Pork-Barrel Bailout No Surprise
The current credit crisis and the massive failure of financial institutions brought the usual Washington response: do something, do anything, even if it is wrong. What was done was a bailout of several institutions, especially the government inspired, government created, and government sponsored enterprises, Fannie Mae and Freddy Mac. I am not going to get into whether the bailout was the right or wrong thing to do—at least not here and now. There is another point I intend to address, the issue of pork, or fat to grease the political wheels of Congress.
I should mention that this is something that I have written about elsewhere (with Robert Tollison in this conference paper, that was later published with Gohkan Karahan in the journal, Public Choice. Our opening line in that paper is “Like other exogenous shocks, the 9/11 attack on U.S. targets opened up the possibilities for wealth transfers as public policy toward terrorism emerged in the aftermath of the horror.“ In professional econ-speak, “wealth transfers” is robbing Peter to pay Paul. The point is this: when our politicians encounter a situation that they can convince voters is a “crisis,” politicians see this as an opportunity to sell voters and their colleagues in Congress on extra spending beyond the scope of the initial problem.
Congressmen trade their votes on one project that they care very little about in order to get their way on projects that they do care about. Congressmen in New York did not mind that some money would go to Wyoming, where the threat of terror was very small, as long as they got their protection. Similarly, many congressmen did not seem to mind that some funds were going to makers of wooden arrows or research on wool as long as the bailout was passed. Of course, other congressmen may have voted for the bailout to get their wooden arrow or wool subsidies for their districts. Even worse, some congressmen may holdout for a bigger piece of the pie, withholding their support for a bill they really do want to see passed so that they can bargain for more spending in their district’s direction, basically using a tragic situation to enrich their friends and supporters.
Political trading, known as log-rolling, is much like trade in the marketplace, but the ones doing the trading or not the ones paying the bills. Often, special spending that is buried in larger spending bills usually flies under the radar, so the ones noticing the pork spending are the recipients of that pork, while others hardly notice.
There was a telling scene in a 2007 Tom Hanks movie, Charlie Wilson’s War. In the movie, Hanks as Congressman Charlie Wilson explains that he can that he can sneak through Congress the financing of a war against the Russians in Afghanistan Congress because he represented the only district in America where the voters don’t ask for much more than for them and their guns to be left alone. He was able to collect a lot of IOUs from other congressmen.
What happens is that by combining two bills or by combining them implicitly through trading support for one bill by promising support on another, two bills can get passed that would not have passed on their own, two minorities sometimes equal a majority.
This is just another face of stealth politics.
-MC
