The most important thing to remember as Capitol Hill debates the auto bailout this week, is that the incestuous relationship between big business, big labor, and big government is not confined to the auto sector. Instead it infects everything Washington touches. CATO’s Dan Mitchell writes:

Naive and/or deceptive politicians often claim that sleaze is the enemy of good government, but the real truth is that government is the biggest friend of corruption. Simply stated, when politicians redistribute more than $3 trillion (and more indirectly via regulation), lobbyists and interest groups will line up to stick their snouts in the trough. The Wall Street bailout is an excellent example of this distasteful practice. The headline of a recent New York Times story summarizes the problem, noting “Lobbyists Swarm the Treasury for a Helping of the Bailout Pie.” The excerpt below reveals some of the corruption that is so pervasive in Washington. The most absurd part of the story is the quote from a Treasury Department official who says the government shouldn’t pick winners and losers – a rather strange statement since the bailout exists so that government can pick winners and losers.

And after your done reading the Times story, check out Tim Carney’s latest on President-elect Barack Obama’s chief of staff Rahm Emanuel:

Studying Emanuel’s brief stint—between his “public service” jobs in the Clinton White House and the U.S. House of Representatives—as a corporate dealmaker provides insight into the functioning of the “revolving door” Obama seems to deplore.

Emanuel left the Clinton White House in late 1998 with a job offer in hand from investment banker Wasserstein Perella & Co. Emanuel, with no experience outside of politics and no MBA, took a high perch as a managing director at Wasserstein Perella, and proceeded to get very rich.

Surely Emanuel’s work ethic, focus, and effectiveness were critical to his job success, but looking at the deals he worked on, it’s unarguable that government connections were what made him the best man for the job.

One prototypical Emanuel client at Wasserstein Perella was Loral Space CEO Bernard Schwartz, a titan of the military-industrial complex. Schwartz was one of Clinton’s top two individual donors (giving the president more than $1 million in campaign contributions), and also beneficiary of Clinton’s executive decisions.

The 42nd President brought Schwartz along on a Commerce Department-led trip to China, where Loral landed a huge cell-phone-service deal with the Communist government. In Clinton’s second term, as the Justice Department was investigating Loral for illegally transferring weapons-capable technology to the Chinese Military, Clinton granted Loral special permission to launch a satellite aboard a Chinese rocket.

So Schwarz was tight with government (he celebrated his 71st birthday at the Clinton White House), and his business required it. When Rahm Emanuel entered the private sector and started looking for clients, Schwartz was among the first men he called. Schwartz hired him to execute some mergers or acquisitions.

One of Emanuel’s two biggest deals never would have happened without government pressure. When telecom giant SBC bought fellow telecom company Ameritech, SBC executives intended to hold onto Ameritech’s home-security company SecurityLink.

But Bill Clinton’s Federal Communications Commission insisted that federal law required SBC to sell the security company. Clinton’s old right-hand man, Emanuel, happened to be working on behalf of a venture capital firm called GTCR Golder Rauner that wanted to buy SecurityLink from SBC. The government pressure helped Emanuel get his clients a good deal, as the Tribune tells the story:

“Under a regulatory deadline to divest itself of SecurityLink, SBC financed all but $100 million of GTCR’s $479 million purchase of the firm. Less than six months later, GTCR resold the company for $1 billion, earning a quick $500 million on its investment.”

Emanuel’s other deals were intertwined with government. For example, he helped Unicom, who owned the Chicago utility Commonwealth Edison (ComEd) merge with Pennsylvania power giant Peco at a time when ComEd was facing the ire of Emanuel’s old boss Mayor Daley, whose brother happened to be the U.S. Secretary of Commerce.

So, when Emanuel ran for Congress in 2002, he was a rich man, pocketing $16.2 million in two and a half years. He also had new friends in business, who continued to help him out. Partners and employees at GTCR—the firm that bought and flipped a security company for a half-billion gain in 6 months thanks to the work of Emanuel and Clinton’s FCC—funded Emanuel’s first election to the tune of $12,500.

Today, with a rolodex full of Wall Street, telecom, defense, housing, and banking tycoons who owe him favors and to whom he owns favors, Emanuel can make sure that even if the revolving door is shut down, the Obama White House still has an open door for big business.