I’ve been banging the drum for years about Washington being a racket for the benefit of politicians, cronyists, bureaucrats, contractors, lobbyists, interest groups, and other insiders.
I’ve written about horrific examples of bloated spending that line the pockets of the well connected.
I’ve shared disgusting examples of Democrat sleaze and Republican sleaze.
I’ve exposed rampant corruption with insiders getting rich at our expense.
I’ve pontificated about fat-cat bureaucrats who get paid more and do less.
But I’ve never figured out an effective way of combining all these issues.
So I’m very happy that Scott Beyer of the American Enterprise Institute combines these themes in a very good article about our self-serving political class.
Here’s some of what he wrote.
…the nation’s capital today is wealthy and growing. Metro Washington now has six of the nation’s ten wealthiest counties. In 2012, Falls Church became the nation’s richest city… The region’s median household income is $88,233, second in the nation… But while in other cities this might be a success story, in Washington it comes with a catch. Rather than resulting from private industry, it merely underlies the growth of the city’s leading employer, the federal government. The city’s flourishing has seemed especially perverse in recent years, as the rest of America has lagged economically. Every tax dollar spent represents less money in the private sector to create jobs.
That’s all good material, but this pictograph is absolutely superb. It’s a very compelling summary of how Washington has become a fat and happy imperial city.
Very well done.
It should be clear to everyone that Washington is booming, and hopefully they make the obvious connection that D.C.’s wealth comes at the expense of America’s productive sector.
While the pictograph is excellent, Beyer has some other observations that are worth sharing.
For instance, there’s been an explosion in the amount of money diverted to lobbying by firms, as well as a huge jump in the number of politicians who cash in on their contacts.
One growth industry, due to the vast expansion of the federal government’s tax and regulatory rules, is lobbying. Businesses spent $3.24 billion last year on lobbying, up from $1.45 billion in 1998 and $200 million in 1983. Two-thirds of US senators and representatives joined the lobbying industry after leaving office in 2012, up from a small fraction in the 1960s.
Because I support the Constitution, I don’t object to the concept of companies exercising their 1st Amendment rights to petition the government.
But I do wish government was much smaller so that companies didn’t have so much interest in what happens in Washington. Particularly since companies oftentimes get seduced into treating Washington like a profit center.
Simply stated, as I explain in this video, big government is inherently corrupting.
Beyer also makes some important observations about the overpaid government workforce.
…the region houses about 14 percent of America’s 2.1 million civilian federal workforce, one in five of whom earns an annual salary of more than $100,000. In 2012, federal civilian employees’ median salary was $81,704, compared to $54,995 for the private-sector employees; after accounting for fringe benefits, those figures go to $114,976 versus $65,917, respectively.
Amen.
As a taxpayer, I don’t like overpaid bureaucrats. But as an economist, I’m even more upset that human capital is being misallocated to unproductive purposes.
For more information, here’s my video explaining that the bureaucracy is far too big and paid far too much.
Though if you prefer specific examples, this post contains the charter members of the Bureaucrat Hall of Fame. And if you’re not already sufficiently nauseated, you can click here and here to learn more about how you are subsidizing fun and games in Washington.
P.S. But I don’t want folks to get overly depressed, so I also encourage you to enjoy these examples of bureaucrat humor and these examples of politician humor.
[…] P.S. I have no doubt Trump and many other politicians of both parties also would be taking credit for falling deficits if they were in Biden’s position. After all, politicians are probably the least ethical people in the nation. And Washington brings out the worst of the worst. […]
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Want corporate money out of political campaigns?
Want to jumpstart the economy?
Here is one stone for both of those birds: Eliminate the corporate income tax.
Consider this. The primary focus of every corporation is the bottom line – net after-tax profits. In the U.S., with a top corporate income tax rate of about 40%, corporations get to keep only 6 dollars out of every 10 they earn; the other 4 go to taxes. Eliminating the corporate income tax would have the same impact to after-tax profits as a 66% increase in sales. Imagine the impact to the economy if every company received an immediate 66% jump in sales.
+ Imagine the reinvestment and growth opportunities a company would have with 66% more after-tax cash in its coffers.
+ Imagine what U.S. multinationals would do with the cash they are holding overseas if they were able to keep 10 out of 10 dollars they bring back home instead of just 6.
+ Imagine where foreign companies would invest their money if they knew they got to keep all of their profit here in the U.S. versus just some of it in other countries.
+ Imagine the additional savings U.S. corporations would reap by eliminating the expense of corporate tax compliance.
+ Imagine the jobs being created in, and flowing back into, the U.S. from all of that new investment.
+ Imagine businesses making investment decisions on the merits of the investment itself, not whether it saves them taxes.
+ With no need to distinguish between for-profit versus not-for-profit corporations, imagine the elimination of the arcane rules for 501c3 and 501c4 organizations and the like, and imagine the associated IRS targeting shenanigans completely vaporized.
+ In fact, imagine the vast volumes of tax laws that could be entirely eliminated.
+ Imagine the savings in federal spending gained by eliminating the corporate division of the IRS.
+ With the value of tax loopholes reduced to zero, imagine what happens to the level of corporate lobbying in DC.
+ With corporations unable to get a return on investment from their political contributions, imagine what happens to corporate cash in political campaigns.
+ With corporate cash drying up for politicians and no favors to be gained or given, imagine what happens to crony capitalism.
Politicians from both sides of the aisle have been advocating corporate tax reform for years but have taken no action. Why? Two reasons: a) both the liberals and the media would howl at Republicans for aiding and abetting the enemy – corporations – regardless of the above-mentioned political and economic benefits; and b) power. The vast amounts of cash in The Capital that are associated with corporate income tax are a big conduit of power for politicians and corporations alike. Eliminate that conduit by eliminating the corporate income tax, and the problems will go with it. Simply reducing corporate income tax rates is not enough. We must wipe away the entire rat’s nest. Besides, corporate income taxes account for only about 10% of federal tax revenue, and the net drop in revenue would be much, much less due to the positive impact on the economy.
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