Tag Archives: corporatism

Peter Schweizer’s Report Details “Compassionate Corporatism”

by Whitney Pitcher

On Friday, FoxNews ran a second “Boomtown” special featuring Stephen Bannon and Peter Schweizer and highlighting the research done by Schweizer’s Government Accountability Institute on food stamps. The federal government currently funds 126 separate anti-poverty programs, ranging from Medicaid to Pell Grants to food stamps. Since President Johnson declared the “war on poverty” in the 1960s, $15 trillion has been spent to combat it. Despite this, there are still 50 million Americans in poverty, including 20% of all children. 47 million are on food stamps–more than 15 times as many as in 1969. Anti-poverty programs have expanded greatly under the guise of “compassionate” conservatism and unveiled socialism. These programs, intended at least in word, to be a safety net for the poor, have actually become a hammock for large corporations. In essence, such programs are really “compassionate” corporatism.

Below is a table from a CATO Institute report detailing the failures of programs aimed at fight poverty:

During the Reagan administration, welfare spending remained relatively constant only to jump from about $200 billion a year to $300 billion a year during President George HW Bush’s tenure. During President Clinton’s two terms, welfare spending remained constant at around $300 billion a year. However, while President George W. Bush was in office, welfare spending jumped to around $500 billion a year by 2008. This upward trend has continued under President Obama.  According to Schweizer’s report, both Bushes and Obama expanded eligibility for food stamps specifically. The welfare reform championed by Speaker Newt Gingrich and signed by President Clinton reduced the number of people on food stamps from 25.5 million to 17 million between 1996 and 2000. In the next four years under President Bush however, those numbers grew again from 23.8 million Americans under the more palatable Supplemental Nutrition Assistance Program (SNAP). This was the “compassionate” conservatism touted by President Bush, but who really received the compassion?

Former Bush speechwriter, Michael Gerson defined compassionate conservatism as “the theory that the government should encourage the effective provision of social services without providing the service itself.” Additionally, the Bush White House claimed that faith based organizations would be empowered to provide these services, but in practice, it was large corporations–like JP Morgan–who were empowered. Schweizer’s report details the role of JP Morgan in food stamp programs. When they acquired Citicorp Electronic Financial Services in 2003, they also received the contracts of what is now nearly half of all states EBT (akin to a food stamp debit card) programs. Since they became involved in the EBT business, JP Morgan has more than tripled their donations to Congressional members who sit on the Agriculture committees (The Department of Agriculture administers the program). Additionally, President Obama received more than $800,000 in campaign contributions from JP Morgan, which he promptly rewarded with an expansion of SNAP through the “stimulus” program and further expansion in 2010. What has this yielded for JP Morgan? According to Schweizer, they have made more than half a billion dollars off of SNAP since 2004, and their profit is expected to grow as SNAP continues to expand.

The very etymology of the word “compassion” indicates that  it cannot be provided by government. The word, compassion, really means to suffer with. How much can government empathize with the poor when their campaign accounts are being padded while their cronies’ profits rise? Additionally, government cannot be compassionate with other people’s money. American is known for being very generous. A study published last August noted that Americans gave over $214 billion to charity in 2008. “Red” states comprised the top eight states for charitable giving, while “blue” states made up the seven least charitable states. This is what compassion is–giving of one’s own money to help those in need. It isn’t using taxpayer dollars to perpetuate poverty while politicians’ cronies profit.

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State of the Union: Incestuous Business Partnerships and Forced State Partnerships

by Whitney Pitcher

Following President Obama’s State of the Union address earlier this week, Senator Marco Rubio and Senator Rand Paul gave Republican and Tea Party rebuttals respectively. Both of them spoke on important points like outrageous spending, high taxes, and the need for choice in education. Senator Paul rightly highlighted both the GOP’s complicity in big spending and the President’s wrong stances on civil liberties and foreign policy while Senator Rubio barely touched these issues. However,there were two very big issues that the two Senators either insufficiently discussed or did not discuss at all–corporatism and federalism.

True to form, during his State of the Union address, President Obama railed against corporate tax loopholes and deductions for the well connected, proving later in his speech that this was only talk. As Veronique de Rugy noted at the National Review, President Obama later called for special incentives and tax breaks for certain industries and sectors of his own choosing–manufacturing, clean energy, infrastructure and construction, housing, science and innovation, and education suppliers among others. Sadly, as Tim Carney at the Washington Examiner notes, neither Senator challenged the President on this sufficiently nor offered alternative solutions:

But Rubio didn’t make a full-throated case for free-market populism. Like Obama, he relied on his party’s well-thumbed playbook: He pinned the housing bubble on government, and took another shot at the failed green-energy subsidy-suckler, Solyndra. Then he called vaguely for shrinking government.

Rubio could have, instead, offered some real free-market populist ideas. To cut the deficit, for instance, he could have proposed ending specific corporate-welfare programs. He could have made it clear he wants to cut subsidies to both Big Oil and Big Green. And why not offer something tangible to the average family, like cutting the payroll tax?

Rand Paul, giving the Tea Party response, hit the right notes a bit stronger. Paul tapped into the near-universal understanding that politics is a rigged game when he assailed “backroom deals in which everyone up here wins, but every taxpayer loses.”

Paul said, “We must continue to object when Congress sticks special interest riders on bills in the dead of night.”

Again, Paul’s economic proposals were typical GOP fare: a balanced-budget, for instance. He never gave bolder proposals — say, breaking up big banks to protect taxpayers from bailouts.

Perhaps one of those two Senators could have said something like this:

[W]e can and we will make America the most attractive country on earth to do business in. Here’s how we’re going to do this. Right now, we have the highest federal corporate income tax rate in the industrialized world. Did you know our rates are higher than China and communist Cuba? This doesn’t generate as much revenue as you would think, though, because many big corporations skirt federal taxes because they have the friends in D.C. who right the rules for the rest of us. This makes us less competitive and restrains our engine of prosperity. Heck, some businesses spend more time trying to figure out how to hide their profits than they do in generating more profits so that they can expand and hire more of us. So, to make America the most attractive and competitive place to do business, to set up shop here and hire people here, to attract capital from all over the globe that will lead to an explosion of growth, instead of chasing industry offshore, I propose to eliminate all federal corporate income tax. And hear me out on this. This is how we create millions of high-paying jobs. This is how we increase opportunity and prosperity for all.

But here’s the best part: To balance out any loss of federal revenue from this tax cut, we eliminate corporate welfare and all the loopholes and we eliminate bailouts. This is how we break the back of crony capitalism because it feeds off corporate welfare, which is just socialism for the very rich. We can change all of that. The message then to job-creating corporations is: We’ll unshackle you from the world’s highest federal corporate income tax rate, but you will stand or fall on your own, just like all the rest of us out on main street.

This idea, proposed by Governor Sarah Palin in September of 2011, would prevent the selection of winners and losers and the “private-public partnership” touted by President Obama that only puts business in bed with government. Since this proposal eliminates corporate taxes, it would also provide push back to the President’s continual false claim that tax breaks are given to companies who ship jobs overseas. This is claim President Obama made in his 2011 and 2012 State of the Union addresses, and it is false. As I wrote nearly a year ago :

 What President Obama calls a “tax break for outsourcing” is really no tax break at all. America has the highest corporate tax in the world. America’s corporate tax rate is nearly three times that of the financially flailing Greece. Companies are not given a tax credit or subsidy specifically for outsourcing, but by outsourcing, their costs become lower as often the regulatory burden is smaller as are other costs. Additionally, American companies who have foreign subsidiaries pay taxes both to that foreign country and the US, and these companies pay taxes if those profits are repatriated.

As the Cato Institute notes “corporate income taxes are the most distortive, and hence the most harmful for economic growth.” Making America’s corporate tax rates competitive with the rest of the world will help drive jobs back to America, but the Obama administration has it backwards by suggesting the corporate tax reduction should follow companies “insourcing” jobs. Even in spite of the fact that President Obama’s deficit reduction commission proposed corporate tax reductions and that he himself discussed reductions in his 2011 State of the Union address, he has not made any concerted effort to reduce the corporate tax. In fact, his administration has even recently spoken of levying a “global minimum tax” to prevent American companies from “escaping doing their fair share” by outsourcing.

President Obama likes to play good cop to Big Business’s bad cop–criticizing them in speeches only to give them special tax incentives and tax breaks. From a policy perspective, eliminating special tax breaks and at least lowering corporate taxes will allow businesses to create jobs and protect taxpayers from paying for special breaks to the President’s cronies. From a political perspective, it means that the alternative concrete solutions are being offered, not just criticism of the opposing party.

In addition to discussing “private-public” partnerships, President Obama focused on state-federal “partnerships”. In particular, states with the best “clean energy” proposal will get federal support and the federal government will work with states on providing Pre-K education. Senator Rubio mentioned briefly that states should have a role in Medicare, but neither Senator pushed back against the President’s plans to push a federal government plan that would likely be an unfunded mandate for states. Maybe that is because it takes a governor to truly understand how the federal government stomps on federalism. Following the President’s speech, Governor Sarah Palin tweeted:

She would know. In 2009, President Obama signed into law the “stimulus” package, which Governor Palin fought against by vetoing large portions of the stimulus funding allocated to Alaska. She noted that such a plan didn’t have strings attached to it–it had “debt-building, binding, controlling ropes” attached to it. Governors today are seeing the same thing with Obamacare. Many Republican governors have rejected state run Obamacare exchanges in part because, although federal dollars are allocated to setup the exchanges, states are required to fund the exchange beginning in 2015. Accepting the exchange turns into an unfunded mandate.

This is not to say that the federal government has no relationship to state government. One of the main reasons the Constitution succeeded where the Articles of Confederation failed in our nation’s founding was because the federal government’s role was ill-defined and weak in the Articles. However, the federal government needs to realize its minimal role at the state level.

Suffice it say, while these two Senators effectively hit on several important issues, they did not appropriately hit on the federal government’s improper entanglement with both business (corporatism) and state governments (lack of federalism). The State of the Union is one of incestuous business partnerships between connected cronies and the federal government and the forced partnership between the federal government and the states and the federal government with the taxpayers paying the dowry.

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Obamacare Insurance Exchanges Are Corporatism Disguised as “Competition”

by Whitney Pitcher

Earlier this week, I noted how Cook County board president and Obama mentor Toni Preckwinkle secured a $100 million Obamacare waiver to implement Medicaid expansion in the county a year early and cover a gap in the county budget. The conflicts of interest in Obamacare adds yet another layer as insurance exchanges are in the process of being implemented before the 2014 deadline. The Hill Healtwatch reports:

The fast-approaching deadline gives the administration little time to scrutinize private-sector partners for conflicts of interest.

The purchase of one of these contractors, Quality Software Services, Inc. (QSSI), by UnitedHealth Group, a major healthcare conglomerate, has sparked concerns about a potentially uneven playing field.

QSSI, a Maryland-based contractor, in January won a large contract to build a federal data services hub to help run the complex federal health insurance exchange.

It will be working with several other contractors, including CGI Federal, Inc., to create the technological architecture for the exchange.

The quiet nature of the transaction, which was not disclosed to the Securities and Exchange Commission (SEC), has fueled suspicion among industry insiders that UnitedHealth Group may be gaining an advantage for its subsidiary, UnitedHealthcare.

The article aptly compares these health insurance exchanges to websites like Travelocity or Expedia where consumers can pick and choose the best deals for airline tickets or hotels. With the potential conflict of interest in the health care exchange, it would be akin to Travelocity or Expedia owning American Airlines or Marriot Hotels and thus potentially driving consumers to purchase their product based upon how that company portrays the available options.  As the article goes on to note:

If an insurance company had influence over the information technology architecture used to run the exchange, it could interpret federal standards in a way to exclude competitors or make it more difficult for them to win approval, say some insurance experts. Or it could have an inside track on knowing how to design plans that meet the standards.

The contractors working on the exchange will also have responsibility over payment calculation for risk adjustment.

This program is intended to redistribute funding from plans that attract younger and healthier participants, and thus have lower costs, to plans that attract people with more chronic diseases.

The draft statement of work for the contract shows QSSI will also work on technical requirements to deliver financial management services, such as payment calculation for risk adjustment.

The prospect that a subsidiary of UnitedHealth Group could have a role in calculating the reallocation of federal funds among rival health plans has unnerved some industry insiders.

In mid October, Senator Orrin Hatch sent a letter to DHHS Secretary Kathleen Sebelius asking for a full accounting of who received federal Obamacare contracts and what government officials signed off on those contracts. Sebelius has not responded. Hatch has also asked if Steve Larsen, a former official at HHS played a role in this contract:

Larsen left the Center for Consumer Information and Insurance Oversight, the office tasked with crafting rules for the national exchange, in July to take a job with Optum. It is not clear how long Optum was in consultation with QSSI prior to purchasing it.

Shields Britt, the spokeswoman for HHS, said Larsen would have to comply with stringent rules.

“Former HHS employees are subject to the strict ethics policies put in place at the start of this administration, which are some of the toughest ethics rules ever imposed on executive branch appointees, and those standards certainly apply here,” she said.

Optum, whom Larsen currently works for, is the subsidiary of UnitedHealth Group that bought QSSI, the company who would provide the information infrastructure for the exchanges.How’s that for a revolving door between government and industry? What are those strict “ethical” standards? Those words ring hollow from an administration whose first choice for HHS Secretary, Tom Daschle, was a “policy adviser” (newspeak for lobbyist) at the firm that lobbied for United Health.

The rhetoric behind the Obamacare insurance exchanges is one of competition and consumer choice, but the truth behind it is nothing more than continued corporatism and conflicts of interest.

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Sarah Palin–Lobbyist for the American People

by Whitney Pitcher

Today marks the one year anniversary of the passage of the Dodd-Frank Financial “Reform” bill which was supposedly intended to reform Wall Street and the big lending agencies such as Fannie Mae and Freddie Mac, but it instead did the opposite. It has paved the way to strengthen government tied lending agencies and stifle private lending agencies. The National Review reports:

Yet Fannie and Freddie are bigger than ever, securitizing nine out of ten home mortgages and receiving unlimited guarantees from the taxpayer, thanks to the Obama administration’s Christmas Eve bailout of 2009. And one provision of Dodd-Frank has not only slowed the momentum of reforming the GSEs, but threatens to make them even bigger.

Dodd-Frank’s rules on “qualified residential mortgages” — as currently proposed in a joint regulation by banking agencies, the Department of Housing and Urban Development, and the Securities and Exchange Commission — aggrandize the GSEs by putting shackles on their private-sector competitors. The regulation sets overly strict rules for down payments for mortgages to be securitized, but then exempts from these requirements any home loan insured by the Federal Housing Administration or purchased by Fannie or Freddie.

[…]

The administration also closed the door on the option of creating any exemption for private mortgage insurers if they create models to reduce risk, as some have proposed. In the Obama administration’s view, the answer is government backing for mortgages, period.

What the then Democratically controlled House and Senate and the President did was pass a bill that was a mix of corporatism and crony capitalism. However, as with anything done by a government at any level—local, state, or federal—an additional issue is how the bill was negotiated and passed, not just what was in the legislation itself. In Spring of 2010 in the midst of the financial “reform” bill legislation discussions, Governor Palin wrote a Facebook post criticizing the negotiation process:

The current debate over financial reform demonstrates what happens when political leaders react to a crisis with a raft of new regulations. First off, the people involved in writing government regulations are often lobbyists from the very industry that the new laws are supposed to regulate, and that’s been the case here. It should surprise no one that financial lobbyists are flocking to DC this week. Of course, the big players who can afford lobbyists work the regulations in their favor, while their smaller competitors are left out in the cold. The result here are regulations that institutionalize the “too big to fail” mentality.

Moreover, the financial reform bill gives regulators the power to pick winners and losers, institutionalizing their ability to decide “which firms to rescue or close, and which creditors to reward and how.” Does anyone doubt that firms with the most lobbyists and the biggest campaign donations will be the ones who get seats in the lifeboat? The president is trying to convince us that he’s taking on the Wall Street “fat cats,” but firms like Goldman Sachs are happy with federal regulation because, as one of their lobbyists recently stated, “We partner with regulators.”

They seem to have a nice relationship with the White House too. Goldman showered nearly a million dollars in campaign contributions on candidate Obama. In fact, J.P. Freire notes that President Obama received about seven times more money from Goldman than President Bush received from Enron. Of course, it’s not just the donations; it’s the revolving door. You’ll find the name Goldman Sachs on many an Obama administration résumé, including Rahm Emanuel’s and Tim Geithner’s chiefs of staff.

Between lobbying efforts and campaign funding, it seems that too often the government allows itself to be beholden to special interest groups and only certain institutions, and, thus, legislation is often crafted to benefited favored institutions, rather than the American people. This is a bipartisan problem. In fact, it is interesting to note that in the last three months, Governor Romney received far more campaign funds from Goldman Sachs employees than even President Obama. Romney has also accepted more than half a million dollars in campaign funding from lobbyists during that period of time. Additionally, in 1994, Romney’s Bain Capital actually has partnered with Goldman Sachs in purchasing Dade International, a medical diagnostics firm. In doing so, 1,600 Dade employees were laid off between 1994 and 1999, but Bain Capital and Goldman Sachs would later cash in selling back their shares to Dade for more than $350 million. So when Mitt Romney tries to tout his job creating skills as a businessman, it should be noted that he has also destroyed jobs while partnering with a company that would later give him loads of campaign money.

 A May piece in the Washington Examiner noted, too, that Romney has been a big supporter of corporatism through government subsidies to business– both during his time as governor and as he outlined in his book when he stated his support for energy subsidies. Contrast that with Governor Palin who recently said that she was opposed to all energy subsidies, favoring a free market, not government guided approach to the economy.

Additionally, as she noted in her book, Going Rogue, turned away campaign contributions that would be perceived as a conflict of interest and her 2007 ethics reform bill made it a crime for Alaskans to trade votes for campaign contributions. She also noted in the aforementioned Facebook post:

We need to be on our guard against such crony capitalism. We fought against distortion of the market in Alaska when we confronted “Big Oil,” or more specifically some of the players in the industry and in political office, who were taking the 49th state for a ride. My administration challenged lax rules that seemed to allow corruption, and we even challenged the largest corporation in the world at the time for not abiding by provisions in contracts it held with the state. When it came time to craft a plan for a natural gas pipeline, we insisted on transparency and a level playing field to ensure fair competition. Our reforms helped reduce politicians’ ability to play favorites and helped clean up corruption. We set up stricter oversight offices and ushered through a bi-partisan ethics reform bill. Far from being against necessary reform, I embrace it.

Commonsense conservatives acknowledge the need for financial reform and believe that government can play an appropriate role in leveling the playing field and protecting “the dynamism of American capitalism without neglecting the government’s responsibility to protect the American public.” We’re listening closely to the reform discussion in Washington, and we know that government should not burden the market with unnecessary bureaucracy and distorted incentives, nor make a dangerous “too-big-to-fail” mentality the law of the land.

As already noted, Governor Palin passed major ethics reform during her tenure. ACES, the oil tax structure she signed into law, revamped the previous legislation which favored predecessor’s cronies. AGIA, the natural gas pipeline project, was also negotiated and passed in a transparent manner and allowed all potential energy developers to submit their proposals. She has consistently fought against crony capitalism and corruption while advocating for competition and free market principles. One of Governor  Palin’s greatest strengths lies in her consistency. This is what the Establishment in both parties fear. Her likely candidacy is a threat to the crony capitalism and corporatism that has become part of the political scene in Washington for too long. Whether it is campaign contributions, energy subsidies, Obamacare waivers to favored districts or states, preferential treatment of unions, or handcuffing the private sector, all of these would be fought against in a Palin administration.  No other candidate or potential candidate can say they have fought against these types of unethical practices and won. That’s why it’s time to put a Lobbyist for the American people, not the large financial institutions or energy companies, in the White House.

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