Michigan and Special Interest

Everybody loves roads.

Elizabeth Warren likes to lecture about roads and President Obama loves speaking about investment in crumbling infrastructure. Get past the talking points and into the weeds and the MSNBC set will offer something about “rebuilding America” as their pet panacea for, well, everything. Even Rand Paul has teamed up with Barbara Boxer on a bill that would fill the coffers of the federal highway fund via revenue brought in by a lower corporate tax rate. Libertarians can hardly go five minutes without being condescendingly informed that our free market paradise could never happen because who would build the roads?!?!?!?!?

In Michigan this week, Republican governor Rick Snyder saw Proposal 1 – a ballot measure to hike sales taxes to finance road and highway improvement – go down by an 80-20 margin. The governor and his party supported this bill which would have increased the average household’s annual tax burden by as much as $545 a year. The key support for the measure came from a lobbying consortium representing several concrete, asphalt, paving and excavation interests in the state. They outspent the opponents of the tax hike by 30 to 40-1.

Proposal 1’s “sound defeat undermined the media assumption that Big Business and Big Government working together represents a public consensus,” says Tim Carney in a piece for The Washington Examiner. Carney ends his column urging conservatives to build on this and sees it as an effective way to make the case against cronyism more broadly: “This points towards the way to sell limited government: When government has more power, it empowers those with connections to government.”

It is naive to think special interest lobbies will ever be eliminated. As long as we put the people’s representatives forward, interest groups will be there to gain their favor. The only way to limit lobbyist influence is to limit the number of laws coming from Washington. Bastiat feared an overabundance of legislation would lead to “legal plunder” which would give incentive to special interests to use the legal system for its own advantage. Illegal plunder earns universal scorn whereas legal plunder is considered “democracy.” But because we are never going to convince self-interested politicians who think they are divas to curb their enthusiasm for passing laws, we might as well abandon the dream of a lobby-free zone in Washington.

Instead, we should focus our attention on the small instances where Big Government-Big Business collusion is exposed, as just happened in Michigan. And we should heed Carney’s advice to highlight how ballot measures such as Proposal 1 “undermine the common liberal trope that the push for lower taxes is the agenda of Big Money, and that higher taxes is the populist agenda.” This is a crucial point.

President Obama, that fierce populist champion and avatar of the working man, showed in his first major act in office just how comfortable Big Business is with the progressive agenda. The stimulus was nothing more than a massive special interest kickback to blue state governments, public unions and friends of the progressive left. The most infamous example is Solyndra, a solar panel firm granted half a billion dollars by the Obama administration for no other reason than the CEO was a huge Obama bundler. The federal bureaucracy is notorious for how it awards contracts to connected firms over more qualified bidders, a fact that became known to most Americans during the Obamacare website’s China Syndrome moment. CGI Federal, a subsidiary of a Canadian firm infamous for completely botching a Canadian gun registry, was given the insanely lucrative contract in part because a Princeton classmate of Michelle Obama’s was the Senior VP. Even Rick Perry was not immune to the special interest lure when he was governor of Texas. Despite presiding over the best economic record of all states since 2007, Perry routinely offered state subsidies to chic tech companies such as Tesla, Google and Apple to entice them to open plants in Texas. That many companies express interest in locating in Texas speaks to the favorable tax and regulatory climate, sure, but the subsidies certainly play a role too.

Conservatives are generally fans of federalism and celebrate the idea of states experimenting with distinct economic models. By foregoing uniform economic policies drawn up in Washington to be applied nationally, we encourage competition between states as they experiment in various ways. Illinois is probably going to have to walk back its progressive obsession with high taxes and oppressive regulations because they are bleeding jobs and capital to neighboring Indiana, Wisconsin and Michigan, all of whom have lowered taxes and cultivated friendlier business climates in the last several years. Unfortunately, state competition for business goes too far when it devolves into a circus of competing subsidies and special treatment, also known as the “Redevelopment Racket.” Cynics say this is the way the game is played, but Michigan offers hope for a brighter alternative.

As Rick Perry and other conservative governors prove, conservatives can also be guilty of catering to special interest lobbies. However, a conservative politician engaging in crony capitalism is straying from established principle whereas a progressive doing the same is adhering to the only principle he knows: grow government. And despite the myth progressives maintain about high tax policy equaling populism, Michigan reveals the truth of the matter. Special interests representing road construction lobby the Michigan government for more spending and more taxes to pay for it, all so they themselves can get rich off the exclusive bid grant. The government – in this case a nominally conservative one – agrees that improved roads are desirable and does the bidding of the special interest by insisting that the voters agree to a pretty stiff tax hike. Perhaps voters would be more open to the measure if they thought the deal wasn’t riddled with corruption and back-scratching to begin with? At the end of the day, governments rarely look for ways to get what they want on the cheap. Why bother being frugal when powerful lobbies are there to suggest a simple tax increase?

Corruption and cronyism know no ideology, but government itself is the engine that drives them. Therefore, the party of government needs to come to terms with this reality and perhaps reconsider their dogma surrounding the benevolent Leviathan. Until then, let us hope for more Michigan-style tax proposals being met with boisterous thumbs down and that they serve to show the public exactly how deals are made in politics and what always lies beneath calls for more “populist” tax increases.

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