Payoff is Sweet

The House of Representatives will change hands today and already Republicans are getting ready to pay back their corporate sponsors (http://www.politico.com/news/stories/0111/46995.html). First a quick look at the numbers. Candidates spent a whopping $4.2 billion on campaign TV ads alone (http://www.dailymail.co.uk/news/article-1327814/Mid-term-Elections-2010-Politicians-spent-4-2bn-adverts.html) in this midterm election. Outside groups increased their spending from $16 million in 2006 to over $80 last year (http://www.rawstory.com/rs/2010/10/groups-spending-elections-dwarfs-parties/). And the Chamber of Commerce spent $31.7 million dollars, with 93 percent going to Republicans. On top of all this, unreported contributions have climbed precipitously based on the Citizens vs. The United States Supreme Court decision. Now Republicans are going to offer their payback, just as they did when Bush II entered office as the first corporate-sponsored President in history. Darrell Issa, the incoming chair of the House Oversight and Government Reform Committee, sent out letters to 150 trade associations, companies and think tanks asking what federal regulation is hurting economic growth.

Issa is apparently troubled by expanded oversight in areas including  food production, energy production, and finance. "Is there something that we can do to try to ease that [regulatory] burden and stimulate job creation?" said an Issa spokesperson. "Is there a consistent practice or regulation that hurts jobs? Until you have all the facts, you really can't make a lot of determinations and judgments." The irony, of course, is that profits are up and companies are doing okay -- they're just not hiring workers. And given the environmental and financial crises that persist to this day, is it really wise to turn the clock back and give corporations more carte blanche to do as they please? I suppose when they are flipping the bill for your election/reelection it does.

In economic terms, moral hazard refers to a situation where individuals or groups act less responsibly because they are covered for losses. A classic example would be buying insurance on a new bike that pays 100% if the bike is stolen. The person with that insurance is less likely to take steps to protect that bike from theft, given that there is no cost to replacing it except time. I believe we have a moral hazard problem today that is systemic. Corporations spend money to ensure that they are not held culpable for their behavior: through lobbying and campaign financing, lining the court with friends of business, influencing the public sphere (media) and all levels of education from Kindergarten to the University and even running for office. With all of these protections in place, the financial sector even feels comfortable handing out huge bonuses in the middle of a financial crisis and spending gads of money to ensure that no regulation is put into place to protect against collapse in the future. And yet people continue to believe government is the problem. Hmm . . .