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Archive for the ‘Big business’ Category

In the grand scheme of things, the Export-Import Bank isn’t the worst government program or the one that most needs to be abolished.

Entitlement programs are a far bigger threat to America’s long-run fiscal stability the Ex-Im Bank, with Medicaid serving as a particularly sobering example.

Handouts to the Paris-based Organization for Economic Cooperation and Development, on a per-dollar-spent basis, do more damage than the Export-Import Bank.

There are entire departments of the federal government, such as Education or Housing and Urban Development, that should be abolished before we worry about the Ex-Im Bank.

But here’s the deal. Achieving any of the goals listed above would require approval of the House, approval of the Senate, and signed legislation from the President.

So I’m not exactly holding my breath for immediate victories.

In the case of the Export-Import Bank, though, victory is possible. Authorization for this odious form of corporate welfare automatically sunsets later this year.

In other words, so long as either the House or the Senate say no (which simply means choosing to do nothing), taxpayers win.

This is why getting rid of the Export-Import Bank is a real test of whether Republicans are serious about shrinking the size and scope of government.

And just in case you need a reminder of why this bit of cronyism should disappear, here’s some of what Veronique de Rugy recently wrote for The Hill.

Politicians are hoarders. Instead of filling up their homes with junk and refusing to throw any of it away, they surround themselves with bloated government programs and come up with excuses to not get rid of any of them.

And if you go down the rickety stairs to the mildew-filled basements of their homes, surrounded by dead mice, you’ll find the Ex-Im Bank.

Ex-Im simply isn’t the job creator that it claims to be. The bank itself reported that only 16 percent of its beneficiaries were seeking to overcome limitations in private sector export financing. And in cases where the private sector didn’t think it was a good idea to finance a deal, why should taxpayers have backed it instead? The truth is that the bulk of Ex-Im’s activities benefit large, politically connected companies. Indeed, over 65 percent of Ex-IM Bank’s loan guarantee program benefits aerospace giant Boeing, which currently has a market cap of $106 billion. …the Congressional Budget Office projects that taxpayers will have to shoulder $2 billion in losses over the next decade. Even when there aren’t losses, it merely shows that the private sector could have handled the financing. Second, Ex-Im places the 99.96 percent of U.S. small businesses that it doesn’t subsidize at a competitive disadvantage because the subsidies artificially lower costs for privileged competitors.

Indeed. You should watch this excellent video from Mercatus to learn more about the destructive economic impact of the Export-Import Bank.

Defenders of the program say it’s necessary for American exports, but only a tiny share of exports get these subsidies.

And here’s a look at export-related jobs. As you can see, it’s preposterous to claim the Ex-Im Bank plays a big role.

And remember, by the way, that this chart looks at the “seen” jobs. If you count the “unseen” jobs destroyed by subsidies and intervention, the overall impact would be very negative.

You can peruse lots of additional evidence at this Mercatus link. The bottom line is that the only argument for the Export-Import Bank is that it helps to perpetuate a corrupt insider scam.

But if you’re not a lobbyist, cronyist, corporate fat cat, or other form of insider, the Ex-Im Bank is a lose-lose proposition.

P.S. If you support the Export-Import Bank and you want to raise your children to have the same warped view of the world, here are some toys you can get them for their birthdays.

P.P.S. Senator Elizabeth Warren pretends to be the scourge of politically connected fat cats, but compare her miserable record to that of a real taxpayer hero who actually believes in free markets rather than big business.

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Let’s compare two politicians, Senator Elizabeth Warren of Massachusetts and Congressman Jeb Hensarling of Texas, to see which one actually has the courage to fight against powerful interest groups.

We’ll start with Senator Warren. She portrays herself as the scourge of Wall Street, but it appears that the Massachusetts lawmaker isn’t merely a fake Indian, she’s also a fake opponent of corporate welfare.

Kevin Williamson of National Review has some withering criticism of Senator Warren’s faux populism.

Senator Elizabeth Warren, the millionaire Massachusetts class warrior who has made the vilification of Wall Street bankers her second-favorite pastime (right behind prospering on the largesse of Wall Street lawyers, the gentlemen and scholars who funded her very generously compensated position at Harvard and fill her campaign coffers) did not exactly make the issue her hill to die on, but the fight did provide her an excellent opportunity for grandstanding. …Senator Warren did her usual dishonest shtick, engaging in her habitual demagoguery without every making an attempt to actually explain the issue, which is a slightly complicated and technical one, to the rubes who make up the Democrats’ base. …This led Maggie Haberman of Politico to admire Senator Warren’s “authenticity,” the choice of precisely that word being the cherry on this sundae of asininity. Senator Warren is as much an authentic champion of ordinary working people as she is an authentic Cherokee princess — and Mel Brooks and those Yiddish-speaking Indians from Blazing Saddles were more convincing in that role.

But the problem is much deeper than empty grandstanding. Senator Warren wants to give government more power, which will exacerbate the problem.

Many on the Tea Party right and the Occupy left intuit that there exists a dysfunctional relationship between Wall Street and Washington, though Senator Warren et al. maddeningly believe that the way to ameliorate this is to invest Washington with even greater powers, enabling even worse misbehavior and even more remorseless rent-seeking.

And let’s not forget the left’s historical revisionism.

Here’s how the New York Times relates the cromnibus skirmish to bailout politics: “The liberal base of the Democratic Party, led by Ms. Warren, also found itself in an unlikely alliance with the Tea Party wing of the Republican Party. Both opposed the Wall Street bailout of 2008 and feared that the spending measure would not only provide a bounty for big banks but would also help cause another economic crisis.” …One wonders which of these famous progressives the New York Times has in mind when it states — as uncontested fact — that “the liberal base of the Democratic party” “opposed the Wall Street bailout of 2008.” …The bailouts were enabled by the Emergency Economic Stabilization Act of 2008, which enjoyed the support and votes of Senator Barack Obama of Illinois, Senator Joe Biden of Delaware, Senator Hillary Rodham Clinton of New York, Speaker of the House Nancy Pelosi, Senator Charles Schumer of New York, Representative Barney Frank of Massachusetts, Senator Patrick Leahy of Vermont, Representative Jesse Jackson of Illinois, Representative Sheila Jackson Lee of Texas, etc. The people who actually opposed bailouts by voting against bailouts were not in the main progressives, but were disproportionately conservative Republicans: Representative Michele Bachmann of Minnesota, Representative Michael Burgess of Texas, Representative Jeff Flake of Arizona, Senator Sam Brownback of Kansas, Senator Jim DeMint of South Carolina, etc.

Elizabeth Warren was a high-paid Harvard professor in 2008, so we don’t know how she would have voted on TARP.

But based on her current support for bailouts, handouts, and subsidies for big companies (including support for the egregious Export-Import Bank), she probably would have voted yes.

The Tea Party came into being as a reaction to Republican complicity in bailouts of all sorts: of Wall Street firms, and of irresponsible mortgage borrowers. Occupy, and the potty-trained version of that movement led by Elizabeth Warren, demands more bailouts: of people who borrowed money for college or to buy a home, of fashionable corporations that do not want to pay market rates for financing, etc. Senator Warren is an energetic proponent of corporate welfare for Boeing, General Electric Bechtel, Caterpillar, and other such poor, defenseless little mom-and-pop operations. If you are looking for actual rather than theoretical opposition to bailouts and corporate welfare, then your choices include Senator Rand Paul and Senator Ted Cruz, but practically nobody who might be called a progressive.

In other words, politicians like Senator Warren pay lip service to the notion that big government shouldn’t be in bed with big business. But when it’s time to cast votes, she’s a reliable supporter of cronyism.

Now let’s review a politician who talks the talk but also walks the walk.

Here are some excerpts from Kimberley Strassel’s Wall Street Journal profile of Congressman Hensarling.

Rep. Jeb Hensarling…has spent a decade riding herd on cronyists who give capitalism a bad name by giving or taking special government favors. …Washington’s Lone Ranger was at it again this week in the fight over reauthorizing the Terrorism Risk Insurance Program, a “temporary” program created in 2002 that requires taxpayers to absorb the costs of insurance payouts after an attack. …The Texan didn’t get all the reforms he wanted in the reauthorization bill that did pass this week, but he got some.

Kudos to the Congressman for arguing that companies should pay market prices for insurance rather than shifting some of the liability to taxpayers.

But that’s just one example of his fight against cronyism. He’s also fighting to protect taxpayers against the predations of Fannie Mae and Freddie Mac.

The congressman stepped down from the House leadership after the 2012 election to become chairman of the House Financial Services Committee, where he could be at the center of restoring what he calls the “bedrock” GOP principle of “free enterprise.” From that perch, Mr. Hensarling has doggedly worked to dismantle crony government programs that reward the well-connected business elite. …Take his longtime fight to eliminate Fannie Mae and Freddie Mac, the government-backed housing giants that were central to the 2008 crash. Mr. Hensarling has yet to get a House vote on his proposal, though this focus has helped put uncomfortable attention on those pushing only watered-down reform. Earlier this year, he led a battle against plans to roll back reforms to the federal flood-insurance program. The House passed that atrocity, but only after former Majority Leader Eric Cantor (to great outrage) did the insurance lobby’s bidding and bypassed Mr. Hensarling on the way to a vote. …This fall he provoked a debate over reauthorization of the Export-Import Bank, which exists to provide cheap financing for select industry players. …The House instead caved and threw Ex-Im reauthorization into a September funding bill, though Mr. Hensarling was able to limit its extension to June—when he intends to have that fight all over again.

Let’s hope Hensarling prevails over Warren next year and the Export-Import Bank no longer is allowed to feed at the public trough.

A key question is whether other Republicans will be willing to join Congressman Hensarling’s fight.

Such fights in the next Congress will be even more worth watching. …The K-Street lobbyists are about to put enormous pressure on Republicans. …All eyes are now on the GOP. Republicans are happy to criticize obvious (and Obama -backed) recipients of government largess: the Solyndras of the world. Yet few have been willing to shut down larger programs that pay off entire industries and send dollars back to their state businesses. This is why many voters see the GOP as the party of the “rich and powerful” and Democrats get traction with their populist catchphrases. …Democrats are the ones who are champions of big government, which exists to reward the politically connected, and to hide those rewards within legislation and backroom bureaucratic payoffs. …The GOP has a yawning opening to make this case, and position itself as the party that truly represents Main Street.

If past behavior is any indication of future behavior, there are some very discouraging reasons (here, here, here, and here) to think Republicans will side with K Street over taxpayers.

But maybe GOPers will surprise us and do what’s best for America rather than what’s best for corporate moochers.

P.S. If you want some serious analysis of Elizabeth Warren’s class-warfare agenda, click here. And if you want some amusing satire about her attack on entrepreneurs, click here.

P.P.S. Let’s praise another lawmaker. In the annual year-end look at the best and worst of Congress from Washingtonian, Congressman Justin Amash was rated as “Lobbyists’ Worst Enemy.”

P.P.P.S. Based on this cartoon, Michael Ramirez isn’t very optimistic on whether the GOP will have the backbone necessary to fight cronyism and special-interest corruption.

And this Ramirez cartoon about GOP timidity is an instant classic, sort of like the one he did on the Republican elephant in the Garden of Eden.

If I do an update of my post on best political cartoons, this will definitely get added.

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When I discuss corporate welfare, my first example is usually the Export-Import Bank. It galls me that taxpayers are coerced into subsidizing some of the world’s biggest corporations.

And since I’m an economist, I also don’t like how these subsidies undermine the overall economy.

But the Export-Import Bank is just the tip of the iceberg. Politically connected corporations now treat Washington like a profit center, making “investments” in politicians in exchange for policies that unfairly tilt the economic playing field.

Let’s look at another example of big companies suckling at the federal teat.

Mark Calabria, one of my Cato colleagues (and we also both studied economics at George Mason University!), explains why the federal government shouldn’t be in the business of helping rich shareholders by having the government subsidize corporate insurance policies.

House Republicans and Senate Democrats are in the midst of negotiating a deal to extend the Terrorism Risk Insurance Act (TRIA), which expires at the end of this year. They should save themselves the trouble and protect the taxpayer by allowing TRIA to expire. TRIA is no more than corporate welfare wrapped up in the flag. …TRIA is simply a mechanism for allocating the losses from a terrorist attack. It does nothing to deter terrorists. Do we truly believe that terrorists say to each other, “Let’s not attack that building, it’s insured”? Under the best of circumstances, TRIA has zero impact on the cost of a terror attack. …Why are taxpayers thought to be better able to bear…risk than shareholders in publicly traded corporations, given the concentrated holdings of corporate equity? Why should middle-class taxpayers subsidize the 1 percent?

Amen.

I don’t want the federal government doing any redistribution, but it’s particularly upsetting when politicians and bureaucrats hurt ordinary people to line the pockets of the rich.

Mark also explains that this isn’t simply a case of robbing Peter to subsidize Paul. As with many government programs, the indirect effects result in added collateral damage.

It would be bad enough if TRIA simply redistributed losses from corporate America to taxpayers, but TRIA runs the risk of increasing the losses from terrorism. If developers faced the full cost of their design choices — say, that between a glass building façade or reinforced concrete – they would build safer structures. We’ve sadly seen this play out in the national flood-insurance program, where subsidies have encouraged poor construction while also encouraging families to live in harm’s way. Even the Congressional Budget Office has acknowledged that TRIA lessens the incentives to reduce losses from a terror attack. …the most important lesson of the financial crisis was that when you underprice risk, people make poor choices. That has been repeatedly demonstrated when Congress has attempted to hide the costs of certain activities, like subprime-mortgage lending. Similarly distorting the pricing of terrorism risk will also lead to poor choices.

The final sentences are critically insightful. We need unfettered prices to ensure that costs and benefits are properly calculated and resources are productively allocated.

The Wall Street Journal editorial page is similarly opposed to this example of corporate welfare.

For proof of Ronald Reagan ’s maxim that the closest thing to eternal life on Earth is a government program, consider the Terrorism Risk Insurance Act of 2002. What was sold to the public as a temporary backstop is becoming another permanent entitlement. …Insurers and potential targets of terror, such as the National Football League, property developers and hoteliers, have lobbied hard to keep the program going, and going and going. Congress waved through extensions in 2005 and 2007. Earlier this year, facing a Dec. 31 expiration date, Harry Reid ’s Senate passed another seven-year extension 93-4. Like the Export-Import Bank, terrorism insurance is one of those business subsidies that both parties are only too happy to support. …The best solution would be for the House to let the program expire. Insurers have had 13 years to adjust their models. The Government Accountability Office reported in May that terrorism risk premiums have stabilized. …Private reinsurers can cover many of the risks that taxpayers now bear.

By the way, I think private insurers and reinsurers were the best option, even immediately after the 9-11 terror attacks. Yes, the market was very unsettled and would have stayed that way for a while, but both insurers and customers would have had big incentives to quickly figure out the best pricing strategies.

I would have much rather faced a year or two of instability rather than a decade-plus of distortionary subsidies.

But that’s water under the bridge. What matters now is that there’s zero excuse for subsidizing the insurance policies of big corporations.

By the way, just in case you think I’m exaggerating and that corporate welfare is limited to the Ex-Im Bank and terrorism insurance, check out these other examples of big business and big government conspiring against taxpayers and consumers.

Look at the way the major pharmaceutical companies and big insurance companies got into bed with the White House to line their pockets via Obamacare.

And examine how big financial firms pillaged taxpayers as part of the sleazy TARP bailout.

How about the way big agri-businesses rip off consumers with the ethanol scam.

Don’t forget H&R Block is trying to get the IRS to drive competitors out of the market.

Big Sugar also gets a sweet deal by investing in politicians.

Another example is the way major electronics firms enriched themselves by getting Washington to ban incandescent light bulbs.

Needless to say, we can’t overlook Obama’s corrupt green-energy programs that fattened the wallets of well-connected donors.

And General Motors became Government Motors thanks to politicians fleecing ordinary Americans.

P.S. Since our topic today dealt with terrorism, check out the terrorism-related humor and links in the “P.P.P.S.” of this post.

P.P.S. New topic. Every so often I find some left-wing political satire that is genuinely clever and thoughtful.

There’s my collection of anti-libertarian humor (including an article about libertarian law enforcement), some good leftist tax cartoons, a Fox News dystopia, and some well-done first-world vs third-world imagery.

Now we can add this cartoon about a Joe GOP Sixpack who thinks government is grossly incompetent and untrustworthy, with one exception.

A very effective zinger, I’ll be the first to admit. Indeed, the cartoonist hits me in a somewhat sensitive spot.

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I’ve argued that the crowd in Washington profits by plundering America, but that’s just part of the equation.

There are also plenty of big companies that have their snouts in the public trough.

No wonder many people have become disgusted

Writing for the Wall Street Journal, James Freeman points out that a growing number of Americans think the system is rigged against them and he links this disillusionment to an ever-expanding federal government.

According to the latest Wall Street Journal/NBC News poll, a full 56% of Americans agree with this statement: “The economic and political systems in the country are stacked against people like me.” This disillusionment index has been rising for more than a decade and coincides with an explosion in the size of the federal government. …The last time Americans had this little faith in the country’s political and economic systems was for a brief period in 1992, in the aftermath of President George H.W. Bush’s breaking of his no-new-taxes pledge in a deal with Congressional Democrats that enabled more spending. …more government enables people to get rich through political favoritism. In the era of the Beltway boom, no wonder so many people feel the deck is stacked against them.

So is this just empty anti-government rhetoric?

I don’t think so.

Consider the way a select handful of big companies use the Export-Import Bank to obtain undeserved profits.

Or look at the way the major pharmaceutical companies and big insurance companies got into bed with the White House to line their pockets via Obamacare.

And examine how big financial firms pillaged taxpayers as part of the sleazy TARP bailout.

How about the way big agri-businesses rip off consumers with the ethanol scam.

Don’t forget H&R Block is trying to get the IRS to drive competitors out of the market.

Big Sugar also gets a sweet deal by investing in politicians.

Another example is the way major electronics firms enriched themselves by getting Washington to ban incandescent light bulbs.

Needless to say, we can’t overlook Obama’s corrupt green-energy programs that fattened the wallets of well-connected donors.

And General Motors became Government Motors thanks to politicians fleecing ordinary Americans.

After looking at that list, I’m surprised that 100 percent of Americans haven’t concluded that the system is rigged for corrupt insiders.

But just in case you think that list is inadequate, let’s look at some new examples.

But first, allow me to reiterate my view on markets.

Simply stated, I believe in genuine unfettered capitalism within a system that protects life, liberty, and property (in other words, “unfettered capitalism” obviously doesn’t include the right to hire a hit man to kill your mother-in-law).

Within those boundaries, I have no objection to people taking risks, accumulating wealth, or losing all their money. Heck, it’s not just that I have “no objection.” I welcome such a system since it means the maximum freedom and prosperity for people, particularly the less fortunate.

But I don’t want people to get rich(er) because they have political allies who will adopt cronyist policies that tilt the playing field in favor of well-connected insiders.

And that’s exactly what’s happening in my two new examples.

First, we have the case of a big Democratic donor who invested a lot of money in a short sell position on Herbalife, which means he will profit if the stock falls in value.

Nothing wrong with that, at least in theory. Short selling can be a very economically beneficial way of correcting markets when something is over-valued. Heck, we would all be much better off today if there had been some short selling to pop the housing bubble before it got so big.

But as Tim Carney explains in a column for the Washington Examiner, this short-selling insider isn’t relying on market forces. Instead, he is asking his buddies in the Obama Administration to use coercive government to hurt the company and lower its value.

Here are some excerpts.

Politically connected hedge-funder Bill Ackman…shorted the nutritional supplement company Herbalife in late 2012… After Ackman’s announcement, Herbalife shares fell from $46 to $27. Ackman kept hammering away, taking his compelling slide show on the road to convince the investing public that Herbalife was a house of cards. But after the initial drop, Herbalife stock rebounded… But Ackman had another weapon in his arsenal. Namely: Big Government. Ackman lobbied congresswoman Linda Sánchez, D-Calif., to sic the Federal Trade Commission on Herbalife. Sanchez complied. Ackman also…“paid civil rights organizations at least $130,000 to join his effort by helping him collect the names of people who claimed they were victimized by Herbalife in order to send the leads to regulators…” Ackman’s firm, Pershing Square Capital Management, hired an army of K Street lobbyists — paying a combined $14,000 a month to three firms that disclose lobbying for him — to turn the government against Herbalife.

What reprehensible behavior on the part of Ackman.

I have no idea whether Herbalife is a good company or a bad company. And I have no idea whether its stock is over-valued or under-valued.

But I do know that Ackman shouldn’t be getting his political buddies to intervene. As Tim points out, this is a recipe for rampant cronyism.

This is different from ordinary lobbying. Typically, companies lobby to protect or subsidize their business. When hedge funds play Ackman’s game, helping or hurting some other company is the entirety of that business — and so lobbying can become the core of their business plan. We’ve seen it before. Investor Steve Eisman took a short position on for-profit colleges and lobbied Congress and the Department of Education to crack down on them. The Obama administration this month announced new proposed regulations on these colleges.

Now let’s look at another example.

Only this time it involves a big-donor Republican who wants favors from big government.

As the Washington Post reports, Sheldon Adelson doesn’t want his casinos to face competition from the Internet.

Given the more than $100 million that Sheldon Adelson has donated lately to Republican causes, the billionaire casino tycoon is well-positioned to get what he wants from a GOP-dominated Congress. But it turns out that the item on top of Adelson’s wish list — a ban on Internet gambling — is encountering resistance. And it’s not Democrats who stand in his way but a small group of fellow conservatives. …Online betting has been embraced by a number of Adelson’s industry rivals and several states eager for the additional tax revenue it provides….Yet the move to the Internet has also been seen as a threat that could deplete the customer base for Adelson’s brick-and-mortar casino resorts. …Half of the 22 Republican members of the House Judiciary Committee have co-sponsored the Adelson-backed legislation.

So what’s the status of the battle?

…conservative opposition began to emerge. …leaders of the other groups, including the American Conservative Union, did not mention Adelson by name. But their letter follows the publication this week of a fiery online column by former congressman Ron Paul (R-Tex.), the libertarian hero and father of potential presidential candidate Sen. Rand Paul (R-Ky.). He called the bill an example of “crony capitalism” written “for the benefit of one powerful billionaire.” …Adelson called the 2011 Justice Department legal opinion a mistake and has taken steps to rein in online gambling, fighting state-level proposals to authorize it and pushing for the federal ban. A company lawyer penned an initial draft of the Restoration of America’s Wire Act — later refined and introduced last year by Sen. Lindsey O. Graham (R-S.C.) and Rep. Jason Chaffetz (R-Utah) — which would effectively prevent states from authorizing online betting.

Ugh, how nauseating.

Though I’m glad to see that there is opposition inside the GOP to Adelson’s self-serving proposal.

I realize we can’t say for sure whether opponents are motivated solely by good principles of non-intervention and federalism. Perhaps they’ve received money from interest groups on the other side, but at least there is resistance and presumably some of that opposition is for the right reasons.

By contrast, I’m not aware of any Democrats who are opposed to Ackman’s cronyist attack on Herbalife.

The moral of the story is that big government enables insider corruption. Which is the message of this video from the Center for Freedom and Prosperity.

But if you don’t want to watch the video, just remember the simple lesson of today’s column, which is that all the examples of sleazy cronyism we discussed (both the new ones and the old ones) were only possible because government had the power to trump free markets.

Now let’s return to where we started. Yes, a growing number of Americans are getting disillusioned, and with good reason. But will the good people in Washington appeal to them with a principled campaign against corporate welfare and other policies that help insider fat cats?

Or will it be business as usual, with GOP cronyists replacing Democrat cronyists?

Even worse, will statists latch onto the issue and say the solution is to impose higher tax rates? That presumably would take some money from rich insiders, but it also would penalize folks who earn money honestly.

And it means the money that consumers lose because of cronyism winds up in the pockets of politicians.

Wouldn’t it be better to simply get rid of the bad subsidies and handouts and solve the real problem?

P.S. Since today’s column looks at capitalism vs cronyism, here’s the famous example of how you can explain various economic systems using two cows.

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I don’t like coerced redistribution. When the government uses the threat of force to take from Person A to give to Person B, it simultaneously reduces Person A’s incentives to produce while also luring Person B into dependency.

But not all coerced redistribution and government intervention is created equal.

I don’t like welfare programs, for instance, in part because taxpayers are writing huge checks to support a plethora of programs, but also because there is very strong evidence that the modern welfare state has caused more poverty.

Nonetheless, I understand that there are well-meaning people who support these programs. Their motives are pure in that they simply want to alleviate perceived suffering. And since they’ve never learned about the adverse indirect effects of government intervention and presumably haven’t given any thought to the ethics of government coercion, I don’t think of these people as being bad or immoral. Just uninformed.

But there are some forms of redistribution and intervention that are so self-evidently odious and corrupt that you can’t give supporters the benefit of the doubt. Simply stated, there’s no justifiable argument for using government coercion to hurt poor people in order to benefit rich people.

Let’s look at two examples.

First, the Export-Import Bank is a quintessential example of corporate welfare. The program forces taxpayers to guarantee the contracts of big corporations and foreign buyers, and there’s now a fight over whether it should be extended.

Needless to say, ordinary voters don’t want their money being used enrich big companies.

So if you were one of the beltway insiders who benefited from this corrupt institution, how would you try to get the program extended? Would you be upfront and argue that big companies like Boeing deserve tax dollars? Would you argue that politicians are really smart and wise and that they should interfere with the free market?

That would be the honest way of supporting the Ex-Im Bank. But you won’t be surprised to learn that advocates instead have resorted to lies. Here are some excerpts from a Reuters story.

The U.S. Export-Import Bank has mischaracterized potentially hundreds of large companies and units of multinational conglomerates as small businesses, a flaw in its record keeping that could undermine the export lender’s survival strategy. …A comparison of some 6,000 businesses characterized by Ex-Im as “small” with information supplied by corporate data collector Dun & Bradstreet, which Ex-Im also uses to vet applicants, and other sources turns up some 200 companies that appear to be mislabeled and many more whose classification is uncertain.

Um… I would say they lied rather than characterize it as a “flaw in its record keeping.” But let’s set that aside and look at some of the “small businesses” that had their snouts in the Ex-Im trough.

…analysis showed companies owned by billionaires such as Warren Buffet and Mexico’s Carlos Slim, as well by Japanese and European conglomerates, were listed as small businesses and Ex-Im acknowledged errors in its data in response to those findings.  …A division of Austria’s Swarovski jewelers shows up, as does North Carolina’s Global Nuclear Fuels, which is owned by General Electric and Japan’s Toshiba and Hitachi. …The list of small businesses in Texas, for example, includes engineering and construction company Bechtel, which has 53,000 employees.

Gee, Warren Buffet and foreign conglomerates don’t exactly sound like my idea of small businesses.

Hopefully this will provide more ammunition of those fighting to wean big companies from the public teat.

Bank officials and supporters have used the Ex-Im’s support for American small business as a first line of defense against a campaign by conservatives to shut it down as an exponent of “crony capitalism.” …“Rarely does Ex-Im miss a (public relations) opportunity to claim that it primarily helps small business, but Ex-Im is again playing fast and loose with the facts,” said Representative Jeb Hensarling, a Texas Republican who chairs the House Financial Services Committee. “The bulk of Ex-Im’s help indisputably goes to large corporations that can finance their own operations without putting it on the taxpayer balance sheet.”

For our second example, we have the absolutely horrifying spectacle of the Obama Administration trying to shut down Wisconsin’s school choice system.

Why? Well, because currying favor with union bosses is more important than improving educational opportunities for students from disadvantaged communities.

George Will explains what’s happening in his Washington Post column.

It is as remarkable as it is repulsive… Eager to sacrifice low-income children to please teachers unions, the Justice Department wants to destroy Wisconsin’s school choice program. Feigning concern about access for disabled children, the department aims to handicap all disadvantaged children by denying their parents access to school choices of the sort affluent government lawyers enjoy. …Wisconsin’s school choice program was pioneered by an American hero, Mississippi-born Annette Polly Williams, who died Nov. 9 at age 77. During her three decades in Wisconsin’s legislature, she overcame the opposition of fellow Democrats to offering education choices to low-income parents. At the end of her life, however, she saw an African American attorney general, serving an African American president, employing tortured legal reasoning in an attempt to bankrupt private schools that enlarge the education options of disadvantaged children. …Closing the voucher program is the obvious objective of the teachers unions and hence of the Obama administration. Herding children from the choice schools back into government schools would swell the ranks of unionized teachers, whose union dues fund the Democratic Party as it professes devotion to “diversity” and the downtrodden.

By the way, you probably won’t be surprised (given the White House’s cavalier approach to the rule of law) to learn that the Obama Administration is using is utterly nonsensical legal theory.

…federal lawyers argue that because public funds, in the form of tuition vouchers empowering parents to make choices, flow to private schools, the schools become “public entities.” …this is like arguing that when food stamps are used for purchases at Wal-Mart, America’s largest private employer ceases to be private — it becomes an extension of the government. Inconveniently for the Justice Department, the U.S. Supreme Court has said the fact that a “private entity performs a function which serves the public does not make its acts state action.”

The preposterous legal reasoning is a farce, but that doesn’t get me overly upset.

What does bother me is the way the White House is acting like the modern-day equivalent of George Wallace, standing in the schoolhouse door to prevent low-income (and largely minority) students from getting an opportunity for better education.

I guess that a black President (who sends his own kids to private school) consigning black children to the back of the proverbial bus shouldn’t surprise me too much. After all, some divisions of the NAACP also have decided that being politically allied with union bosses is more important that educational opportunity for minority kids.

But that doesn’t make it morally acceptable. Put yourself in the shoes of a low-income parent. Wisconsin’s school choice programs gives you some hope that your kids can break free of poverty. Imagine what it feels like, then, when some of the politicians who claim to be on your side then decide that your children are expendable pawns. How disgusting.

Since we’re talking about things that are disgusting, let’s shift back to the Ex-Im Bank. I’ve actually had some Republican types tell me that corporate welfare is okay because it “helps to offset” some of the redistribution from rich to poor.

I confess that I’m dumbstruck by such arguments. It’s sort of like hearing someone say it’s okay to murder, rape, and steal because other people are doing it.

This is why it’s not easy being a libertarian. Yes, we believe in small government for utilitarian reasons such as faster growth, higher living standards, and more jobs. But we’re also motivated by morality, by the belief that there’s right and wrong and that good people should strive to uphold the former and fight the latter.

That’s not a popular view in Washington, which is best characterized as an incestuous racket for the benefit of interest groups, politicians, cronyists, lobbyists, bureaucrats, contractors, and other insiders.

P.S. On a completely separate (and non-political) issue, I can’t resist seeking some sympathy after what happened to me this morning. I took two of my cats to the vet for their spay and neuter appointments. Some of you pet owners already know that most cats don’t like car rides, so you might have some inkling of what I’m about to report.

In happier times

About five minutes into the drive, one of the cats vomits in the little cat carrier. That obviously wasn’t a happy development, particularly since it left me with an unpleasant choice of enduring a very unpleasant smell or having the window open and enduring a very bitter chill. But then, a few minutes later, the other cat…um, how should I phrase this…loses control of her bowels.

Which means that the next 20 minutes was almost as unbearable as watching a state-of-the-union address. I was running late for the appointment, so I couldn’t stop someplace and try to deal with the mess. And the two cats kept moving around in their carrier, making things worse. Trying to breathe through my mouth, even with the window down, was at best a pitiful attempt to mitigate my suffering.

An utterly miserable situation. Almost 1/10th as bad as an IRS audit.

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I periodically try to explain that there’s a big difference between being pro-market and pro-business.

Simply stated, policy makers shouldn’t try to penalize businesses with taxes, mandates, and regulations.

But neither should politicians seek to subsidize businesses. That’s why I’m against bailouts, subsidies, and other distortions that provide special favors for politically connected companies.

I have nothing against companies earning money, to be sure, but I want them to earn their profits in the marketplace rather than lining their pockets by using the coercive power of government to rig the rules of the game.

But I don’t just have disdain for companies that stick their snouts in the public trough. I also have little regard for the politicians that enable this sordid type of business by trading campaign cash for corporate welfare.

I realize that’s a strong assertion, but I can’t think of any legitimate reason to support handouts for big companies. And I get especially angry when giveaways are facilitated by politicians who claim to support free markets.

Let’s look at two examples, the Export-Import Bank and the Obamacare bailout for big insurance corporations.

I’ve previously argued that the Export-Import Bank is a squalid example of corruption and I’ve shared a video that explains why it’s economically foolish to subsidize a handful of big exporters.

To augment those arguments, here’s some of what Professor Jeffrey Dorfman of the University Georgia recently wrote in a column for Real Clear Markets. He correctly warns that certain GOP politicians are to blame if the Export-Import Bank stays alive.

The Export-Import Bank is everything that Republicans should stand against. It is crony capitalism at its worst. It is corporate welfare, taxing American families to boost corporate profits. It ever forces firms to potentially subsidize a competitor. There is simply no need for this government agency. Republicans in Congress should make a stand and show voters that Republicans believe in free markets and small government, even if some big businesses complain. The Ex-Im Bank should not be reauthorized. …Over the last decade or so, the Democrats have increasingly become the party of big business, stealing that crown away from Republicans because of the Democrats’ willingness to engage in crony capitalism and actively pick winners and losers in our economy. While Republicans are still thought of as the pro-business party, and other actions by the Democrats are clearly anti-business (Obamacare, environmental over-regulation), large multinational corporations like Boeing and GE have donated money to Democrats and generally profited from their political alliances with them. If Republicans want to make gains among (lower) middle-class voters, one of the things that could help is to convince voters that they are on the side of the people and not big corporations. The Ex-Im Bank reauthorization is a perfect opportunity to do just that. …Income redistribution is wrong especially when the money is going to big and profitable companies.

Ryan Ellis of Americans for Tax Reform agrees. Writing for Forbes, he looks at both the policy and politics of Export-Import Bank handouts.

The ExIm bank is an export subsidy program, giving money to certain companies…in the hopes that gives them a leg up in international trade.  It’s been criticized for decades by free traders and those who simply oppose corporate welfare spending out of Washington. …the ExIm bank will sunset on its own on September 30th.  All Congress has to do is let nature take its course, and this corporate welfare program simply goes away forever.

Sounds like we should have a guaranteed victory from free markets over intervention, right?

Don’t count your chickens before they hatch.  Ryan explains that Republicans may shoot themselves in the foot by trying to rescue this reprehensible example of cronyism.

Charging in at the last minute to save ExIm only makes the House GOP look beholden to K Street.  It also looks like they are flip-flopping from where they were back in the summer.  …ExIm reauthorization…is likely to take a GOP grassroots focused on President Obama’s failures and full of midterm election intensity, and turn them inward toward criticism of the House GOP leadership instead. If things go badly with this CR gambit, the House GOP will have given themselves a self inflicted wound just as they are trying to get out of town and not screw up what should be a good year for their candidates.

How nauseating.

I realize that the Export-Import Bank is a relatively minor issue and that I should mostly care about whether politicians do the right think on big topics such as entitlement reform. After all, that’s what really counts if we want to avoid fiscal catastrophe.

But I can’t stop myself from foaming at the mouth when self-proclaimed supporters of free markets undermine the argument for economic liberty with cronyist deals.

Obamacare is another example of big business being against free markets. We already know that the big pharmaceutical firms cut a special deal with the Obama White House.

The big insurance companies also had their snouts in the trough. Not only did they get legislation that mandated the purchase of their products, but they also got language that provides bailouts if they aren’t able to profit from Obamacare.

What’s really amazing, though, is that some Republicans are willing to go along with Obamacare bailouts for those major companies.

The good news is that Florida Senator Marco Rubio is in the right side. Here’s some of what he wrote about bailouts for health insurance companies for Fox News.

 …section 1342 of the ObamaCare law…established so-called “risk corridors”. According to this provision, taxpayers will make up the difference for health insurance companies whose plans lose money under ObamaCare. Last November, as it became clearer what this section of the law actually meant, I introduced legislation repealing it and protecting taxpayers from being forced to cover insurers’ ObamaCare losses. …In recent weeks, the public has learned that senior White House officials have been working closely with insurers behind the scenes to make sure that their earlier bailout deal, which helped assure ObamaCare’s passage in 2010, would stand and that a taxpayer-funded bailout was still, in fact, on the table. …On this ObamaCare bailout, as with so many issues, Washington politicians are misleading average Americans and planning to stick them with the bill. This is government favoritism and corporate cronyism at its worst. …It’s time to repeal and replace it, but at the very least, we should make it the law of the land that health insurers won’t be bailed out by taxpayers.

I’ll also add a moral argument.

As far as I’m concerned, I want the health insurance companies to suffer major losses. I want the business community to see that it’s a mistake to get in bed with big government.

Though I guess I’m actually making a practical argument. I may be motivated by morality, but the companies hopefully will do a cost-benefit analysis and decide that it’s too risky to strike deals with the political class.

By the way, Republicans often do the wrong thing because they’re afraid that voters favor the statist agenda of dependency.

But that’s not the case for Obamacare bailouts for health insurances companies. Here’s some polling data on the issue that showed up on my Twitter feed.

Let’s close by sharing some of what the editors at National Review wrote about both the Obamacare bailout and Export-Import Bank subsidies.

Congressional Republicans keep saying they oppose Obamacare. Yet they’re refusing to take the simplest and easiest action against it. …Some Republicans say that the insurance companies should not be penalized for the defects of the law. Why not? They have freely chosen to participate in the exchanges, and they should bear the risks of that decision — which include the risk that Congress might decide not to shovel tax dollars at them. The alternative, after all, is to punish taxpayers. …The debate over the Export-Import Bank is one test of Republican sincerity about ending corporate welfare. These taxpayer subsidies are another: If Republicans can’t take on corporate welfare when doing so advances one of their party’s most popular and basic commitments, when will they?

Amen. Both of these issues are tests for the GOP.

Actually, they should get added to a long list of issues that tell us whether Republicans have any sincerity (or brains) in the fight against statism.

o No tax increases, since more money for Washington will encourage a bigger burden of government and undermine prosperity.

o To stop bailouts for Europe’s decrepit welfare states, no more money for the International Monetary Fund.

o Reform the biased number-crunching methodology at the Congressional Budget Office and Joint Committee on Taxation.

o No more money from American taxpayers to subsidize the left-wing bureaucrats at the Paris-based Organization for Economic Cooperation and Development.

P.S. If you’re in the mood for some dark humor, here’s the federal government’s satirical bailout application form.

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The Export-Import Bank is noxiously corrupt example of crony capitalism.

It never should have been created. But that’s something we could say about most government programs.

So the real question is how to reverse the damage.

If we reform a big program such as Medicare, you can’t end it overnight. You have to deal with the reality that millions of people have made plans based on government policies. And even if those policies are wrong, you can’t pull the rug out from folks who did nothing wrong.

So it’s important to put in place appropriate and fair transitions when reforming a major program.

But that’s not an issue with the Export-Import Bank. It provides undeserved subsidies to big companies. Those big companies will be just fine without having their snouts in the public trough. The right thing to do, from both a moral and economic perspective, is to shut it down immediately.

Indeed, this should be a test as to whether supposedly pro-taxpayer politicians in Washington understand the critical difference between being pro-business and being pro-market.

But what about the argument that the Export-Import Bank is somehow a win-win for the American economy? I tend to automatically dismiss such claims for the simple reason that all sorts of companies in the private sector would do what the Ex-Im Bank is doing if it really was a money maker.

But with the issue heating up, it would be a good idea to examine this claim more closely. Fortunately, Matt Mitchell (no relation) of the Mercatus Center does an excellent job of explaining the dodgy economics of the Ex-Im Bank is this short video.

In some sense, Matt is channeling Frederic Bastiat, the great French thinker who said that a good economist looks at both direct and indirect consequences of policies (the “seen” and the “unseen”).

Matt shows that the negative indirect impact of the Ex-Im Bank is far larger than any putative benefits generated by handouts to politically well-connected firms.

Just like bailouts, s0-called stimulus, and green-energy programs all look bad when you examine all the costs and benefits.

For more information, I also recommend this superb video on why cronyism is so corrosive.

And if you want a humorous analysis, scroll to the bottom of this post and see what the Kronies have to say about the Ex-Im Bank.

Or just enjoy this Glenn Foden cartoon.

P.S. I shared six jaw-dropping examples of left-wing hypocrisy last month.

But maybe it’s time to create a special Hypocrisy Hall of Fame, because the Wall Street Journal reveals that we another member who would be a shoo-in for the award.

It seems that Warren Buffett was not being terribly sincere or honest when he said people like him should be paying higher taxes.

Now this is awkward for President Obama and Senate Democrats. …Warren Buffett’s Berkshire Hathaway is expected to help finance Burger King’s  pending acquisition of Canadian doughnut-chain Tim Hortons. The deal will allow Miami-based Burger King to claim Canada as its new legal home for tax purposes. Beltway Democrats had been hoping to use a recent wave of such corporate inversions as a campaign tool. The idea was to propose new taxes on the companies that move. Step two was to beat up Republicans who don’t agree to make the free world’s most punitive corporate tax system even more punitive. But now that Democratic tax hero Mr. Buffett has been spotted surfing on top of this wave, the political challenge has become more difficult.

Sort of makes you wonder whether Buffett endorses higher taxes for the self-interested reason that the political class will then give him a free pass on issues such as the Burger King inversion?

Shocking, just shocking, to think that rich leftists are hypocrites.

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