Tag: corporate welfare

Happy National Entrepreneurs’ Day?

President Obama has proclaimed today to be National Entrepreneurs’ Day. The president who has brought us regime uncertainty, more regulations, more government intrusion into the economy, more debt, and is proposing to raise taxes on productive businesses and individuals wants to celebrate entrepreneurship?

I was alerted to National Entrepreneurs’ Day via an email (not online) from the Department of Commerce’s Economic Development Administration. The EDA email makes it clear that the administration wishes to celebrate political entrepreneurship, not market entrepreneurship.

In his book, The Myth of the Robber Barons, historian Burton Folsom explains the difference:

A key point about the steamship industry is that the government played an active role right from the start in both America and England. Right away this separates two groups of entrepreneurs — those who sought subsidies and those who didn’t. Those who tried to succeed in steamboating primarily through federal aid, pools, vote buying, or stock speculation we will classify as political entrepreneurs. Those who tried to succeed in steamboating primarily by creating and marketing a superior product at a low cost we will classify as market entrepreneurs. No entrepreneur fits perfectly into one category or the other, but most fall generally into one category or the other. The political entrepreneur often fits the classic Robber Baron mold; they stifled productivity (through monopolies and pools), corrupted business and politics, and dulled America’s competitive edge. Market entrepreneurs, by contrast, often made decisive and unpredictable contributions to American economic development.

As Obama administration achievements, the EDA touts increased Small Business Administration subsidies and a smorgasbord of industrial planning contained in last year’s stimulus package:

The American Recovery and Reinvestment Act served as the cornerstone for this new foundation by pumping $100 billion into the economy to help us tackle some of the grand challenges of the 21st century in diverse fields from healthcare IT and health research, to clean energy, to smart grids, and high speed trains. Recovery Act investments are creating a virtuous cycle of investment, innovation, and job creation that have so far led to the creation of 3 million new jobs.

Wrong. The stimulus has fueled an unvirtuous cycle of political entrepreneurship in which business interests chase federal hand-outs for endeavors sanctioned by inside-the-Beltway planners. Political entrepreneurs have less incentive to innovate and are naturally reluctant to criticize the government because they don’t want to bite the hand that’s feeding them. As Chris Edwards puts it, they become “tools of the state.”

If the administration were really interested in promoting entrepreneurship, it would repudiate the anti-market policies it has pursued thus far. That’s obviously not going to happen, so it’s going to be up to congressional Republicans to repudiate their own history of supporting federal subsidies. In other words, the GOP’s re-found fondness for limited government rhetoric is going to have to actually be matched by action.

The Big Government-Big Business Health Care Plan

Ross Douthat at the New York Times, with help from Reihan Salam and Tim Carney, explains how the Senate health care bill can be both a government takeover and a huge subsidy to the insurance industry:

We’ve achieved an unusual left-right convergence in the health care debate: Both conservatives and liberals are attacking the current version of reform as an egregious giveaway to the insurance industry. (Both sides sound an awful lot like Tim Carney, in other words.) Suddenly, it’s hard to tell the difference between the right’s Yuval Levin (“The bill is basically a massive subsidy to the insurers — it is not a reform of the system”) and the left’s Markos “Daily Kos” Moulitsas (“it’s unconscionable to force people to buy a product from a private insurer that enjoys sanctioned monopoly status”).

Ed Kilgore argues that the two sides’s concerns, while superficially similar, are actually contradictory:

… on a widening range of issues, Obama’s critics to the right say he’s engineering a government takeover of the private sector, while his critics to the left accuse him of promoting a corporate takeover of the public sector. They can’t both be right, of course, and these critics would take the country in completely different directions if given a chance.

He’s right about the gulf between the critics’ prescriptions, but I think he’s wrong about the incompability of their critiques. Here’s Reihan, explaining why:

Actually, it is entirely possible for both sets of critics to be correct. The concern from the right isn’t that the Obama approach will literally nationalize for-profit health insurers. Rather, it is that for-profit health insurers will continue evolving into heavily subsidized firms that function as public utilities, and that seek advantage by gaming the political process. Profits, including profits governed by medical loss ratios, can and will then be cycled into political action, which leads to the anxiety concerning a “corporate takeover of the public sector.” Again, progressives don’t literally believe that such a takeover is happening. Instead, they believe, rightly, that subsidies without effective cost containment represent a massive windfall for the private insurance sector, including non-profit insurers that generate salaries for large numbers of politically active middle and upper middle class professionals.

So yes, Obama does not intend to nationalize the private insurance industry and then turn around and auction off the new nationalized health agency to Rupert Murdoch or Monsanto. But the anxieties of critics on the left and right are, to italicize for a moment, perfectly compatible.

The point is that the more intertwined industry and government become, the harder it is to discern who’s “taking over” whom — and the less it matters, because the taxpayer is taking it on the chin either way. Or to put it another way: The creatures outside looked from pig to man, and from man to pig, and from pig to man again; but already it was impossible to say which was which …

Tim Carney will discuss his book, Obamanomics: How Barack Obama Is Bankrupting You and Enriching His Wall Street Friends, Corporate Lobbyists, and Union Bosses, at a Cato Book Forum on January 12.

The Week in Government Failure

The Biggest Leeches Always Live

By proposing to eliminate the Federal Family Education Loan Program, President Obama has raised a pretty big ruckus in the relatively staid world of higher education policy. For the uninitiated, FFELP uses taxpayer dollars to essentially guarantee profits to participating financial institutions, and to keep student loans cheap and abundant. 

Since neither corporate welfare nor rampant tuition inflation are really good things, getting rid of this beast would be a welcome move. Unfortunately, the president wants to replace FFELP with direct-from-Washington lending and to plow the savings into Pell Grants, so there’ll be no savings for taxpayers and probably very little beneficial effect on college prices. 

As I wrote on NewMajority.com in May, no one should expect big lenders to get kicked off the federal gravy train:

[T]he Obama administration is saying they’d keep private companies as servicers of loans to maintain quality customer service. Of course, this could very well be worse than the status quo: It will likely keep at least the biggest current lenders (read: Sallie Mae) at the political trough, but Washington will be THE lender for all students.

Right I was! Or, at least, signs of my prescience keep getting brighter:  Despite Obama promising to go to war against an ”army” of lenders’ lobbyists, the U.S. Department of Education just awarded Sallie Mae and three other big lenders lucrative contracts to service federal loans. So while smaller leeches could very well be removed from their supply of taxpayer blood, the biggest will keep on sucking!