One of Donald Trump’s most important arguments during the Presidential campaign was that Beltway insiders have rigged the game in their own favor, benefitting the big guys and leaving the little guy in the cold. Battling “crony capitalism” was similarly part of the energy behind the Tea Party.
This was the soundest part of Trump’s populism, yet the president and his party seem determined to do the opposite these days. Whether it’s public-private infrastructure boondoggles, reviving the Export-Import Bank, extending the ethanol mandate, tilting tax cuts to the corporate side, or preserving crony tax credits in a so-called tax reform, Republicans are acting fairly swampy.
Treasury Secretary Steve Mnuchin said Tuesday that Trump wants to “open the Export-Import Bank for business.” The Export-Import Bank is a federal agency that subsidizes U.S. exports (mostly Boeing jets) through taxpayer-backed financing to foreign buyers. It’s corporate welfare, which is why conservative Republicans in the House and Senate have ground the agency to a halt, refusing to fill out its board.
Absent a quorum, Ex-Im hasn’t been able to offer its typical massive subsidies to the likes of Air China and Saudi Aramco. Into this void has stepped (you’ll never guess) private financiers who, as it turns out, are perfectly willing to take on risk in exchange for potential profits. “Insurers back Boeing's overseas sales with Ex-Im grounded,” ran the headline at the Puget Sound Business Journal.
Trump has in the past said he would abolish the agency. Then he moderated and decided to keep it, while appointing a harsh critic of Ex-Im’s corporate welfare — Scott Garrett to head it up. That’s when his own party sided with Boeing and Wall Street over populism and free enterprise.
Republican Senators Tim Scott (from Boeing-heavy South Carolina) and Mike Rounds (very friendly with the banks who love Ex-Im’s guarantees) opposed Garrett’s nomination, under heavy pressure from industry. All Democrats (who love Ex-Im and hate Garrett and Trump) were also against him.
The populist or conservative move would be to keep Ex-Im’s board shorthanded until the Senate approves Garrett or another reformer. Instead, Mnuchin hinted Trump will get the agency working again, presumably under the guidance of someone approved by the National Association of Manufacturers.
This wasn’t the only time Trump cabinet members let the GOP corporatists in the Senate steer him into the swamp. The ethanol mandate, or Renewable Fuel Standard, is another prime example.
Trump showed his cynical side and willingness to pander in Iowa before the 2016 caucuses, when he became the biggest champion of the RFS, in order to draw a distinction between himself and Ted Cruz, who proposed winding the mandate down in five years.
But then Trump appointed an oil-industry friend Scott Pruitt as head of his Environmental Protection Agency. The oil industry (particularly refiners) is the biggest victim of the mandate, which also hurts drivers, grocery shoppers, grocery stores, water supplies, and the environment more broadly.
Pruitt was steering Trump towards a sane position of dialing back the ethanol mandate. Then Iowa Senator Chuck Grassley, a tireless champion of corporate welfare for ethanol, applied pressure. Eventually, the administration caved and gave the corn hustlers what they wanted: a full-throttle legal mandate that we mix their moonshine into our gasoline.
Trump’s infrastructure project is also bound to become a cronyist porkfest. Alongside the salutary devolution of infrastructure projects down to the state level, the White House’s plan calls for plenty of “public-private partnership.”
Whenever you hear those words, fellow taxpayer, guard your wallet. If you think government is terribly inefficient and wasteful, wait until you see what happens when government’s monopoly power and bottomless budgets combines with the profit motives of politically connected companies. It’s a recipe for waste and rent-seeking.
There are three sources of the problem.
First, Trump has no grounding in conservatism or limited government. He can mouth the words, but he has no commitment to the idea. To the contrary, he likes power and he likes "big ideas." That lends itself to boondoggles.
Second, Trump likes businessmen too much. It was Boeing executives who turned Trump on Ex-Im. It was ethanol barons who first got to Trump on ethanol. You may recall that Trump defended the indefensible Jones Act (which forces Americans to use U.S. shipping companies) because the U.S. shipping companies like it.
Third, the Republican Party as a whole has never really opposed corporate welfare. When former President Barack Obama was peddling it, it was easy for Republicans to point out his hypocrisy and even try to scuttle his plans. But it’s still lobbyists who call the shots in the GOP, as it always has been.