Capitalizing on Big Government

The Securities and Exchange Commission is investigating “political intelligence” firms that promise to give investors advance word of what Congress and regulators may do next. A continuing Washington Post investigation reports:

Antonia Ferrier, a spokeswoman for [Sen. Orrin] Hatch, said the senator is aware that his staff participates in such events [as an investor phone call on Medicare and private insurers, organized by a Washington consulting firm] and that communicating with these types of groups is not unusual given the technical nature of the issues the committee handles.

“Staff members meet with stakeholders on every side of an issue as a means of better crafting policy solutions,” Ferrier said. “What information they share is the same information that Senator Hatch shares in an open and transparent way with his constituents. Senator Hatch has a zero-tolerance policy for anyone who would take advantage of privileged information, and he’s confident that no one on his staff has done that.”

This is just one more inevitable facet of the system we live under. As long as the federal government spends trillions of dollars, and reallocates more trillions through taxes and regulation, and issues bans and mandates on everything from contraception to local speed limits, you’re going to see a lot of money spent to control how those decisions are made. Which includes spending money to find out what the decisions will be, in order to make appropriate investment choices. 

I’ve been writing about this for years, apparently to no avail. I focused on why money flows to Washington way back in 1983 in the Wall Street Journal:

Business people know that you have to invest to make money. Businesses invest in factories, labor, research and development, marketing, and all the other processes that bring goods to consumers and, they hope, lead to profits. They also invest in political processes that may yield profits.

If more money can be made by investing in Washington than by drilling another oil well, money will be spent there.

Nobel laureate F.A. Hayek explained the process 40 years ago in his prophetic book The Road to Serfdom: “As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power.”

As the size and power of government increase, we can expect more of society’s resources to be directed toward influencing government.

We can pass all the laws we want, launch insider training investigations – but as long as the federal government is acquiring and redistributing so much wealth, businesses and investors are going to go to great lengths to figure out where it’s going and how to get a piece of it.