Crony Capitalism

In the media, there has been lots of reporting about how the Tea Party and Occupy Wall Street are either exactly the same or totally different. Unfortunately, because neither are formal established political parties with National Committees and platforms it is not possible to sit down in a deliberate manner and compare the official policies. What can be understood is that both represent frustrated citizens.

Tea Party members seem to be frustrated with a government that is too big, takes too much of their money and delivers little in return. They see connected parties (Unions and Big Corporations) using the government to funnel tax dollars either directly or through tax credits and deductions into their pockets. The OWS crowd is mad at Wall Street. Mad that Wall Street got bailed out and they didn’t. If you read between the lines it’s not only Wall Street that gets them mad but the government that bailed them out. The interesting thing is that as you peel back the onion for both groups and get to the root of their complaints there are frustrated with large special interests getting free stuff from the government. The difference is OWS wants their cut (free tuition or bailout of student loans) and the Tea Party wants it to stop, but the both are mad about Crony Capitalism.

Crony Capitalism doesn’t solely exist on one side of the aisle or the other. It is independent or maybe codependent is a better word. Both Republicans and Democrats practice it. Anytime a group uses their relationship with a politician to extract a favor (or as economists call it “Rent Seeking”) they are practicing Crony Capitalism. It can take the form of the Teacher Pensions that are sought by the Unions. Or the loan guarantees for Solyndra that were favored by their investors and the Greens. They include Ethanol Subsidies that are endorsed by politicians of both strips. Or Sugar Quotas that are a favorite of Florida Republicans. Pages and pages could be filled listing the myriad of Rents that have been sought. (As a matter of fact the US Tax code covers over 6,000 pages most of which are the result of Crony Capitalism).

Everyone makes excuses for their particular brand of Crony Capitalism. “The mortgage deduction is crucial because owning a home is the American Dream and supports family”. “It’s about educating our Children”. “College wouldn’t be affordable if it weren’t for the student loan program”. “It’s a hand up, not a hand out”. Blah, Blah, Blah. As conservatives we should be against Crony Capitalism of every kind. Every week we experience how bad government is at picking winners and losers, we see the unintended consequences of these decisions, we see power hungry politiciansusing our tax dollars and code to curry favor with certain groups in order to get reelected. What they should be doing is creating an environment where every American has the same opportunity to be successful or to fail on their own merits. As Milton Freidman said “the important part of the profit and loss system is not the profit, but the loss”.

Nice thoughts Dave, but what does this mean. How can this cycle be broken? We need to demand 3 things – 1) transparency in elections. Anyone funding a candidate should be listed on the web within 24 hours. Let the voters decide if the candidate is selling their votes. 2) Simplify the tax code. Those 6,000 + pages are filled with sweatheart deals. If rates are reduced and loopholes are eliminated the incentive to Rent seek is lowered and everyone is on an even keel. 3) Reduce the size of the budget. Why do you rob banks? Because that’s where the money is. When the government spends $3.7 Trillion in one year that is a lot of opportunities for special deals “that no one will notice”.

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