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BIG MONEY & POLITICS/WHO GETS HURT?
FEBRUARY 7, 2000 VOL. 155 NO. 5

How The Little Guy Gets Crunched
When powerful interests shower Washington with millions in campaign contributions, they often get what they want. But it's ordinary citizens and firms that pay the price--and most of them never see it coming
BY DONALD L. BARLETT AND JAMES B. STEELE

It was just your typical piece of congressional dirty work. As 1999 wound down, the House and Senate passed the District of Columbia Appropriations Act. You might think that would be a boring piece of legislation. You would be wrong. For buried in the endless clauses authorizing such spending items as $867 million for education and $5 million to promote the adoption of foster children was Section 6001: Superfund Recycling Equity. It had nothing to do with the District of Columbia, nor appropriations, nor "equity" as it is commonly defined.

Instead Section 6001 was inserted in the appropriations bill by Senator Trent Lott of Mississippi, the Senate majority leader, to take the nation's scrap-metal dealers off the hook for millions of dollars in potential Superfund liabilities at toxic-waste sites. In doing so, Lott had the support of colleagues in both parties.

This early Christmas present to the scrap-metal dealers--who contributed more than $300,000 to political candidates and committees during the 1990s--made them very happy. Others in the recycling chain were not so happy. All of a sudden, they were potentially responsible for millions of dollars in damages the junkmen might otherwise have had to pay.

While clever in its obscurity, Section 6001 is not an especially big giveaway by Capitol Hill standards. Rather, it is typical among the growing litany of examples of how Washington extends favorable treatment to one set of citizens at the expense of another. It's a process that frequently causes serious, sometimes fatal economic harm to unwary individuals and businesses that are in the way.

How do you get that favorable treatment? If you know the right people in Congress and in the White House, you can often get anything you want. And there are two surefire ways to get close to those people:

--Contribute to their political campaigns.
--Spend generously on lobbying.

If you do both of these things, success will maul you like groupies at a rock concert. If you do neither--and this is the case with about 200 million individuals of voting age and several million corporations--those people in Washington will treat you accordingly. In essence, campaign spending in America has divided all of us into two groups: first- and second-class citizens. This is what happens if you are in the latter group:

You pick up a disproportionate share of America's tax bill.

You pay higher prices for a broad range of products, from peanuts to prescription drugs.

You pay taxes that others in a similar situation have been excused from paying.

You are compelled to abide by laws while others are granted immunity from them.

You must pay debts that you incur while others do not.

You are barred from writing off on your tax return some of the money spent on necessities while others deduct the cost of their entertainment.

You must run your business by one set of rules while the government creates another set for your competitors.

In contrast, first-class citizens--the fortunate few who contribute to the right politicians and hire the right lobbyists--enjoy all the benefits of their special status. Among them:

If they make a bad business decision, the government bails them out.

If they want to hire workers at below-market wage rates, the government provides the means to do so.

If they want more time to pay their debts, the government gives them an extension.

If they want immunity from certain laws, the government gives it.

If they want to ignore rules their competitors must comply with, the government gives its approval.

If they want to kill legislation that is intended for the public good, it gets killed.

Call it government for the few at the expense of the many. Looked at another way, almost any time a citizen or a business gets what it wants through campaign contributions and lobbying, someone else pays the price for it. Sometimes it's a few people, sometimes millions. Sometimes it's one business, sometimes many. In short, through a process often obscured from public view, Washington anoints winners and creates losers. Among the recent winners and the wannabes, who collectively have contributed millions of dollars to candidates and their parties and spent generously on lobbying:

TAX-FREE PROFITS Last December, President Clinton signed into law the Ticket to Work and Work Incentives Improvement Act, hailing the legislation as providing "the most significant advancement for people with disabilities since the Americans with Disabilities Act almost a decade ago." He called it "a genuinely American bill."

Indeed so. For it also provided something quite unrelated to disabilities: a lucrative tax break for banks, insurers and financial-service companies. A provision woven into the legislation allowed the foreign subsidiaries of these businesses to extend the income-tax-free status of foreign earnings from the sale of securities, annuities and other financial holdings. Among the big winners: American International Group Inc., an insurance giant, as well as the recently formed Citigroup. Overall, the tax break will cost the U.S. Treasury $1.5 billion in the next two years, just as it did in the past two years. The amount is equivalent to all the income taxes paid over four years by 300,000 individuals and families that earn between $25,000 and $30,000 a year. MORE>>

PAGE 1 | 2 | 3

IMAGE CREDITS | ILLUSTRATIONS FOR TIME BY PETER KUPER

COPYRIGHT © 2000 TIME INC.





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