(Previously here, here, and here.)

When we elect politicians to office, we like to think that — by careful scrutiny of their legislative records and campaign platforms — we’re electing good statesmen.  Unfortunately, that isn’t so: we’re only electing good politicians.  The democratic process rewards and selects for people who are good at the business of getting elected, which is only incidentally related to the business of managing a country.

By way of a for instance*, I present this article from Coyote Blog, in which our protagonist promotes a carbon tax to the government of California:

• A civics lesson in one sentence

Mr. Meyer makes four points about the nature of government programmes, which are quite revealing when we keep in mind that legislators are politicians rather than statesmen:

1. “Private implementation and compliance costs are meaningless to legislators.”

   Why should politicians care?  Compliance costs are well-hidden from the voting public’s view; at most, they piss off small-business owners and corporate managers.  The money has to come from somewhere, of course — which means higher prices, lower wages, and less innovation — but it doesn’t come from anything that can be immediately traced back to the politicians.  (A particularly savvy legislator could pass this off as “punishing the greedy fat-cat corporations”; see also Sarbanes-Oxley.)

2. “For legislators, particularly in California, creating large new bureaucracies is good.”

   What better way to win people’s votes than by magicking up secure jobs for them?  Meyer points out that this establishment of patronage serves a double purpose: it puts public employees’ votes firmly in the incumbents’ pockets, and creates a secure place for those politicians to land when they finally leave office.  I’d add a third: it creates an illusion of “doing something” to address a problem.  Of course, there’s generally little cost for politicians in creating large new bureaucracies.

3. “[I]f [politicians] can pass the same tax in a way that is more hidden (i.e. cap-and-trade vs. carbon tax) they will prefer this approach, even if it means the tax is substantially less efficient.”

   Politicians tend to get punished for taxes.  For some reason, most people don’t like the idea of government-sponsored extortion.  (”Nice transit system you got here.  Be a shame if anything were to, you know, happen to it.”)  With that in mind, politicians have every incentive to hide the taxes — whether by borrowing money (taxing the future), printing money (inflation; existing money is now worth less), or passing it off to compliance costs and the like.  The money ends up in the same place, but it’s harder to trace it back to those legislators.

4. “[P]oliticians, no matter what their public stance, love lobbying, because everyone who comes to ask them for something knows there has to be a quid pro quo.”

   Got it in one.  The more complex the legislative answer, the more opportunities politicians have to cut deals and make “special exemptions” for “critical industries” or the like — which means more campaign donations and more grateful supporters from large corporations and special-interest groups.  Politicians excel at getting elected, so putting forth a complex bill is like chumming for sharks.  (Of course, complex legislation creates complex systems which don’t respond well to legislation, but that’s hardly the point here; there are votes to be won!)

Now with all that in mind, have a look at this:

• The latest bailout plan: let’s re-inflate the housing bubble! (Below the Beltway)

The Treasury Department is strongly considering a plan to intervene directly in the mortgage industry to dramatically force down rates and stimulate the moribund housing market, according to sources familiar with the proposal.

Under the initiative, the Treasury would offer to buy securities that finance newly issued loans for home purchases, according to the sources. But to participate in the government’s program, mortgage lenders would have to set exceptionally low interest rates, for instance, no more than 4.5 percent for traditional, 30-year fixed-rate loans.

[...]

At a meeting attended by the Treasury’s Interim Assistant Secretary for Financial Stability Neel Kashkari and the National Association of Realtors in mid-November, senior Treasury officials said they were optimistic that subsidizing lower mortgage rates with taxpayer dollars would help revive the housing market, sources said.

I’m amused that we apparently have an “Interim Assistant Secretary for Financial Stability”, but my favourite part is this:

The cost of the plan and source of funding remain unclear. One possibility is for the Treasury to raise money by issuing bonds to the public at 3 percent interest. This could allow the government to turn a profit because it would be buying securities that pay 4.5 percent.

“Look, look!  We’re being all fiscally responsible and stuff.  This plan’ll turn a profit!”

Uh, really?  Seriously? Have we all gone fucking retarded?  The Treasury is going to fix the problem of uncertain credit caused by banks counting on the profitability of mortgage-backed securities gone bust by counting on the profitability of the same kind of mortgage-backed securities that have gone bust? Hit the showers, cupcake: if those securities really would pay 4.5% you wouldn’t have to buy them!

But gobsmacked and outraged as I may be, the politicos and bureaucrats at the Treasury are behaving fairly rationally here.  Their plan, as mentioned in the article cited above, would probably end up providing a visible, reasonably small, short-term benefit to real-estate speculators and (if the refinancing part of the speculation goes through) to most homeowners.  The “we’re turning a profit” smokescreen would perfectly obscure the real costs of the programme, which would probably manifest as inflation (since they’d be pumping more and more credit into an already-saturated market).  When the securities fail, someone else can take the blame — Fannie Mae, perhaps, which has had its reputation sufficiently tarnished over the past few months.  And a new programme this substantial would provide ample opportunity for political patronage and special-interest lobbying.

Democracy sucks — almost as hard as the alternatives.

——

* I find myself quoting Marv a lot lately.