This is very true. When I first interned Congress, I was amazed that everyone who worked there was several cuts above the median in intelligence. Plus, most people were genuinely dedicated and well intentioned. Even many of the lobbyists honestly believed that they were just trying to ensure that the business they worked for got its fair share.

The reason things go wrong, I believe, is the process of Adaptive Fiction. ( see http://unqualified-reservations.blogspot.com/2007/07/democracy-as-adaptive-fiction.html ). Let's say you have 100 very smart people. 99 out of a hundred of these people do not believe that giving more money and power to Washington will make the world a better place. One person honestly does believe it. Because of this, he ends up running for office, while the others end up in science or business. Since this person is smart and sincere, he wins, and now is in Congress. Now as Congressman, he votes the government more power. As part of this funding government, there is more money for schools. These schools in turn teach people that government is good and great. Repeat this cycle enough times, and you have systematic delusion across the country and all throughout government.