Crony Capitalism

When the Government Plays Favorites

Government continues to threaten our future while claiming to help us.

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People say government must "help the little guy, promote equality, level the playing field."

People often go into government to do that. But even when people mean well, it's natural for them to help out their cronies.

David Stockman, who ran the Office of Management and Budget under Ronald Reagan, was criticized for saying the government's budget numbers didn't add up. But he was right.

Now, in his book "The Great Deformation," he says both major political parties failed ordinary Americans when the housing bubble burst, and they rushed to bail out cronies at big banks. Government continues to threaten our future by printing gobs of money and guaranteeing trillions in loans to banks, homeowners, students and other politically connected groups.

The political class claims the economy would have been destroyed in 2008 without a bailout of the big banks. Stockman says that's a myth: "The Main Street banks were not going to go into a huge retail bank run … and (Fed chairman Ben) Bernanke is totally wrong when he says we were on the verge of Depression 2.0. We weren't close. We would have worked our way through it. We've done it many times in history."

Worked our way through it? Without the bailouts, there might have been a bigger stock market drop, and more businesses would have closed! But Stockman says, so what? It would have been worth it. And I agree with him.

Today, taxpayers would be $1 trillion richer and not on the hook for trillions in loan guarantees. Prices would now have found a natural floor, business would be eagerly hiring again, and America would be free of moral hazards like "too big to fail" banks.

What do I mean by "moral hazard"? I once built a beach house on the edge of the ocean—a very risky place to build—but I did so because federal flood insurance guaranteed my investment. Eventually, a storm swept away my house, but I didn't lose a penny. Government "insurance" covered my loss. Thanks, taxpayers!

Now that I'm wiser—and more libertarian—I'm ashamed that I took your money and understand that the whole program is a mistake. The same government that worries about global warming causing flooding spends billions to compensate risk-takers who live next to oceans. That's moral hazard.

But beachfront property owners have political connections. They make desperate calls to legislators. Politicians respond to whoever screams loudest.

When the housing bubble burst, politicians got panicked calls from their friends on Wall Street—in many cases former colleagues. Instead of letting their old friends take big losses and trusting smaller banks to expand and take their customers, the political class propped up risk-takers who made bad bets.

It's not that those who move back and forth between Wall Street and government are evil. But when you are close to a problem, you are quicker to panic. A few years back, brilliant scientists who studied SARS or bird flu sincerely thought a mass epidemic was coming, and therefore government had to "do something." (It didn't hurt that "doing something" meant spending more on their area of research.)

In 1999, computer techs really believed computers would freeze when the calendar turned to 2000, causing planes to fall from the sky. Killer-bee researchers were convinced bees would sting us to death. Anti-pesticide environmentalists, flesh-eating bacteria researchers and today's global warming fanatics are all sincere in their fear.

But unlike Wall Street bankers, none could confiscate a trillion of your dollars and give them to their cronies. Believe me: If Al Gore could have done that, he would have.

Politicians accuse those of us who advocate limited government of being heartless when we say that government should not protect us against loss. But government efforts to "protect" us create a moral hazard that just makes our problems bigger over time.

Politicians say, "Yes, we can!" But don't be fooled: "No, They Can't."

NEXT: Gunman Holding Firefighters Hostage in Georgia

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  1. Wait, when doesn’t the government play favorites?

    1. Every appropriation is a choice to pay someone and not someone else. It’s government’s job to play favorites.

      1. “Every appropriation is a choice to pay someone and not someone else.”

        Which is why they should be as small as possible.

        “It’s government’s job to play favorites.”

        Says the guy who thinks libertarians are corporatist stooges

        1. Yeah you are. But the point is not to play favorites resulting from corporate bribery, but based on the public interest. You don’t believe in a public interest, and that corporate bribery can be done away with by wishing upon a star.

          1. Tony| 4.10.13 @ 8:41PM |#
            “Yeah you are. But the point is not to play favorites resulting from corporate bribery, but based on the public interest”

            Now THAT’s FUNNY, shithead.

          2. But the point is not to play favorites resulting from corporate bribery, but based on the public interest.

            Which of course is impossible because people in power will always find a way to get the excesses of government.

            Face it Tony. You’re in favor of an economically fascist corporate state where rich people loot the government. That’s the only way this ever ends.

            1. “Which of course is impossible because people in power will always find a way to get the excesses of government.”

              Not to mention, what exactly is the “public interest?” Whatever the majority votes for? That could lead to some pretty undesirable ends …

              1. Much more desirable to ignore majority wishes and just do it your way, because you know best?

                1. The majority has decided that queers should be rounded up, and forced to go straight.

                  I’ll fight to death for the minority.

                  1. Thanks but not every minor change in regulation is a call to arms.

                    1. Tony| 4.10.13 @ 11:48PM |#
                      “Thanks but not every minor change in regulation is a call to arms.”

                      Shithead, you have no idea what the term “minor” means. You’re too stupid to even fantasize about the definition.
                      You’re an ignoramus, shithead.

                2. Tony| 4.10.13 @ 9:47PM |#
                  “Much more desirable to ignore majority wishes and just do it your way, because you know best?”

                  No, shithead. Much more desirable to ignore your claim to know that the ‘majority’ wishes and not do it at all.
                  Is that clear, shithead?

                3. Much more desirable to ignore majority wishes and just do it your way, because you know best?

                  You’re an idiot, Tony. The majority should not be allowed to vote away the rights of a minority. Or should I be allowed to take rights away from you if I can muster 50.1% of the electorate?

                  Not all of us yearn to worship demagogues and the loving embrace of the state, like you do. The state will never love you, Tony. I’m sorry if you’re just hearing this now.

                  1. Not every vote is a vote on people’s civil rights.

            2. But the point is not to play favorites resulting from corporate bribery, but based on the public interest.

              And WHO defines the public interest? That’s always the problem. No one is capable of accurately defining the public interest – because it is in the eye of the beholder. So it can never be satisfied.

            3. Possibly, but there’s no reason to hasten it along by removing all barriers from such, as is a primary concern of “free market” advocates the world over.

              1. Tony| 4.10.13 @ 9:46PM |#
                “Possibly, but there’s no reason to hasten it along by removing all barriers from such, as is a primary concern of “free market” advocates the world over.”

                Shithead, you should learn to read English.
                WIH is this referring to? Are you capable of copying and pasting a comment? Is this beyond your skills, shithead?

          3. “corporate bribery can be done away with by wishing upon a star.”

            The projections here is just incredible. You’re the one who thinks passing a law will magically make it go away. I’m mean this is really ridiculous, one of the arguments libertarians make against campaign finance laws is that they do nothing to actually curtail corruption, and yet Tony thinks we’re the ones wishing upon a star. Another example would be all the government regulation he supports that opens up a huge opportunity for corporate bribery

          4. You believe in the nonsensical, arbitrary concept of “public interest”, which is a subjective term and even more futile than wishing on a star.

          5. Public interest also includes the taxpayers, and future generations. Any government expense must be evaluated not only whether the expense itself is beneficial to society, but also whether the results justify the expense itself. The actual results, including side effects and long term considerations, not some made-up claims about potential benefits.

            Many government programs simply are a blatant failure, $1000 for a hammer style.

            1. Or $3 trillion for a war based on lies. Or $1 trillion in tax cuts that did nothing for the economy.

              1. Bush sucks. So far, Obama sucks a little more, but it isn’t an endorsement of Bush. Bush and Obama both suck ass, for exactly the same reason. That you focus on one shows only how vapid and dishonest you are.

          6. Yeah you are.

            Just curious, but how in the fuck can you call anyone here a stooge? We come to our views through first principles and objective reality, and you cheer on and evolve your morals to match the whims of a fucking hyper-partisan political party primarily funded by special interests.

            You claim that we’re doing the bidding of the super-rich corporate entities, despite the fact that these entities have taken over world commerce in the century-long era of complete and total repudiation of Libertarianism at the federal level, and despite the fact that while these same people finance the campaigns of people like Barack Obama and Mitt Romney, they don’t give a dime to a Gary Johnson.

            So tell me, you disingenuous shithook, exactly where are YOU, the state-as-arbiter-of-morality apologist for power, qualified to call US, the no-man-is-above-the-law anti-cronyism-and-manipulative-monetary-policy ideologues, corporate stooges? In what feverish fucking twist of absolute cognitive dissonance?

            1. That reply is frame-able.

  2. I will be damned if I will pry my wallet open for a candidate who won’t regulate my competition out of the market.

    1. It’s amazing how many progtards seem to be completely oblivious that this is why many businesses support regulation. They actually think TEH CORPORASHUNS want deregulation and brave liberals are there to help them.

    2. Hem in existing competition, create massive barriers to entry for new competition. Laugh like a little girl.

      1. taxi medallions

        1. “Barriers to entry” is a libertarian/Randroid/Kochtopus myth.

          All regulations are put in place solely for the greater good of society.

          1. and if you disagree you want to use those sweet salty tears of those poor brown kids in sweatshops to polish your platinum rimmed monocle

            1. Platinum? How pedestrian! Tungsten rims are in season this year, old boy. I use platinum to shackle my child laborers to their work stations.

  3. I remember I saw on stossel once, there was this dermatologist who was using those “nible fish” for people’s feet and it was regulated away by an association made up elusively of her competition. Such a blindingly obvious scam I wanted to scream at the tv.

  4. exclusively…fuck

    1. Elusively works in that sentence just as well as Gorilla works in your handle.

      1. y’know in a way…it kinda does. And it was a toss up between gorilla tactics and simian saboteur

  5. Our good doctor needs to report back to us on this town.

    1. I’ve never met anyone who got an Eastern European mail order bride. Wonder what it’s like.

      1. I used to work for a guy whose best friend was young and rich, but he was short and awkward too; he got himself a russian bride.

        She looked hot in pictures, but up close was kinda skanky and looked older than her age. She’d party every night in the clubs and he’d stay at home.

        1. good lay though?

          1. I have a feeling that if you’re buying a wife any lay is a good lay.

        2. That sounds about right. If you want unconditional love, buy a dog. If you want familiar contempt, buy a cat, or get married.

    2. Eastern European women are definitely beautiful

  6. Looks like stossel wants to be invited to some cocktail parties. The cosmotarian party scene must be heating up with the weather.

    Why doesn’t this article criticize Obama or Pelosi? Why is stossel against the government helping businesses? Is he a commie?

    Why won’t serious people answer my serious questions? It’s like when you go to McDonald’s and they have the shamrock shake but it doesn’t taste like you remember it did.

    1. It’s like when you go to McDonald’s and they have the shamrock shake but it doesn’t taste like you remember it did.

      Give me a break!”

      1. No doofus. “Give me a break” is from the jingle for Kit-Kat bars, not Shamrock Shakes. You can’t even get that right. Jeesh!

  7. Should be interesting to see how that all works out.

    http://www.AnonNow.tk

  8. Why would you be embarrassed that you took the money for your destroyed beach house? I mean, I think that someone throwing hundred dollar bills on the floor and yelling, “Come and get it!” is stupid and I think he shouldn’t do that, but I’m still picking up the Franklins and stuffing them in my pockets without second thoughts.

    1. but but but Ayn Rand collected thocial thecurity so she’th a welfare queen!

  9. “When the housing bubble burst, ”

    Some clever people thought “never let a good crisis go to waste.” And they didn’t.

  10. my classmate’s mother-in-law brought in $13061 past month. she has been working on the internet and got a $575500 condo. All she did was get blessed and put to work the instructions written on this link and go to home tab for more detail— BIG76.COM

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