownership of the means of production. Today we call all this “progressive.”

Call it whatever you want. Me, I’m still clinging to my freedom.

The Occupy Wall Street movement ignores the political power of big business to effectively lobby government for favors. Their solution—placing more power in the hands of government and more economic decisions in Washington—will only encourage more bad behavior. When politics, rather than individuals freely acting in a marketplace, is used to make important economic decisions, those with the most political power win. And it is clear that those with the power in Washington are those who can afford to hire the lawyers and lobbyists needed to twist legislation and regulation in their favor.