The Corner

Cronyism vs. American Taxpayers

Chairman Paul Ryan gave a very compelling statement last Friday during a testimony about how to put America back on track by putting an end to cronyism. He also rightfully noted that both parties are guilty of the incredible amount of special-interest politics going on in Washington.

Both parties have messed this up. Republicans and Democrats alike have believed in putting preferences into law for a selected industry and for a selected company. It’s helpful to look at the track record of this bipartisan idea that government is smarter and better at picking winners and losers in the marketplace. What we have learned from this bipartisan approach is that corruption does occur, cronyism does occur, and what ends up happening is those who are connected, those who have established connections, those who know the ways of Washington end up usually getting the benefits. We end up erecting barriers to entry that protect established, connected businesses, which necessarily comes at the expense of tomorrow’s entrepreneur. That makes it harder for people to rise.

The latest example, of course, of a policy that “protect well-established, connected businesses” is the shameful bipartisan reauthorization of the Ex-Im Bank a few weeks ago. The Bank’s biggest beneficiary is the country’s No. 1 exporter, Boeing. Why? It’s not because Boeing could borrow money or that foreign and domestic companies would entirely stop buying Boeing planes. Ryan continues:

Let’s recognize that both parties messed this up. Let’s go back with what works: entrepreneurship; small business growth; risk taking; transparent regulations that are fair for all; equality before the law. That’s what we are trying to reestablish here. What we’re saying is the same rules apply to everybody, so that you – based on your own merit, your own God-given talent – that determines success. Our goal in America is to advance the starting line so that we can promote equal opportunity so people can make the most of their lives instead having Washington pick and choose winners and losers.

#more#Testifying before the committee last week, Cato Institute’s Chris Edwards laid out clearly four specific problems with corporate welfare — arguably the main form of cronyism. Tad DeHaven, who co-authored the written testimony, sums it up:

  • Business subsidies undermine the bedrock American value of equality under the law.

  • The more subsidies the government provides to businesses, the more the market’s profit-and-loss signals are weakened and the more America’s traditions of entrepreneurship and risk-taking by the private sector are undermined.

  • Business subsidies have spawned an expanding web of lobby groups that demand ever more favors from policymakers.

  • Business subsidies create an unhealthy – and sometimes corrupt – relationship between businesses and the government.

These subsidies costs taxpayers almost $100 billion annually.

If you aren’t convinced, on Friday, I posted this video showing how cronyism happens and all that is wrong and unfair about cronyism and the unhealthy (for taxpayers) relationship between the government and handpicked companies. Watch it.

What’s the solution? The only way to end this behavior, to end corporate-welfare cronyism, is to end all business subsidies (whether green-energy, oil-and-gas, automobile-manufacturing, banking, or manufacturing). End them all.

Then, we can move to end regulatory capture.


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