06/29/2010 11:11 pm ET | Updated May 25, 2011

Orrin Opens the Hatch

Day two of the Elena Kagan Supreme Court confirmation hearing saw an act of political soap-boxing by Utah Senator Orrin Hatch, who dedicated the bulk of his time to the left's griping over January's Citizens United decision. Some of his frustration is likely deserved -- a few responses to the ruling may have gone above and beyond the call of shrillness (further elucidation on that here). But nor was the content of Hatch's tirade without its flaws. His allusion to the decision's wide public support does not reflect polls taken in its aftermath. And as Constitutional Accountability Center founder Doug Kendall notes, the Utah Republican conveniently avoided a central argument of the case: whether corporations should enjoy the same equal rights as individuals to vote, run for office, and participate in electioneering.

Just as revealing as these outstanding blemishes though is what Hatch had to say about Utah small businesses and S Chapter corporations (small corporate-chartered entities that can have as few as one shareholder), which by his conjecture would lose free speech rights if corporate political speech were to be managed. On some issues it is expected that the business community will unite homogeneously around a common cause, such as on taxation. But bundling in small businesses and S Chapters with multinational corporations that comprise forceful "special interests*" largely ignores the way influence peddling works in American politics. When one looks to the most destructive and inane policies operative today, or to lobbying and electioneering efforts that effectively "drown out" the voice of the people, rarely is it disparate laundromat owners or lawn services that raise eyebrows.

Though Wall Street and health insurers have stolen the show this year, these are merely the latest installments in a long saga whereby the general public ultimately suffers from a concentrated industry's bloated gains. More often than not, the story is eventually told of how that industry made its own bed through policy-oriented efforts to avoid oversight and costly regulations, or to garner the largess of contracts and extravagant subsidies. For the past decade a famously egregious but hardly exceptional example of waste stemming from special interest influence is the U.S. sugar program, which pointlessly subsidizes the largest sugar producers at an estimated cost of $2 billion annually to American households. Equally concerning is the massive waste of taxpayer dollars due to an unseemly favoritism for wildly expensive defense contractors and foreign aid distributors prosecuting American adventures abroad. In fact, another salient example could be some public labor unions, which Hatch conveniently groups in with corporations as fellow influence peddlers (the implication being that equal opportunity institutional corruption is unproblematic).

Single-cause special interests in politics more resemble business cartels like OPEC than innocuous collections of freethinking but like-minded individuals. The distortive power of such highly concentrated funds on specific legislative causes cannot be overstated, and it is influence dispersed citizens and small business owners cannot match. In 1998, the year the sugar program began, it's estimated that the industry enjoyed a net gain of over $1 billion at a campaigning cost of only $2.8 million because its vast reserves of potential electioneering funds were leveraged into powerful campaign threats. Donating to a pliable candidate with the threat of funding his next opponent tenfold is common practice, and it turns $2,000 spent into $12,000 worth of influence gained. What's more, the ruling in Citizens United furnishes special interests with far more threat credibility than they previously had at their disposal because they may now run independent express advocacy ads.

This influence equally pervades all parties and campaigns, and it has a knack for building up those who are most susceptible. Very rarely do the policy victories attained partly or wholly through such means benefit anyone else. The sugar program has done nothing but reward a few large producers at the expense of billions of dollars to consumers. The regulatory breakdown in the financial sector and that sector's subsequent growth over the past two decades has resulted in a crash that leaves millions of homes underwater or in foreclosure and middle class incomes stagnant, to say nothing of the national debt to GDP ratio leaping up 30 percent. The influence of nationwide health insurers first ushered in significantly higher costs for care over time, and has now resulted in a reform bill that profoundly expands those very insurers' customer bases without challenging their status as legal monopolies.

Scenarios of this nature that benefit genuine small businesses and striving midsized S Corporations are simply nowhere to be found. Nor does the situation arise abruptly. Each is the foreseeable product of years of influence that is eternally trickling into the system widely unbeknown to the rest of us -- American workers and business owners who are busy holding a job, raising a family, pursuing an education, or just trying to stay out of the red (and wondering why sugar is always costing more and more). When politicians from both sides of the spectrum -- including Senator Hatch -- condemn waste, fraud and abuse in government, these are the types of surreally counterproductive policy scenarios of which they speak. So, it doesn't take much to see the irony in a politician simultaneously condemning waste in government while championing measures that further enable special interest participation in policy making.

* The definition I am using for "special interests" in this post is that used by the IMF's Marcos Chamon and Stockholm University's Ethan Kaplan. It states that: "Special interest groups care only about a particular policy, and do not care inherently about which candidate wins the election as long as their special interest policy is supported by the winner."

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