Moochers and Cronies Part II
More on crony capitalism from "A Nation of Moochers":
Especially as government increasingly tries to pick winners and losers in the marketplace the stakes continue to rise. As journalist Timothy Carney notes, “when government is discussing making some products (such as health insurance) mandatory, some (such as the incandescent light bulb) illegal, some (such as a trip to the tanning bed) more heavily taxed, some (such as wind-mills) more heavily subsidized, and granting others (such as biologic drugs) lengthy government-enforced monopolies, you can expect businesses to lobby up… Even if Washington isn’t threatening your industry, but is instead only handing out goodies, you still suffer by not investing in K Street, because your competitors will just get your share of the loot.”[i]
The allure of billions of taxpayer dollars has not only changed the rules and expectations of corporate America, the dollars have also proven to highly addictive. “Once executives get a taste of corporate welfare, they want more,” notes Barry Ritholtz. “Do you have any idea how hard it is to earn $30 billion in a year? Flying commercial – or even driving – to Washington, DC, for an afternoon of hostile Q&A is a lot easier than having your company make $30 billion. The return on investment (ROI) on the day trip is fantastic.”[ii]
Offense and defense
In fairness, much of the lobbying explosion is defensive, part of the push-pull between currying favor and fending off damaging political interventions. In the halls of corporate America, the story of Microsoft is a cautionary tale. Perhaps assuming that it success would speak for itself without paying court to the powers in Washington, the software giant made no effort to mount a serious political presence. In 1999, the Clinton Justice Department smacked the firm with a massive anti-trust suit that would eventually cost Microsoft billions of dollars and force it to change the way it did business. “Before then,” noted the Washington Post, “it had mostly ignored the nation's capital.”[i]
Few big firms make that mistake anymore, nor can they afford to. In recent years, realtors ramped up their lobbying efforts, hoping both for bailouts and to fend off various anti-housing measures (like the elimination of the home mortgage deduction.) And as health care reform loomed, Big Pharma dramatically stepped up its own courtship of government. As a result, notes Carney, “Every reform proposal with significant congressional backing represented corporate welfare for the drug makers. This is why the drug makers ran advertisements supporting ‘reform.’”[ii] The same story could be told in industry after industry.
 According to Center for Responsive Politics, the “Pharmaceutical/Health Products” industry spent more on lobbying since 1998 than any other industry….”
[i] Birnbaum, op. cit.
[ii] Timothy P. Carney, Obamanomics,” Washington. D.C., Regnery, 2009, 54-55
[iii] James Gattuso, “Chrysler’s Creditors and Offers You Can’t Refuse,” The Foundry, the heritage Foundation, May 1, 2009
[iv] Mary Williams Walsh, “Government takes Over Delphi’s Pensions,” the New York Times, July 23, 2009
[vi] Carl Horowaitz, “Nonunion Delphi Retired Employees Get Shaft in Auto Bailout,” National Legal and Policy Center, December 31, 2009
[vii] Cited in “TARP Enable Big Labor Crony Capitalism Again,” The Foundry, Heritage foundation, November 5, 2009
[i] Timothy P. Carney, “Barack Obama and the Miracle on K Street,” The Washington Examiner, December 24, 2009
[ii] Barry Ritholtz, Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy,” Hoboken, NJ, John Wiley and Sons, 2009., p. 273