The K Street Scandal

If you’re a movie goer, you’ve probably seen trailers for Brad Pitt’s zombie movie, World War Z. Pitt plays a United Nations employee forced to deal with a global zombie pandemic of epic proportions.

Hollywood is picking up on a theme we’ve been discussing in these pages at some length…

First, let us remind you of what zombies are. We’re not talking about the cartoon characters you see in the movies. We’re talking about real people who live at the expense of others…people who take, but don’t give…people who twist ‘the system’ to get things that rightfully belong to others.

Here is our zombie hypothesis in case you’ve forgotten. As a society ages, more and more people find ways to take advantage of it. Everybody wants power, wealth or status. And they naturally try to get it in the easiest way possible.

The shortest, softest and surest route is to game the system: use it to get subsidies, grants, jobs, tax breaks, bail-outs, welfare, special parking places and other benefits.

But gradually, the cost of supporting all these chisellers and layabouts increases…until the whole system goes broke. Society can no longer afford to continue. As in France before the revolution of 1789, the whole shebang collapses.

A colleague has done a study of the large companies that spent the most on lobbying. He calls it the ‘K Street Index’ after the street which lobbying firms tend to call home. In the period measured, they spent $1.2trn on lobbying (including campaign contributions).

Readers will note that lobbying is not productive behaviour, at least not in the ordinary sense. It does not lead to higher output. It does not fund innovation or new invention. It does not pay workers nor stimulate additional sales.

Lobbying expenses should lead to lower stock prices. Like spending money on call girls or rent boys, it means the companies are using their scarce resources on things that will not raise production or increase sales or boost profits.

But so what? This is a zombie economy… It’s not greater output or better management that counts; it’s who you know in Washington. Lobbying pays off. It’s how to grab hold of the system and twist it in your favour.

The K Street Index outperformed the rest of the stock market more than two to one. The rest of the market rose 60%. These top ass-kissers rose 170%.

How do you like that? Politics pays. You make campaign contributions. You hire a K Street lobbyist to curry favour for you. Your business may not really get better. But your stock goes up!

What’s the harm? It’s always been like that, hasn’t it?

Well, no. There have always been corrupt politicians and conniving corporations. Zombies will always be with us. But never before have the zombies been so numerous and profitable. Zombyism pays like never before.

Why? Because there are more opportunities for parasites than ever before. More laws. More loopholes. More little giveaways and privileges…thousands of them snuck into every piece of legislation and every petty rule.

The tax code alone has more opportunities for favouritism that the whole of the US government a few years ago.

The new ObamaCare regulations are so complex, you could hide hundreds of blood-suckers in them.

And then, there are the ‘environmental’ protection rules too — full of subsidies, low-cost financing, tax breaks and other giveaways.

Is it really any wonder that lobbying pays off?

A report in the Wall Street Journal last week told us about housing assistance programmes. We can’t recall the details, but the gist of it was that people wait years to get on the list to get free housing. Then, they’re fixed for life. There’s no time limit. They can live at the expense of other people for the rest of their lives.

Sometimes the unintentional parts of a story tell more than the intentional parts. The story included a photo of a woman who had just got into the programme. It was like ‘winning the lottery’, said another free-housing beneficiary.

And like winning the lottery, it comes with certain advantages. In the photo of this poor woman who has just been given free housing are two automobiles. One is a Cadillac. The other a Mercedes.

Go figure. There are zombies everywhere.


Bill Bonner
for Markets and Money

Join Markets and Money on Google+
From the Archives…

The Higher the Market, the Harder the Fall
10-05-13 – Vern Gowdie

India’s Balance of Trade — a World out of Balance
9-05-13 – Greg Canavan

How the Dow is Just Wall Street’s Marketing Tool
8-05-13 ­– Dan Denning

Watch Out For When Australia’s Terms of Trade Goes Back to ‘Normal’
7-05-13 – Greg Canavan

The Greatest Wealth Transfer in History
6-05-13 – Bill Bonner

Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America’s most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind Markets and Money.

Leave a Reply

Your email address will not be published. Required fields are marked *

Markets & Money