How Government Really Works: Money Talks

money bagAs school children we are taught that we live in a democracy and that we can vote. We are told that our elected officials go to Washington and pass laws that are good for our country and that our elected officials must “answer” to the people. It’s instilled in our brain at an early age and we continue to believe it, even when evidence continues to mount to the contrary.

Here is classic example. Over the Fourth of July weekend, little stories appeared in newspapers that small tobacco shops were being closed by the federal government. Buried deep in a transportation bill, a new federal law changed the definition of a “manufacturer” and assessed a tax on small businesses that owned cigarette-rolling machines that allowed customers to buy tobacco and roll their own cigarettes. The shops sold tubes, filters and raw tobacco, which allowed customers to create and roll their own cigarettes. The law didn’t ban the machines; it simply taxed them and regulated them–out of existence.

A curious reader would assume that anti-smoking activists or the AMA led such a charge perhaps. They would be wrong; it was lead by Altria–the parent company of Phillip Morris, one of the largest cigarette companies in the country. Surely, then, the government was concerned about public health, lung cancer, and second hand smoke? Nope.

Here is your answer. According to the South Florida Sun Sentinel:
“The interest in roll-your-own smokes has grown since 2009 after a federal excise tax on tobacco rose dramatically, affecting the price of packaged cigarettes. Roll-your-own shops use loose pipe tobacco, which was less affected by the tax hike. … Where a carton of packaged cigarettes would cost more than $60, they sold at Double D’s Tobacco for $26.99.”

The law was passed simply because smokers could get a carton of cigarettes for $33 less, if they rolled their own in a smoke shop, instead of buying the corporate product. The government wasn’t getting its tax cut and the big corporation was losing sales–a political match made in heaven. (Let’s wave the flag now.) The new law is a win-win, except for the hundreds of small shops that are now out of business and the thousands of people who have now lost their jobs.

In a related article which ran in the July 9, 2012, Chicago Sun Times an astute store owner, Marsha Smith, who is closing her shop, nailed it. “It’s quite clear that this is politicians and big tobacco working against small businesses,” Smith said.

The Las Vegas Review-Journal in its June 6, 2012 article, quotes local owner Robert Weissen, who is more direct: “The man who pushed for this bill is Sen. (Max) Baucus from Montana, and he received donations from Altria, a parent company of Philip Morris. Interestingly enough, there are also no RYO machines in the state of Montana. It really makes me question the morals and values of our elected speakers.”

This is how government and power really work in our purported democracy. There is no market to determine the winners and losers. If you want to win, you hire lobbyists and put your competitors out of business. (If your competitor has just as much money as you, then you create a trade group and regulate the smaller competitors out of business.)

This is the sad sorry state of affairs of our current body politic; not much different from the Old Soviet Union, except we pretend to be free and live in a democracy. At least the brutal dictators were honest with the masses; we live under the pretense that we are still somehow free.

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