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Tuesday, December 09, 2008
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One More Reason to Limit Government Power

So as you've probably heard in many other places first, Illinois Governor Rod Blagojevich was arrested today on corruption charges:

Illinois Gov. Rod Blagojevich embarked on a "political corruption crime spree" and tried to benefit from his ability to appoint President-elect Barack Obama's replacement in the U.S. Senate, federal officials said Tuesday.

At a news conference in Chicago on Tuesday, U.S. Attorney Patrick Fitzgerald called it a sad day for the citizens of Illinois and alleged that the governor tried to "auction off" the Senate seat "to the highest bidder."
...
The affidavit contends Blagojevich discussed getting a substantial salary for himself at a non-profit foundation or an organization affiliated with labor unions. It also says Blagojevich talked about getting his wife placed on corporate boards where she might get $150,000 a year in director's fees.

The affidavit also quotes Blagojevich as saying in one conversation that "I want to make money."

I think what is surprising some (though not me), is really the extent of the corruption.  But aside from the awfulness of this one case, this serve as a reminder to all those who seek to increase the scope of government influence in our lives, that this is what it leads to.  Government takes our money from us... money that we would have directed to good economic use, and redirects it to places where there is political influence.  The more money with give government, ostensibly for the purpose of the "common good", the more chance there is for political corruption to take hold in order to control that money.

Remember, we can't stop giving our money to the government.  They'll arrest me if I do that.  I can stop buying cars from GM.  The irony of course, is that when we stop giving our money to a company that makes lower quality products at higher prices, then they go to the government for money instead, which is yet another reason why the bailout is such a bad idea.

So next time you think that we should have nationalized health care, think of Rod Blagojevich, and whether you want him to control a board that decides which insurance company gets the state contract.  And before you make the argument that this was one really bad apple... think about how many other politicians aren't as corrupt as Blagojevich, but still peddle their political influence in many smaller, mostly legal ways... and do so with your money.

# Posted at 1:43 PM by Nick  |  Comment Feed Link 28 Comments  |  No Trackbacks

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Wednesday, December 10, 2008 6:38:22 AM (Central Standard Time, UTC-06:00)
Nick, there is no question that Rod Blagojevich should go to prison for a very long time. But what in the world does he have to do with nationalized health care? And what exactly is "nationalized health care?" Is it Medicare?
Jack Lohman
Wednesday, December 10, 2008 8:33:44 AM (Central Standard Time, UTC-06:00)
I use Nationalized Health Care as just one example of the increased power over our lives that some people wish to give to government. And the more power we seat in government, the more opportunities it will create for corruption. Not only that, but the more power exists, the more it will ATTRACT corrupt people to attempt to control it.

Would you want someone like Blagojevich deciding what medical care you should be allowed to have, and at what cost they should have it?
Nick
Wednesday, December 10, 2008 8:49:50 AM (Central Standard Time, UTC-06:00)
There is absolutely no question that we have a corrupt government, and it is being corrupted by the CEOs and special interests that want to maximize profits and personal wealth. Some of the ambition is good, some is very bad. Our core problem in all of this is how we fund the elections. Get the money out of the political system and let the politicians perform as intended. Yea, it will mean more regulation but it should default to wise regulation.

Neither extreme is good. Not total regulation and not zero regulation. But now we have corrupt regulation and deregulation, and most of us are not happy with what it has produced.
Jack Lohman
Wednesday, December 10, 2008 8:53:12 AM (Central Standard Time, UTC-06:00)
Any corporate influence that is in government is really all tied to rent seeking. That's why most regulations that are written to "control" one particular aspect of the economy ends up being written, and often times supported and asked for by the companies that are ultimately being controlled!

And you'll never get the money out of the system. As long as government wields the awesome amount of control over our daily lives that it does, people will always want to, and have the right to, control how that power is used.

If you create a honey pot, you ought to expect a lot of bees.
Nick
Wednesday, December 10, 2008 8:58:44 AM (Central Standard Time, UTC-06:00)
And on the health care issue, Nick, I'm on Medicare and Doyle has zero control of what care I receive. I go to the same doctor and same hospital I went to before Medicare. They just send their bills to a different payer.

You may not have experienced the gory privatized system yet, but you'd do well to read this free book on the web: http://www.makingakilling.org/chapter1.html

Would you rather have your care decided by a profit-motivated CEO or by a doctor? Or by a politician under the same system you are?
Jack Lohman
Wednesday, December 10, 2008 9:03:58 AM (Central Standard Time, UTC-06:00)
We'll never get the "illegal corruption" out of the system, but those guys go to jail. Think about Illinois' previous governor Ryan and Dan Rostenkowski and Randy Cunningham. But all of this is just the tip of the iceberg. Far bigger is the "legal corruption," which is the core of today's economy problems. No amount of illegal corruption could have gotten us to where we are today.
Jack Lohman
Wednesday, December 10, 2008 9:11:55 AM (Central Standard Time, UTC-06:00)
Personally, I'm on a company sponsored plan. If the tax code weren't written against me, I'd much rather get out of that plan, and buy my own insurance through a company that I choose, not one my employer chooses.

And as far as Doyle not controlling my health insurance... just wait... there are many people who want him to, or do you not remember Health Wisconsin, and the fact that most decisions regarding health insurance in that plan were to be decided by an APPOINTED board... not an elected one.
Nick
Wednesday, December 10, 2008 9:13:04 AM (Central Standard Time, UTC-06:00)
And Nick, who really wields this control? Is it the politician or the special interests that fund his election?
Jack Lohman
Wednesday, December 10, 2008 9:15:56 AM (Central Standard Time, UTC-06:00)
I agree it all comes down to people, but it also comes down to the power those people wield by force of law, and the point of a gun. So I fight to not only get better people in office, but also expose any attempts to give those people more power. You have to have both... better people, and less for them to control.
Nick
Wednesday, December 10, 2008 9:23:35 AM (Central Standard Time, UTC-06:00)
I both remember and supported Healthy Wisconsin. It was a decent proposal than would have cost employers $15 billion and saved them $17 billion in healthcare premiums, a $2 billion savings. But the insurance industry opposed it and they won. So businesses and the public got screwed, again by our moneyed political system.

But HW wasn't the perfect system. A Medicare-for-all system is better, and the one Taiwan chose after studying every other system in the world. Even our for-profit system.

I don't like a single-person pool, unless I'm young and rich and my kids are not apt to come down with a devastating genetic disease, like childhood diabetes. I much prefer a pool where the risks are spread over 300 million Americans. But as long as they haven't outsourced your job and your covergae is good, I can see why we might disagree.
Jack Lohman
Wednesday, December 10, 2008 9:30:30 AM (Central Standard Time, UTC-06:00)
I've actually blogged about the whole topic in much depth, so I'm not going to try to bring it all back in comments. This has gotten way off the original thread and point of the post, which is when you give government the ultimate control over your life, it breeds corruption that is harder to eliminate, and has a more devastating effect than the corruption that may occur in any one company.
Nick
Wednesday, December 10, 2008 10:02:28 AM (Central Standard Time, UTC-06:00)
I only brought up the HW connection because the original post had tied it to the corruption of Blagojevich, and I don't think they are related.

Some feel that government is automatically bad, and I'm careful about accepting either of the two extremes. The good thing about politicians is that they can be unelected, whereas the special interests that control them cannot be. So you have to decide whether you want your politician obligated to the people that voted them in or the special interests that funded their elections.

My feelings are that if they are to be beholden to anybody, it should be the voters, and thus public funding of campaigns is the way to go. It has worked beautifully in Arizona and Maine,and 70% of their legislature have been elected under their "Clean Election" system.
Jack Lohman
Wednesday, December 10, 2008 12:54:37 PM (Central Standard Time, UTC-06:00)
Jack, business people are much easier to get rid of than politicians. If you don't like them, don't buy their products. You get to vote every day with how you spend your money. Politicians are able to stay in office long past their usefulness. Look at what it took to get William Jefferson and Ted Stevens out of office and they barely lost. As long as we give the government practically unlimited power over our lives, we are begging for troubles exactly like this.

If the Governor didn't have the power to make or break a business, he wouldn't have been in a position to make money from the people willing to pay for play. If the Governor didn't have the power to decide which health care provider can operate in a particular state, health care providers wouldn't have to bend to his will. They'd have to do the will of their customers or risk losing them.
BJ Lillo
Wednesday, December 10, 2008 5:54:41 PM (Central Standard Time, UTC-06:00)
Nick, the Blagojevich deal was very complex and favors were discussed in many areas. But the system worked. He got caught and will go to jail. Having spent 25 years as a health care provider, however, at no time was the viability of my company at the whim of the governor. That just doesn't happen. And there is virtually no evidence that companies can or are penalized for giving campaign contributions and taking favors in return. Perhaps you and 1% of the public retaliate, but the majority doesn't. "They all do it"

And about the only way a politician can be rewarded is with campaign contributions. Except when those contributions are via public funding of elections.

So I guess the opposite extreme is no laws. Sounds like Somalia to me.
Jack Lohman
Thursday, December 11, 2008 8:42:35 AM (Central Standard Time, UTC-06:00)
Government power, is there really such a thing anymore? Whats the difference between the ILL Govenor soliciting and WMC funding supreme court chairs in Wisconsin? So far we have sold two, thats progressive Wisconsin politics. Even worse we the public are stuck with these two for a ten year period. And we wonder why this state is in the state its in...
LaFay
Thursday, December 11, 2008 9:02:39 AM (Central Standard Time, UTC-06:00)
>>> "Whats the difference between the ILL Govenor soliciting and WMC funding supreme court chairs in Wisconsin?"

Wow, we agree!

Public funding of campaigns would eliminate the selling of judges, but more so, would eliminate the spending of $1300 per taxpayer per year on giveaways to the special interests that currently fund the elections. For $5 per taxpayer per year this would be a great bargain.
Jack Lohman
Thursday, December 11, 2008 10:02:26 PM (Central Standard Time, UTC-06:00)
The bottom-line issue here is that there will always be those among us who will do anything--including engaging in unethical and dishonest activities--to gain power or money. This includes those in private business as well as those in government. The ones who have the bombs and the power to jail us for not obeying them are the ones I'm the most concerned about.

The idea that government can protect us from 'the evils' of big business assumes that those who run the government aren't evil, themselves. Like Nick, I'd much rather allow the market to dictate who is evi/good (my words, not his) in the private sector, and allow our court system to decide whether or not a private entity has harmed the freedoms of another private party.

A government that no longer respects the essential rights of their people (private property, for example) has no right to claim at the same time that they're 'protecting' our essential rights by regulating the crap out of 'evil capitalists' (and nationalizing them, in the case of the Big Three) who mean to rip us off. I get ripped off constantly by the government, but because of their 'good intentions' and presumed high level of ethics and intelligence, I'm supposed to be grateful for it...while having a gun pointed at my head. It's insulting.

I'll deal with the sleazy used car dealer on my own, thanks.
Joey
Friday, December 12, 2008 9:47:35 AM (Central Standard Time, UTC-06:00)
Joey, if 100% of our politicians and business leaders were honest and of high integrity, I'd agree that unregulated free market is the way to go. But it isn't that way. We've slowly been deregulating since Reagan, and you surely see where that has led us. We must reinstate the Glass-Steagall act, stop risky mortgages, prohibit (oil) speculating, and add new regulations to prevent more of the same.

The key in all of this is that we have corrupt politicians, and if they weren't taking bribes from business and labor interests this mess would not have occurred in the first place. History tells us that we've got to quit what we've been doing, because it ain't working.
Jack Lohman
Friday, December 12, 2008 11:42:07 AM (Central Standard Time, UTC-06:00)
I am for gov't regulation that provides transparency so people can make a better informed decision. However, much of what is called "regulation" today is about either punishing or rewarding certain people, groups, industries or companies. Many rights and liberties are lost in the name of "Reform" or "regulation".

Money in elections is not the source of the problem, it is the symptom of the problem. When gov't has the power to pick winners and losers then groups will lobby aggresively because great personal reward or their very survival is often at stake. It is a bastardization of the free market where the group with the most effective lobby and biggest campaign donation (instead of the most effective product) wins.

The marketplace is a messy place. However, it must be remembered that the market is the sum of all human financial decisions.

Jack Lohman cites the need for regulation to stop risky mortgages...but it was gov't interferance in the market through Fannie Mae and Freddie Mac that distorted the market and created the foundation for risky loans. The market didn't want intially provide those types of loans, but the FM/FM created a market incentive to pursue them. With regard to oil speculationg....decades of gov't regulation placing domestic oil production off limits is a factor that those who purchase oil take into account. Notice how the price of oil has dropped since the Off Shore Drilling ban expired in September. Also, the little known fact is that investors can make just as much money on $40 oil as $150 oil if they invest the right way. With regard to speculating....it is the market allocating resources on the basis of supply and demand. Resources are finite and you can either have it that way or some gov't bureaucrat deciding who gets what. We tried wage and price controls and it was a disaster.

Right now all money in this economy seems to flow through gov't. The easiest way to keep corruption out of gov't is to keep the money and the power out of the government's hands.
Tosaguy
Friday, December 12, 2008 12:11:46 PM (Central Standard Time, UTC-06:00)
>>> "Money in elections is not the source of the problem, it is the symptom of the problem."

Then come up with a better solution.

Money is the least common denominator. Arizona and Maine eliminated it through full public funding of campaigns. It has worked beautifully. So well, in fact, that the special interests have sued the state 3 times because it has blocked moneyed access. Not lobbyist action, mind you, but they can't lobby with cash in hand. So they sued.

The price of oil dropped not because of the expiration, because new wells won't come alive and compete for years. It dropped because the oil speculators were finished playing their game. They drove prices up, cashed out, and then got out. Speculating on oil should be prohibited. But I'm sure we disagree.

Yea, we could keep government and regulations out of it. See how it worked for Somalia?

Jack Lohman
Friday, December 12, 2008 2:03:57 PM (Central Standard Time, UTC-06:00)
Glass-Steagall is one of the few things that helped us during this crisis! It was the banks that had combined investment banking arms and brick and mortar arms that faired the best. The banks that ended up needing the help were either 100% brick and mortar, or 100% investment banking. Its called diversification.

Oil Speculation is actually a very good thing as well. It serves a similar purpose to short selling. People who speculate on those things are actually signalling people right now that they think in the future, something will be more scarce. By buying now (because they think the future value will be higher), they actually help to force innovation before the actual scarcity takes hold. When airlines speculate and lock in low prices, nobody complains though.

For those reasons, finding new wells and drilling them do affect prices today even if they don't come online, because they affect the future price, which is what speculators look at. They see that the price won't be so high in the future after all (because new wells will be pumping) and therefore today's prices is the best, so they sell, which increases supply and thus drops the price.

Short selling (similar to speculation) does the exact same thing, except it portends the possibility that a stock is over values. Here of Enron? Yeah, thank short sellers for helping to discover that.

As far as "stopping people from taking on risky mortgages"... you do that by properly pricing mortgages in the first place. Government regulation actually helped to distort the market so that prices on mortgages were artifically low, to help fund "the American dream".
Nick
Friday, December 12, 2008 3:03:58 PM (Central Standard Time, UTC-06:00)
>>> "Oil Speculation is actually a very good thing as well."

It was more scarce because they made it more scarce by hoarding for greedy, capital gains purposes. I suppose hoarding food would be just as good. Look at how good you're going to feel when you finally get to eat.

Wow.... Uh, and short selling is sort of like getting hit in the face with a bat. It feels sooo good when you stop.

Nick, you are being delusional, grabbing at straws to try to prove that all of the sh*t that went on was really good sh*t. Yea, it really made us thankful when it stopped.
Jack Lohman
Friday, December 12, 2008 3:12:04 PM (Central Standard Time, UTC-06:00)
Not at all Jack, it's you who is delusional that nothing bad should ever happen. Folks have been saying for years that we've reached "peak oil"... we have to come up with alternatives. And yet its the delusional ones out there who want to come up with these alternatives, and at the exact same time never pay a premium for what you are saying is a deminishing resource. It is increasing prices which create demand for alternatives.

If we didn't have short sellers, then the only pressures on stocks would the pressure of people going long on a stock price. That means that the price of a stock would be artifically encouraged to continually increase, even if that means the company itself is overvalued. Short selling is a signal that a stock has too much value, and helps to pop bubbles, or stop bubbles from forming in the first place. It also allows people to hedge on investments and compensate for losses in other areas.
Nick
Friday, December 12, 2008 3:23:56 PM (Central Standard Time, UTC-06:00)
Well, you win Nick. How are you liking it so far?
Jack Lohman
Friday, December 12, 2008 3:30:21 PM (Central Standard Time, UTC-06:00)
Quite nicely actually. Gas prices are coming back down, housing prices are decreasing, which should help me if I want to buy a house in the coming year or two. Prices of many durable goods are coming down as well, which helps stretch my dollar further. Ethanol demand is decreasing, which helps decrease food costs.
Nick
Friday, December 12, 2008 3:34:18 PM (Central Standard Time, UTC-06:00)
Is anything going on outside your own little world? Like, uh, a depression?
Jack Lohman
Friday, December 12, 2008 3:40:12 PM (Central Standard Time, UTC-06:00)
The only problem that we have (and we're still a recession, and not a depression... yet), is that government is trying to distort markets too much. We had a bubble... which is a misallocation of resources. It started in housing, but it is also exposing other misallocations in other places.

Now then, recessions ARE NOT BAD THINGS. They are the result of booms, which generally lead to waste in certain areas. When we have a recession, that is a time of correction. We figure out what was doing poorly, STOP INVESTING IN THOSE THINGS, and then figure out what to do next.

The problem is that people are running around demanding that we pour taxpayer dollars (my money) into the sectors of the economy that had a bubble... ie... were poor investments. Instead, we should allow the prices on those investments to drop, so that their price is more realistic (ie, not inflated by the bubble), which will allow us to reinvest in other sectors of the economy.

If you do what I assume you are suggesting, we will poor ever increasing amounts of capital in an effort to reinflate a bubble, which was the problem in the first place.
Nick
Friday, December 12, 2008 3:57:38 PM (Central Standard Time, UTC-06:00)
No, what I'd like to see is an end of political corruption so the market can work like it should. But I also recognize that the market will not always work like it should because we have corrupt business leaders who don't want a free market, they want one tilted in their favor and they are willing to pay cash bribes to politicians to get hat they want.

Corruption leads to giving away the store, and now the taxpayers are trying to buy back the store our politicians traded for cash.

IF we had totally honest business leaders we wouldn't need regulation. But we don't. Removing regulations have made it a "free-for-all" market instead. I wish the world were perfect, but it isn't. But we can't have government-sanctioned political bribing and expect a stable country. Corruption has never worked in any other country, nor can it be sustained here.
Jack Lohman
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