Leveling the Playing Field in the American Market: The Threat of Cronyism

The federal government spends nearly $100 billion on corporate welfare each year through various subsidies, tax credits, and loans for businesses with the right friends in Washington. Addressing this threat head on, last week the Charles Koch Institute joined a panel of experts for “Playing Favorites,” exploring the harmful effects of cronyism on American competitiveness in both domestic and global economies. The event, held in Washington, DC, included experts from the Washington Examiner, the Mercatus Center, and The Heritage Foundation.

William Ruger, vice president of research & policy for the Charles Koch Institute, moderated the event, starting off with a clear picture of the danger cronyism poses to America: “Cronyism, or welfare for the rich, is a bane on society. It stifles competition and innovation by creating an uneven playing field and it harms consumers, entrepreneurs, and taxpayers. And when government picks favorites, it unfairly creates winners and losers in the marketplace.”

“Government intervention in the economy in order to privilege a distinct class of interests rather than the broader, general interest [is] tilting the playing field.”—Tim Carney

Tim Carney, senior political columnist at the Washington Examiner and Visiting Fellow at the American Enterprise Institute, called out several specific instances of corporate welfare. “The unholy trinity of Ex-Im, sugar, and ethanol [subsidies], combined with our pro-Wall Street policy stance, I think, are the most morally upsetting, the most politically vulnerable, and the most economically distorting examples,” said Carney.

But corporations aren’t the only benefactors of cronyism, argued Veronique de Rugy, a senior research fellow at the Mercatus Center. De Rugy explained, “Government grows by concentrating benefits on a bunch of winners and spreading the cost on numerous losers. In loan guarantees you really never hear anyone talk about those victims,” later commenting, “Congress thinks it is totally okay to say, ‘no one will lend you money, but you know what, taxpayers are here for you.’”

For Diane Katz, a senior research follow in regulatory policy at The Heritage Foundation, corporate welfare is simply “a transfer from the government from the many—us—to the few.” Katz later argued that the practice of cronyism “is a bipartisan problem,” before adding, “it is always, always, always a symptom of government that is beyond its proper scope and authority.

The event concluded with a Q&A by audience members, and a look towards what’s next in the debate over crony capitalism. While all of the panelists agreed that the fight against corporate welfare is far from over, there was a note of optimism for bipartisan reform, as noted by de Rugy: “I really think that we could be close to actually seeing some movement on that front.”

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