April 27, 2017

Senator Lee: “America’s crisis of crony capitalism”

In a speech  on Wednesday (find the full speech below at bottom), Utah Senator Mike Lee took on what he sees as a major problem causing a loss of opportunity for the poor and middle classes–the rise and expansion of cronyism in the growth of government to benefit well-connected special interests and businesses.

The more power government amasses, the more privileges are bestowed on the government’s friends, the more businesses invest in influence instead of innovation, the more advantages accrue to the biggest special interests with the most to spend on politics and the most to lose from fair competition.


Recently I was on a local radio show with a local politician of the left leaning variety as we discussed and debated the merits of a major speech given by a national politician. He was providing commentary from the left and I from the right.

During a commercial break, I mentioned my disappointment with the favoritism that  banks and major corporations seemed to get from the government, and the local, left leaning politician asked me if I was sure I was a Republican. Shouldn’t I be defending corporate America, not criticizing its cozy relationship with D.C. insiders?

SuskindHogwash, I said. President Obama is about as cozy with corporate America as any politician out there. I cited Ron Suskind’s Confidence Men: Wall Street, Washington, and the Education of a President documentation of Obama’s close relationship to Wall Street, not to mention the left leaning folks at Google, Microsoft, Berkshire Hathaway, Apple, and others who spend billions on lobbying for regulations which benefit them and stifle the free market.

The market, unfettered, works, I said, and cronyism is bipartisan.

“That’s true,” he admitted and we went back on the air and didn’t return to the topic, again.

I wonder he would agree with Utah’s Senator Mike Lee’s assessment Wednesday that cronyism is a “crisis” affecting opportunity in America. In a speech at the Heritage Foundation, Lee took on what he sees as an opportunity deficit in America, hurting especially those without access to wealth or power.

This is America’s crisis of crony capitalism, corporate welfare, and political privilege: in which government twists public policy to unfairly benefit favored special interests at the expense of everyone else.

Cronyism simultaneously corrupts our economy and our government, turning both against the American people. It forces American families who “work hard and play by the rules” to prop up, bail out, and subsidize elite special interests that don’t.

The poor are “increasingly disconnected from the networks of opportunity that more affluent Americans take for granted,” said Lee and the middle-class are finding that  family stability, work-life balance, affordable education and health care “have grown too elusive for too many.”

In a properly functioning free-enterprise economy – in which success can be earned, and has to be – successful CEOs stay up nights either obsessing about innovating to better serve their customers, or panicking about competitors who are.

[…] rewards flow to those who add real value to the lives of their neighbors and their nation.

Cronyism turns all of this upside-down.

Rather than innovate, the wealthy seek influence in government.  On the other hand, it isn’t America’s largest and oldest corporations that have provided the net employment growth from 1977 to 2005, but the innovators.

Once profits depend on serving congressmen instead of customers, the interests of the elite diverge from those of the nation. Innovation slows, and true inequality – inequality of opportunity – emerges. The American people are forced to work for big businesses instead of the other way around. The middle class falls and the middle-men rise.

For this, Lee points to an interesting study by the Kaufmann Foundation that seems to find that “, both on average and for all but seven years between 1977 and 2005, existing firms are net job destroyers, losing 1 million jobs net combined per year. By contrast, in their first year, new firms add an average of 3 million jobs.”

If that’s the case, American governments–at federal, state and local levels–should be doing all they can to encourage everyone to become an entrepreneur.

On the other hand, complicated regulatory government benefits those who can afford to hire lawyers and accountants to take advantage of it to entrench and cement their  business against innovators and upstarts.

We see the effects in our education system, as well, said Lee.

Even our education system is distorted by special-interest privilege, breeding inequality within the very institution that’s supposed to be our society’s “great equalizer.” Across the country, lower- and middle-income families are priced out of the best elementary and secondary schools, and denied affordable alternatives. Meanwhile, our higher-education policies entitle existing universities to inflate prices while denying access to non-traditional students and more affordable schools.

Throughout his speech, Lee makes efforts to make the point that everyone should benefit from the policies, not just “our people.”

There is just the American people… all in this together… in a free-enterprise economy and voluntary civil society… working hard and playing by the rules… helping each other and especially those who can’t help themselves[…] the only option for conservatives today is a clear and simple zero-tolerance policy toward cronyist privilege of any kind.

Policy Proposals:

  • Income tax reform: “eliminate most credits and deductions from the individual tax code, while lowering the mortgage-interest deduction to $300,000 worth of principal.” Also increase “the child tax credit to help equalize treatment for working parents.”
  • Corporate tax reform (with Senator Marco Rubio): “eliminate special interest privilege from the corporate code and level the playing field for small and large businesses.”
  • Regulatory Reform: Supports the REINS Act which would “introduce transparency and accountability to the system by requiring congressional approval of any major new executive-branch regulations.”
  • Regulatory Authorization: “require Congress to prioritize and approve the cost and content of all regulations Washington imposes on the economy every year.”

Other proposals that Lee name dropped or suggested:

  • Senator Rubio has proposed “legislation to protect taxpayers from the implicit health-insurer bailouts in Obamacare.”
  • House Banking Committee Chairman Jeb Hensarling’s  “fight in the House against the reauthorization of the cronyist Export-Import Bank this year[.]”
  • Lee has proposed “legislation to introduce competition and innovation in higher education accreditation – to lower prices and increase access to college.”
  • Congressman Tom Graves‘ “bill to let state and local governments build their own roads and infrastructure without having Beltway bureaucrats, labor bosses, and federal eco-cronies inflate the costs and skim off the top.”
  • Avoid “Too Big to Fail” situations: a new bankruptcy process similar to that proposed by Senators John Cornyn and Pat Toomey “that would transfer authority over failed banks from political regulators to more impartial courts. Or perhaps changes to capital-reserve requirements, an approach supported by Senators David Vitter and Sherrod Brown, which “could force big banks to operate more responsibly, preventing the next crisis from ever emerging.”

04-30 — Cronyism Heritage Speech

About Daniel Burton

Daniel Burton lives in Salt Lake County, Utah, where he practices law by day and everything else by night. You can follow him on his blog PubliusOnline.com where he muses on politics, the law, books and ideas. He is active on social media, Republican politics, and has been named to PoliticIt’s list of the “Top-50 Utah Political Opinion Leaders” on Twitter. You can reach him directly at dan.burton@gmail.com

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