CQ TODAY ONLINE NEWS
Jan. 27, 2009 – 5:40 a.m.
Money for Nothing — and Corruption for Free
By Peter Schweizer, CQ Guest Columnist
“He comes to Washington and tells me a sad story,” Franklin D. Roosevelt once said of New York Mayor Fiorello LaGuardia. “The tears run down my cheeks and tears run down his cheeks and the first thing I know, he has wrangled another 50 million dollars.”
There may or may not be tears in Washington these days, but with more than a trillion dollars in bailout money pouring out of Washington and President Obama talking of a 21st century New Deal, the amount of dollars has certainly exploded.
With taxpayer dollars going to banks, investment houses, and automakers (with others certain to get into line) and heavy spending on infrastructure and other works projects coming soon, there has been a sharp and healthy debate about whether this burst of Keynesism actually makes good economic sense.
Overlooked is the harsh reality that the Obama economic agenda can stimulate political graft, cronyism and corruption in Washington.
Anytime you give public officials the opportunity to pass out cash, loans, or public contracts, you create powerful incentives for corruption.
Create an opportunity to pass out hundreds of billions of dollars and you end up with temptations for corruption on steroids.
Part of the problem is how it will be determined where the money will actually go.
The notion that the Obama administration and leaders in Congress will somehow separate sound economic decision-making from partisan political gain is a seductive myth.
Consider our experience with the last New Deal.
Harry Hopkins, who oversaw both the Works Progress Administration (WPA) and the distribution of funds from the Federal Emergency Relief Act (FERA), understood very quickly how these funds could be used for partisan political ends.
“I thought at first I could be completely non-political,” Hopkins is quoted by Robert E. Sherwood in the definitive “Roosevelt and Hopkins: An Intimate History.”
“Then they told me I had to be part non-political and part political. I found out that was impossible, at least for me. I finally realized that there was nothing for it but to be all political.”
History’s Reality Check
Can there be any doubt that political friends will benefit when stimulus dollars are passed out? Under FDR there were numerous instances where funds were used to help friends and punish political enemies.
In Illinois, when Gov. Henry Homer resisted some of FDR’s policies, Hopkins used FERA funds to support Mayor Edward Kelly in an effort to unseat him. In 1938, Senate Majority Leader (and future vice president) Alben W. Barkley of Kentucky and conservative Gov. A.B. “Happy” Chandler were locked in a bitter election. After a bitter race in which Barkley’s diligent campaigning was bolstered by Roosevelt’s strong endorsement, Barkley handily defeated Chandler, receiving 56 percent of the vote.
A Senate committee investigation later found that both candidates were using taxpayer “relief” money to bolster their campaigns.
Can there be any doubt that a political calculus, rather than an exclusively economic one, will be used in determining where in the United States the relief dollars end up?
A statistical analysis of how FDR’s administration distributed FERA funds, authored by professor Robert Fleck and published in the Southern Economic Journal, found that funds for job creation, infrastructure, and other programs were skewed heavily toward swing states, crucial to maintaining and expanding the electoral fortunes of the Democratic Party.
Professors Jim Couch and William Shugart, using other data, found that Depression-era agricultural programs, designed to help destitute farmers, often ended up in the hands of successful farmers and political allies, and that the “distribution of agricultural relief was guided more by Roosevelt’s electoral strategy” rather “than by objective economic need.”
Modern progressives and liberals, who have for years quite rightly railed on about the problems of corporate corruption, don’t seem nearly as animated by this much more profound and far-reaching problem of how stimulus funds might be diverted for partisan benefit.
Private corruption, in which corporate interests pursue their private economic interests through our political system, is one thing.
But systematic corruption — the use of federal power and federal funds to serve private economic (or political ends) — is quite another and far more dangerous to the health of our Republic.
The Founding Fathers saw private corruption as a fact of human nature that needed to be contained but could never be completely eliminated.
What they worried about was designing political institutions to prevent systematic corruption.
They favored limited government and small government not simply to protect our liberties; it was to limit the opportunities for systemic corruption.
The arguments raging today about the role and size of the federal government should not simply be about economics.
We should be concerned, too, about the body politic.
Limited government is the best antidote to political corruption. The greater the role and power of the federal government, the more individuals will be tempted to wield them for their own personal or partisan benefit
It should not be surprising that when you examine at any list of the most corrupt countries in the world, those with centralized economies always rank on top.
Peter Schweizer is a research fellow at the Hoover Institution, Stanford University and a New York Times best-selling author.
Comments
Uh, Excuse Me, but where in the HELL were you when Bush and Cheney were shoveling a TRILLION taxpayer dollars into the pockets of Iraqi Militias, and the overseas operations of Halliburton, and Bechtel? Don't you think it's a little late to bring up this point? Yes, there will be favoritism, but not how you envision it. Obama will spend taxpayer dollars here in AMERICA. And, some of this will be used to buy assets such as foreclosed homes and preferred stocks which will return part of the taxpayer's investment in the future. The conservatives who oppose the stimulus are HYPOCRITES and TRAITORS, because they squandered a TRILLION taxpayers' dollars on foreigners and overseas companies like Halliburton. Obama is the patriot, because his plan will invest in AMERICA. And FYI, my grandfather got a job building dams for the TVA during the depression. And, where it not for that job, I'd probably be an illiterate hillbilly voting for the Republicans AGAIN instead of being a degreed information worker who can articulate what a bunch of crap your post really is.
Amen
Let the private sector get us out of this recession. The American government's main job is protecting Americans, not being a middleman in one giant wealth transfer payment. I'm tired of paying high taxes. Michael A, are you questioning the patriotism of conservatives? What a liberal narcissist . Also, my grandparents, from southern Illinois, were part of the Progressive Miners of America--a union terrorized by John L Lewis's thugs. The Democratic leadership of Illinois and FDR didn't care. Yeah, those Democrats always stand up for the common man.
Peter Schweizer-- certified knee-jerk Obama hater
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