Politics 101
Let's start with a riddle.
Q: When is an oil company a manufacturer?
A: When Congress starts writing laws on corporate taxes. And so too are major engineering firms, mining companies, corn farmers and electric utilities.
Welcome to the wonderland of tax legislating, where an attempt to resolve a dispute with the European Union over tax breaks for exporters becomes a bonanza giveaway including the elimination of tariffs on imported ceiling fans (at the behest of Georgia Senator Zell Miller) and elimination of excise on fishing tackle boxes (at the behest of House Speaker Dennis Hastert) ... and, the addition of a new sales tax deduction for states without an income tax.
Do we need to connect the dots? You already know who was pushing the sales tax deduction, although most economists would say we need more savings, not more consumption.
As for the others, Atlanta-based Home Depot sells half the ceiling fans in the United States and Hastert's Illinois district is home to a major manufacturer of fishing tackle boxes.
The "inside-the-beltway" explanation for this pork barbecue is that the original $4 billion in subsidies that the WTO ruled illegal could not be repealed without bribing enough elected representatives to pass the bill. Only in Washington does it make sense to spend $137 billion to solve a $4 billion problem.
This tax bill doles out another great round of corporate welfare. But it is bad economics and corrupt politics.
Lobbyist Donald Carlson told the New York Times, apparently without irony: "When you have to pick winners and losers within the corporate community, that is always a messy process that Congress is reluctant to undertake." If this is reluctance, we'd hate to see them get enthusiastic about the process.
The fact is that these breaks were not chosen for any purpose other than doing favors to special interests. It is the most irrational kind of economic decision making imaginable. Tax policy is now the plaything of lobbyists. If you're big enough, you get a special break to pad profits. The beneficiaries were either old and inefficient and should be subjected to the rigors of the market or they were already successful corporations grabbing more because they could.
And that's why the whole process so corrupts politics. The Republicans took over Congress promising to rein in spending and toss out the special interests. Now it looks as if they are governing on the principle that some interests are more special than others.