Crony capitalism is a funny thing to watch. Cronies don’t have a political party, don’t have a prevailing ideological policy stance, and don’t have a selfless moral framework. They advocate for themselves, their businesses, or the businesses of their clients.
That means several things, but interestingly, like a broken clock may get the time right, even a crony can be right on policy sometimes.
For instance, Elon Musk’s companies have received millions and millions of dollars in taxpayer money, but now that his companies are successful, he is having second thoughts about a government with an open purse. In a recent tweetstorm, Musk said, “Another government stimulus package is not in the best interests of the people. These are jammed to gills with special-interest earmarks. If we do a stimulus at all, it should just be direct payments to consumers.”
Musk is right in this situation. Any COVID-19 relief bill is going to a grab bag of pork and giveaways amounting to millions, or even billions, of dollars. Government money shouldn’t be sent to companies. It is a bad investment for taxpayers, it encourages bad decisions by business owners, and it creates yet a new sense of entitlement to bailouts.
But government spending on private companies isn’t just a bad investment of taxpayer dollars during a pandemic. It is wrong in the good economic times as well. While Musk’s companies are still seeking government funding in the form of tax breaks and job-training assistance, Tesla would more than likely still be a successful company without government funding. SpaceX would probably still be competitive in the private sector’s race to space, but it would have been private sector money taking the risk instead of public sector money. That government money could have been spent to help people who actually needed it.
In this case, Musk is advocating for checks to go to consumers, which would give them the choice of how to spend their money. If they want to support a local restaurant with that money, buy a Tesla, or pay their rent, it would be up to them. Businesses that figured out how to entice customers to spend their relief funds with their businesses would benefit, and others might fail. It would be up to the market to decide and up to businesses to adapt. While that isn’t the preferred option, it is much better than just blindly sending money to businesses that may or may not spend their newly found resources in a helpful manner.
The best option, in my opinion and many economists’ opinions, is to continue funding unemployment benefits. Unemployment benefits help provide funding where it is needed most. Many households are struggling to survive the economic downturn associated with the pandemic, but many aren’t. Any funding that is provided should be as targeted as possible to the people who are struggling the most, and unemployment benefits seem to fit that rule the best.
Government funding was distributed in a fast and loose manner at the beginning of the pandemic. Some of it was spent well, some of it was spent on special interests, and some of it was just a waste. However, given the need for a quick reaction, that spending and misallocation of funds should be considered water under the bridge, at least until we are out of the pandemic and have time to process the reaction fully. But now, politicians have time to think, plan, and better target funding.
While it would have been better if Musk was always opposed to government spending the way that he is opposed to it now, it is nice to have another prominent ally in the fight against government overreach, even if it is only temporary until he builds another factory or starts another business. Government funding shouldn’t go to private businesses that may or may not need the funding. Any new relief funds should be targeted to the people who need them the most.
Charles Sauer (@CharlesSauer) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is president of the Market Institute and previously worked on Capitol Hill, for a governor, and for an academic think tank.
