Currently, there is not a single demographic in the United States of America that does not receive some form of benefit when they exercise their right to vote. Since the presidency of Lyndon B. Johnson (LBJ), the federal government has strategically harnessed this dynamic. If you feel marginalized or overshadowed by the interests of other groups, and you believe you’re not receiving fair representation from the federal government, it indicates that the interest group you’re associated with (which could encompass a wide range, such as teachers, unions, law enforcement, corporations, pharmaceutical companies, the military-industrial complex, oil companies, farmers, women’s rights advocates, proponents of child tax benefits, religious, and more) are not effectively utilizing its financial resources and voting influence compared to competing groups in the same domain.

Essentially, you’re criticizing the fairness of a game without a full understanding of its rules. Can you genuinely argue for fairness when you lack knowledge about all the factors and rules that influence the game? The answer is no, or at least not from a standpoint of good faith.

LBJ introduced the practice of exchanging votes for subsidies, setting a new benchmark in American politics. With the implementation of the Great Society programs, the driving force behind people’s choices in local politicians shifted away from communities of individuals. Instead, the criteria for selecting one’s representative became centered on whether voters were willing to support a single or double issue that could be connected to their interests, affecting their well-being, wealth, and finances. This shift in focus devalued the communal consensus based on shared values. This transformation gradually infiltrated small communities, where hometown individuals ventured to prestigious schools and returned with a vision of attracting clientele who could support their political aspirations.

After decades of weakened communities, the composition of congressional and senatorial representatives now consists largely of individuals who align their votes with policies benefiting a substantial portion of their active and vocal constituents. Even though taxes are collected from those who don’t vote, politicians often convey to their supporters the idea that the eventual “ballot vote” will serve the interests of the coalition capable of promising votes and funds. This represents a significant departure from the original purpose of the American government and the principles on which the nation was founded. The initial intent was for elected representatives to safeguard the rights of their constituents against encroachments by the government and foreign entities. However, the federal government was never intended to serve as a tool that offers various coalitions specific advantages in the form of government subsidies and loans in exchange for money, votes, and status. Consequently, election winners are those who pledge to provide the desired benefits to the right groups.

When a government realizes it can sway its constituents through incentives, it loses its restraint and will exploit its citizenry. The constitution of a country is designed to shield its citizenry from actions, rules, statutes, or mandates put forth by their “Governors” for personal gain. Local laws are intended to govern what an individual citizen is allowed or prohibited from doing within a specific locality. However, when a government utilizes its legislative authority to dispense benefits to those willing to vote for them, a significant issue arises.

This is not to suggest that governments should never provide subsidies to various enterprises at different times. However, historical subsidies were primarily intended to support infrastructure development in an area. The deviation from this original purpose eventually gave rise to the modern concept of subsidies. To comprehend how subsidies evolved into an accepted part of everyday American life, one must examine the initial private monopolies (referred to as “Old School Subsidies”) in the United States.

The First Form of a Subsidy –> Monopoly.

“Old school subsidies” were those that conferred exclusive rights upon certain companies or individuals to exploit resources that might not have been developed due to a lack of funding necessary to initiate the enterprise without the aid of establishing a monopoly. This is particularly applicable in the context of projects such as bridge construction, railroad development, oil mining, exclusive maritime contracts, and, in the modern era, utilities like electricity.

It seems that two primary rationales underpin the logic for allowing these monopolies to maintain control:

1. These structures or enterprises would not be developed without monopolization.
2. Adequate funding for such ventures would be lacking without monopolization.
3. Hence, the government needs to grant exclusive monopolistic rights to certain investors for projects.

These ideas can be dissected as follows:

(1)  

a. Investors expect a return on their investment.

b. Initiating these projects requires a substantial investment.

c. Without protection, other players can easily enter the market, diminishing the returns for initial investors.

d. Secondary development becomes more feasible after someone has pioneered the way.

e. Reduced returns deter future investments in such projects.

(2)

a. The enterprise or infrastructure is of critical importance or offers substantial benefits to the area or country.

b. Engagement in these projects would yield considerable benefits to the region.

c. If returns for investors in the infrastructure are insufficient, the crucial enterprise may not be constructed.

d. The absence of such development incurs an opportunity cost.

e. The exclusive license becomes the sole means for these projects to come to fruition in the near future.

(3) Consequently, the government needs to grant an enduring exclusive monopoly right to investors in the respective project.

Notably, there exists a logical gap between step 2 and step 3, as well as a somewhat abrupt transition between 2(e) and 2(d). The link between 2(e) and 2(d) serves as the initial crucial step in the emergence of lobbying. Individuals interested in building bridges or securing exclusive ferry rights could navigate from 1(a) to 2(d), initiating the rudimentary form of clientelism. This clientelism evolved and was set free into the world, a phenomenon that can be likened to omphalotomy (the act of cutting the umbilical cord). Figures such as the Rockefellers and Vanderbilts excelled in the art of lobbying, crafting a form of business royalty. They knew how to effectively influence legislation and manipulate administrative non-enforcement by skillfully engaging with the powerbrokers and purse strings.

State-sponsored monopolies granted to private entities aren’t inherently negative. Many governments and kingdoms throughout history have employed such arrangements. The corporations of antiquity often served as extensions of feudal kingdoms, pursuing the economic objectives of the realm or religion as they expanded into new territories. Even the monopolies established in the United States have reasonable justifications. They emerged as world markets opened up, and nurturing and, at times, safeguarding industries became essential for global competition.

However, when entities like Standard Oil were granted a 40-year exclusive right to oil, the Vanderbilts gained control over all transportation, and JP Morgan’s influence over the railroads went unchecked, issues arose. These monopolies persisted until additional anti-trust laws, such as the Sherman Act, were enacted to address the symptoms of the federal government’s willingness to either redistribute wealth from some individuals to others or grant exclusive rights to private companies and entities.

The Shift to BAILOUTS

The issue then transitioned into bailouts, where private companies could turn to the government to rescue them from imprudent decisions. The first recorded instance of a bailout in the United States occurred during The Panic of 1792 when the federal government intervened to stabilize the markets. At that critical juncture, Treasury Secretary Alexander Hamilton authorized purchases to prevent the securities market from collapsing. There are limited examples of government bailouts in the 19th century, with any potential instances likely related to the aftermath of the Civil War. However, bailouts primarily become a prominent issue when banking institutions grow too “large to fail”.

In the early 1900s, particularly during the early 2000s, the financial landscape witnessed a series of bank runs and panics driven by extensive speculative investing—a situation that may sound all too familiar. In response to these challenges, the federal government entered the realm of financial control by establishing the Federal Reserve. (As a side note, I once aspired to be the Chair of the Federal Reserve, diligently reading every economics book I could find during my younger years.)

However, the formation of the Federal Reserve did not prompt banks to adopt wiser or more secure banking practices. Subsequently, both the United States and the global economy took a perilous plunge, as people made investments and borrowed against assets with little to no tangible value, or assets that existed merely in theory. It’s almost reminiscent of the financial crisis of 2008, albeit happening some 80-odd years earlier.

The Beginning of American Feudalism: The New Deal and old costs

In the years that followed, FDR laid the foundation for a resurgence of a quasi-feudal system. In fairness, it was a challenging period in history, marked by a workforce with a staggering 25% unemployment rate, and genuine hunger among the population. This was not the statistical games played by modern economists, which indicate that 30% of Americans feel food scarcity. As I write this, I’m indeed feeling hungry, and I haven’t yet planned my dinner. However, this doesn’t equate to imminent starvation.

FDR’s approach during a time of crisis has been a subject of debate. But he was a bully and a borderline tyrant. While his leadership during World War II and the subsequent economic prosperity for nearly two decades helped overshadow certain issues. FDR’s willingness to threaten to pack SCOTUS led to the resignation of Justices who opposed his policies, ultimately resulting in the New Deal.

However, it’s worth noting that the New Deal wasn’t a cohesive, systematically designed solution to address the various aspects of the Great Depression. Instead, it took a multifaceted approach, dealing with different elements of the crisis in ways that sometimes appeared haphazard and occasionally led to contradictions. To delve deeper into the subject, one might consider reading the case of Wickard v. Filburn, which set a precedent in 1942 and granted the federal government a broader scope of authority to intervene in matters within the privacy of one’s home or property, a decision that I find repugnant.

FDR’s New Deal established the Works Progress Administration (WPA), which employed various individuals, including artists, actors, and authors, to contribute to the construction of new schools, bridges, and other infrastructure projects across the country.

“The National Recovery Administration attempted to check unbridled competition which was driving prices down and contributing to a deflationary spiral. It tried to stabilize wages, prices, and working hours through detailed codes of fair competition. Meanwhile, the Agricultural Adjustment Administration sought to stabilize prices in the farm sector by paying farmers to produce less. Finally, over the course of the New Deal, the administration addressed questions of structural reform. The Wagner Act, which created the National Labor Relations Board in 1935, was a monumental step forward in giving workers the right to bargain collectively and to arrange for fair and open elections to determine a bargain agent, if laborers so chose. The Social Security Act the same year was in many ways one of the most important New Deal measures, in providing security for those reaching old age with a self-supporting plan for retirement pensions. But there were other reform measures as well. The Securities and Exchange Commission and Federal Deposit Insurance Corporation were new.”[1]

Rather than allowing the country to self-reflect on its challenges and encouraging local communities to collaborate for stability, FDR introduced government programs that fostered dependency on government intervention to rectify issues when they arose. This inadvertently incentivized risk-taking in situations where caution might have been the norm to avoid catastrophic consequences. It’s worth noting that government-funded programs, in essence, involve taking money from some individuals to provide for others. In a society, if individuals wish to offer charity, they should do so based on their own initiative. Historically, if a community believed that a neighbor wasn’t contributing adequately, they could address the issue through rebuke, discussion, or even exclusion.

However, with the government’s involvement, communities were left less equipped to deal with adversities such as famine, plagues, or economic downturns as they had traditionally. The federal government began mandating and litigating against farmers for producing more than their allotted quotas, notably in the case of Wickard. Government interference with businesses and their ability to compete, was then set in motion.

The concept of unions having the ability to influence their employers through collective bargaining altered the dynamics of work, discouraging the need for individuals to improve their skills in order to earn higher wages. This shift undermined meritocracy. Furthermore, it facilitated the formation of coalitions that, while not legally considered mafias, were sanctioned by law and could leverage their collective interests to influence various policies. It’s important to note that many people within specific professions often share similar worldviews and temperaments, which not only make them suitable for the job but also contribute to their job satisfaction.

Social security was destined to favor the older generation, but it went beyond that, fostering a sense of financial irresponsibility and diminishing the commitment to raising children. Both parents and children began to believe that the government would ensure financial support in old age, leading to a reduced emphasis on nurturing intergenerational relationships that form the cornerstone of communities and societies.

The SEC is uses its authority to categorize certain matters within its jurisdiction and potentially take actions against those it disapproves of. Similarly, the FDIC has sometimes been viewed as a tool that banks exploit to take more risks with their clients’ funds, particularly when most clients fall below the threshold for significant losses of banked funds. This can create a false sense of security, as even though there’s insurance, the money is still at risk and subject to speculation.

The New Deal marked a transformative shift in the role of the Federal Government, which previously had minimal involvement in people’s lives beyond the collection of income taxes, mainly once a year. However, with the New Deal, everyday activities such as working, banking, and saving became subject to government regulation and intervention. Moreover, a growing number of individuals, including those in specific occupations like the military or farming, as well as the unemployed, could claim government benefits.

However, this was merely the mechanism through which clientelism became a pervasive issue, as policies and representatives were no longer elected solely based on their qualifications as representatives of the United States. Over the ensuing decades, the focus shifted towards leveraging agency to secure rights and benefits from the government, as these benefits were increasingly being distributed by the government itself.

“Ask not what your country can do for you, but what you can do for your country…” These words, articulated by JFK Jr., were not spoken in isolation from the civil rights movements. Instead, they aimed to reinforce the existing sentiment that the government provides citizens with opportunities to assist one another, if taken with a benevolent interpretation.

All that remained for LBJ was to secure unwavering support from the Black vote in the United States, enabling the Democratic Party to advance its agenda of exchanging benefits for status. Consequently, all the Democrats needed to do was pledge positive outcomes and formulate policies that appeared to favor the Black community, regardless of the outcome. Following suit, Republicans did the same thing with rural and religious collisions. These effects continue to resonate to this day.

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[1] https://www.banking.senate.gov/imo/media/doc/WinklerTestimony33109TheNewDealSenateTestimony.pdf