Where there’s Big Government, corruption can’t be far behind

Daniel Mitchell Senior Fellow, Cato Institute
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Why is Washington always engulfed by scandal? Whether Democrats are in charge or Republicans are in charge, it’s hard to open a newspaper or watch the news without being bombarded with more evidence of venal behavior and corrupt antics.

But the crimes that make the news are just the tip of the iceberg. Michael Kinsley famously noted years ago that the real scandal in the nation’s capital is not what’s illegal, but what’s legal. Influence peddling, favor swapping, and back scratching are art forms in Washington, as politicians, lobbyists, and interest groups exist in a symbiotic relationship.

The usual Washington response to sleaze is to enact more laws – more ethics laws, more campaign finance laws, and more lobbying laws. The politicians want us to believe that each new law will clean up Washington. Yet nothing ever seems to change. Why is it that these laws do not seem to have much impact?

Maybe, just maybe, the reason we have so much corruption is that government is so big and politicians have so much power to redistribute other people’s money.

The federal government, for instance, is going to spend about $4 trillion this year. That is an enormous amount of money, approaching $50,000 for every family of four in America. Should we be surprised, therefore, that hordes of special interests descend on Washington like locusts, figuring out ways to get a cut of the action? These interest groups are jockeying for more welfare, foreign aid, bailout money, bridges-to-nowhere, artist handouts, income redistribution, health care subsidies, and military contracts, to name just a few.

Whatever they are looking for, the key thing to understand is that the massive size of government creates opportunities for corruption. There have always been lobbyists in Washington, and there always has been corruption. But the number of lobbyists has grown and the extent of corruption has increased as the size of government has expanded.

Imagine if we still had the type of federal government our Founding Fathers envisioned. How many lobbyists and scam artists would there be in Washington if the federal government was collecting and redistributing less than 5 percent of economic output, which was the case for much of our nation’s history?

Today, by contrast, the federal government redistributes about 25 percent of our GDP. And don’t forget that government intervention and regulation create additional opportunities for corruption and malfeasance. Many interest groups seek unearned wealth by convincing politicians to provide special rules and other forms of favoritism. Fannie Mae and Freddie Mac are examples of how sleazy insider dealing can be pervasive and remain – at least until recently – completely separate from budgetary debates.

The tax code is another sandbox for both legal and illegal corruption. Every interest group seems to have a special loophole or cozy shelter in the internal revenue code. This is the main reason why we have tens of thousands of pages of tax rules. Nobody understands them, but lots of people in Washington get rich because of them and lots of politicians fatten their campaign coffers as a result. Imagine how much less vice there would be in DC if the IRS was replaced by a simple and transparent tax system that treated everybody equally. No wonder the beltway bandits don’t like the flat tax.

The moral of the story is that government has become far too big. We have degenerated from the great system set up by our Founders to a racket that works for the benefit of the political class. In other words, influence peddling and other sleazy behavior in Washington is the symptom. The underlying disease is excessive government. So instead of passing laws that unsuccessfully address the symptom, wouldn’t it make more sense to treat the disease?

Let’s answer that question with an analogy. The next time you read about some new proposal to “reform” the ethics regulations, the campaign finance laws, or the lobbying rules, think about pressing on a balloon. The more you squeeze in one spot, the more you expand the balloon in another spot. This is why legislation to clean up Washington is destined to fail. If you really want to reduce sleaze, the only effective option is to reduce the size and power of government.

Dan Mitchell is a Senior Fellow at the Cato Institute.  He is one of the nation’s experts on the flat tax and has been the leading international voice in the fight to preserve tax competition, financial privacy, and fiscal sovereignty.