Rumble On The Right – It’s Not What You Think

Alison Acosta Fraser Managing Director, Charles Koch Institute
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Regardless of what you think about this election year so far, one thing seems clear: Americans are mad as hell and they are not going to take it anymore. That is understandable. Just consider what comes out of Washington — special goodies handed out by politicians on both sides of the aisle to those who have connections, influence, and money. These special favors are the essence of cronyism and corporate welfare, and they are baked into every nook and cranny of government.

Politicians and pundits on the right have excoriated the assault on free markets and limited government that’s occurred over the last 8 years. And while some fight over who is the most pure, the fact is the right is divided. Being pro-business is not the same as supporting free markets and, by extension, limited government.

Rather than focusing on creating value for their customers, businesses routinely employ scores of expensive lobbyists to fight for special treatment through spending or tax subsidies, or even regulatory preferences. But these handouts all have the same end result: the use of government to gain an advantage over competitors and grow the size of government.

Consider the recent fight over the Ex-Im bank. Touted as a way to help American exports, especially for small businesses, in reality, Ex-Im is not a bank at all but a federal government agency. Its subsidies go primarily to a handful of large, multinational corporations. The top ten recipients of Ex-Im’s largesse received 75 percent of its financing. This does little to help small business and it exposes taxpayers to significant risk. But it also directly harms other U.S. firms. For example, Boeing, Ex-Im’s single largest recipient, receives financing subsidies for selling planes to foreign air carriers. This allows the foreign carriers to undercut domestic carriers like Delta on international routes, in turn harming some American jobs in the name of helping others.

Ex-Im’s critics fought hammer and tong against the bank’s reauthorization. In the end, the concerted lobbying efforts of big corporations like GE, Boeing and Caterpillar and trade associations like the US Chamber of Commerce who spent tens of millions of dollars to win over the ‘pro-business’ crowd that laments welfare except when it benefits them. Congress reauthorized the bank.

But let’s remember why this fight was even possible. One of the bank’s staunchest supporters, House Majority Leader Eric Cantor, was defeated in a shocking primary upset. That signal opened the door for free-market defenders to launch a concerted attack against Ex-Im.  That the fight happened at all is encouraging. Even candidates on the campaign trail are attacking the evils of corporate welfare.

It’s too early to know if politicians will turn over a new leaf with the demand for special goodies for the well connected and influential. After all, corporate welfare is not just limited to exporters or manufacturers.

It’s endemic.

The recent highway bill for example, was larded with corporate welfare. For starters, lawmakers crammed the Ex-Im reauthorization into the bill. But they didn’t stop there. Last fall’s Bipartisan Budget Agreement reduced crop insurance subsidies by $300 million. Not an elimination of the subsidies, just a reduction. Yet, lobbyists for farmers and insurance agents claimed this would be so devastating it would make crop insurance unprofitable and no one would sell it. Lobbyists got this reduction removed in the highway bill, even though their claims were not supported by evidence.

Want more? Take sugar. Subsidies, tariffs and central planning benefit and protect U.S. sugar farmers. The result? Millions of dollars in taxpayer handouts each year, and U.S. consumers pay twice the world average for sugar at the check-out counter. Then there are the jobs lost to other countries as candy manufacturers move their factories out of the country to control costs.

This small smattering is just the tip of the iceberg of corporate welfare and cronyism policies that exist across all levels of government. They cost jobs and waste taxpayer dollars. They misallocate resources, stifle innovation, and slow growth. They rankle our sense of fairness because having politicians and bureaucrats pick winners and losers is the antithesis of how a free market should work.

The right should remember — pro-business policies are not necessarily pro-market, indeed they can undermine how free enterprise is supposed to work. Corporate welfare is actually harmful to the pro-liberty movement by compromising principles for cash. If this makes you mad as hell, it’s time for a rumble on the right.

Alison Acosta Fraser is managing director of research and policy at the Charles Koch Institute