Free Markets, Free People


Crop cronyism’s destructive results

We talk about it.  Politicians condemn it.  Nothing ever happens to change it though.

This year’s agriculture bill again redistributes your money to rent seekers:

Combine a Midwestern drought with pointless ethanol mandates, and the supplies of corn inevitably dwindle, driving prices sky high. Politicians like Sen. Claire McCaskill, Missouri Democrat, are citing the crop crisis as an excuse to ram through a near-$1 trillion farm bill. While a bit of that cash might find its way to a small farmer, the bulk of the loot will be transferred to individuals who are anything but poor. Like the bank bailouts and TARP, the farm bill illustrates the capture of the legislative process by special interests.

The last farm bill in 2008 was the focus of $173.5 million in lobbying expenditure, according to a report released Tuesday by Food & Water Watch. This is all money spent on what the Mercatus Center’s Matthew Mitchell calls “unproductive entrepreneurship” where people are organizing and expending their talent to become rent seekers, and the end result is wealth redistribution, not wealth creation. Real entrepreneurship innovates in ways that are socially useful. Cronyism diverts resources — both money and talent — into a system that rewards privileges to favored groups. In the case of the 2008 farm bill, recipients of subsidies of $30,000 or more had an average household income of $210,000.

Mr. Mitchell argues that “government-granted privilege is an extraordinarily destructive force” because it not only results in a misallocation of resources and slower growth, it undermines civil society and the legitimacy of government by providing a rich soil for corruption.”

She’s absolutely right.  And, of course, when you mess with markets, like has been done with the corn market and mandated ethanol, the expected results occur when something unanticipated, like a drought, happens:

Corn and soybeans soared to record highs on Thursday as the worsening drought in the U.S. farm belt stirred fears of a food crisis, with prices coming off peaks after investors cashed out of the biggest grains rally since 2008.

Corn prices crossed into uncharted territory above $8 per bushel — about three-and-a-half times the average price 10 years ago of $2.28. Soybeans punched past $17 for the first time — also three-and-a-half times the 2002 average.

Analysts said that while forecasts for continued dry weather are expected to sustain the rally, corn prices could be vulnerable to any move by the government to lower the amount of corn-based ethanol blenders are required to mix with gasoline.

Notice what entity is mentioned in the last paragraph?  Yes, government. A key player in the increase in corn prices (yes, understood, they’d be higher with the drought alone, but government’s ethanol mandate has driven them even higher yet).

Meanwhile, as mentioned above, we’re subsidizing agriculture to the tune of $1 trillion dollars of your money (in cash or in debt to be paid back in the future).  Meanwhile, you’ll be paying more for corn based products at the grocery store as well.

Nita Ghei lays out the bottom line problem with this sort of cronyism and rent seeking:

Government privileges come in many forms, direct and indirect. It might be a monopoly, such as the one granted to utilities like Pepco. Regulations such as licensing can be used to limit entry to a particular field to the benefit of existing businesses. Lobbying and the revolving door in Washington create what economists call “regulatory capture,” which is what happens when existing firms use regulatory agencies to benefit themselves. Tax breaks, loan guarantees and subsidies are the most direct signs of a government’s favor. Bailouts of big banks under TARP, and Fannie Mae and Freddie Mac when the housing bubble burst, are the most recent examples of direct action.

Extending each of these privileges reduces America’s economic competitiveness. A monopoly protected by the government has little incentive to provide good service. The greater the availability of privileges, the greater is the incentive to indulge in rent seeking, which diverts resources from truly productive activities. In the long run, the result of anti-competitive policies is less innovation, lower growth and a smaller pie to share.

The greatest scourge to the honest Midwest farmer is not unfavorable weather, pestilence or disease. Far worse for them is the plague of politicians who create an artificial market in which only those with influence can truly compete. Defeating the budget-busting 2012 farm bill is the best chance at a good harvest.

The chances of that happening, however, are slim to none.  Regulatory capture is as common now as government debt and unemployment.  It is a systemic problem that rewards rent seekers and the well connected to the detriment of innovators and competition.  It is the antithesis of capitalism.

Unless we have the will to stop this sort of cronyism, we’re on a short road to failure.  This is another, in a long line of government programs, that are unsustainable, destructive and just flat something government shouldn’t be involved in.

But my guess is, this time next year, we’ll still be talking about it, politicians will still be condemning it and nothing will change except the higher national debt number.


Twitter: @McQandO

Why Is The President Pushing Pond Scum?

Well the Washington Free Beacon has an idea:

President Obama’s most recent green energy fixation—algae—may suffer from the accusations of cronyism that have plagued his broader effort to promote non-fossil fuel energy sources through massive federal subsidies.

May suffer?  Read on:

Solazyme, a San Francisco-based firm that specializes in the plant matter, has received more than $25 million in federal grants and contracts as part of Obama administration’s controversial stimulus package, and is poised to receive millions more as part of the president’s recent efforts to promote green biofuels such as algae.

The firm employs a former member of the Obama-Biden transition team who, according to one online bio, “played a key role in developing the energy provisions in the economic stimulus bill.”

That’s right, the usual – crony capitalism.  And in this case, you get a twofer.  San Fran Nan’s district benefits.

Be nice if the guy who claimed he was going to change “politics as we know it” wouldn’t revert to “politics as usual” at every opportunity to pad his re-election campaign and help out his cronies, huh?


Twitter: @McQandO

Peter Schiff engages OWS and makes some good points

Watch and listen. Schiff makes a lot of points we’ve been hitting for years. It is a fundamental misunderstanding of capitalism and what it is that drives a lot of the OWS supporters to focus on the wrong entities. Schiff has a lively discussion with them. Interestingly some agree and some simply won’t take the ideological blinders off. You’ll quickly identify who is who.


Twitter: @McQandO

More Econ 101, more lies

Have you been following the latest gambit of our president?  It’s time to pull the youth vote back to him with some candy.  Taxpayer candy of course.   In his latest “policy” swing, he’s offering a way out of student loans to … students with loans, of course.

And of course there’s the convenient lie – you can essentially get something for next to nothing.  Go borrow money and the government will help you “satisfy” the loan after so many years if you do things like “public service”.  Oh, and it will never cost you more than 10% of your salary … so go for it.

Wait, one more thing from the Candy Man as he addressed a crowd of college students at the University of Colorado’s Denver campus:

But, he added, “young guys, I need you involved, I need you active … I need you to get the word out.”

Of course that’s code for “hey, vote for me and I’ll solve all your student loan problems”.  Cronyism at its finest and all without legislation.  Wasn’t it the Democrats who said they feared the “executive President”.  But I digress.

Here’s the basic truth:

But the colleges fees have to be paid somehow, even when repayments are stopped, said Burke. Sooner or later, this “will ultimately result in tax increases — in putting this on the backs of three-quarters of Americans who did not graduate from college.”

Working-class people will end up paying for middle-class graduates’ basket-weaving and women’s studies degrees, she said.

That’s right … these are government guaranteed loans.  So they will be paid.  The creditor doesn’t care who pays it.   The student or the taxpayer. So what Obama is more than willing to do is to buy votes today, by executive order, for taxpayer bailouts of deadbeat students tomorrow.

Obama is “shifting the burden of paying for college to all of those Americans who did not graduate from college — the waitresses, construction workers, mechanics — and that should infuriate the taxpayers who worked hard to pay off their loans, who decided to live a modest lifestyle to pay off their loans,” said Lindsey Burke, an analyst at the Heritage Foundation.

Obama’s policy is also widening the class division between working-class Americans and those with college credentials, said Matthew Denhart, a researcher at the Center for College Affordability and Productivity in Washington, D.C.

In case you were wondering, Colorado is a swing state and one in which polls show the Candy Man below 50%.

Crony Capitalism isn’t the only form of cronyism in the world as Barack Obama (and politicians of all stripes) have been proving for years.  And all funded by your money.


Twitter: @McQandO

Joe Biden: Scaring the little people in flyover land

In another version of the “pushing granny over the cliff” scare which typified the resistance mounted by Democrats to Social Security reform, VP Joe Biden is out there trying to scare the people about crime in order to spend more on shoring up the Democratic base (more political cronyism) to be found in teacher’s and public servant’s unions:

“Murder will continue to rise, rape will continue to rise, all crimes will continue to rise,” if the Democrats agenda isn’t passed, he added.

Because, you know, there’s a direct correlation between murder, rape and the number of cops on the beat.

Except both murder and rape stats have been in a downward trend since 2006.  In 2006 the murder rate per 100,000 was 5.7, rape 30.9.

In 2010 the rate for murder was 4.8 and rape 27.5.  In the two intervening years, those numbers continued to fall.  And we all know we’ve been in the recession for at least 3 years and there have been cutbacks in police during that time.

So, unsurprisingly Biden is wrong and is pushing a myth (they’ll “continue rising”) when in fact, the stats show a steady drop for the past 4 years.

But he’s shameless in his fact free attack:

Then in the same speech he wished Republicans were themselves rape victims.  “I wish they had some notion of what it was like to be on the other side of a gun, or [to have] a 200-pound man standing over you, telling you to submit.”

Amazing.  Vice President of the US and trying to pull this political hackery complete with the usual scare tactics off.  Of course, look at his boss.


Twitter: @McQandO

Harry Reid: Crony jobs bill to shore up the political base

If you’ve ever wanted a good argument against seniority as a good way to pick leaders, Harry Reid is your poster boy.  The Nevada Democratic Senator and House Majority leader manages to make himself look stupid on any number of occasions during a legislative year.  His latest:

Senate Majority Leader Harry Reid (D-Nev.) on Wednesday indicated Congress needs to worry about government jobs more than private-sector jobs, and that this is why Senate Democrats are pushing a bill aimed at shoring up teachers and first-responders.

“It’s very clear that private-sector jobs have been doing just fine; it’s the public-sector jobs where we’ve lost huge numbers, and that’s what this legislation is all about,” Reid said on the Senate floor.

Really?  That’s the sector “government” needs to worry about more because “private-sector jobs have been doing just fine?”   Where in the world, other than the Senate cloak room, has this man been?

What this is, and anyone who can’t figure this out doesn’t deserve to be in a political discussion, is just another version of cronyism.   Teachers unions and government unions are where you find the Democrat base. This is throwing taxpayer money to that base in order to shore it up for the upcoming election.  Nothing more.

He has access to your tax dollars and spending them in this way benefits his party.  Screw the country, he has an election to win.  Of course he’s also the Senate leader who hasn’t offered a budget in over 900 days.  That’s dereliction of duty.

Reid reiterated his emphasis on creating government jobs by saying Democrats are looking to “put hundreds of thousands of people back to work teaching children, have more police patrolling our streets, firefighters fighting our fires, doing the rescue work that they do so well … that’s our priority.” He said Republicans are calling the bill a “failure” because they are “using a different benchmark for success than we are.”

Yeah, they’re using the private sector where jobs generate revenue for taxes to pay for all the nonsense Reid spouts. 

Government workers are not producers in the sense of the production we need to get the economy going.   But they are voters.   This is an attempt to keep them in the Democratic corral long enough to get Democrats re-elected.  Then Harry probably won’t care very much again.

Remember, when Obama was calling for his jobs bill to be given priority, Harry Reid was on the Senate floor expounding on the virtue of  … bike paths (and, naturally, calling for government to pay for them).

Ever get the idea that we’re all now serfs on a huge plantation paying for the whims of our “leaders”.


Twitter: @McQandO

More ObamaCare waivers an indication that it is bad law

There’s  a lot being written and said about the latest batch of ObamaCare waivers and the fact that many have gone to companies in Nancy Pelosi’s area.  And, of course, the agency granting them has claimed that Pelosi had absolutely no effect on them being granted.

Okay, that’s not the important point anyway.  Tim Pawlenty actually manages to stumble across it as he claims cronyism in their grant:

"I don’t blame people for trying to get out from underneath it — that it is an awful law," Pawlenty said. "But when you have that many needs for exemptions, it tells you that the law — it is a warning sign that the law is broken and doesn’t work."

Ya think?  You have about 26 or 27 states challenging the Constitutionality of the bill and its individual mandate.   You have hundreds, if not thousands of companies, agencies and businesses seeking waivers.  And obviously, there’s an organization in place to grant those waivers.  Imagine a job where you review and grant waivers to a law.  I don’t know about you, but that would tell me there must be something fundamentally wrong with it.

Pawlenty is also correct about his broader point – those without the ability to appeal for a waiver are stuck with paying the piper:

"Another example of really crony politics or crony capitalism, if you’ve got the right connections, the right lobbyists, the right interest group, you get your special deal, and the rest of us get our wallet out, and that’s in the tax code, it’s in earmarking, and now you see it in ObamaCare.”

Yes, exactly.  His larger point is absolutely correct.  Those without the connections do indeed end up having our wallets looted.  Cronyism is certainly alive and well and very prevalent not only in the treatment of ObamaCare, but in other areas as well.  Which brings up an ironic point – for the party of “fairness” this seems singularly unfair.  Yet Democrats aid and abet it – in fact, just like Republicans, they use this sort of process to gain favor with certain constituencies … at the expense of others.  And by expense, I’m including paying the bill too.

ObamaCare is an obviously wretched law.  What was supposed to be insurance reform ended up being a polyglot of government bureaucracy at a huge and unaffordable price.

Now we hear the House GOP members saying that repealing it is “hard”.  We hear candidates like Romney and Gingrich saying they agree with parts of it, like the individual mandate.  Cronyism is directly linked to power – it’s a give and take process that benefits politicians.  It comes as no surprise to me that both sides are engaged in it up to their necks.  The problem is it is unlikely to ever get fixed since it is the fox guarding the hen house and enjoying the job.


Twitter: @McQandO

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