Red v. Blue: “Crony Capitalism”

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A weekly column where Gettysburg’s College Republicans and Democrats debate topics in the news. This week College Republicans discuss: “Crony Capitalism” 

By Timothy Meads, College Republican

If you were a legal lager aficionado at Governor Tom Wolf’s inauguration party, you might have been scouring the bar looking for your favorite adult beverage: the glorious Yuengling beer.  Yuengling is America’s oldest brewing company and Pennsylvanians have enjoyed it since 1829. Founded by a German immigrant, the business became a well-respected firm and has employed thousands of Pennsylvanians.

So why didn’t the Pennsylvania Governor want it at his party? The company isn’t unionized. Why should that deter Tom Wolf from supplying their libations to the people who elected him?  No, the answer isn’t that Tom Wolf and his elitist pals only quaff Stella Artois and the finest Pinot Grigios.  The real answer is this is a classic example of big government sleeping with Big Business, or in this case Big Unions. Anytime Big Government gets involved with Big anything, it spells troubles.

While this case may seem trivial, the sentiment and message that has been sent is not: agree with Tom Wolf and the unions, or your company will pay the price. This precedent is not specific to Tom Wolf alone, he probably learned it from his buddies in D.C. Kickbacks abound across America for those who support corrupt officials.

The problem does not lie within the Democratic Party per se, but within a leftist and statist mindset that pervades the American government and exploits the taxpayers, whose hard earned dollars are doled out in exchange for votes or personal financial gain. Business officials who seek to profit on the backs of the taxpayer know these corrupt public servants exist and take advantage of their greed.

The oldest case of Crony Capitalism is the building of the transcontinental railroad.  The Credit Mobilier scandal set up a system in which the federal government subsidized the Union Pacific railroad. A certain amount of money, often inflated, was allotted for each mile built across America.

This meant the longer the rail itself, the more the railroads stood to make money. To make matters worse, companies knew they had to keep in good standing with Congressmen. Like any crony capitalist, these businessman sold company stocks to Congressmen at a cheaper rate. This meant so long as the government supplied funding, all officials involved would make profit. Eventually, this scandal was exposed and halted, but the government simply gave a slap on the wrist to those involved. The lack of punishment foreboded a great danger to the American taxpayer. The secret was out. Tax dollars could be used to bribe companies as long as companies could ensure political victory.

Fast forward to 2009 and over many cases of crony capitalism to the Stimulus Package, promising new jobs and a rejuvenated economy. Critics warned this bill would be laden with pork barrel spending, but the promises set forth by Barack Obama seemed too tempting to resist. The critics were right. The $787 billion stimulus package failed the American taxpayer. It wasn’t all gloom though; businesses and unions who supported Obama’s presidential run gained incredible amounts of revenue. Billionaire Elon Musk   has been thriving off the taxpayer since 2009. Musk donated the maximum amount of $35,800 dollars to the Obama Victory Fund in 2008 and has helped raised hundreds of thousands for Democratic candidates across the country.

One of his numerous government backed companies is Solar City, a company that installs solar panels. Solar City received $11 million dollars in the stimulus, but through a tax program has received more than $442 million dollars in tax credits. According to Watchdog.org, this company is now being investigated by the government for overpricing its products. The more expensive the product is, the higher the taxes are on it and Solarcity can yield more profit through tax credits. One might wonder if Elon Musk got his business model from the railroad owners in the late 1800s.

Interestingly enough, Musk applied for another massive loan upwards of $300 million from the Department of Energy, but was denied. He quickly found the funding in the private market and for good reason: it’s profitable to be in business with a man who is in bed with the government. Most recently Elon Musk came to help another Democrat get re-elected, Governor Cuomo in New York. Cuomo failed to turn around Buffalo’s ailing economy and needed a bailout. Musk came to the rescue and promised to move Solar City to the beleaguered upstate city. In return, Musk received $750 million from the state of the New York and lucrative benefits, such as paying a $1 a year property tax on his company’s factory. He created jobs, but how much more beneficial would it have been to just cut state taxes and city taxes to make Buffalo a viable option for businesses? Furthermore, how is this not disrupting the market by giving Solarcity privilege over a potential competitor that could outperform Musk in the free market? A plethora of jobs would have been created, but Governor Cuomo would have lost re-election. To save his own skin, Cuomo sacrificed the taxpayer to the corporations.

Democrats will be quick to argue that the stimulus bill and government spending create jobs for millions of Americans. What they do not understand is that these jobs are often temporary, are funded by tax payers, and distort the market. Billions of dollars are spent unwisely on maleficent products.

Big money benefits big business, leaving the taxpayer in the dust. This rampant corruption cheapens products, reduces efficiency, and creates distrust of our government. The market cannot function because those with government connections have the competitive edge over those who do not. Consider the example of Musk’s solar panels, he was incentivized to charge more to a select few who could afford the panels rather than try to innovate and create an efficient, cheaper panel for the masses.

This is not capitalism, this is Crony Capitalism. It prevents sustainable job growth and much needed inventions like viable cheap renewable energy from emerging in the free market. Democrats will also point to numerous examples of this from the Republican side, and they have a valid point. But those Republicans are not true Conservatives. This problem is bipartisan. Any liberal with an R or D next to their name thinks the government can dictate the economy and reap the benefits. Whether it’s as simple as beer or as complex as solar energy, companies are taking advantage of government subsidies.

My advice to any free market advocate is to grab your Statist friend, sit them down with a Yuengling, and explain that while we’re getting drunk off beer, fat cats with connections are getting drunk with our taxpayers dollars.

 

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Author: Isabel Gibson Penrose

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