Holiday feasts always remind me of that old Twilight Zone episode where aliens with sparkly robes, big eyes and knowing smiles show up with a book called “To Serve Man.” Everyone naturally assumes the book is a primer for saving us silly humans from our own ignorance and evil natures. This is during the Cold War, remember, when we all assumed we were going to blow each other to smithereens at any moment.
Naturally the best and the brightest humans line up for a trip to the home planet where further enlightenment undoubtedly awaits, and a select few will be chosen as mankind’s benevolent overlords: to serve their fellow man.
Unfortunately, though, “To Serve Man” turns out to be a cookbook and the best and brightest are on the menu instead of the guest list.
Maybe it’s just the Christmas sugar rush talking, but I think that’s where this country is headed as people and businesses line up for special treatment from an increasingly centralized, opaque and powerful federal government. At some point they’re going to find out that they’re dinners instead of diners.
Last weekend’s Cromnibus is a case study in how this happens. A huge unreadable bill covering everything from national defense to prairie chickens is ginned up behind closed doors and presented as a “must-pass” piece of legislation that no one will either read or debate before heading home for Christmas.
And who’s behind those closed doors? Only those who can afford their own D.C. lobbyist or, better yet, politician. The result, besides more spending, is a pact with the devil filled with restrictions, regulations, and costs that disproportionately fall on small businesses and families, and favoring inside interests and their benefactors.
Packing bills with favors has been going on for years, but it really reached an art form during the financial meltdown with Dodd/Frank. This “reform” resulted in taxpayers bailing out big banks to the tune of billions of dollars and includes massive increases in compliance, insurance and capital costs, along with giving politically favored large institutions a de facto “too big to fail” designation.
It’s a law that was written for big bankers by big bankers. They can absorb the increased compliance costs while small banks with much lower margins can’t. They can meet the capital and insurance requirements that stifle small banks’ ability to make local loans to farmers and homebuyers. And of course with an implicit government guarantee, big banks enjoy lower borrowing costs than small banks, giving them even more of a competitive advantage.
Big banks, like most big businesses, can absorb and pass along compliance costs and other regulatory burdens while smaller businesses, often operating on razor-thin margins as it is, cannot. That’s why box stores and big hospitals like Obamacare, why drug companies like the FDA, why big banks like Dodd/Frank. Expensive and byzantine regulations erect barriers to new companies entering the market and drive smaller players out completely.
But that’s not my point.
My point is that by centralizing and expanding government power we’re creating a courtier society, one where access to the King’s court is more vital to success than merit is. The effect is similar to monarchies of old when power, influence and success came more from proximity to the levers of power than from working hard and taking risks. The politically connected will always have access to power, and so the greater that power is, the more they will succeed at everyone else’s expense.
The result of this centralization and expansion of power is the systematic elimination of small business in this country. The barriers to entry are becoming so high and the cost of complying with regulation so onerous that would-be entrepreneurs are increasingly unable to make any return on their investments or even go about their daily business without risking fines, penalties, or jail.
Many existing businesses will simply close up shop as regulations and reporting requirements become too expensive or difficult to comply with. Job growth will dry up – especially at the low end of the income scale – as the costs of hiring new employees increase and government becomes a competitor for labor with new and expanded entitlement programs. New entrepreneurs will increasingly look at the barriers to entering the marketplace and the myriad of obstacles erected in their path and just go do something else. The risks and rewards of starting a new business will just not be worth it, especially if their success will be demonized in the increasingly popular political tactic of class warfare.
In a courtier society power is centralized and only that power decides who succeeds and who fails. Decisions are made based on proximity to the throne rather than merit, effort, or even the law. That is the direction we are headed as government becomes increasingly centralized, large, powerful and arbitrary.
The end of this path lies in a business/government partnership where large corporations operate under the umbrella and the thumb of government, and people trade their freedom for a monthly check. There’s a name for that, but I don’t want to be incendiary on this holiday. Just take a look at Italy in the 1920s for a good example.
And have a Merry Christmas while we still have much to be thankful for.