No lobbyist left behind!
That’s the new motto of the whole Washington establishment. Every spending bill has something in it for everybody.
Today is a holiday in America. It’s “Presidents Day,” a day set aside for Americans to honor those who rule over them. Most Americans think of Washington, Lincoln and Roosevelt…but here at The Daily Reckoning we honor America’s truly great presidents – William Henry Harrison, Chester Arthur and Warren Harding – those who didn’t make things worse.
But look on…ye dead chiefs…at what your country has become:
Europe has only 1,800 registered lobbyists. There are 15,000 of them in the US. Most of them probably live in our new neighborhood…getting in our way as we drive around the Beltway…taking our parking places…hogging the tables at Starbucks… The parasites!
The Financial Times reports that companies spent more on lobbying in 2009 than they had the year before. Investment in new plants and equipment fell dramatically. But investment in lobbying rose by 5%.
You don’t need a Ph.D. in political science or economics to figure out why. Returns from lobbying were higher. That is the big shift in the US economy…the final shift.
We’ll come back to this theme in a minute. First, let’s look at what happened on Friday. Just to set the stage…we’re trying to figure out whether the stock market has entered a declining phase. At the beginning of last week, we thought so…by the end of it we weren’t so sure. And on Friday, the evidence was mixed. The Dow fell 46 points, but still ended up for the week. Gold dropped $4.
As to the economy, the evidence was mixed too. Consumer spending rose in January…but consumers are still reluctant to spend. And they don’t have any money to spend anyway…
So let’s return to our Presidents Day theme…
The US economy began as a frontier economy on the tidewater area of the East Coast…with a few big planters, but mostly small farmers, merchants and artisans.
Then came the entrepreneurs with their mills and factories.
Then, a few of the entrepreneurs grew to be captains of industry – the Vanderbilts, Carnegies, and Rockefellers.
When the inventors, founders and innovators died off, their businesses were taken over by corporate managers.
And then the leading corporations shifted their focus, from making things to marketing them. This shift corresponded roughly with the ascendancy of New York over Chicago…and, then after 1980, the focus shifted again – to financing. Wall Street grew rich. Motown – Detroit’s automotive industry – fell into decline. For a while, even the auto businesses made more money financing cars than they made building them.
Finance blew itself up in 2007-2009. Now, there’s a new shift underway…from the private economy to the government. Mommas in the ’20s and ’30s wanted their babies to grow up and go into manufacturing. In the middle of the century, marketing was more rewarding – Madison Avenue was the best address in America. And by the end of the century, the best and the brightest were headed to finance.
Where should bright young grads go now? Well, follow the money…! Where’s the money now? Not in manufacturing…at least not in US-based manufacturing. And not in marketing either – gone are the days of selling soap to big families with big pay raises. How about finance? Forget it. The boom in credit lasted more than 50 years. But who can borrow now? Only the feds. Sure a few big banks will make money by helping the feds raise cash. But the big expansion in consumer credit is over.
Now, government is about the only major industry that is expanding. The feds have the money now. They’re even handing it out. Get in line!
for The Daily Reckoning Australia