In his weekly column, James Surowiecki deftly explains why so many bad laws persist: they matter a great deal to a few people and not so much to everyone else.
If we were starting from scratch, after all, it seems unlikely that the Senate would choose this particular moment to pass a bill subsidizing money managers to the tune of billions of dollars a year. But, because the tax break already exists, it exerts a kind of gravitational pull that makes it hard to get rid of. In part, that’s simple economics—those who benefit from the tax break have more money to lobby for it to be kept in place. Furthermore, while the cost of subsidies is spread out among all taxpayers, the benefits are highly concentrated, so, naturally, opposition is generally diluted and diffuse while support is intense. If you work in private equity, it’s possible that nothing the government does matters more than keeping this tax break intact. And this pattern is true not just of subsidies but of government programs in general: every government action creates a constituency with an interest in keeping that action going.