Cameron Smith: The crisis of government cronyism

  For the last several election cycles, Democrats have successfully branded Republicans as the protectors of corporate greed, companies that are too big to fail and the much maligned “one percent.”

  This branding strategy succeeds because it resonates on some level with most Americans. The policy and political arguments of an executive whose annual compensation is more than many of us will make in our entire lives fails to draw sympathy regardless of political leanings.

  Republicans respond to the political left’s successful messaging with the sentiment that government should focus on job creation instead of penalizing success or picking economic winners and losers.

  The cycle continues predictably with the only consensus between the political left and right being that government must grow. The American people simply are left to decide which party will determine how much it should grow and where. This is a dangerous false choice, and our nation’s future success hinges on rejecting it.

  Continued growth of government is largely fueled by cronyism, or unmerited political favoritism. Many Republican politicians support the corporate rent-seeking that comes with many taxpayer-funded economic development deals. Democrats claim that they are the champions of the middle class, but they conveniently ignore the health care companies and insurers intimately involved in the creation and passage of the Patient Protection and Affordable Care Act.  They also turn a blind eye to the large banks exercising their “duty” to help the Obama Administration craft regulations under the Dodd-Frank Act. To make matters worse, both sides vote for subsidies to favored industries.

  Right now federal, state, and local government accounts for 34 percent of America’s Gross Domestic Product. It accounts for more than a third of our economy. The most aggressive political ideas for curtailing the size of our national government suggest “controlling” spending at about 18% of GDP. According to a Real Clear Markets article by Dean Kalahar, “for the first 130 years of [America’s] existence, federal spending as a percentage of GDP averaged around 2.5%.”

  The most beneficial crony for businesses and unions is a well-funded and powerful government. At the same time, nothing is more destructive to our economy than government cronyism used to block out competition, impose barriers to market entry, saddle competitors with burdensome regulation or feed off government inefficiency and waste. Economist F.A. Hayek notes that cronyism results in a state “more and more identified with the interest of those who run things than with the interests of the people in general.”

  For those who are not particularly concerned with free markets, ask yourself whether income inequality has declined as the size and scope of government has increased.

  Even the most liberal estimates show rapidly growing inequality in spite of a government that has radically expanded as a percentage of our economy. If more government regulation and spending reduce inequality, the result should be inverted.

  The growth of government gives tremendous power to the few unions, corporations and lobbying associations that have the time and resources to spend in Washington, D.C. and state capitals around the nation. Taxes that fuel spending and heavy-handed regulations rarely affect these entities, largely because they are present when politicians put those measures together. Instead, your dry cleaner, your favorite restaurant, your healthcare provider, and most importantly, you and your family are left out of the discussion except when cameras are rolling or elections are around the corner.

  The solution to job creation, income inequality and even strong communities is to push government that favors the political elites out of the way for Americans who want to build, manufacture and work to build new jobs for Americans. Unfortunately, significant changes like comprehensive tax, spending and regulatory reform are difficult mountains to climb specifically because they challenge the political establishment.

  Change must first come from Americans rejecting the narrative that growing government in one direction or another is the only way to improve our society, our economy and our lives.

  Americans on both the left and the right must begin solving problems without turning to and expanding the power of elected officials lest their government become, as Barry Goldwater noted, a “monolith of power…bounded only by the will of those who sit in high places.”

  About the author: Cameron Smith is vice president and general counsel for the Alabama Policy Institute, an independent, non-profit research and education organization dedicated to the preservation of free markets, limited government and strong families. If you would like to speak with the author, he may be reached 205.870.9900, at camerons[at]alabamapolicy.org or on Twitter @DCameronSmith.

 

  This article was published by the Alabama Policy Institute.