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Topic: crony capitalism

The Conservative Case Against Crony Capitalism

In an essay for COMMENTARY last year, Michael Gerson and I, writing on how the GOP can revivify itself and increase its appeal, argued that it had to focus on the economic concerns of working-and middle-class Americans, many of whom now regard the Republican Party as beholden to “millionaires and billionaires” and as wholly out of touch with ordinary Americans. (In a Washington Post/ABC News poll that is otherwise filled with awful news for Democrats, by 52 to 32 percent, Americans trust Democrats over Republicans when it comes to helping the middle class.) 

Gaining a fair hearing on a range of issues, we wrote,

requires changing an image that the GOP is engaged in class warfare on behalf of the upper class. Republicans could begin by becoming visible and persistent critics of corporate welfare: the vast network of subsidies and tax breaks extended by Democratic and Republican administrations alike to wealthy and well-connected corporations. Such benefits undermine free markets and undercut the public’s confidence in American capitalism. They also increase federal spending. The conservative case against this high-level form of the dole is obvious, and so is the appropriate agenda: cutting off the patent cronyism that infects federal policy toward energy, health care, and the automobile and financial-services industries, resulting in a pernicious and corrupting system of interdependency. “Ending corporate welfare as we know it”: For a pro-market party, this should be a rich vein to mine. 

Now comes a miner by the name of Mike Lee, who last week delivered a powerful conservative case against crony capitalism.

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In an essay for COMMENTARY last year, Michael Gerson and I, writing on how the GOP can revivify itself and increase its appeal, argued that it had to focus on the economic concerns of working-and middle-class Americans, many of whom now regard the Republican Party as beholden to “millionaires and billionaires” and as wholly out of touch with ordinary Americans. (In a Washington Post/ABC News poll that is otherwise filled with awful news for Democrats, by 52 to 32 percent, Americans trust Democrats over Republicans when it comes to helping the middle class.) 

Gaining a fair hearing on a range of issues, we wrote,

requires changing an image that the GOP is engaged in class warfare on behalf of the upper class. Republicans could begin by becoming visible and persistent critics of corporate welfare: the vast network of subsidies and tax breaks extended by Democratic and Republican administrations alike to wealthy and well-connected corporations. Such benefits undermine free markets and undercut the public’s confidence in American capitalism. They also increase federal spending. The conservative case against this high-level form of the dole is obvious, and so is the appropriate agenda: cutting off the patent cronyism that infects federal policy toward energy, health care, and the automobile and financial-services industries, resulting in a pernicious and corrupting system of interdependency. “Ending corporate welfare as we know it”: For a pro-market party, this should be a rich vein to mine. 

Now comes a miner by the name of Mike Lee, who last week delivered a powerful conservative case against crony capitalism.

In his speech Senator Lee defines crony capitalism (policies in which government twists public policy to unfairly benefit favored special interests at the expense of everyone else); identifies specific cases of it (federal financial regulations, sugar subsidies, our education system, and the Affordable Care Act, among others); and explains why it is antithetical to true conservatism.

Senator Lee also identifies policies that would combat cronyism, including tax, budget, and regulatory reform, ending special tax treatment for the energy sector, protecting taxpayers from the implicit health-insurer bailouts in the Affordable Care Act, modernizing federal labor laws, doing something about “too big to fail,” and more.

“Americans intuitively understand that crony capitalism is not a form of private enterprise,” according to Lee, “it’s a form of public corruption.” He went on to say, “It seems to me that a principled, positive agenda to remove government-created barriers to upward mobility and middle-class opportunity – to level our economic playing field and put economic elites back to work creating jobs and growth for everyone else – represents everything conservatism should stand for.”

I agree; and I hope more conservatives will rally to this good cause.

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The Budget and the Light Bulb

When the House of Representatives voted earlier this week to pass a budget it was widely, and rightly, considered a defeat for the Tea Party. Conservatives who opposed the compromise devised late last year by Republican Rep. Paul Ryan and Democratic Senator Patty Murray to put an end to the partisan impasse on fiscal issues have lost their ability to pressure the House leadership into following them into suicidal stands that undermine the country’s confidence in the GOP. But Tea Party members weren’t the only losers in that vote. Along with them, light bulb manufacturers also took one on the chin as Republicans insisted on including in the $1.1 trillion deal a measure that will defund the enforcement of the regulations that forced consumers to give up their preferred incandescent bulbs and replace them with new halogen, LED, or fluorescent lights.

While proponents of the law forcing the end of incandescent sales claimed it as a victory for the environment, the regulations in fact came about more through the workings of crony capitalism than the arguments favoring energy conservation. Though this move comes after repeated failures by conservatives to end this travesty that enacted bans on various bulbs that have already been implemented, it is not too late to halt a ban that constrains the freedom of consumers to make their own choices and reinstates some slight semblance of a free market. Though a minor part of the compromise both parties have forged, it should give some satisfaction to those who lament the passage of laws that value social engineering over consumer choice.

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When the House of Representatives voted earlier this week to pass a budget it was widely, and rightly, considered a defeat for the Tea Party. Conservatives who opposed the compromise devised late last year by Republican Rep. Paul Ryan and Democratic Senator Patty Murray to put an end to the partisan impasse on fiscal issues have lost their ability to pressure the House leadership into following them into suicidal stands that undermine the country’s confidence in the GOP. But Tea Party members weren’t the only losers in that vote. Along with them, light bulb manufacturers also took one on the chin as Republicans insisted on including in the $1.1 trillion deal a measure that will defund the enforcement of the regulations that forced consumers to give up their preferred incandescent bulbs and replace them with new halogen, LED, or fluorescent lights.

While proponents of the law forcing the end of incandescent sales claimed it as a victory for the environment, the regulations in fact came about more through the workings of crony capitalism than the arguments favoring energy conservation. Though this move comes after repeated failures by conservatives to end this travesty that enacted bans on various bulbs that have already been implemented, it is not too late to halt a ban that constrains the freedom of consumers to make their own choices and reinstates some slight semblance of a free market. Though a minor part of the compromise both parties have forged, it should give some satisfaction to those who lament the passage of laws that value social engineering over consumer choice.

The key fact about the ban on the old bulbs that was usually ignored in discussions of this issue is that the chief advocates of it were not so much the environmentalists but the far wealthier manufacturers who were thrilled to force Americans to buy a new product that cost up to 10 times more than the old reliable bulbs. The profit margin on the new bulbs is significantly higher. The new bulbs may be more efficient and may last longer, but they also contain toxic mercury, are slow to turn on, and don’t work with dimmers and many other fixtures in American homes. While improved LED bulbs may eventually sweep the market and make us forget the old bulbs we chose, the new ones are being shoved down our throats merely to line the pockets of manufacturers while allowing them to pretend to “save the planet.”

The point here isn’t that innovation is bad. To the contrary, if the new bulbs are more cost-effective and reliable they should make the incandescent as obsolete as lamps that ran on whale oil. But legislating such change makes no sense. No laws were needed to force Americans to use cell phones rather than rely solely on landlines. Nor were regulations required to make us give up long-playing records for compact discs and then to embrace digital devices that don’t require either to play music. If the new bulbs prove to be better, the old ones would have become extinct without Washington dictating the change.

Some on the left may lament this vote as a sop to troglodyte conservatives who don’t believe in science. But the truth here is that the reversal of the regulation is a victory for consumer choice over a market model in which bureaucrats and intellectuals dictate what the public must do. Though a small and belated victory, it is one that those who love freedom and the free market are celebrating.

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ObamaCare’s Crony Capitalism: Worse than We Thought

At times it seems like the sheer magnitude of bad news about ObamaCare can redound to its own benefit. It’s easy for individual pieces of bad news to get lost in the sea of failure that has characterized the Obama administration’s signature “achievement.” That might be the case with the most important story to appear about ObamaCare this week, from Tuesday’s edition of the New York Times.

The paper reported that the Obama administration has ruled that the federal health-care program be exempted from the category of laws considered “federal health care programs.” Now, this is obviously dishonest: the federal government is running insurance exchanges, funding health-care subsidies under the law, and employing federal workers to help manage the law–all of which are clearly “federal health care programs.” So why would the administration choose not to label them according to observable reality? Because, as the Times explained, this decision–believe it or not–exempts ObamaCare from kickback restrictions and anti-fraud protections:

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At times it seems like the sheer magnitude of bad news about ObamaCare can redound to its own benefit. It’s easy for individual pieces of bad news to get lost in the sea of failure that has characterized the Obama administration’s signature “achievement.” That might be the case with the most important story to appear about ObamaCare this week, from Tuesday’s edition of the New York Times.

The paper reported that the Obama administration has ruled that the federal health-care program be exempted from the category of laws considered “federal health care programs.” Now, this is obviously dishonest: the federal government is running insurance exchanges, funding health-care subsidies under the law, and employing federal workers to help manage the law–all of which are clearly “federal health care programs.” So why would the administration choose not to label them according to observable reality? Because, as the Times explained, this decision–believe it or not–exempts ObamaCare from kickback restrictions and anti-fraud protections:

The surprise decision, disclosed last week, exempts subsidized health insurance from a law that bans rebates, kickbacks, bribes and certain other financial arrangements in federal health programs, stripping law enforcement of a powerful tool used to fight fraud in other health care programs, like Medicare.

The main purpose of the anti-kickback law, as described by federal courts in scores of Medicare cases, is to protect patients and taxpayers against the undue influence of money on medical decisions. …

Under the Affordable Care Act, millions of people will be able to buy insurance from “qualified health plans” offered on exchanges, or marketplaces, run by the federal government and by some states.

Most of the buyers are expected to be eligible for subsidies to make insurance more affordable. The subsidies, paid directly to insurers from the United States Treasury, start in January and are expected to total more than $1 trillion over 10 years.

Ms. Sebelius said the Health and Human Services Department “does not consider” the subsidies to be federal health care programs. She reached the same conclusion with respect to federal and state exchanges, built with federal money, and with respect to “federally funded consumer assistance programs,” including the counselors, known as navigators, who help people shop for insurance and enroll in coverage through the exchanges.

This has two effects on the law: first, it encourages precisely the kickback schemes this statute was put in place to prevent; and second, it could easily produce an enormous financial burden on the government. The prescription drug “kickback” scheme is how federal law enforcement officials describe the practice in which drug companies give customers coupons to purchase their brand-name medications instead of lower-cost alternatives. The coupons reduce the cost for consumers, but not for insurers or government agencies paying out reimbursement costs. This creates a windfall for the drug companies at high cost to insurers and the government.

So why would the government actively facilitate corruption under ObamaCare, especially at the risk of ballooning its own costs and collapsing its budget estimates?

The answer has to do with the revelations of major drug companies’ cooperation with President Obama on shepherding ObamaCare to the finish line. In June 2012, the Wall Street Journal explained how this particular partnership formed. In 2009, drug companies were concerned that an Obama-led health-care reform effort would emphasize price controls and re-importation allowance–the latter being the process by which drugs sold cheaper abroad could be re-sold here, a case of foreign quasi-socialist health-care systems undermining the market forces in the U.S. that enable companies to be able to conduct the research and development that produces the drugs in the first place.

The administration worked out a deal with the pharmaceutical giants, but then Democratic Representative Henry Waxman demanded further concessions from the drug industry. The White House stepped in to protect them, and the drug companies responded with more pro-ObamaCare advertising.

That appeared to be the extent of the already-nauseating crony capitalism at the heart of ObamaCare. But the Times story suggests otherwise. And the inconsistency is the giveaway: the Justice Department is prosecuting high-profile companies (like Johnson & Johnson) for a practice the government plainly considers an illegal kickback scheme. And yet now that same government is giving the green light to the practice, which will be a financial boon to the companies that helped ObamaCare pass in the first place.

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Democrats’ Convention of Hypocrisy

The “hope and change” mantra that lifted Barack Obama to the presidency in 2008 raised unrealistic assumptions about his administration that were bound to be debunked after a few years in office. That’s why his re-election campaign strategy is based on demonizing his opponents rather than running on a record of all the “change” he effected. Yet there are some vestiges of the messianic tone of his 2008 run that remain, and one of them is a ban on corporate sponsors at the 2012 Democratic National Convention. The ban is a holdover from the rhetoric of four years ago that asserted the Obama candidacy would bring an end to the way lobbyists and big business attempt to influence politics. This was a joke even four years ago as the Democrat raked in record contributions from Goldman Sachs and other Wall Street titans and corporate giants. But the 2012 convention in Charlotte will be free of such sponsors, allowing the Democrats to claim they are faithful to their ideals.

However, as the New York Times reports today, the leading local booster and organizer of the Charlotte convention just happens to be the CEO of the nation’s largest energy company, which has been a major beneficiary of the president’s trillion-dollar stimulus boondoggle. Duke Energy CEO James E. Rogers claims that he and his company are going all out to help the Democratic jamboree as a matter of local pride. But the company’s costly contributions to the event have raised serious issues about the way it stands to benefit from Obama’s policies, making a mockery of the Democrats’ pose as the opponents of corporate influence. Rather than a tribute to the party’s stand against influence peddling, the lack of other corporate sponsors merely illustrates President Obama’s ongoing hypocrisy about big business and ethics.

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The “hope and change” mantra that lifted Barack Obama to the presidency in 2008 raised unrealistic assumptions about his administration that were bound to be debunked after a few years in office. That’s why his re-election campaign strategy is based on demonizing his opponents rather than running on a record of all the “change” he effected. Yet there are some vestiges of the messianic tone of his 2008 run that remain, and one of them is a ban on corporate sponsors at the 2012 Democratic National Convention. The ban is a holdover from the rhetoric of four years ago that asserted the Obama candidacy would bring an end to the way lobbyists and big business attempt to influence politics. This was a joke even four years ago as the Democrat raked in record contributions from Goldman Sachs and other Wall Street titans and corporate giants. But the 2012 convention in Charlotte will be free of such sponsors, allowing the Democrats to claim they are faithful to their ideals.

However, as the New York Times reports today, the leading local booster and organizer of the Charlotte convention just happens to be the CEO of the nation’s largest energy company, which has been a major beneficiary of the president’s trillion-dollar stimulus boondoggle. Duke Energy CEO James E. Rogers claims that he and his company are going all out to help the Democratic jamboree as a matter of local pride. But the company’s costly contributions to the event have raised serious issues about the way it stands to benefit from Obama’s policies, making a mockery of the Democrats’ pose as the opponents of corporate influence. Rather than a tribute to the party’s stand against influence peddling, the lack of other corporate sponsors merely illustrates President Obama’s ongoing hypocrisy about big business and ethics.

Rogers is under fire not so much for the way he has used his perch at the company to help raise money for the Democrats as the manner in which Duke Energy has donated office space and guaranteed a loan to enable the financing of the convention. While as the Times notes, the Democrats sent out a fundraising letter last year with Michelle Obama’s signature promising “a different convention for a different time,” the company’s outsized role as a sponsor combined with the fact that it received $226 million from the president’s stimulus and energy initiatives has exposed the Democrats to both mockery and legitimate complaints.

The problem here is not so much the obvious conflict of interest as Duke Energy, which stands to rake in even more presents from the government if Obama is re-elected, plays host in Charlotte. Rather it is the pretense that the Democrats are trying to cleanse the political system of the influence of money. Even many Democrats admit that it is not possible to eliminate corporate contributions to hold conventions and that the Republicans, who have no such faux restrictions, are being a lot more honest about it this year.

As President Obama has proved during his four years in office, his administration has broken new ground in crony capitalism as the stimulus and other measures poured money from government coffers into the pockets of companies like Solyndra that had a friend in the White House. It is not so much the spectacle of Democratic corruption that grates on the voters but the president’s pose of being above such petty concerns. Contrary to the way it is being sold to the public, the Democratic convention is a tribute to the venality of their candidate, not his ethics.

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