Crony Capitalism

All Animals Are Equal, But Politicians' Cronies Are More Equal Than Others

The privileged win. The people lose.

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Politicians say, "We're all equal," and pretend that they represent everyone. But, in fact, they constantly pick winners and losers. America, as The Wall Street Journal's Kim Strassel points out, is now like the place described in George Orwell's book Animal Farm: "All animals are equal," but some are "more equal than others." Animal Farm was about Communism, but today the allegory applies to our bloated democracy, too.

During the "fiscal cliff" negotiations that Congress and the media made sound so tough—as if every last penny were pinched—Congress still managed to slip in plenty of special deals for cronies.

NASCAR got $70 million for new racetracks.

Algae growers got $60 million.

Hollywood film producers got a $430 million tax break.

When America's going broke, how do moviemakers get a special break? By lobbying for it. Movies are a sexy business, so 42 states offer film producers "incentives" to film there. (State legislatures are as shortsighted as Congress).

Michigan offered the juiciest handouts until the state ran out of taxpayers' money. Now Ohio, Louisiana and Georgia (that's why the latest "Hunger Games" movie was shot in Georgia) offer the biggest handouts. The mayor of Los Angeles recently declared a "state of emergency"—not over an earthquake or storm, but because so much moviemaking has left California for states with bigger subsidies.

The U.S., which used to pride itself on being more free-market than Europe, is now hardly different from France, which crippled its economy by subsidizing all sorts of old industries, and even gives money to producers of American films that mention France.

Politicians everywhere are always eager to help out people who helped get them elected. In the U.S., labor unions were big supporters of President Barack Obama, and—presto—unions got 451 waivers from Obamacare.

Congressional staff got a special exception, too. Funny how many of these laws are supposed to be great for all of us but, once passed, look ugly to the privileged class. So they exempt themselves.

Even the crusade to save the earth is captured by the "special" people. Subsidies for "green energy" were supposed to go to the best ideas. Yet somehow your money went to companies like Solyndra, whose biggest shareholder just happened to be an Obama backer who bundled money for the president.

And somehow Al Gore, who had a modest income when he entered politics, reaped $200 million from brilliant investments after he left office. He must just be really smart.

On my TV show this week, progressive commentator Ellis Henican says this cronyism is "inevitable" and doesn't really bother him: "If we want roads and bridges and prisons and a military and a safety net, someone somewhere is going to benefit from that. But you can't use that as an excuse to not do important things for our society."

I say it's one more reason to keep government small.

Politicians doling out favors quietly shift where society's resources flow, who gets employed, what ideas are pursued.

It distorts the economy and the culture—and it turns us into a nation of favor-seekers instead of creators and producers.

What about all the new businesses that would have gotten investment money but didn't have Gore on their boards? What new ideas might have thrived if old industries weren't coddled? We don't know. We will never know the greatness of what might have existed had the state not sucked the oxygen out of the incubator.

Because of government's favor-granting, Washington, D.C., is now the place where the well-connected go to get rich. For the first time in history, six of the richest counties in the U.S. surround D.C. When a small group of people gets to dispense $3.6 trillion and set rules that can help or kill your idea, you want to suck up to them.

As long as government has the power to grant favors, cronies and their lobbyists will seek those favors out.

The privileged win. The people lose.

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  1. Is this the man-beast love thread? I’m asking for a friend.

    1. At least it’s not the CP thread from last night.

      1. Well I saw the pig and after the last series of post about pedophiles I made an assumption.

      2. Reason had to have left that as the Independents thread to fuck with us.

        1. Prolly cause we bitched when they left it as the weekend/cruise thread.

  2. For the first time in history, six of the richest counties in the U.S. surround D.C.

    Maybe it’s that specific number for the first time in history, but DC has been nationally (in)famous for jaw-droppingly rich suburbs since at least the seventies.

    1. The war on poverty is a success! Federal workers have been lifted from poverty!

  3. John Stossel wants to know why?while America’s going broke?moviemakers get a special break?

    When the remake of Gabriel Over the White House (starring Matt Damon and Ben Affleck) hits the theaters, you’ll know.

    1. Yeah, that pro-government propaganda they churn out comes with a price tag.

  4. 24/7:
    “Eight Cars Fall into Sinkhole at National Corvette Museum in Kentucky ”

    I’m sure that’s a metaphor for something.

    1. At least they were Corvettes and nothing important was lost.

    2. This is obviously a warning from Mother Gaia about global warming.

      1. She must have been asleep too long. Better call out the Planeteers.

  5. But according to New Progressive Theory, all of those organizations which received that money are now “more free”.

  6. Yet when Obama tried to end the oil company subsidies the GOP went into a collective conniption fit.

    1. Man, something smells like shit.

      1. “Man, something smells like shit.”

        Get near a shitpile and that happens.

    2. Tax breaks are not subsidies. A subsidy is when government takes money from one party and gives it to another. A tax break is when government takes less than it otherwise would have. Oil companies pay billions of dollars in taxes. They are not subsidized. Dipshit.

      1. Money is fungible. When taxes are artificially uneven, that’s an indirect subsidy. To pretend otherwise is silly.

        1. Taking less is still not the same as giving.

        2. When taxes are artificially uneven then that is an arbitrary taking. Allowing you to keep your money is not a subsidy of any kind. Money may be fungible but private property is not.

          1. Well put, Bryan C.

          2. When the government takes less money from some and more from others, the effect is the same, whether it’s called less subsidy and more subsidy, or less taxes and more taxes. You may as well quibble over whether overpaying income tax withholding and getting a refund is different from underpaying withholding and paying at end of year.

            Quibbling over nonsense like that is the same as sending food to a dictatorship and denying it helps the dictator stay in power.

            1. “Don’t tax you, don’t tax me, tax the fella behind the tree”. Can I PWEASE get elected or erected or somethin’, NOW?!?!!? Send me you votes or your Viagra NOW!!!

            2. Not taking as much money from someone is not the same as giving them money they never had in the first place.

              Taxes and subsidies can have the same effect on market forces but they are two completely different animals.

        3. What are referred to as “subsidies” for the oil industry are merely deductions for expenses, depreciation, etc. that all corporations get. The oil industry pays massive taxes, unlike, say, government darling GE. Typical disingenuous bullshit from proggies.

        4. For what you wrote to make sense, one person’s tax break has to be the cause of another’s taxes being higher. I’m not at all convinced that eliminating some tax breaks would lead to the remaining taxes’ being diminished. In fact, I think giving tax breaks to some increases the pressure to reduce taxes for others.

          1. If giving tax breaks to some does not increase taxes on others, then it increases the deficit and debt.

            Which still has to be paid by somebody, directly or indirectly.

            On the whole, I think there is value in distinguishing between normal deduction of business expenses, tax breaks, and subsidies.

    3. Yet when Obama tried to end the oil company subsidies the GOP went into a collective conniption fit.

      Oh, OIL company subsidies. For a second my mind registered that as ‘energy company subsidies’. My bad.

      1. Speaking of energy company subsidies……what happened to solydranda?

    4. Re: Palin’s Buttplug,

      Yet when Obama tried to end the oil company subsidies[…]

      Yes. Poor, poor and powerless president Obama. It’s not like he had both houses for himself his first two years in office.

      I have tears rolling down my eyes. See the water below my eyes? See? Those are tears.

    5. Not that favor subsidies to any business, but oil company subsidies are actually the same sort of tax deductions that all businesses get.

      Last I checked, the Feds did not write Exxon a check, unlike Soyndra or some of the other favored.

      1. So tax breaks for profitable companies=good and tax breaks for companies that don’t make a profit= bad. Yes, of fucking course! Thank you libertarian for showing me the difference between giving tax money to oil company flunkies and giving tax money to cellulosic ethanol flunkies. I like the way you libertarians are all about fighting corruption.

        1. The corruption seems to be in that soft spot between your ears.

    6. The main “subsidy” he is referring to is the deduction for intangible drilling and development costs (IDC). This is for expenses such as grating roads to a well, labor, site prep, etc. that are essential to drilling a well but have no salvage value.

      When a company invests in drilling new wells, they spend millions of dollars up front without seeing an immediate payout (e.g., a well in the Bakken shale may run $10MM). The IDC deduction allows companies to immediately deduct the aforementioned items instead of depreciating them using MACRS or depleting them over the life of a well; thus allowing the tax savings to be immediately reinvested.

      Therefore, it is merely a timing difference, not a permanent revenue loss for the government. It is letting the company deduct more of its deductible business expenses in year 1 instead of years 1-??. Moreover, the government still restricts the IDC deduction for Alternative Minimum Tax (AMT) purposes.

      That doesn’t seem like a subsidy to me. If it was a permanent revenue loss for the government (e.g., free shit), I would call it a subsidy.

      1. If it was a permanent revenue loss for the government (e.g., free shit), I would call it a subsidy.

        I wouldn’t, because I think its an abuse of the language to call “leaving money in the taxpayer’s hands” a subsidy. Subsidies are the feds writing a check or, perhaps, doing something like guaranteeing a loan to get the private party a lower interest rate.

        Those IDCs strike me as being awfully expense-like, especially since they are improvements to someone else’s property that allows the oil drilling to company. They don’t result in capital assets in the oil company’s hands, so it would be odd to treat them as capital expenditures rather than expenses. Not even, IMO, a “tax break”, just good accounting.

        1. “Those IDCs strike me as being awfully expense-like…”

          Exactly. It’s analogous to offices deducting ordinary business expenses such as employee wages or materials and supplies that have no salvage value.

          “Not even, IMO, a “tax break”, just good accounting…”

          I agree. I think it’s an (extremely rare) instance where the Internal Revenue Code attempts to coincide with economic reality.

  7. Have I mentioned I like Stossel?

    1. Francis and Stossel sitting in a tree…

      1. … Rooting for private property.

    2. It’s the ‘stache

  8. The mayor of Los Angeles recently declared a “state of emergency”?not over an earthquake or storm, but because so much moviemaking has left California for states with bigger subsidies.

    It’s not a subsidy if the government is stealing less money via taxation than other similarly situated businesses in the state. Cronyism, yes, but not a subsidy.

    1. When the gov’t says that they will essentially ignore the tax code for your special project, I’d call it a subsidy. And cronyism.

  9. Yet when Obama tried to end the oil company subsidies the GOP went into a collective conniption fit.

    Define “subsidy” for us, shit-for-brains.

    1. Subcity? It’s like this awesome sandwich shop bro, best bread in town. Much better than subway, natch!

      /Progtard

    2. Apparently not taking is giving and not giving is taking. So by taking less in the form of a tax break, that’s giving. Since the money from that tax break would have been used to feed starving children, that tax break amounts to taking food directly from the mouth of starving children, selling it, then giving the proceeds to Big Oil.

      1. Let’s not forget the bastard cousin of this model where giving money to someone for doing nothing is called an investment.

  10. Was Stossel’s point here to simply depress me?

  11. SEPARATION OF ECONOMICS AND STATE.

    .

    And Stossel is failing to identify the essential nature of America’s current system when he attributes the cronyism to “bloated democracy”; it is not democracy as-such that is to be condemned (in this context), but the mixed economy. America is *not* a capitalist country, it is a mixed economy, a pragmatic hodgepodge of free markets and coercive controls, of capitalism and statism, of individualism and collectivism.

    Those “gray areas” exalted by pragmatism are, in the context of political economy, holes through which bureaucrats and their cronies use force to protect themselves from superior competitors and objective market forces.

  12. I bet wanting to cut any funding to Nascar would be viewed as liberal or socialist by its conservative fans. I remember an old redneck saying former New Mexico Governor Gary Johnson was NOT a fiscal conservative because he wanted to streamline Social Security and raise the retirement age. Seriously someone thought making changes to Social Security was a left-wing conspiracy. Usually it’s the other way around. Talk about being resistant to change.

    1. Most conservatives (as most people in-general) don’t know that Nascar is being subsidized. But I would surmise that the conservative on the street, so to speak, would say it should be ended if he were posed the question.

      But if you really want to talk about “being resistant to change”, remember that Democrat politician who said (in abject horror) of the Ron Paul movement, “They want to repeal the entire twentieth century!”

      That is your new reactionary, bub–the leftoid on the street, on tv, in government skoolz and fascist universities.

      And you can bet your ass that we want to repeal the twentieth century.

      1. I’m from Florida where it’s common to find people who are socially conservative and economically progressive, and that’s the part of the Nolan Chart i was hitting at.

        And as a political moderate whose political hero is former New Mexico Governor Gary Johnson I do agree with PART of the sentiment that an ideological hardliner like Ron Paul would repeal some useful parts of the twentieth century. Only an ideologically driven person would want to get rid of all federal food labeling laws and worker’s comp (the Cato Institute has some great material on reforming worker’s comp). I am aware that if he were president that he (Paul) wouldn’t have been able to accomplish alot ideologically and that it wouldn’t have been very different from a (Gary) Johnson presidency, but that doesn’t change his ideals.

      2. Dear 20th Century,

        You were great but I think we need some time apart. It’s not you, it’s me.

        Could we just repeal the new deal, the great society, the war on poverty and the war on drugs just to see how it goes?

        1. Social Security and Medicaid are legitimate programs that SOME people need. They just need to be overhauled. The Cato Institute has alot of good material on doing just that.

  13. Liawatha actually making some sense…but not completely … about student debt.

    While wringing their hands over America’s student-loan crisis ? a $1-trillion debt bubble resembling the 2008 mortgage meltdown ? federal officials ought to look in the mirror. Washington started the mess and enables it to worsen.

    Sallie Mae, a government-sponsored enterprise turned “private,” exhibits a “pattern of breaking the rules and ignoring its contractual obligations,” said U.S. Sen. Elizabeth Warren, D-Mass.

    All the while, Sallie has raked in record profits with Washington’s help.

    Years after Sallie went private and dominated the student-loan market, the federal government continues to grant the company favorable loan contracts worth hundreds of millions dollars.

    “These contracts are in addition to a number of indirect and direct benefits the government has already provided to Sallie Mae,” Warren said.

    Notice Liawatha blames the ‘private’ nature of Sallie Mae, not so much the government corruption, for the problem. Is she really that deaf, dumb, and blind? Is she Tommy?

    1. When it became a private KKKorporashun those activities became dirty. As an appendage of inherently beneficent government those activities were undertaken purely in the furtherance of altruism with no concern for dirty money or profit, and the purity of the state sanctified them.

  14. Nascar. Bread and Circuses. Bread and Circuses. Bread and Circuses.

    1. At least a circus has 3 rings. And something interesting going on inside them…

      1. Yeah idiots getting injured or killed.

  15. On my TV show this week, progressive commentator Ellis Henican says this cronyism is “inevitable” and doesn’t really bother him: “If we want roads and bridges and prisons and a military and a safety net, someone somewhere is going to benefit from that. But you can’t use that as an excuse to not do important things for our society.”

    What is it, Stossel? Too chicken to do your show live?

    I saw Kennedy blow snot out of her nose on live TV. That alone is worth the $77/month I’m paying for Uverse. Why can’t you be that bold, so I can start profiting from my investment?

  16. The U.S., which used to pride itself on being more free-market than Europe, is now hardly different from France, which crippled its economy by subsidizing all sorts of old industries, and even gives money to producers of American films that mention France.

    The level of cronyism one is seeing is to be expected when the end is almost near. There has been always some level of cronyism ever since there has been government, however mostly subdued by the sheer presence of a productive economy; however, once those who are well-connected start to realize that the money is running out and that the privileges will stop catastrophically, they scramble to get as much as they possibly can, increasing the visibility of their corruption to the point where it completely overwhelms the activities of the productive. The scenario is the same that you would see in a run of the bank or a food panic or a looting.

    1. The level of cronyism one is seeing is to be expected when the end is almost near.

      Unfortunately, OM, I am afraid you are too optimistic. There are so many people apologizing for the cronyism it won’t go away that easily or very soon. I don’t see too much panic on the part of the looters. ;(

  17. “someone somewhere is going to benefit from that. But you can’t use that as an excuse to not do important things for our society.”

    I agree. That’s what’s so wonderful about voluntary trade you dipwad.

  18. “progressive commentator Ellis Henican says this cronyism is “inevitable” and doesn’t really bother him: “If we want roads and bridges and prisons and a military and a safety net, someone somewhere is going to benefit from that. But you can’t use that as an excuse to not do important things for our society.”

    Wow. What a putz.

    Sadly, this is EXACTLY how they argue. I have friends who say stupid things like this. Corruption is inevitable, as long as they keep my water running!

    BUT, the second a company goes bad – whoa! – out come the Che t-shirts.

    Finks all around.

  19. The oil industry pays massive taxes, unlike, say, government darling GE. Typical disingenuous bullshit from proggies.

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