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Why Special Interests Sacrifice the Future for Short-Term Gain

By: Gary Galles

The special interests that dominate politics dominates to produce a form of economic warfare. The more some can manipulate the political machinery, the more they can feather their own nests. They even use similar propaganda techniques.

In wartime, we are always defined as the good guys, ennobled by our moral cause. “They” are the bad guys, to be demeaned and dehumanized, so few will be bothered by what is done to them. Similarly, in domestic politics, representatives of each group paint themselves as particularly worthy or needy, making their advocacy morally superior, contrasted with their opponents whom they tar as selfish or unprincipled.

However, advocates for such causes do not always occupy the moral high ground they try so hard to create. They advocate coercing those who have done no harm to others to justify it. Further, the policies proposed often benefit existing members of a group, but harm those who will be members of that group in the future.

In such cases, justifying the political plunder to deliver a group’s demands because they are particularly deserving is self-contradictory. If membership in a group justifies special treatment, the same must apply to future members as well. Therefore, policies that benefit current members, while harming equally deserving future members, necessarily violate their own rationale.

The first example of how this works is the use of minimum wage laws.

Much in the news of late, these laws are promoted as helping low-skill workers. It is true that those lucky enough to keep their existing jobs, hours, working conditions, on-the-job training, promotion possibilities, etc., can gain. But other low-skill current workers, who lose jobs, hours or training, are harmed. Beyond that, though, by raising the cost of hiring low-skill workers, it leads employers to reduce the number of jobs and training opportunities available to future low-skill workers, with the consequences worst for the least-skilled. Similarly, arguments for living or prevailing wage laws, to provide “good” jobs, raises the cost of hiring workers relative to alternatives such as automation, reducing the number of future “good” jobs available.

Another good example is rent control.

A recently-introduced bill in the California legislature, AB 1506 would allow local governments to dramatically expand rent control in California, where I live.

It is true that rent control would benefit many current renters, by lowering what they pay and locking in their too-good-to-give-up gains for years. But coming at the expense of property owners, it would progressively reduce the supply of rental housing over time. And those eventual effects are very large. As Swedish economist Assar Lindbeck once commented, “next to bombing, rent control seems in many cases to be the most efficient technique so far known for destroying cities.” That reduced future rental housing, particularly for unoccupied units, harms all future renters.

A third example is taxation on capital. 

Some claim that taxing or regulating capital more heavily will benefit laborers. But, reducing the payoffs to saving and investing with increased burdens reduces the growth rate of the capital stock. With fewer tools, future workers will be less productive, reducing their earnings and well-being.

Other special-interest groups follow the same pattern. Those now old want others to pay for more of their retirement, health care, etc., because they claim to be especially needy or deserving. But the cost must then be imposed on others who are not yet old. That will leave future generations worse off when they become old. Similarly, licensing and other restrictions are proposed to benefit current suppliers, but they harm potential future suppliers by denying them entry.

Those who want government to pickpocket others for them go to great lengths to claim special worthiness. However, not only does what they want punish innocent parties, but many of those harmed are future members — often a much larger number — of the “special” groups proponents claim to care so deeply about. That unwarranted harm and the glaring inconsistency between rhetoric and future reality justifies thinking far more carefully about such policies before buying into the propaganda.

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