At the Republican presidential debate last week, congresswoman Michelle Bachmann, the Tea Party stalwart, attacked Rick Perry, the governor of Texas and current frontrunner, over his 2005 executive order to vaccinate all 12-year-old girls against HPV. While she made some rather unfortunate insinuations about the safety of this vaccine (now taken back), she made a fundamentally important point alongside it: Perry wasn’t motivated by the health of young women in issuing his mandatory vaccination order—the producer of the vaccine, Merck, just happened to have hired the governor’s former chief of staff as a lobbyist. A look back at the money trail confirms these linkages—Merck contributed significant sums of money to Perry’s reelection campaign. Beyond the appeal of mere lucre, Merck had successfully pulled at the strings of friendship and won the game of influence, skills now possessed in spades by every large American corporation (to say nothing of those overseas).

Crony capitalism presents the greatest long-term threat to the future prosperity of the United States. From financial firms evading regulations and destabilizing the economy to military contractors ripping off the defense department, it pervades our political and economic system. A few key examples can explicate the depth of the issues involved:

• Medicare Part D—When patients on Medicare buy prescription drugs, they do not receive a special rate, unlike people on any other health insurance plan, be it public or private. Congress forbade Medicare from bargaining collectively in a massive sellout to the pharmaceutical industry. The Congressman responsible for all this, Billy Tauzin, retired soon after the passage of the bill (and his extraordinary efforts to get it passed) and got a million-dollar job as a pharmaceutical lobbyist.

• The F-22—Despite veterans and hawks in Congress, such as John McCain, and the determined support of Defense Secretary Robert Gates, it has proven nearly impossible to axe wasteful defense spending, such as orders for the F-22 “super-plane.” Defense contractors such as Lockheed-Martin have proven adept at constructing factories in as many congressional districts as possible to ensure as much local support as possible in addition to hiring retired generals as spokesmen and lobbyists.

• Tax breaks in NYC—In a past issue, I have addressed how stifling regulation has made the property market turgid and expensive in NYC. A look through the news will show you that in the case of most large buildings going up in Manhattan, the city has negotiated special deals with developers, exempting them from certain especially vexing regulations in return for accomplishing some supposed social good, such as renting a handful of apartments at below market rate.

The principles involved in the Medicare Part D case, the revolving door system, whereby Congressmen and regulators are promised much higher paying jobs after retiring from government, are a major source of sweetheart deals for corporations throughout the United States. It is no wonder, then, that GE has an effective tax rate of 3.6%, while most startups pay the full rate of 35%. A sign of tech company maturity has been building a Washington office, hiring lawyers and lobbyists, and bringing its effective tax rate down—just as Google has done over the past five years.

Similar deals help firms avoid regulatory scrutiny—a situation most commonly found in the financial services industry, where the cases involved are complex, and there is plenty of money to be offered to former regulators. When we ask why the Government didn’t do anything about the subprime mortgage crisis, our first look should be at the regulators at agencies like the Office of the Comptroller of the Currency (OCC) that were rewarded with fantastically high paying jobs in return for their lassitude. We see the same principle currently with the Obama administration pressuring the States’ Attorneys Generals to accept a much smaller settlement over the robo-signing scandal than they had original desired.

In a system replete with crony capitalism, wealth accrues to the rich and well-connected, making barriers to entry into the marketplace much steeper, especially for new entrepreneurs. The fewer competitors in a marketplace, the higher the prices will be and the less quickly innovation will occur. Politicians sell out their taxpaying and consuming constituents in the interests of their own avarice and cupidity. The situation becomes even worse in markets that are already overregulated and overtaxed, such as New York State. The small manufacturers that once made upstate New York wealthy do not have the clout to avoid the job-killing regulations forced upon them by overzealous liberals. The only industries that have consistently possessed such power are the financial services and real estate industries, not coincidentally headquartered in the center of the state’s left-wing politics, and city denizens are left to reap what our politicians have sown: high real estate prices, an economic meltdown, and a hollowed-out industrial base upstate.

These deleterious effects extend all the way down to the smallest businesses, for instance those of the immigrant entrepreneurs. I have written about the perils of occupational licensing before, which stifles the talents and opportunities of the poor and those who have just come to this country especially. The more hoops that one must jump through to open a restaurant, or a store, or a service business, let alone a small manufacturing shop out in Queens, the less likely it is that they will be able to accomplish it. City bureaucracy is maddening enough for us upper-class natives; it is worse for the immigrant. A recent law required yet a new license for so-called facilitators, who help foreign-born entrepreneurs navigate the city bureaucracy—clearly a fantastic solution for encouraging economic growth. How much easier this all is if you (or your mother) can call a friend on the City Council to get you the necessary permits without the hassle of mixing with the great unwashed!

The political debate in the United States sadly ignores all of this. The liberal wing of the Democratic Party frequently originates regulations that have greatly damaged many American industries, while its pro-business wing, as can be expected, is friendly to its contributors, but skeptical of business on the whole: just look at New York’s own Chuck Schumer—a foe of corporate thievery, unless the corporations involved happen to be on Wall Street. The Republican Party, nominally pro free-market, has lined itself up behind corporatist interests. Rather than cutting senseless regulations that make markets much less competitive, the Bush years saw giveaways to the energy and the pharmaceutical industries (among others). Sensible market-oriented changes, such as tort reform, patent streamlining (the sheer volume and conflict among patents in the high-tech industry threatens to destroy it and give massive rents to “patent trolls,” while ruining individual entrepreneurs), and more open government contracting were not pursued.

And thus we stand today, ensconced in economic malaise, with no one to blame but ourselves for our predicament. By voting on sexier issues and ignoring the substance and records of our politicians, we have helped insure that our government will waste ever-greater sums of money and that the innovation desperately needed for future prosperity will be harder to come by.