Obama and the GOP Both Hypocrites on Special Interests

It's easy for government officials to denounce special interests—except when they are the beneficiary.

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Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University. He blogs about economics at www.NeighborhoodEffects.com.

Since taking office, President Barack Obama has decried the untoward power and influence of "special interests" 208 times. He's not alone. President Ronald Reagan complained about them 151 times and President Harry Truman 110 times. In fact, every president since Herbert Hoover has warned of the dangerous mix of special interests and politics.

But the problem with special interests is that they are only easy to spot when they're not your own. In his 2012 State of the Union, for example, Obama called for an economy in which "everyone plays by the same set of rules." But moments later—and without a hint of irony—the president proudly recounted his administration's rescue of a single firm: General Motors.

According to Bureau of Labor Statistics data, from the beginning of 2009 to the end of 2011, more than 4 million U.S. firms shuttered their doors. The vast majority received no government bailout. How many of the owners and employees of these failed businesses feel that GM had to play by the same set of rules as they did?

[See a collection of political cartoons on the economy.]

Democrats, of course, do not have a monopoly on hypocrisy. Though most Republicans are quick to criticize the president for Solyndra, many are just as quick to protect their own special interests—such as the aerospace industry—from the Budget Control Act's defense cuts. (Never mind that 202 Republicans voted for the measure last August and praised its spirit of "shared sacrifice.")

When governments bestow privileges to particular firms or industries, it is not simply unfair—it is destructive. In a new study for the Mercatus Center at George Mason University, I explore the problems inherent in special interest politics. The record shows that when governments grant privileges to particular firms or industries, the well-heeled and well-connected tend to benefit at the expense of the modest and unknown. Moreover, government-granted privileges misallocate resources, hamper economic growth, foster corruption, and ultimately undermine the legitimacy of both the government and the private sector.

[See a collection of political cartoons on Congress.]

To make matters worse, as the Brookings Institution's Jonathan Rauch describes in Government's End, each of us is a member of some special interest group or another. And each of us, in our own way, benefits from some privilege. "The problem," in his words, "is us." 

But this problem may also be part of the solution. Each of us stands to gain if we give up our own privilege in exchange for others giving up theirs. I'll forgo my mortgage interest deduction if it means that farmers forgo their subsidies, health insurers give up their favored tax treatment, and film production companies go without their tax credits. We all stand to gain if we all stop trying to live at one another's expense. 

But there is nothing to gain—indeed there is much to lose—if we keep pretending that special interest politics is only a problem when we are talking about someone else's interest.

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