I have just finished a new book on political corruption. The book takes a broad overview of corruption, across the whole history of the nation, explaining its typical patterns over time.The most pertinent revelation is how the government captures private interests, which in turn capture the government right back. Indeed, reciprocity is a real phenomenon in government. It leads inevitably to conflicts of interests, and thus corruption.
James Madison was one of the first to notice this possibility. He and Thomas Jefferson were intense critics of the Alexander Hamilton’s Bank of the United States. The problem with the Bank, as Madison wrote to Jefferson, was that it “gives a moral certainty of gain to the Subscribers with scarce a physical possibility of loss.” Jefferson had reported to George Washington (on reasonably good authority) that the Bank was actually buying off members of Congress in order to rope them into the scheme.
Madison took all this together to predict that the shareholders of the Bank would “become the pretorian band of the Government, at once its tool and its tyrant; bribed by its largesses & overawing it by its clamours and combinations.”
Madison’s insights were quite keen. There is a consistent theme that runs through American political corruption: The government, in hopes of producing some public benefit, ropes in private interests to do the work for Uncle Sam; this can only happen if the private interests make a profit from the transaction; the private interests respond by plowing money and resources into the government to make sure that the end result works for those private purposes. In some instances, like the First Bank, the public-spirited purpose is still accomplished, more or less. But, in others, like the Second Bank -- or Fannie Mae and Freddie Mac, for that matter -- it is not. There are multiple cases where gross inefficiencies (Medicare) or stark inequities (farm subsidies) undermine the entire project at hand.
In fact, I’ve recently discovered a new “pretorian band of government,” if you will: the health care insurers working hard to protect their Obamacare subsidies.
Now, to be fair, insurers were already hand-in-glove with the government, thanks in no small part to Medicare Advantage and Medicare Part D. Still, Obamacare has further cemented this relationship. Compare and contrast two headlines.
The first, from United Press International, dated October 9, 2009: “Health insurers report slams Baucus bill.” The opening sentence: “The day before a U.S. Senate panel votes on healthcare reform, an insurance industry report said a family premium in 2019 could cost $4,000 more than thought.”
The insurers did not like the weak individual mandate in the “Baucus bill,” which was the version of reform worked out by the Senate Finance Committee -- and more or less adopted by the entire Congress. And so it seemed as if the insurers were actually opposed to reform.
Now let us jump ahead to the present day, for our second headline, from National Journal, dated January 29, 2015: “Can The Health Care Industry Save Obamacare? / Hospitals and insurance companies are coming to the law's defense before the Supreme Court.” The opening sentence: “Health insurance companies and hospitals mounted an aggressive defense of Obamacare's insurance subsidies Wednesday, warning the Supreme Court that eliminating the payments would be ‘grossly inequitable’ to millions of Americans.”
Quelle surprise! Former enemies are now friends. How can this be?
As with so much else about American politics, it just goes to show that if James Madison predicted something, the smart money is on it coming true.