For five years now, the Republican party has attacked the economic policies of President Barack Obama as “crony capitalism.”
And with good reason.
From the stimulus to cash-for-clunkers, from the bailouts to cap-and-trade, from Dodd-Frank to Obamacare, every name-brand initiative of the Obama era has distorted public policy to privilege well-connected insiders and elites at the expense of taxpayers and consumers.
Republicans have slammed all this “corporate welfare” and “venture socialism” for unfairly “picking winners and losers in the marketplace.” In 2012, for the first time, “crony capitalism” was even singled out for condemnation in the Republican party platform.
The Right’s resistance to corporatism is a welcome development. Special-interest favoritism represents a uniquely malignant threat to the economic, political, and social ecosystem that makes America exceptional.
Policy privilege corrupts the free market by rewarding political connections over competitive excellence. It subverts the rule of law by codifying inequality. It undermines social solidarity by pitting citizens against one another, twisting cooperative communities into rival special interests.
And even as cronyism poisons the moral credibility of our institutions of democratic capitalism, it degrades the economic benefits those institutions yield.
According to a 2010 study by the Kauffman Foundation, all net job creation in the United States between 1977 and 2005 came from firms five years old and younger. Yet half of all new businesses fail in their first five years. That is, almost all new American jobs come from the small fraction of new businesses that rocket from startup to superstardom.
Cronyist policies — from tax loopholes to regulatory advantages to direct subsidies — deliberately tilt the playing field to keep those very firms down, to bury them in red tape and slow their disruptive growth.
But it’s precisely the dynamism that new firms bring into the marketplace that creates the jobs and growth our economy needs.
Without it, the American people have every reason to doubt our system’s moral and material legitimacy. After all, if ordinary citizens who “work hard and play by the rules” only end up subsidizing, propping up, and bailing out privileged insiders who don’t, then the land of opportunity really isn’t.
Obamanomics has delivered record corporate profits but sagging middle-class wages and an anemic, jobless recovery. It has promoted and exacerbated inequality. It has isolated the poor and squeezed the middle class.
It has also exposed the president’s party to extreme political vulnerability.
But to seize this opportunity — to fix what’s broken in Washington and our economy — a still-distrusted GOP first must end cronyism in our own ranks. The GOP has to close its branch of the Beltway Favor Bank and truly embrace a free-enterprise economy of, by, and for the people.
Impossible? That’s what they said about earmarks.
Too radical a change? These are principles we already espouse.
Imagine a reformed Republican party seizing the moral high ground against political corruption and economic dysfunction. Imagine its leaders, advocating populist, free-market reforms to restore jobs, growth, and fairness to the economy. Faster than you can say “TARP,” we could pin the Left between their egalitarian facade and their elitist agenda, and force them to choose between K Street and Main Street.
That Republican party could not only unify and excite conservatives, but appeal to hardworking families in the purple and blue communities that President Obama’s special-interest favoritism is leaving behind.
For three years now, Republican leaders have challenged anti-establishment conservatives to come up with a viable plan to make principled conservatism inclusive and popular — to grow our party into a national majority.
Well, here it is.
The question is whether Republicans’ Obama-era opposition to policy privilege has been sincere or situational.
One test will be this summer’s expiring congressional authorization of the federal Export Import Bank. The Ex-Im Bank exists to dole out taxpayer-backed loan guarantees to help American exporters. Most of the benefits go to large corporations that are perfectly capable of securing private financing anywhere in the world.
In short, Congress allows the Ex-Im Bank to unnecessarily risk taxpayer money to subsidize well-connected private companies. President Obama himself called the program “little more than a fund for corporate welfare” back in 2008, when total taxpayer exposure to Ex-Im Bank guarantees was less than half its size today.
Whether the beneficiaries of particular Ex-Im Bank loan guarantees are respected, successful companies like Boeing or crony basket cases like Solyndra is irrelevant. Twisting policy to benefit any business at the expense of others is unfair and anti-growth.
Whether congressional Republicans say so — and do something about it — during the coming Ex-Im Bank debate will tell us a lot about what, and who, the party really stands for in 2014 and beyond.
— Mike Lee is a U.S. senator from Utah and a member of the Senate Judiciary Committee.