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Crony Capitalism and the Political Class

Posted by Steve Markowitz on December 1, 2012

A remarkable data point to come from the 2012 presidential election was that Republican candidate Mitt Romney received 3 million less votes than John McCain did in 2008.  While neither Republican candidates were extremely attractive, this discrepancy is astounding given that Barack Obama ran against the unpopular legacy of George W. Bush in 2008 that included the Iraq war and economic meltdown.  However, this time around it was Obama who had the legacy of failure, but did not pay a political price for it.

While many conclude that the Republican’s 2012 defeat was the result of changing demographics, this logic is incomplete.  While the style of Romney and Obama were clearly differentiated, the Republicans spent much of their time running against Obama, rather than proposing game-changing policies.

One area that the Republicans failed to present a coherent case was on taxes.  Obama ran on increasing taxes on the top 2%, and easy sell for the lower 98% of the electorate.  Romney countered by offering an undefined promise to end loopholes.  However, without specifics, this sounded to many as protecting the country-club set at the expense of the common folks.

Relating to taxes and income redistribution is the subject of subsidies.  The government subsidizes many special interests.  While this includes programs for the needy, it also includes programs that subsidize wealthier Americans.  Romney and the Republicans were viewed as attacking the programs that mainly benefit the needy.  This caricature could have been avoided with a simple program to eliminate government corporate subsidies, a big part of crony capitalism.  But the Republicans were silent on this issue.

Boston Globe columnist Jeff Jacoby wrote an interesting piece titled: “Yes, slash farm subsidies — but don’t stop there.  Jacoby, a conservative writer, suggests support of a policy being proffered by the ultra-Leftists US Senator-elect from Massachusetts, Elizabeth Warren.  Ms. Warren suggests eliminating America’s federal agricultural subsidies, a view shared by Jacoby and this Blogger.  Jacoby points out the following concerning the subsidies:

  • During the past six years, farm subsidies cost US taxpayers approximately $275 billion.
  • The average farm household income in 2010 was over $84,000, 25% higher than the average for all US households that year.
  • 75% of government payments to farmers went to only 10% of farm businesses.  Some of these funds went to millionaires.

While Ms. Warren’s motivation behind cutting farm subsidies is political rather than altruistic given that few of these subsidies go to her state of Massachusetts, conservatives should back her proposal.  This could then be used as a springboard to eliminate other crony capitalism subsidies that also disproportionately benefit wealthier Americans.  Such a platform, if appropriately presented, would have wide appeal since such programs by their very nature can only benefit a small percentage of the population.

Attacking subsidies to wealthier Americans is but a first step in a broader program to limit the handout and entitlement mentalities that is taken over the Country.  However, it is a prerequisite for cutting the handouts that are the basis of power for the nanny state and the political class that runs it.  Republicans would do well to take a truly conservative position on this bi-partisan issue of the People.  But those already in power have self-interest in perpetuating the political power of handouts.


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