Cronyism Kills Capitalism

Cronyism is alive and well in the Swamp. “We The People” who resoundingly voted to “Drain the Swamp” will lose if the status quo is allowed to win.

“Status quo, you know, is Latin for ‘the mess we’re in’.”—Ronald Reagan

Crony capitalism is defined as an economic system characterized by close, mutually advantageous relationships between business leaders and government officials. Many of our nation’s biggest companies come to the Washington Swamp, to hire lobbyists to preserve tax breaks, to use the power of government for competitive reasons or to secure government money for corporate projects. And Elizabeth Warren is happy to line their mutual pockets.

Why not post the whole thing?

“Status quo, you know, is Latin for ‘the mess we’re in’.”—Ronald Reagan

The battle over tax reform is an excellent example of rampant cronyism. Last year, Speaker of the House Paul Ryan laid out a bold plan to scrap the corporate income tax for a system that falls more in line with a territorial system of taxation that does not punish companies who sell products domestically. A territorial tax idea would exempt foreign sold goods from being taxed to remove the incentive for companies to reorganize in another country to avoid double taxation.

The cronies are spending large amounts of cash to keep the code as is

Bloomberg reported on May 24, 2017 “in a tax-overhaul blueprint released last year, Ryan and other House leaders proposed replacing the U.S. corporate income tax with a 20 percent levy on U.S. companies’ domestic sales and imports. Exports would be excluded. That border-adjusted feature would function as a tax on the U.S. trade deficit, Ryan says.” That plan has changed a bit, yet the lobbyist on K Street in the Swamp are furiously lobbying to preserve the current tax code that is littered with exemptions and special provisions for different corporate lobbying interests.

The cronies are spending large amounts of cash to keep the code as is. Fox Business reports on May 30, 2017 that the tax reform dreams are becoming a nightmare. “The GOP’s dreams have collided with interest-group lobbying and the tax system’s reality. Politicians all profess to hate the tax code, but they don’t agree on exactly what they hate. Voters gripe about complexity but are wary of losing cherished breaks that are woven into the economy.” The status quo is winning with prospects for a simplified tax code with a lower personal and corporate income tax structure are getting dimmer by the minute.

There is also the case of Pershing Square Capital’s Bill Ackman who has been fighting a long war to destroy the company Herbalife. Fortune reported on September 9, 2015 “At about 2 p.m. on Wednesday, Dec. 19, 2012, CNBC’s Kate Kelly broke the news that billionaire Bill Ackman’s hedge fund had taken a massive short position—about $1 billion worth, we know now—in the stock of a nutrition company called Herbalife.” Ackman was successful in getting the Obama Administration to investigate the company’s business model to bankrupt the company and make good on his $1 billion bet. Ackman only makes money if the company goes bankrupt.

Cronyism is alive and well in the Swamp

His bet turned out bad, yet he has continued his war on the company that has extended from 2012 to today. Ackman is not the only crony capitalist looking for hand outs in Washington. The company Bose is pushing for a new regulatory scheme that may help that company make more money and cost the American people with limited choice and higher prices for personal sound amplification products (PSAPs).

Twenty one conservative groups penned a letter to Sen. Lamar Alexander (R-Tenn.) on May 8, 2017 opposing an effort by Sen. Elizabeth Warren (D-Mass) to impose new regulation on PSAPs through legislation. The Warren bill claims to be a deregulatory bill yet the letter argues “it turns out this claim is misleading at best, if not completely disingenuous. Sen. Warren’s bill expands the power of federal bureaucrats, eliminates state authority, and reduces consumer access to amplification devices by making them more expensive and highly regulated. That’s not how she advertises the bill, but that’s how it would be described if truth in labeling laws applied to Congress.” According to a Boston Globe report from last week one of the lobbying interest in favor of the bill, Bose, is based in Framingham, Massachusetts.

Cronyism is alive and well in the Swamp. “We The People” who resoundingly voted to “Drain the Swamp” will lose *if the status quo is allowed to win.

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