U.S./Middle East Policy is Usually Special Interest Policy

U.S./Middle East policy has been distracted and distorted by lobbyists and special interests. Critics of U.S. policy have focused on a variety of special interests including oil companies and military contractors. Was U.S./Middle East policy unduly influenced by U.S. oil interests wanting concessions in a post-Saddam Iraq, or by major construction and contracting firms like Haliburton?

Rand Paul, in a YouTube video from some years ago, suggests that a former politician’s role as CEO of a private firm influenced U.S. policy:

There’s a great YouTube of Dick Cheney in 1995 defending [President] Bush No. 1 [and the decision not to invade Baghdad in the first Gulf War], and he goes on for about five minutes. He’s being interviewed, I think, by the American Enterprise Institute, and he says it would be a disaster, it would be vastly expensive, it’d be civil war, we would have no exit strategy. He goes on and on for five minutes. Dick Cheney saying it would be a bad idea. And that’s why the first Bush didn’t go into Baghdad. Dick Cheney then goes to work for Halliburton. Makes hundreds of millions of dollars, their CEO. Next thing you know, he’s back in government and it’s a good idea to go into Iraq.”

In Dick Cheney’s defense, it is okay to change one’s views, even after making lots of money. The situation in Iraq had changed since the first invasion of Iraq, and intelligence apparently indicated Saddam (and his sons) were more unhinged and likely a source of further instability to the Middle East. This concern brought U.S. foreign policy into play due to the longstanding Carter Doctrine policy of defending oil flows from the Middle East.

As earlier posts have argued, given the tremendous increase in U.S. shale oil and gas production, plus Canadian oil sands production, and increased off-shore production in Brazil and West Africa, the U.S. can more easily do without Middle East oil. What does this dramatic change in U.S. energy production mean for U.S. Middle East policy?

An article in The Spectator notes U.S. policy continues to call for major military expenditures in the Middle East, The wars that really are about oil:

By policing critical regions like the Persian Gulf on behalf of all industrial nations, Washington hoped to forestall re-armament and unilateral scrambles for security, including energy security, by the other great powers. George W. Bush expressed this idea in a 2002 address at West Point: ‘America has, and intends to keep, military strengths beyond challenge, thereby making the destabilising arms races of other eras pointless and limiting rivalries to trade and other pursuits of peace.’ 

Link to this article, discussed below.

Policies that require lots of federal spending, whether domestic (“stimulus” programs, education reform, transportation, space exploration, climate change), or foreign policy and military, stir up special interests. Spending programs have strong natural constituencies from the firms and organizations expecting to receive the spending. These firms and groups deploy resources for lobbyists, advocates, consultants, even think tank research making the case for programs they will benefit from. Strong lobbying comes too from the federal bureaucracies called upon to carry out the policies with larger budgets.

With housing, federal policies ensuring two quasi-government agencies, Fannie Mae and Freddy Mac provide most of the nation’s home loans, is and was lobbied for and well-promoted by the agencies themselves. Fannie Mae and Freddy Mac contributed tens of millions of dollars to Congress and other groups advocating these policies and expanded spending. (Heritage Foundation studies here and here, Cato Institute here, AEI here. Article in The Atlantic here.)

That federal spending stirs up special interests (or factions), shouldn’t imply that those receiving federal funds are greedy or that the bureaucracies involved are corrupt. It is just that people know more and focus more on programs and policies that support their jobs, firms, and agencies. Other things equal, Army generals are more likely to favor policy that relies on the Army, than policy that employs resources from the Marines, Navy, or Air Force.

A central concept of Public Choice economics is the asymmetry of government spending. For any state or federal government program, benefits flow to concentrated groups who lobby for programs while costs are disbursed to large numbers of taxpayers who pay small amounts for particular spending programs.

At the Downsizing Government website are dozens of federal spending programs that illustrate this government transfer system:

• The Department of the Interior oversees more than 500 million acres of land, distributes subsidized irrigation water, and runs aid programs for American Indians.  The department will spend $13 billion in 2014… 

• The Department of Education provides loans and grants to college students and subsidizes elementary and secondary schools. The department will spend $66 billion in 2014, or $537 for every U.S. household. 

• The Department of Energy oversees nuclear weapons sites and subsidizes conventional and alternative fuels. The department has a history of fiscal and environmental mismanagement. Furthermore, misguided energy regulations have caused large losses to consumers and the broader economy over the decades. 

The department will spend $28 billion in 2014, or $228 for every U.S. household. It employs 15,000 workers directly and oversees about 100,000 contract workers at research facilities across the nation.

• Large-scale federal intervention into America’s energy markets began in the 1930s and continued through the 1970s. A series of major laws and executive actions sought to control energy prices, regulate electric and gas utilities, and limit imports. Competition was stifled and domestic investment was suppressed. 

By the 1970s, the Middle East oil embargoes and other upheavals began making the failure of federal energy interventions clear to policymakers. They reversed course, and took major deregulatory steps in the 1970s and 1980s to free up energy markets, to the ultimate benefit of consumers and the overall economy. 

• Large-scale federal intervention into America’s energy markets began in the 1930s and lasted for four decades. Many rules were imposed to control prices, restrict imports, and distort markets in various other ways. The shortcomings of this heavy regulatory climate became apparent during the energy crises of the 1970s, prompting policymakers to reverse course and begin deregulating oil, natural gas, and coal markets. 

However, energy markets continue to be regulated and subsidized in many ways today, and federal policymakers are quick to find new reasons to intervene. One factor that promotes intervention is the cyclicality of energy markets, which prompts consumers and producers to variously complain about prices being too low or too high. Other factors that promote intervention include national security and environmental concerns. 

It is worth noting also that recipients of U.S. foreign aid play a role in U.S. Middle East policies. Foreign aid agencies end up with a lot of money to spend themselves and to distribute to consultants and NGOs. Here is chapter (pdf) from the Cato Handbook for Policymakers, “U.S. Policy in the Middle East” and at right a chart of 2008 Foreign Aid spending, led by spending on projects in Middle East countries.

Given in pro-spending influences of special interests, a policy of restraint in foreign policy and foreign interventions seems reasonable. Below is a video interview of what such a U.S. foreign policy would look like.

These ideas are outlined in William Ruger’s article “A Realist’s Guide to Grand Strategy” published in the American Conservative, August, 2014.