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The Democratic Strategist

Political Strategy for a Permanent Democratic Majority

How ‘Citizens United’ Ruling Screws the Free Market

Few Democrats need another reason to be outraged by the Citizens United ruling. But Marvin Ammori’s contribution to the Boston Review forum on the Supreme Court decision, entitled “Corruption Economy” should provide cause for serious concern among libertarians and others who consider themselves real “free-market” conservatives and advocates of creative entrepreneurship. Here’s a piece of Ammori’s case:

But Citizens United imperils not only our democracy. It also threatens the U.S. economy. Citizens United adds to the existing institutional tools that encourage a “corruption economy,” long known to waste social resources and reward inefficiency. This economy also systematically disadvantages startups and “disruptive innovators”–companies and individuals whose ideas productively displace entrenched alternatives.
…In 2007 David Cay Johnston, a Pulitzer-prize winning New York Times reporter, devoted his book Free Lunch to exploring, in the subtitle’s words, “How the Wealthiest Americans Enrich Themselves at Government Expense (and Stick You With the Bill).” He details how certain laws transfer wealth to the politically powerful by, among other methods, capping corporate liability, shifting tax burdens, and generously subsidizing billionaires at the average citizen’s expense.
Taking this one step further, researchers have attempted to quantify the return-on-investment (ROI) of this corruption. A widely cited study by professors at the Universtiy of Kansas shows a 22,000 percent return on $283 million spent lobbying for tax holidays. Another study demonstrates that large companies got a 600-2000 percent return lobbying for tax breaks. Both of these estimates far eclipse the average ROI for Fortune 500 companies, which is less than 10 percent. As Johnston puts it, corporations can more easily “mine gold from the government treasury than the side of a mountain.”

Ammori then closes the argument as far as ‘upstart’ entrepreneurs are concerned:

….A corruption economy disincentivizes investment in new technologies, human capital, and socially useful products and services. It instead encourages companies to invest in lobbyists, political action committees, and campaign ads…A corruption economy rewards those most adept at the D.C. game, not market competition and innovation. The result is higher prices for inferior products and services.
…In a corruption economy, established companies are given the upper hand. They have legions of lobbyists, revenue to allocate to campaign expenditures, and deep and long relationships with legislators. Upstarts usually have none of that, so established companies use their greater access to government and legal avenues to kill off young competitors. For instance, when a new data format (from home video to YouTube) hits the market, established content providers often file copyright complaints. Following similar logic, established telecom companies attempt to interfere with Internet traffic. This changes the behavior of new companies for the worse. An upstart’s first idea should be a product or service, not an appropriations rider; its first employees should be engineers, inventors, and management, not lobbyists and lawyers.

All of which strengthens the case that President Obama’s next Supreme Court appointment — replacing a retiring Republican, God Willing — ought not only have a progressive record with respect to social issues, but also be a clear and unflagging champion of economic justice for workers and small business people, when pitted against the interests of corporate power. Justice Kagan was a good choice in this regard, and the next nominee ought to be equally opposed to the Citizen’s United ruling.
The Citizens United decision is disastrous for small business conservatives, as well as for Democratic Party liberals. If progressives make the extra effort to insure that this message resonates outside the choir, it could help solidify the Party’s image in a favorable light with a key swing constituency.

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