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1 J. D. Foster, Regulating the Washington Money Market 1 (1999)

handle is hein.taxfoundation/regwashxz0001 and id is 1 raw text is: TAX 1MiW FOUNDATION October 1999 Regulating the Washington Money Market The professor, the skipper, and Mr. Howell are marooned on an island. They have plenty of fresh water, but the only food available is in crates of cans that washed up on shore. The trouble is, they have no can opener. Fortunately, the professor is a noted chemist, the skipper is a physicist, and Mr. As Washington' power and influence continue to grow with the size of government and the depth of the regulatory regime it controls, the potential benefits of buying a seat at the table grow with it as do the risks of staying out of the game. Howell is a free-market economist. The professor suggests putting a few drops of salt water on top of a can and use a magnifying glass to accelerate the rusting process, weak- ening the top of the can enough so that he can can open it. The skipper quickly points out they would all starve first. He then suggests he could build a contraption using rocks to smash open the top of the cans. Mr. Howell objects that much food would be lost and that they needed to husband their food because they did not know when to expect a rescue. So the other two turn to the economist to demand his solution. After thinking just a moment Mr. Howell says, First, assume a can opener. There are times when economics is of little use. But there are others when economic principles can lead to a solution. Campaign finance reform is one such instance. Cam- paign finance reform proposals past and present suffer from one fatal flaw above all others: they fail to grasp the market they seek to regulate. Why do individuals and corporations give money to political candidates and to political parties? To buy votes? To gain influence? Perhaps just to gain access? These are the usual answers offered, but they miss the mark. Money is drawn to politics because that is where the power is, in the form of taxes, spending, and regulations. Why do robbers target banks? Because that is where the money is. Why give money to politicians? Because that is where the money is. It's the flip side of the exact same coin. As Washington's power and influence continue to grow with the size of government and the depth of the regulatory regime it controls, the potential benefits of buying a seat Suppose PACs and soft money were banned and the bans found to be constitutional. Would the flow of money stop? Hardly. at the table grow with it, as do the risks of staying out of the game. This power is like a magnet, drawing campaign money from every direction. Increase the energy in the magnet ByJD. Foster, Ph.D. Executive Director and Chief Economist Tax Foundation 14.0E9J:!1 III,

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