Of Public-Private Partnerships and Public Corruption

One of the popular phrases in Washington that makes me cringe every time that I hear it is public-private partnership.   This is a foreign concept, alien to the Declaration of Independence and the Constitution.  The Founders fled from the institution.  It had a rich history in Europe, and our Founders hated it, because it tended toward abuse (as it does today).  They had been methodically abused by it.

One example, the infamous British East India Company was a public-private partnership that engaged in colonization in America and elsewhere (perhaps most notably, India), harnessing the colonies with oppressive collars of monopolies that forced the colonists to do business only through the Company that enjoyed the privileges and powers of the Crown.  Those privileges were used to underpay the colonists for what they produced and sold and overcharge them for what they bought.  Fortunately for America, the Founders became champion smugglers, taking advantage of a land with an extensive seacoast and rich with usable harbors.  The smuggling was fortunate also for Britain, for without it the new British colonies in America would have been strangled in their cribs.

The Boston Tea Party was a colonial revolt against monopoly powers exercised in the name of the British Government by the East India Company.  That this revolt took place in Boston was not unusual, as the power and influence of the Crown-endorsed Companies were stronger in Virginia and other places to the south than they were in New England.  The New Englanders were less accustomed to it and therefore felt its oppressions more keenly.  Crown companies had much less of a role (but were not unknown) in lands settled by freedom-seeking Puritans and Pilgrims.  The Jamestown Colonies were from the beginning Company expeditions.  But the Virginians and many other Americans grew increasingly weary of those public-private partnerships and the corruptions that they fomented.  The wide lands of North America encouraged a freedom that the public-private partnership of Crown and Companies was not able to stifle.

It took royal favor to create the public-private partnerships, and the maintenance of royal favor to continue them.  No surprise, then, that such favor had to be funded by steady payments from the partnership to the government officials possessing power to control the royal favors.  In exchange, government discretion, including the judging of right and wrong, was all too often influenced by what favored the partnership rather than what favored justice.

This was how public-private partnerships were corrupting on a personal level.  They were also corrupting to the State, corrosive of freedom.  In no small degree British freedoms from the King have been built by the power of taxation controlled by Parliament.  With great skill over centuries British Parliaments wielded the power of managing the government purse to win new freedoms from the British Kings.  Since there is money to be made by using government power in public enterprises, however, sovereigns can find ways to cash in on that value and avoid the accountability that comes with having to seek new taxes to pay for their programs.  In the great conflict between the Parliament and King Charles I, the King was long able to avoid resorting to Parliament and acceding to its demands for freedom by funding his operations through the sale of royal privileges to and by reaping revenues from the companies and other public-private partnerships.  He carried it too far and eventually lost his head, but the American Founders did not fail to learn the lesson.

Neither did our modern Presidents, many of whom have revealed a fondness for public-private partnerships as a means to extend government programs and influence, even to the exclusion of congressional and public oversight.  Franklin Roosevelt loved creating government-sponsored monopolies, even while giving many speeches against the evils of monopolies.  Today our economy is riddled with public-private partnerships, large and small, and they as always tend toward abuse. 

At the heart of the recent financial recession was the housing bubble supported by two of the greatest public-private partnerships in American history, Fannie Mae and Freddie Mac.  Created to promote government housing policy without using taxes or appropriations—and thereby escaping public accountability—their government privileges allowed them to borrow all the money they needed at prices little above government rates and use that advantage to drive competition out of the middle of the housing markets that they occupied.

When the housing bubble at last burst, the Treasury’s TARP used a public-private partnership with banks (most but not all of whom were unwilling partners) to push investors out of the banking markets and turn the financial crisis into a financial panic.  Once in office, the Obama Administration embraced TARP, to which they added a trillion dollar stimulus package that accelerated our budget deficit crisis.  The Obama stimulus package was lousy with public-private partnerships, a significant reason why it failed so miserably to stimulate our economy, destroying one or more jobs for each one that it promised to create through government favor.

The Faustian bargain at the core of the public-private partnerships corrupts all involved and touched by them:  the government that creates them, the partners who sell their souls for the advantages, and those disadvantaged by the whole unfairness.  Former Congressman Dick Armey—a foe of public-private partnerships—has often warned that when you partner with the devil, you are always the junior partner.

Of Civil Wars and Slavery

One hundred fifty years ago today Jefferson Davis was “elected” President of the so-called Confederate States of America.  For half a year up until then Davis had served as provisional president of the rebellion, not subjected to a formal election process.  With the election he had the trimmings of legality, enough to give him legitimacy in the eyes of most voters in the southern states.  Still, all that the phony election could do was make him the acknowledged leader of an unconstitutional rebellion against the best government then in existence on the earth.

There yet may be some shallow commentators who will claim that the rebellion was not about slavery.  You just need to ask them a couple of children’s questions—such as “Why”—to expose slavery as the fundamental reason for the break.  The attempt at secession from the Union, although threatened for years, did not take place until after the election of 1860 when Republican Abraham Lincoln defeated two different Democrat candidates and one independent.  In accordance with the procedures of the Constitution, Lincoln obtained a clear (and decisive) majority of votes in the Electoral College.  Then southern politicians in southern states started trying to peel away.

Why?, the six-year old asks.

Well, because they did not want to live under Lincoln as President, would be the modern firebrand’s reply.

Why?

Because he was in favor of the abolition of slavery and would be unlikely to do what the Democrat presidents had done before him to keep Congress from passing laws that would destroy slavery.

So the war was about slavery, then?, you might be forgiven for asking.

No, would be the reply.  It was all about states' rights.

Which states' rights?, you could ask without being rude.

Like the right to determine their own future, their own culture, their own institutions.

Which institutions in particular?, you should be expected to inquire.

Well, the institution of slavery in particular, the southern apologist would rejoin.

Are there any other southern institutions that Mr. Lincoln or the Congress were threatening? 

No, not really, responds your interlocutor, except maybe free trade.  Congress several times before imposed protective tariffs and restrictions on trade, and one time the southerners did rebel.  At least South Carolina did.

Did South Carolina really rebel and leave the Union over trade protection?

A truthful response might go like this:  Well, no, not really. No other states were much interested, and President Andrew Jackson, a southerner, by the way, threatened to send in the army.  The action became just talk and eventually died down.

So the only institution southern politicians feared for in 1860 was slavery?  So the rebellion is about slavery after all.

Here the defender of the indefensible would be left with nothing but denials and circular talk, leaving slavery as the only justification standing.

It is hard today to imagine Americans at war with each other, slaughtering each other for the better part of four years and over half a million people.  It took a mighty polarizing canker at the heart of the nation to allow it.

It may be easier to imagine American politics getting all pushed into an impossible situation by failure to come to grips with a monumental problem that only grew worse.  It was clear in the mid-1800s that slavery was unsustainable socially, politically, and even economically.  It was poisoning American government and society and polarizing the nation, but neither Congress nor President was willing to take it on directly.  Sure, there were several grand compromises, the heart of which was to avoid the problem rather than solve it.  The problem was pushed off to another day for someone else to solve.

Keeping millions of people in servitude was increasingly untenable and at odds with the governing morality of the nation, the morality that comprised the central spirit of both the Declaration of Independence and the Constitution.  Neither of those documents ended slavery, but both set in place governing principles intolerable with slavery and that progressively undermined it.  That is why it took one last grand breaking of the Constitution—the southern rebellion—to try to preserve slavery.  Fortunately it was met by an even greater struggle to enforce the Constitution and as a result bring an end to the South’s “peculiar institution.”

We should be able to imagine that kind of an exercise in political catastrophe, because we have a no less intolerable situation threatening our nation today, a situation that only grows worse by the month as too many leading politicians fail to address it.  Those who try are lambasted by a media sympathetic to the whole evil business.  We have our grand compromises that in fact do very little other than put off dealing with the real problem.  The social welfare society of Franklin Delano Roosevelt and his political heirs down to President Obama cannot be afforded by any nation, not even the United States, the wealthiest and most prosperous of them all.  A much less prosperous Europe is coming unglued over their social welfare system.  The process of buying votes with government programs and benefits paid for by future generations may make for temporarily clever politics, but it is fundamentally immoral, destructive of society and individual character, and economically unsound and unsustainable. 

President Obama hopes to buy a few more years before the day of reckoning (enough to get him past 2012 elections) by talking of taxing the rich.  Unless he is stupid, he knows that higher taxes—whether on the rich or anyone else—cannot solve the problem.  Today 48% of the population pays little or no net Federal taxes.  What happens to our republic when the line crosses 50% and the majority come to believe that they can live by taxing the rest of the population?  How long will the working minority put up with that modern slavery?

But here is another slavery that the government welfare society is creating.  Even if we stop the whole process now, ending all government deficits where they are—no new debt—my children and grandchildren will still have to be twice as productive as we are today just to maintain current standards of living.  Today there are 4 workers for every retired person in America.  Current projections show that during my time in retirement (should I ever reach it) there will come the day when there are only 2 workers for every retired person.  At that time, more than half the production of my grandchildren will go to support other people and pay the debts piled up in many cases before the children of today and tomorrow were born.

Anyone care to predict how America’s social fabric will be held together then?