 Welcome to Free Thoughts from Libertarianism.org and the Cato Institute. I'm Trevor Burrus, a research fellow at the Cato Institute Center for Constitutional Studies. I'm Aaron Ross Powell, editor of Libertarianism.org and a research fellow here at the Cato Institute. Our guest today is Timothy P. Carney, senior political columnist for the Washington Examiner and a visiting fellow at the American Enterprise Institute. He is also the author of The Big Rip-Off, How Big Business and Big Government Steal Your Money, and Obama Nomics. Welcome to Free Thoughts, Tim. Hey, thanks for having me. Your beat is corporate welfare and cronyism in general. You're a never-ending source of stories that make me even believe in government less than I already do right now. But it seems that most people believe that government and big business are enemies. Yes. And you often point out that's not the case. So why aren't government and big business enemies? Absolutely. I call it the big myth that big business and big government are enemies. And this is a frame you see when the media talks about it. They say, well, on the one side, there's government. On the other side, there's business. And one of the reasons that this myth is so useful to sort of the Washington insiders and harmful to the cause of liberty is that it creates this false appearance of unanimity and consensus. So you see this in the coverage of, say, the light bulb laws that effectively outlaw the traditional cheap incandescent bulb and requires bulbs to have a higher efficiency. And they say, well, you got tea partyers against it, but even the light bulb industry supports these regulations. Now, of course, the traditional light bulb was a very low profit margin thing. This was an ongoing problem for the people who made it. And a testament to free enterprise that the price was kept low. And the bigger, the more expensive light bulbs, they have higher margins, higher barriers to entry. And those companies benefited from regulations that made us buy those things. And so that's just one typical example of it, that often free enterprise doesn't allow for giant profit margins. And government can create barriers to entry. And so I like to sort of turn a lot of the argument for free enterprise on its head and say, it's not about these companies making profits. It's about making it hard for these companies to make profits. And government can come in and, through regulation, add barriers to entry. And then a general way I put it is the big guys are going to be able to afford the better lobbyists. And so once government gets involved, it becomes a home game for the biggest guys. That is interesting when they say, you know, we look at the tea party, you presume they're pro-business. And then we say, even businesses like this. Yes. So you turn tea party people and people who are free market onto the same side as business, which is just constantly where the debate is sitting on this false dichotomy. Yes. How long has this sort of thing been going on? I mean, how long has big business been benefiting from government? Because we've got this narrative that stretches back quite a long time that of, you know, the government is the enemy of it, the Great Depression and the programs that came out of that, was this attempt to kind of reign in free market capitalism. Don't forget the Progressive Era, the Muck Rakers. Yes. The big guys were, you know, running loose and we had to stop them when, in fact, they were often heavily involved in these sorts of things. So how new is this? Well, in my first book, The Big Rip-Off, I start at the Whiskey Rebellion, where you've got Hamilton talking George Washington into going out and shutting down the, you know, the guys doing the moonshining in western Pennsylvania and who was cheering on Hamilton in this case. It was the bigger Whiskey producers on the East Coast. But one of the greatest places to focus is, Trevor, as you said, the Progressive Era and Gabriel Colco's Triumph of Conservatism is a book that focuses on this, where he says, when Teddy Roosevelt and Wilson were increasing government, it was often at the request of and to the benefit of big business. And so the most famous sort of Muck Raker Progressive story is up in Sinclair, going into the meatpacking plants, and then everybody reads a book and sees how gross these meatpacking plants are. It's an interesting story as a journalist, because Sinclair was trying to write a socialist thing about the plight of the worker. And people maybe started thinking, oh, the worker has it rough, and then they say, they pull what in my meat, and they lost all consumers. It was sermon beads, I think. They were actually people falling into the vats and stuff. But yeah, he said, I aim for the country's heart, and I accidentally hit them in the gut, was what Sinclair said. And so there's letters that Teddy Roosevelt wrote that Gabriel Colco, who himself calls himself a socialist, he dug up these letters, and he sees Roosevelt saying, I find Sinclair like a completely despicable man, but he's very useful here because it allows me to push for increased mandatory federal regulation of meatpacking. And you have the head of the big meatpackers show up in congressional committees and say, we are now and have always been in favor of federal regulation of meatpacking. And Sinclair said, no, this isn't what I was aiming for. This is going to just give a government sample of approval on the big guys. It's going to create barriers to entry that keeps out the little guys. And you see it again and again throughout where a lot of the attempts at monopoly and say oil and steel, the market undercut those attempts in the ways that you know they very often do, that everybody raises their prices in a cartel, and then one guy is just way too tempted by the idea of stealing all the sales by undercutting the cartel, and that they started to go get together and say, we're not going to have a successful cartel unless we bring the government into it. So again, I track it back to Alexander Hamilton and George Washington, but you can also, you can see it throughout all of history. Given that this has been going on for so long and that in many cases it sounds like it was rather obvious what was going on. I mean, there was no real attempt to hide the influence of big business on these regulations. Why does this narrative of the antagonism persist? Why does the big myth persist? This is something I've tried to look into. For one, there are people who find it useful. If you're a big business, you find it very useful to sort of have a docile kind of Republican party that's willing to do what you say because they believe it's in service of a higher cause. For two, I think, and I'm a journalist as you mentioned, and what we're always looking for is a good story. The worst is when you go and you do all your reporting and what you come out with is, this is kind of complex and nuanced. You need to have two different sides and a clear lesson, and so that's the easiest way to do it. And you just think about the way a reporter does his craft where he calls two different sides. And the easiest thing to do, if you're writing about, say, the environment, is you call Exxon and then you call Greenpeace. While the more telling thing to do might be to call Exxon and then call General Electric. I actually think that would be a more interesting story, but it's a harder story to tell and a lot of the reporters don't even grasp it. When they do grasp it, it's this amazing exception. The New York Times just recently had a piece about catfishing companies and said that these companies that sell this catfish, they were having trouble and so they did the unthinkable. They asked for more federal regulation. And of course, that's almost the same phrase the New York Times used when they said, you know, the Philip Morris did the unthinkable and they asked for more federal regulation of cigarettes. And then you've got, you know, all these other companies that go ahead and they did the unthinkable and they asked for more government involvement. So occasionally they do tell the story and it's always an interesting twist. I'm glad when they don't tell the story because then I get to write the column and nobody else gets it. It's interesting. The next question on my sheet is why would big business prefer more regulations? But I also think it's interesting because sometimes they do, but sometimes when they're smaller, they don't. So at the beginning they might not want more. How does that work between the big business and the small business? So in general, I mean, first it sort of lists off the reasons why they might like more regulation. The simple one and in my second book, Obamonomics, I call it the overhead smash is that regulation adds to overhead. It makes it more expensive to do business. You see Philip Morris doing this and supporting federal regulation of tobacco makes it much harder for smaller guys to come in. But the other is one thing I call the inside game. It becomes a home game for the big guys because they can hire the lobbyists. The lawyers working for the big tobacco companies are former FDA commissioners. The small tobacco guys can't hire the former FDA commissioners. Are there even small tobacco companies? I don't even know if there are startup tobacco companies. Can I start one tomorrow? There have been in the past. So I don't know if there still is artisanal tobacco. Probably it's in Brooklyn if it exists. So there's all these reasons to want to do it. And sometimes the regulations they want is a mandate. The most obvious ones of these are not on the federal level. It's on the local and state level. The restaurants trying to oppose food trucks. The taxi cabs trying to oppose Uber. You see it and it's not strictly big versus small though. You do see in a lot of places supermarkets aren't allowed to sell alcohol. And the smaller businesses are the liquor stores. And they're the incumbent businesses. And they might have more sway because they're actually locally owned than the bigger guys. But in general, and so they'll support state and local rules to prevent the bigger guys from selling it. But in general, the bigger you get, I think the more likely you are to support these regulations. In part because bigger guys gain the advantage of economies of scale and they can deal with the higher costs. They can hire the federal, the former federal regulators or congressmen as their lobbyists. And also they sometimes become a little less nimble. You see it happening with any company in America. Even Apple, you feel them sort of slowing down and getting sluggish and that sort of thing. And so they, the bigger guys are less able to adapt to a changing environment. So the more that you can freeze the environment in place, the better it is for the bigger guys. Yeah. We were talking before we started recording about I was meeting at one point with certain representatives of a certain tobacco company who shall remain nameless who are being outcompeted on e-cigarettes right now. And the problem they face is trying to shift, if e-cigarettes get big and that becomes a growing market, they have to take their entire production line which is like a huge behemoth moving in one direction and try and shift it all over to one other thing. Imagine what Blockbuster Video thought when Netflix came out. How much they had invested in physical stores and physical video and videotapes and whether or not it was easier for them to maybe if they could get a law pass that made Netflix illegal or localized or high cost versus trying to switch their entire business over. So it does seem like a generally consistent idea. Do larger companies use regulations against each other? Because most of the examples you've given of either like the big guys against the small guys or possibly like big guys in one category versus big guys in another. But when you earlier on you said they talked to Exxon and Greenpeace, but it would be more interesting if they talked to Exxon and GE. So you do see a lot of times just these battles of the Titans going after one another. Net neutrality is a great example of that where the networks don't want the regulation but the content providers do. And that can be considered Netflix versus AT&T. And then sometimes you do see the guys selling the renewable energy versus the guys selling the fossil fuel energy and they're doing the battle. And those are often very fun. Some of my favorites though are when it's more the midsize industries where you have the credit unions going after the community banks. The credit unions are kind of non-profits so they get some benefits. And so the community banks went after them a couple years ago to try to take away their benefits. They're so upset, the community banks, that they started lobbying against a special subsidy that most people didn't know about created during the financial crisis called the Transaction Account Guarantee, which was basically like FDIC insurance, but it went up to infinity. So it was a subsidy to really rich people who kept their money at banks and it was more important to the community banks. And so the credit unions, as far as I could tell, just said, well, they came after our special benefit, we're going after theirs and they won. And I was thinking, how did this subsidy get killed? And part of it was just out of spite down there on Cave Street. So sometimes these fights are really to our advantage. When I ask about motives, which is something that I have asked variants of this question on quite a lot of episodes of free thoughts. But when I hear stories like this, I wonder – so the congressmen who are enacting these laws or the regulators who are writing them and getting them onto the books, are they – how aware are they of what's going on? Like when these companies approach them, are they like, oh yes, it would be good to pass this thing that will hurt these guys at the expense of these guys or profits for a given industry or are they being duped and thinking they're doing a good thing? I think – so there's a – I always paint a spectrum of kind of how corrupt is something happening in Washington. And on one end – and this is a story a lot of people tell – is basically bribery. And we know this happens. Some guys are in jail for bribery, where he says, if you support my – will you support my policy? And the congressman says, all right, give me $100,000 check and I will and he cuts it and he does it. On the other end – I think that usually comes as a bag of money with a dollar sign on it that they give you straight to him. Well, with one congressman it came wrapped in tinfoil and he put it in his freezer. Yes, yes. And so then the other end of the spectrum is that if you – how is the money in politics connected to this? Well, you're only going to get a meeting with a congressman if he really decides that you're worth his time. If I call up my congressman and I say, by the way, I have some thoughts on the export import bank of the United States, I'm not going to get a seat at that table. But if I've been to his fundraisers and contributed, I'm going to get a seat at the table. Most congressmen often end up hearing from both sides and you posit perfectly innocent motives and you could say, well, the guys who are getting the seat at the table are the guys who can afford to cut the check. And when your problem is a problem of concentrated benefits and diffuse costs, then the people paying the costs are much less likely to have a seat at the table than the people getting the benefits. And so the most innocent explanation is that the congressman only gets one side of the explanation and that's why he does it. And I think that's largely true. That's truer than most cases being bribery. But what we can't rule out is you think about the role of senior staff on Capitol Hill Play. The congressmen obviously are outsourcing a lot of their meetings, their decision-making to their legislative director or their chief of staff or their deputy chief of staff. And the congressman himself, they face pressures from the revolving door from the fact that the guy they're talking to is their former boss or their former committee chairman. That's who the lobbyist is. And they know that if they play ball, they're going to be able to afford a suit as nice as that guy instead of wearing the men's warehouse suit that they're wearing as Capitol Hill staffers. And so that's the other thing I think you need to sprinkle in there is a point in the direction of corruption. You mentioned getting into the staff at the great points. We'll get there because we talked about the revolving door and you love revolving door stories about that kind of corruption. But you also mentioned a little bit earlier about the knowledge of the transaction fee that you had mentioned for the community things. It also seems like one of the elements of this is there's so much hidden nuances to the law that only the people who pay attention to it actually know about. How many things and which page of the code of federal regulations and only the specific applies to the specific bank in the specific area so they are the only ones paying attention to it and no one else. Complexity is a subsidy to the big guys. Tax code complexity. There was a story of General Electric in 2011 paying near zero federal income tax. And the New York Times ran this and the scandal was supposed to be that they paid near zero federal income tax. I think every corporation should pay zero federal income tax and I think everybody else, all your listeners, should do what they can to minimize the taxes that they legally owe. Within the bounds of the law. Yes, and of course you pay all the taxes that they legally owe. But for me the scandal was that there was over 900 people in the tax division at General Electric. Not that it was nefarious for them to hire them but it's scandalous that it's profitable for them to hire all these guys to spend their time doing that instead of making their refrigerators work better or anything like that. And the problem is on a couple levels. The lower level problem is that these guys, unlike a smaller business, can just spend all their time going ahead and moving money around on pieces of paper to minimize their taxes and thus maximize their profit and that's unfair and that tilts the playing field in the direction of the bigger guys. The worst problem is that these guys can call off the heads of the actual business department and say, by the way, if you do your business a little differently in another country or at a different time a month or in a different order, then you minimize the taxes. Well then they're actually encouraging business activity that's less efficient and less optimal for the economy but is more profitable. And so that for me is a scandal. It both tilts the playing field in the direction of the big guy and reduces economic prosperity. You mentioned for some examples now because you've got so many. The Big Rip-Off I think is one of the best books for getting a really negative view of government. So, and you wrote about this. The first time I think I wrote about the XM Bank was when I read The Big Rip-Off, which I think you wrote in 2006. And now we're still talking about it. A little bit more now. Finally talking about it. So what is the XM Bank and isn't it the greatest thing ever? It is the greatest thing ever as far as making work for me. But as you've suggested that, you know, if we got rid of it there's plenty else I could write about. Sorry, Boeing paid me to say that. The Export-Import Bank is, it's not a bank, it's a government agency and it actually has nothing to do with imports oddly enough. It is a federal agency that subsidizes U.S. exporters. It does it by financing, by giving taxpayer financing to foreign buyers of U.S. goods. So typically for the most part this means a loan guarantee to a foreign airline which is buying a Boeing. So, you know, J.P. Morgan lends money to Air China because you don't just buy airplanes straight up. You borrow like you would for a house. But instead of J.P. Morgan bearing the risk for that loan Export-Import Bank does, meaning the taxpayer does. So J.P. Morgan charges a lower interest rate. Maybe Air China is more likely to buy a Boeing than they are to buy an Airbus in this situation. And so a lot of their financing happens with direct loans. A satellite company in Belgium wants to buy a U.S. satellite so U.S. taxpayers through XM loan the money directly to them. So if Air China decides it's not going to pay back the loan U.S. taxpayers help out J.P. Morgan. If the Belgian satellite company goes bankrupt U.S. taxpayers just eat the costs of the loan. For the most part XM hasn't lost money in recent years. It basically breaks even. But its costs are, you know, first of all Fannie Mae didn't cost taxpayers money for years. But its costs are spread throughout the economy in distortions. And I write about that in all my articles in my books. The distortions being yes. They can always say we're not costing the taxpayer anything but they're restructuring the economy around themselves and also as Boeing giving themselves an advance. It is called the Boeing Bank. 40% of their finance dollars go to subsidize one company which is Boeing. And again the most egregious forms of corporate welfare in my view don't actually end up costing taxpayers money. I think that would make it too obvious and harder for them to survive politically. Sometimes you have to look at these programs in terms of like Darwinian evolution. Why are they surviving? And one survival trade is not being a direct outlay. And so XIM's costs are, again, the risk that taxpayers carry just like Fannie and Freddie. But also the people who lose business. The most obvious one is the guy who doesn't get the loan. Two guys show up at Boeing. One is, you know, Sullivan's Bar and the other is Air China. And Air China is carrying an export import bank guarantee. Sullivan's Bar loses the loan. Another is the domestic competitors of the foreign subsidized company. Delta Airlines has tried to sue export import banks saying, we lost, we used to fly from Atlanta to Mumbai, but then you guys came in and subsidized Air India to buy planes for this flight, for this route. And they underpriced us because they got subsidized planes. And so now we had to do that and we had to lay people off. And so those are definitely victims of export import bank subsidies. And then even more, you know, XIM likes to subsidize American farm equipment. So John Deere gets to sell more tractors to Europe. That's great for John Deere. But if you drive up the foreign demand for U.S. made tractors, you're going to drive up the price that American farmers are paying for their tractors. So they're another victim. Now maybe it means that they're each paying 100 extra dollars for a tractor. And they don't even know that XIM is involved in it. You can see why these costs are so hidden and so diffused. Dan Ikinson here at Kato is one of the best guys at documenting those hidden costs of XIM. But if Boeing and John Deere are getting more money for their tractors or I guess their planes and their tractors, how – I mean sure, so maybe other guys are losing out, but more money is flowing to them and they're not sitting on that money. They're reinvesting it. They're using it to hire more hardworking Americans. So doesn't it help in some ways too? So it helps some people, yes, and it hurts other people. And so maybe that's a wash or – but the argument for it existing is that it's a gain and that argument is based on the idea that these bureaucrats on Vermont Avenue know better than the market how to allocate resources. And that's an argument that I don't blame Democrats for holding. I mean I do blame Republicans and people who espouse the idea of free enterprise for believing that the government agency is better at deciding where the money goes than the market is. So for example, Elizabeth Warren. Yes. And how she – apparently according to all sources, she hates big business in Wall Street and she wants to bring everything back to the American worker, but she is not against the XIM Bank. No, she is for the Export-Import Bank, which is – Has she explained that? It's a Wall Street subsidy. The most basic level – I go to the Export-Import Bank conference every year and – Wait, wait, who holds – did they hold it? They hold it, yes. The government – So do you hold a sign outside? No, I just sign up as press and I was drinking at the hotel late one night with a U.S.-based banker and he said, well, why wouldn't we do it? It's free money and it is. They make a loan and almost all of the risk is shouldered off to the taxpayer, but the interest payments come back to the loan. It is a Wall Street subsidy and Elizabeth Warren supports it. It seems like you could really just infer how much it's worth to them by how much they spend on lobbyists to try and keep it in place. Yes, so the financial services round table, which represents these banks, they're absolutely supporting it. I haven't noticed whether American Bankers Association is, but you see these guys all sign on to the letters to keep it in place. But for the most part, it's a U.S. Chamber of Commerce and it's Boeing that have a real interest in keeping this agency in place. Has Warren given reasons for why she supports it? She says she thinks it creates jobs. And again, that fits into her economic view that a government can create jobs, but it certainly cuts against the entirety of her rhetoric that the government, you know, that the banks are stealing from us because this is one way in which they are literally offloading their risk onto us. So I say XIM is consistent with Democrats' economic beliefs and inconsistent with their populist rhetoric. Now, what about lobbyists? Because we keep saying, we keep talking about lobbyists and that word is rarely not said with derision anymore or with absolute disgust even. Shouldn't we just ban lobbying? No, I mean, lobbying obviously is a first amendment protected right and ought to be that the government needs input. Congressmen need experts to talk to them. Everybody has a right to petition the government for the redress of grievances. I have a couple thoughts on lobbyists. The first is that the revolving door really is a problem. Then if you just think about it, if you're a Republican congressional staffer and you're one who says, no, no XM, no, no earmarks, no, no ethanol subsidies, you're narrowing down your job opportunities afterwards. If you just, and then even if you're a Democratic staffer and you get something like Dodd-Frank or Obamacare coming up, are you going to try to sort of push this sort of socialist agenda or if you're a Republican staffer a free enterprise agenda? No. The optimal thing to do is to increase government involvement but not take the private sector out of it. And that's exactly what Obamacare and Dodd-Frank were. I'm not saying that this was any motives, but I think systematically it's a reason if you had said, I want to make a bill that maximizes the post passage value of every staffer who wrote this, you would have written Obamacare and you would have written Dodd-Frank. And those incentives are bad on the Democratic side and they drive Republicans towards more subsidies and towards stuff like the post Enron Sarbanes-Oxley bill where Michael Oxley became a lobbyist for the financial sector. And a lot of the staffers did too. And so those bad incentives are created by the revolving door. And that's something that I do think we could regulate more because it's about regulating politicians more than about regulating the private sector. How would we regulate that? I mean, would we just say like you're not allowed to work for these guys after you leave the Hill? So currently there's a cooling off period. It's one to two years depending on, you know, for members and for former Hill staffers. There's a limit on your ability to contact your former boss. And I would dramatically expand that. Barney Frank actually had a good rule after I wrote a few articles about his former staffers becoming Wall Street lobbyists. He said, well, you know what? Those guys haven't spoken to me since the day they left. He said, chairing the financial services committee, if you go and work for one of the companies that we regulate and subsidize, frankly, if you go and work for one of these companies, you are not allowed to talk to me or anyone in my staff for as long as I'm the committee chairman. Republicans could institute that as their own rule. I think that would be a great thing to do. The Congress could pass that as a rule. And again, this is a restriction on government employees, which is what they do when they leave. You got, you know, lots of lawyers here who could argue about whether this is too much of a restriction on the First Amendment. Right, I don't think it is. The cooling off period for senators at two years, there have been bills to make it lifetime. There's a legal definition of a lobbying contact. And if you said you're not allowed to make a paid lobbying contact on behalf of somebody else forever, that's the sort of bill that I'm open to. Again, I'm not a lawyer, but I do think that this is, it's regulating senators and congressmen in how they live their lives. It's not about their ability to petition the government for the redress of their own grievances. It's about, well, first it's about General Electric's right to hire Tom Daschle to petition the government. It's about Tom Daschle to get paid by General Electric to petition the government. So I do think that restrictions on the revolving door are something that conservatives, libertarians ought to consider. That strikes me though as something that would be potentially impossible to pass, right? Because you're asking, I mean, the people who would have to pass it would be the very people who want those high paying jobs as soon as they leave. You're not thinking cynically, Tom. What you do is... That's a rare thing for Eric. You grandfather in the current members. So then you address the problem in the future and you create a barrier to entry. So for the short term, they're making themselves worth even more. Just like they did, the Democrats did when they grandfathered in the current spouses who were lobbyists, which was Tom Daschle, Byron Dorgan, Kent Conrad, Dick Durbin's wife, Liddy Dole's husband. They grandfathered in all those people, which made them the last few women who you could ever hire to lobby or men to hire their spouse. That is a really interesting thing I've noticed in this town in the five years I've been here is that oftentimes your pay, this is not true of most Cato people, especially not because I've never worked on the Hill, but your pay is just sort of directly proportional to the people you know. You wrote an article recently about Hero 34, I think it was number 34, people that Harry Reid's retirement is really going to mess up their life because it's their reconnection to Harry Reid that actually made them valuable. It is an interesting thing to watch the lobbyists who adapt and realize that they're former bosses at some point going to retire and so pick up other areas of expertise. But yes, you're creating a special class who wrote the bills so they know the ins and outs and the really policy people and then door openers are sort of another class of people and that those are what our economy is rewarding and that's what people are getting rich off of. I mean, if you were to just bring in like an old communist and show him the Washington D.C. economy, he would say, yes, see, this is what I was saying about the corruption. The people who are rich don't actually provide any value. Would you be in favor of... One of the interesting theories too about lobbying and you kind of mentioned it is that the Hill staffs are not that big. They don't get paid that much. They're very young and the government and what it does is so big and so broad that lobbyists are just ultimately, partially a legislative subsidy in the sense that they know about this one little area and so they help for maybe better informed lawmaking so maybe increasing staff and increasing salary could be a good deal. It's one of the things when we point out that what is it? Six or seven of the ten richest counties in the country are within commuting distance of Washington D.C. Is that just really chapter-having? Is that the fact that this is everything about what we're talking about today? A lot of conservatives assume that this is about the two government bureaucrats who each make $150,000 and that's a small portion of it. A big part of it is the contractors are evolving toward lobbyists and that sort of thing. I would rather us pay the congressman and their staffers more to have more of that expertise be announced. You are going to necessarily need the expertise from the outside and that is always going to create a potential possibility for corruption but I really do think addressing the revolving door is a way to take away because the problem with the revolving door is not that these guys are getting rich, it's that they have bad incentives when they're on Capitol Hill. I want to get back to some of these fun and juicy examples of awful stuff that's being done. You've talked about, you called that the unholy trinity and we've got the XM Bank and the next one is the ethanol mandate. So, yeah, we got rid of a lot of the federal actual ethanol subsidies. Did that blow your mind? Was that very surprising to you? No, and again, once you think I just got to hang out with you more because I'm not cynical enough here. So, you had a tax credit where a refiner who bought ethanol got a special tax credit and of course it wasn't really a tax credit because there were some people for whatever reason who didn't actually owe the excise tax but could still get a tax credit. So, it was literally a check from the federal government, from the treasury for buying ethanol and then after that in 2005 and 2007 in those energy bills we got the ethanol mandate which basically requires in a complex mechanism I don't totally understand but requires ethanol, requires refiners basically to buy it. So, once the mandate was no once the subsidy was no longer driving demand and it was entirely driven by the mandate, it just ended up being a subsidy to the refiners and if you think about how that works that ended up being a subsidy for the refiners. So, the ethanol subsidy was subsidizing Exxon and people who own SUVs and so that's why Congress was willing to let that expire but the real subsidy now is the mandate and by requiring refiners gas stations to buy the ethanol it is obviously driving up demand for ethanol often driving up the price of gasoline always applying upward pressure to food prices you had tortilla riots in Mexico I think that was in 2007 or 2008 that that happened and that was partly driven by the fact that agricultural land is going over towards corn ethanol corn used to be mostly for feeding cows secondarily for feeding humans now it's mostly for ethanol secondarily for feeding cows and thirdly for feeding humans and so this obviously has a distorting effect on the market using up water creating lots of runoff and that sort of thing and then when they try to do advanced ethanol there are a lot of people who worry about the effects on rain forests of some of the advanced biofuels and that sort of thing and so it really is just a clear special interest boondoggle I mean the benefit to the farmer the corn farmer is completely offset by the cost to the rancher Is this entirely because of the presidential election going through Iowa or is that overplayed? So I used to think that was overplayed until I saw Scott Walker basically do a 180 degree flip-flop when he went to Iowa and that it's a big part of it another part is that there's so many different constituencies for they constantly shift the argument there is a national security people you get a lot of people say oh well it's a way to reduce our dependence on foreign oil I mean nowadays unless you count North Dakota as a foreign country that argument doesn't doesn't hold as much sway oh well it's for the family farmers is one of the arguments that's made oh well it's good for the environment I don't think anybody believes that anymore and so they're really running out of excuses but it gets bundled in with other legislation and that sort of thing and now it's a permanent piece of legislation it would actually take a bill to go ahead and repeal it for us to get rid of this now the third of the holy trinity is something that maybe our listeners have heard before the sugar subsidies which is maybe the most well-known subsidy that's out there how does that work? what is the origin of that? so this one's very complicated in some ways but it starts with the federal government keeps out foreign sugar it has a quota each country is only allowed to sell us a little bit of sugar so it is the as far as I know the most protectionist policy that we have and then the second step of it is that all this every sugar grower can borrow against their own sugar either the growers or the people who are holding on to it at something like 19, 20 cents a pound of sugar and it's a non-recourse loan meaning that if the price of sugar drops too low then they just walk away and the federal government has the sugar which then they of course turn into ethanol they sell to the ethanol makers to turn into ethanol and so this is like a Marx Brothers idea I swear and so if the price drops too low then the U.S. tax payers buy it but the price rarely drops too low even though the world's sugar price is often half that 10, 12 cents I mean it fluctuates quite a bit but the but it often doesn't drop that low the price in the U.S. because of the protectionist policies and then there are other things the silos for storing the sugar get taxpayer backed loan guarantees the entire sugar ecosystem in Florida is because of the kind of draining the Everglades into a bunch of channels so that you could actually grow the sugar there and it not be flooded and that sort of thing and again it used to be justified as jobs program but then the government went ahead and they imported the jobs it wasn't a question of open borders it was government boats getting people from the British West Indies bringing them here saying you can work here unless your boss gets dissatisfied and we send you back and there are these great propaganda videos where they'd be like oh to watch someone from the West Indies work the cane fields is to watch generations of mastery now these people weren't doing these horrible brach breaking jobs until we imported them to do it and so there's all these subsidies and again in the big ripoff I spend about half a chapter on it with one of my favorite details being Bill Clinton's star report the report of the special investigator and during Bill Clinton's inappropriate relationship with Monica Lewinsky at one point while they were inappropriately relating he got a phone call from a congressman and she stayed there at another point while they were inappropriately relating he got a phone call from one of the Fanjul brothers the sugar farmers down in Florida at that point that was too important so he dismissed his friend Monica from the Oval Office I can't decide which part of that story is dirty or that's the difficulty there so is it campaign contributions that's a big part of this how does campaign contributions do? some of the campaign contribution regulations have had the exact opposite effect so for instance right now you can only give a couple grand I think maybe now it's 2700 to a candidate in the primary and then another 2700 2600 I think it goes up with inflation and so what that has an effect of doing because you can't go to somebody and say can I have a $10,000 check you need to go to somebody and say can you get me 40 guys and cut this $2600 check well who's going to do that who's going to volunteer their own free time to do that somebody who wants to earn your favor and has a connection to lots of businessmen that's going to be a lobbyist so it's a lobbyist bundler was a creature made by that and that seems the most corrupting thing as possible if you want to win reelection you need to be able to get these lobbyists and all their clients in there with the room with you so A you have to make them happy and B you're going to be listening to them a lot of times the campaign finance regulations have the opposite effect and if you look at what's happened since we've liberalized campaign finance law with the with the Citizens United ruling you see kind of the birth of an anti-corporate welfare lobby I mean you see that these groups like the club for growth or Americans for prosperity or some other groups that get started up by people in the Koch network they start lobbying against corporate welfare why? Because there's a bunch of rich ideologues and half of them are on the liberty side and they're able to get together and so you think what's your financial interest in killing XM or the sugar subsidy none except they actually want free enterprise while it used to be the only people who would get together and spend money for lobbying or electing politicians were the people who had a concentrated benefit from it and so I think that the liberalizing of campaign finance in recent years has done something to create an anti-corporate welfare lobby which is something that a lot of public choice people didn't think was going to happen I'm curious how green energy subsidies fit into this story because on the one hand so they seem like an obvious there's these companies and they're getting loans or loan guarantees and there's lobbying for it and all that but on the other hand there's the argument that this is an industry that doesn't really exist in a robust way and we need it to in order to get off the foreign oil and global warming or whatever compete with China and so the government is you know it's hard to get these sorts of industries off the ground the government's the one that's got the money to do it because private investors aren't yeah I mean the you hear all these arguments I used to it used to be my favorite thing to talk about was green energy because there's so many of these were technologies or industries that couldn't survive in free markets where they were dependent on this and you saw and you see so much stuff but then it got to be that that was the only thing that Republicans identified with crony capitalism they would simultaneously attack cylinders loan guarantees and defend loan guarantees for nuclear power plants so did you step off the you know what the Republicans have the cylinder thing handled I might back off that one a little bit but so what I always say when I'm you look at how Obama and the Democrats talk about the green energy subsidies and they always say we are going to be left behind economically if we don't spend money on it it's a nonsensical argument but it's an economic one and they're afraid apparently to make the environmental argument which would be to say we should subsidize solar panels because they produce fewer emissions or in less pollution and one reason is that people don't people like the environment but they're not willing to spend a lot more on their energy bills to help the environment and two there'd be a lot more direct ways to address these things I mean the obvious answer a lot of people give is if you want to reduce carbon dioxide emissions you tax carbon dioxide emissions instead of some Jerry Rake thing because I love telling stories about the indirect efforts to do this there's the the corporate average fuel economy standards and a lot of these things where cars have to give off less emissions and so Alcoa is a company that supports these standards and they say and by the way if you use aluminum instead of steel and making cars are lighter weight that reduces emissions that's great they support these standards and then back in Australia they oppose regulations on greenhouse gas emissions because that's where they make the aluminum and make the parts a process which is incredibly intensive not just an energy but also just chemical processes that give off greenhouse gases that are much more potent than carbon dioxide and so if you actually measure what we call the dust to dust economic ecological footprint of an Alcoa car versus a steel car it's about a break even but they find these other ways to measure it and try to save the environment and that just allows for corporate gaming of it and no improvement in the environment so we mentioned these a couple but I know you got a bunch of these so we can just talk about a few as we close out here your favorite revolving door stories because there's just so many good ones oh yeah there are and after I tell you a couple favorite I'll probably think of others that I wish I had told you one that I often tell involves Chuck Schumer right after the Democrats win control of the Senate in 2007 he goes ahead and he gives a talk to a bunch of hedge fund guys in New York in January and he says you guys basically you guys need to grow up politically you're all scattered you're not working together you're working against each other you're immature basically they weren't spending enough on lobbying so he has that dinner and then a few months later at the beginning of a hearing of the banking committee or subcommittee says oh I just want to say farewell to a long time staffer I've had my banking person and her name was Carmen Sita Wonder and he said oh I just want to say farewell to her I used my go-to banking person and of course she's going to a K Street firm Brownstein Hyatt that has hedge fund and banking clients within a few weeks of her hire shockingly they pick up seven more hedge fund clients including the people who were sitting at that dinner with Chuck Schumer that election they're spending on politics and lobbying went up many fold five six ten times with two-thirds of the contributions going to Chuck Schumer's Democrats and a lot of that money going to Carmen Sita Wonder and who then became a bundler for Chuck Schumer and other Democratic senators so what I like about this story is that it shows that often the revolving door is not you know business sort of plucking people off the hill and then using them to infiltrate Congress but it's the political class deploying their people out to business to attract money and cooperation from the private sector that's a good one so I guess the question people would be thinking is who's worse Democrats or Republicans and maybe we can tie that in with I think the last question which would be what do we do and maybe they're both tied together in their own way so who's worse this is always this reminds me of one of my favorite games to play with any Libertarian because Libertarians say oh well I'm neither left nor right but for the most part they're on one or the other side and the way you find out is when a Republican does something stupid are they angry or are they embarrassed and disappointed and when a Democrat does something stupid are they angry or are they embarrassed and and so by that test I calm down on the right I call myself both a conservative and a Libertarian and so I feel more upset for the Republicans when they do it in part because again the Democrats are just basically going against their rhetoric and their politicians and sure as a journalist it's my job to show how their rhetoric is false but we don't really hold them to it the Republicans are going against their rhetoric and sort of their stated principles as well and so that that I think makes it worse when they do it who does it more historically I wouldn't want to judge it some like the export import bank vote you have half of the Republicans supporting XM which is shameful you have unanimity in favor of XM on the Democratic side which is even more telling and it's similar with ethanol it's similar with sugar it was the same with the bailouts where more and more I think the Democrats just see that government's growth in and of itself is good for them and so the easiest way to grow government is not to go and battle big business and grow government in the way they oppose but to team up with big business and to grow government in the way that business wants so especially since the Tea Party I would say the Republicans are a party that's just mostly corporatist and cronyist and the Democrats are a party that's almost entirely corporatist and cronyist So is there any hope whatsoever? Can we do anything except for tear the whole thing down? As I said I think there's an anti-corporate welfare lobby growing up that most people if they find out that they are bearing the risk for going export to a state-owned airline that they don't like them. Most people don't know about it though because you know again it doesn't directly cost the taxpayers money it's one of a million federal programs and that the more that a lot of it is technology Mike Needham at Heritage Actions said like it used to be impossible or he put it this way the cost of informing the public about Export-Import Bank has gone way down the cost of organizing people against it has gone way down and thus Boeing's cost of organizing people for it hasn't gone way down they've always been able to just get XIM give me the list of everybody who got a loan guarantee and we'll get them here to lobby for it so that hasn't really gone down so it's tipping the scales a little bit and so the I mean in the Export-Import Bank fight the agency's charter expires June 30th again if you were to pull Congress right now I think it would pass you got a financial services committee chairman who wants to kill it you got a house majority leader Kevin McCarthy who said he wants to kill it and you've got a Senate majority leader Mitch McConnell who has voted to kill it and so there is a chance that you could win on that and then you've got a Republican presidential field that on XIM on corporate welfare in general on sugar on these things are generally good so not saying that I think we're going to win on all these fights I'm saying that the odds are better today than they were when I started writing about this 10-12 years ago Thank you for listening if you have any questions you can find us on Twitter at Free Thoughts Pod that's Free Thoughts P-O-D Free Thoughts is produced by Evan Banks and Mark McDaniel to learn more find us on the web at www.libertarianism.org