A solution in search of a problem

By DAVID MOON, Moon Capital Management
October 10, 2004

Alexis de Tocqueville was the son of an aristocratic French politician. He lived with all of the trappings of unearned wealth and appointed power. He had the finest private schooling, studied philosophy and then become a lawyer. By the time he was 35 years old, he had already served as a judge, Assemblyman, Chamber of Deputies Representative and as the French minister of foreign affairs. His greatest contribution to the political process, however, occurred after he traveled to America and penned the two volumes of Democracy in America, in 1835 and 1840. Many historians still consider the work as the most thorough and insightful political tome ever complied about the United States.
In the book, Tocqueville makes a timeless observation: 'The American Republic will fail when politicians realize that they can bribe people with their own money.'

How sad. And timely.

I thought about Tocqueville as I read plans of both presidential candidates to provide high-speed Internet access to every American. That's right: Internet access. (I am still trying to verify the rumor that negotiations are underway to amend the Pledge of Allegiance to include the phrase, 'with liberty, justice and broadband for all.') In March, President Bush declared 'this country needs a national goal for universal, affordable broadband technology by 2007.' John Kerry calls for $2 billion in tax credits that would lower the current $30 average cost of monthly broadband access.

In 2003, 28.2 million homes and businesses had high speed Internet access, up 42 percent from 2002. Kerry and Bush want to solve a problem already being addressed by supply and demand. This is a solution in search of a problem. And these candidates want to 'solve' the problem by bribing us with our own money. Who do you think will pay for this expanded, low-cost broadband?

As long as taxpayers are convinced the benefits they receive are paid for with other peoples' money, this and other little bribery Ponzis will continue to be popular.

A conservative republican senator recently spoke to a group of his supporters. For most of his speech, he sounded like Ted Kennedy. His remarks were mostly a litany of locally managed, federally funded programs he worked to get approved, along with the new funding he would secure for his constituents if they would raise enough money to send him back to Washington. What a deal! Not only are you going to bribe me with my own money, I can give you money to help you get in a position to do the bribery. Now how could I pass that up?

On a federal scale, the gambit actually predates the 16th amendment to the constitution, when Congress passed a two percent flat tax in 1894. Those revenues eventually allowed people in Washington to dole out favors to constituents and contributors.

Speaking of constituents and contributors, as of August, telecommunications and equipment sector businesses had donated $62.6 million to candidates during the 2004 election cycle.

I wish Tocqueville could moderate Wednesday night's debate on domestic policy.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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