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Kill Crony Capitalism

The opinions expressed by columnists are their own and do not necessarily represent the views of Townhall.com.

Jeffrey Immelt, CEO of General Electric, was recently appointed by President Obama to chair the Council on Jobs and Competitiveness. So it was no surprise when Immelt published a column in the Washington Post in which he applauded Obama for completing a free-trade agreement with South Korea – leaving completely unmentioned the fact that the agreement was actually negotiated five years ago, and was approved by Obama and Congressional Democrats only after it was changed to include costly giveaways to their union buddies.

Immelt somehow also failed to write about the thousands of American jobs lost purely because Obama and his Democratic posse have failed to affirm similar agreements with Panama and Colombia. This whole episode just illustrates how Big Business is beholden to Big Government, and why ”Crony Capitalism,” a huge tax on the vast majority of Americans, has got to be eliminated ASAP.

The left likes to attack Crony Capitalism because they only see it as the underhanded machinations of Big Business, Big Oil, or some other imagined Big. While these are indeed valid observations – even a stopped clock is right twice a day – Crony Capitalism comes in many forms and is a surefire sign of government run amok, which is why Republicans, prompted by the Tea Party, have begun to focus on the issue.

There are, regrettably, many styles of Crony Capitalism, each of which saps the federal government, states and municipal governments, as well as every taxpayer along for the ride:

Big Business – The sheer size of the federal government makes it conducive to large entities or consortiums sucking the life out of it for their own purposes. 80% of agriculture subsidies go to large agri-businesses. Big Steel was protected from competition for years. Billions were poured into the auto industry, much of which we’ll never get back. Insurance companies receive special dispensation in the tax code to enhance their profits. And, of course, there’s the AARP, whose Medi-Gap coverage was granted a waiver by Obama – conveniently placing every one of their competitors at a substantial disadvantage. These businesses are either feeding at the trough of government or manipulating regulation for their own devious purposes, and it’s why almost half of the political donations from large businesses go to liberal Democrats.

Big Business also uses its muscle to influence public policy. Walmart – along with the major drug companies – sold us out on the health care bill to get a competitive advantage. Now Wal-mart is teaming up with the government to coerce Amazon into collecting sales taxes for interstate sales – every dime of which will come out of our pockets. In both cases, Big Business is actively working to expand Big Government – and always at the cost of the little guy.

Walmart moves into a new market area and there are major protests. The protests are not because Walmart has tremendous advantage over local retailers with confronting government regulations such as OSHA. Although the argument centers on the ability of small retailers to survive with Walmart as a competitor, the campaign to stop the big box retailer is funded by Big Unions and other Big Businesses such as Safeway and Costco who hire those unionized workers. These entities use Crony Capitalism to achieve their goals to protect their own interests.

Business Licenses – We often complain about government intervention in our lives, but then we run to the government, usually at the State level, to protect our businesses from competition. The expansion of unwarranted licensing requirements is completely out of control, and just drives up the cost of government and the related licensed services.

No one will ever dispute that certain professions need to be licensed. From my standpoint as a CPA, I believe that it’s actually good that the Feds have stepped in to demand minimal testing for tax preparers – a requirement instituted in response to multiple instances of charlatans using the tax preparer role to defraud the government through the abuse of refundable credits.

Yet the list of “professions” lining up in state capitals to protect themselves under the guise of protecting the public boggles the mind. A recent article in the Wall Street Journal identified cat groomers, music therapists (whatever that is), tattoo “artists,” and tree trimmers as examples of “professionals” attempting to enhance their own revenue through Crony Capitalism. In New York State, you need a license to be an interior decorator. To be fair, some of the houses I’ve seen there clearly warrant criminal charges against their designers, but a license? Thankfully, there are no licenses required for movie makers, because most of Hollywood would be in Leavenworth.

These ridiculous requests by private citizens to have government safeguard them and protect their income are no less offensive than the policy and regulatory manipulations by big businesses.

Government Workers – Yes, this is also Crony Capitalism and it’s no better – and often much worse – than the categories above.

Many government workers are members of unions, which extract excessive dues through payroll deductions. The union then uses those dues to elect council members, school board members and state representatives who are beholden to them. The elected officials then rubber stamp their benefactors’ salary and benefit requests. If this isn’t Crony Capitalism, then I don’t know what would qualify as such.

The common thread here is that Crony Capitalism is a symptom of too much government. Business owners are often forced to make a tough decision: do I stay true to my free-market convictions, or do I play the game. Sadly, too many executives – like Jeffery Immelt – become whores to government and sell their principles for short-term benefits. Is there any surprise that GE announced it made over $14 billion in 2010 and made no American taxes? Unfortunately, those short-term benefits turn into long-term losses of freedom that may never be regained, and for which we all pay a very steep price.

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