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3 Ways the Trump Administration Could Stop Crony Capitalism

Drain the swamp. Please.

TrumpOlivier Douliery/SIPA/NewscomIf the pre-budget rumors are true,* President Donald Trump is making good on his promise to drain the swamp by putting a few corporate welfare programs, such as the Export-Import Bank and the Overseas Private Investment Corp., on the chopping block. Unfortunately, getting rid of cronyism in the federal government won't be easy, given the deep-rooted and mutually beneficial relationship between politicians and commercial interests. Still, the new administration and Congress could take some action in the coming year to move in that direction.

Before I start detailing how, let me say that abolishing all corporate welfare programs is the right thing to do. Corporate welfare, a practice in which government officials provide preferential treatment (such as loans, subsidies or regulatory preferences) to hand-picked firms or industries, is unfair. It picks winners and losers for no other reason than that they're politically connected or not politically connected. The winners are usually big and able to invest in lobbying on Capitol Hill. The victims are often unseen and usually don't have a press office. Favoritism also slows the economy because entrepreneurs and businesses misdirect their resources. They spend time lobbying for those privileges instead of finding new ways to create value for customers.

Short of terminating programs, the first thing Congress could do is adopt fair-value accounting. Under the government's current accounting scheme, most direct and guaranteed loans look as if they cost taxpayers nothing and even create the illusion of returning money to the Treasury. Moving to a fair-value accounting system would actually capture the direct and opportunity costs of these lending programs.

That was the finding of a 2014 Congressional Budget Office report that looked at the real cost of three lending mechanisms—the Department of Education's four largest student loan programs, the Ex-Im Bank's six largest export credit programs and the Federal Housing Administration's single-family mortgage guarantee program. In our new Mercatus Center paper, "Curbing Favoritism in Government," Tad DeHaven and I explain that when the CBO switched to a fair-value accounting method like the one employed by the private sector, it found that rather than save or make money, these programs combined will cost taxpayers—excluding administrative expenses—roughly $120 billion over the next 10 years. A fair-value accounting system would make these programs' costs more transparent.

Second, Congress could create a Base Realignment and Closure-like commission to eliminate favoritism. An independent commission made of non-politician experts would be charged with the narrow focus and specific instructions of reviewing programs, tax expenditures and regulations that confer privileges on commercial interests. The commission would then submit a package targeting the elimination of the most egregious corporate welfare programs. It would go into effect unless a joint resolution disapproving all of the commission's recommendations were passed and signed by the president.

Like BRAC, which it's modeled on, this would likely be a very effective tool to curb cronyism. BRAC successfully neutralized special interests, DeHaven and I say, as it provided "policymakers political cover by enabling them to support the overall package of base closures while putting up a public fight against closures back in the district to demonstrate they stuck up for their constituents' jobs."

Finally, lawmakers could start taking a real stand against corporate welfare. When then-Sen. Tom Coburn, R-Okla., successfully stood up against spending $223 million worth of taxpayers' money through earmarks to reconstruct an Alaskan bridge connecting an airport on Gravina Island (population 50) to the town of Ketchikan (population 8,900)—a bridge he labeled the "Bridge to Nowhere"—not only did we remember his gesture in the name of taxpayers but also it helped kill earmarks once and for all.

Coburn was following in the steps of former Sen. William Proxmire, a Wisconsin Democrat. Proxmire left Congress in 1989 and was an outspoken opponent of government waste, including corporate welfare. He would famously highlight a program that wasted public money and the public officials supporting it and give them "Golden Fleece Awards." According to Time magazine, his constant denouncing of government waste and those who supported it made Proxmire "the bane of defense contractors, pork-barreling colleagues and consumer frauds." His persistence won him very rare but important victories.

Lawmakers could emulate this model to fight against the unfairness of corporate welfare and stand for its unseen victims. Their efforts might not always be successful, but they would be remembered for trying to bring some justice and balance against those giant beneficiaries of favoritism.

COPYRIGHT 2017 CREATORS.COM

*Update: Despite the rumors, the Trump budget does not eliminate the Export-Import Bank.

Photo Credit: Olivier Douliery/SIPA/Newscom

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  • prolefeed||

    Why would the poster boy for crony capitalism want to put a stop to it?

  • Fist of Etiquette||

    Second, Congress could create a Base Realignment and Closure-like commission to eliminate favoritism. An independent commission made of non-politician experts would be charged with the narrow focus and specific instructions of reviewing programs, tax expenditures and regulations that confer privileges on commercial interests.

    If they're not allowed mission creep, then any such commission would seldom if ever bother to meet.

  • A Cynic's Guide to Zen||

    Congress could create a Base Realignment and Closure-like commission to eliminate favoritism. An independent commission made of non-politician experts would be charged with the narrow focus and specific instructions of reviewing programs, tax expenditures and regulations that confer privileges on commercial interests. The commission would then submit a package targeting the elimination of the most egregious corporate welfare programs. It would go into effect unless a joint resolution disapproving all of the commission's recommendations were passed and signed by the president.

    "I told you, we're an anarcho-syndicalist commune. We take it in turns to act as sort of executive officer for the week. But all the decisions of that officer have to be ratified at a special bi-weekly meeting, by a simple majority in the case of purely internal affairs...but by a two thirds majority in the case of more..."

  • Agammamon||

    So, a BRAC-like commission that, like the BRAC, has no power to actually *do* anything and constantly 'revises' its findings everytime a powerful senator bitches that 'closing the base in *my* district will hurt memy constituents'?

    In the mid-2000's BRAC reccommended closing Groton - too single-purpose, too far from all the other Navy stuff - and then changed their mind when the CT government freaked-the-fuck-out.

  • Lord_at_War||

    Nope, just your penis DanO- but you probably already knew that before you posted...

  • MarkLastname||

    How would he know? Fat as he is he probably hasn't seen it in over a decade.

  • Lord_at_War||

    Google is your friend, dude...

  • Lord_at_War||

    Some of us horse racing fans are interested in pedigrees,

    Meanwhile- I'm sure you're a midget detective in Hawaii played by James Caan's son...

  • Agile Cyborg||

    When the vaunted state ceases its debauched molestation of consumers and producers collectivist commercialism will shrivel into the perplexing ether.

  • Fatty Bolger||

    All good stuff, but the headline makes no sense. Every one of these suggestions has to do with Congress, not the President.

  • Diane Reynolds (Paul.)||

    Politics becomes easier to understand when everyone accepts the President is the King.

  • buybuydandavis||

    I'd rather have the President as King than the federal apparatchiks.

  • Diane Reynolds (Paul.)||

    Well, the federal apparatchiks are the kings men, since 99% of them fall under the executive.

  • Agammamon||

    Are they? Or is the king an apparatchik's man?

  • Trigger Warning||

    Who is Dan Davis, and why are you urging me to purchase him?

  • some guy||

    I assume VdR is calling for Trump to push for this. He needs Congress to do it, but it certainly has a better chance of succeeding with his vehement support than without it.

  • NotAnotherSkippy||

    According to Time magazine, his constant denouncing of government waste and those who supported it made Proxmire "the bane of defense contractors, pork-barreling colleagues and consumer frauds."

    You mean the Proxmire who fought EX-IM cronyism like this?

    Senate agreed to House amendment with amendment (10/18/1986)
    (Senate agreed to House amendments with an amendment)

    Amends the Export Administration Act of 1979 to authorize appropriations to the Department of Commerce for FY 1987 and 1988 to carry out the Export Administration Act of 1979.

    Amends the Export Administration Amendments Act of 1985 to authorize appropriations for FY 1987 and 1988 to the Department of Commerce for export promotion programs.
  • ||

    I have some confidence that Trump truly means what he says about draining the swamp based on the actions he's taken so far (as noted above) but also through the hires he's made.

    One in particular is Mike Pompeo, the new head of the CIA who ripped to shreds the government officials who were in charge of the Solyndra disaster back in the day.

    Here's the video-
    Energy Department Loan to Solyndra

    (go to 41:34 to see his part)

    He showed how the government should not be in the business of picking winners and loser in ANY market and put the parasites Obama put in place to let Solyndra rob the taxpayers blind in their place.

  • ||

    In case anyone enjoyed that one, go to 2:42:08 of part 1 for Pompeo going after them.

    Energy Department Loan to Solyndra Part1

  • Trigger Warning||

    1) End crony capitalism
    2) ???
    3) Profit!

    It'll be yuge.

  • SchillMcGuffin||

    The Fair Value Accounting proposal is a wonderful idea from our perspective, but it seems like a complete non-starter from the perspective of Congress and the President.

    "I propose that we alter our accounting methods to stop concealing losses."

    "So that will increase the deficit, while pleasing no constituency at all."

    "But it will make our spending more transparent."

    "As I was saying..."

    "Which will help us more meaningfully target budget cuts."

    "Which will piss off various constituencies, while getting the budget back to the same deficit we started with..."

  • Diane Reynolds (Paul.)||

    I came here to note that one of the reason why everyone (someone) screams bloody murder when one dollar is proposed to be cut... is because every single dollar spent by the federal government has an interested party. Every. Single. One.

    If there's a department standing in the back and looking stupid which has a conservative budget of $1,000,000 per year, every dollar of that $1m has an interested party somewhere behind it.

    We need politicians with balls who won't cave to NPR's amazing ability to find and interview the interested party hanging on to every dollar.

  • some guy||

    We need politicians with balls who won't cave to NPR's amazing ability to find and interview the interested party hanging on to every dollar.

    Gotta love journalism by anecdote.

  • AlmightyJB||

    Eliminate all Federal power and sources of revenue. I solved it in two.

  • some guy||

    But if you just eliminate all Federal power won't the sources of revenue part fix itself?

  • buybuydandavis||

    Before I start detailing how, let me say that abolishing all corporate welfare programs is the right thing to do.

    Great.

    Can we abolish the H1B corporate subsidy, which allows corporations to offer the right to live and work in the US as part of their compensation package?

  • MarkLastname||

    You're just plain retarded aren't you. If someone who owns a building wants to rent a room to someone from the other side of a line on a map, they have the right to do so without your permission. It's their private property, not yours. Mind your own fucking business.

    Or do you not believe in private property? Are you a libertarian Marxist?

  • chemjeff||

    It continues to amaze me the number of people who hate dictatorial government trying (and failing) to micromanage parts of the economy nevertheless want to give government power to micromanage travel between nations. Why do they think central planning will work out any better THIS time than it has any other time?

  • Agammamon||

    Oh, absolutely. If we end visa quotas altogether. If you're not known threat - you get a visa if you want one.

  • some guy||

    This would require an increase in the screenings budget, but then we could take that from the enforcement budget and still have savings left over. But then we'd also have a bunch of lazy Americans screaming about "jobs" and "English", so this will never happen.

  • Agammamon||

    BUT! Even if you move the enforcement budget all over to the screening budget, its still a draw financially while being a win for freedom.

  • Damned||

    Corporate welfare, a practice in which government officials provide preferential treatment (such as loans, subsidies or regulatory preferences) to hand-picked firms or industries, is unfair.

    So, why is the focus on just about everything else related to welfare, like food stamps or Obamaphone. Even if Cato estimates are correct, it is about $100 billion that is spent. What's worse it actively works towards suppressing the free market. Whereas someone not working and mooching crab and burgers does not prevent someone else from making a living. Both are funded by debt or other people taxes, but corporate welfare is kinda the greater evil.

  • ||

    Slow night, huh.

  • gad-fly||

    How can Trump eliminate Corporate Welfare when the Trump Organization, supposedly run by Uday and Qusay, have all the freedom in the world to do whatever they want? Nobody will take on Trump's conflicts of interest - so the rich will get richer and the taxpayer will pay.

  • gordo53||

    Given that there is not a single member of Congress that doesn't take special interest money either legally or otherwise, this is all just worthless chatter. Our elected government is little more than a criminal enterprise whose purpose is the enrichment of its members.

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