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Bigger Government, More Cronyism, Less Economic Freedom

Posted By Ryan Olson On September 28, 2012 @ 3:15 pm In Ongoing Priorities | Comments Disabled

Recent news about the Obama Administration’s divestitures from AIG [1] and GM [2]—in some cases at a loss of billions of dollars—stands as a reminder of the privilege and cronyism that permeates our economy.

As favoritism grows with the size of the government, economic freedom continues to be eroded by policies like bailouts [3], loan guarantees [4], and tax exemptions. Privilege has replaced the good public economic policies of freedom. The influence of a select few is eroding our economic values and introducing perverse incentives and inefficiencies that hurt our competitiveness.

This is what Matthew Mitchell of the Mercatus Center argued in a recent lecture [5] at The Heritage Foundation. Drawing from prior research [6], Mitchell argues that cronyism—manifested in regulations, subsidies, bailouts, tax credits, monopolies, loan guarantees, non-competitive bidding, and protectionism—is becoming all too common in our public policy discourse:

[Economic] privileges limit the prospects for mutually beneficial exchange—the very essence of economic progress. They raise prices, lower quality, and discourage innovation…[padding] the pockets of the wealthy and well-connected at the expense of the poor and unknown.

Such privileges strike at the heart of our society’s values and affect every American. This allocation of certain privileges to certain groups also has dire consequences for our economy, hurting the American consumer by reducing competitiveness and raising prices.

The result has been declining economic freedom. According to the most recent Index of Economic Freedom [7], published by The Heritage Foundation and The Wall Street Journal, freedom from corruption in the United States has fallen by 5 percentage points over the previous year due to increasing levels of cronyism and corruption.

In order to get our economy back on track, policymakers should embrace free enterprise and reduce subsidies [8] and regulations [9] that act as government-sponsored protection for a select few. Everyone should have the right to compete in the marketplace on an equal basis.

America’s leaders need to represent all Americans, not just a privileged elite. Thus, we need policies that help all Americans, not just the ones who can afford lobbyists and large campaign donations.


Article printed from The Foundry: Conservative Policy News from The Heritage Foundation: http://blog.heritage.org

URL to article: http://blog.heritage.org/2012/09/28/bigger-government-more-cronyism-less-economic-freedom/

URLs in this post:

[1] AIG: http://www.forbes.com/sites/steveschaefer/2012/09/11/treasury-trumpets-aig-bailout-repayment-after-18b-stock-sale/

[2] GM: http://online.wsj.com/article/SB10000872396390443995604578000754035510658.html

[3] bailouts: http://www.heritage.org/research/reports/2012/06/auto-bailout-or-uaw-bailout-taxpayer-losses-came-from-subsidizing-union-compensation

[4] loan guarantees: http://blog.heritage.org/2012/08/06/morning-bell-solyndra-revelations-show-its-time-to-close-the-bank-of-washington/

[5] lecture: http://www.heritage.org/events/2012/09/pathology-of-privilege

[6] prior research: http://mercatus.org/sites/default/files/The-Pathology-of-Privilege-Final_2.pdf

[7] Index of Economic Freedom: http://www.heritage.org/index/default

[8] reduce subsidies: http://www.heritage.org/research/commentary/2011/05/farm-subsidies-are-ripe-for-reform

[9] regulations: http://www.heritage.org/research/reports/1999/07/how-regulation-harms-health-consumers-and-the-uninsured

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