In his new book, “The Big Ripoff: How Big Business and Big Government Steal Your Money,” Tim Carney, the Warren T. Brookes Journalism Fellow at the Competitive Enterprise Institute, argues that big business and big government have a quiet partnership with each other — and it isn’t good for America. The Examiner interviewed Carney to get an insight into this unhealthy relationship.
Q Your book seems challenges political conventional wisdom in several ways. Although the assumption is that businesses thrive when there is minimal government intervention, you actually argue that there is a “quiet partnership” between big business and big government. What is that partnership and how is it mutually beneficial?
A On the most basic level, big business, through lobbyists, has more relative clout in Washington than it does in the free market. That means that the more power is in Washington, the more the playing field is tilted towards larger corporations. Specifically, I look at two different kinds of big business-big government ripoffs: regulation and corporate welfare. Regulation adds to the costs of big business, sure, but it disproportionately hits smaller businesses.
Q How does it hurt smaller businesses?
APhilip Morris supports FDA regulation of tobacco. Philip Morris can afford the lawyers, lobbyists, and added overhead in ways smaller companies can’t.
Mom and Pop businesses typically don’t have a staff lawyer. They don’t have D.C. lobbyists. Their expertise is in business, not in government. Regulations create barriers to entry. Corporate welfare distorts the market, too. If your bigger, better-connected competition has access to a pipeline of taxpayer cash or subsidized loans, you won’t be able to compete.
Q Have these partnerships increased during the Bush administration? If so, why?
A On this score, I think the Bush Administration is no better and no worse than the previous administrations.
Bush has cut taxes, but he has also further complicated the tax code. He has expanded subsidies, specifically when it comes to energy and renewable fuels.
I think President Bush is pro-business and he believes the government can help business help the economy. This leads him down the same road as Clinton, Nixon and all the others.
The ethanol mandate is probably the worst offense: it drives up gas prices, does nothing for fuel self-sufficiency, and mostly benefits Archer Daniels Midland, which has spent $3 million on politics since 2000.
Q How can this harmful system be improved? And what would the results be?
A Basically, we need to stop trusting government to help the little guy, and free-market advocates need to stop believing that big business is on their side. Corporate welfare gets “reformed” every two years, and the plunder just increases. The only way to keep big business from using government to rip off consumers, taxpayers, and big businessmen is to get government out of the economy as much as possible. In a freer market, we would all pay less for sugar and corn and Home Depot would pay more for its real estate. More small businesseswould pop up, and more big businesses would collapse. On the whole, we would see a better allocation of resources.
Q What motive do politicians have to buy into this system of increased regulation?
A Politicians and bureaucrats love power, and if they can gain more control over industry they will do it, in part just for the sake of power, and in part for the perks of power: the nice dinners, the flattery, and so on.
Q Ultimately, is this system beneficial to big business? Or are they being short-sighted when they see big government as a boon?
A I think in most cases it is short-sightedness.
Wal-Mart sees a public relations benefit in lobbying for a higher minimum wage, and the company also knows a minimum wage hike would hurt smaller competitors and no touch Wal-Mart.
But does this open the door to new federal health-benefit requirements? It’s happened to Wal-Mart in the past. They’ve benefited from eminent domain and other local central-planning initiatives, and now a California community is using eminent domain to keep out a Wal-Mart.
General Motors supported the clean air rules in the 70s that mandated the catalytic converter.
GM had the converter developed and tested, while Ford and Chrysler were way behind. The new rules almost drove Chrysler out of business, and GM gained in the short-run. Since then, environmental rules such as fuel efficiency standards have probably hurt GM, but did they pave the way for this in the 70s?
An Excerpt from “The Big Ripoff: How Big Business and Big Government Steal Your Money”
Big business has too much power in Washington, according to 90 percent of Americans in a December 2005 poll.
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Just what is big business doing with all this influence?
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The standard assumption seems to be that government action protects ordinary people by restraining big business, which, in turn, wants to be left alone. The facts point in an entirely different direction:
» Enron was a tireless advocate of strict global energy regulations supported by environmentalists. Enron also used its influence in Washington to keep laissez-faire bureaucrats off the federal commissions that regulate the energy industry.
» Philip Morris has aggressively supported heightened federal regulation over tobacco and tobacco advertising. Meanwhile, the state governments that sued Big Tobacco are now working to protect those same large cigarette companies from competition and lawsuits.
» A recent tax increase in Virginia passed because of the tireless support of the state’s business leaders, and big business has a long history of supporting tax hikes.
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Most important, in these and hundreds of similar cases, the government action that helps big business hurts consumers, taxpayers, less established businesses, and smaller competitors.
What Robert Novak says about Tim Carney
But Tim Carney is no leftist. He is part of a group of iconoclastic young journalists, congressional aides and political operatives in Washington who generally are labeled as conservatives. Tim was trained at the conservative National Journalism Center and, after working for me, began this book with a grant from the Phillips Foundation, headed by conservative publisher Tom Phillips and its board of trustees, including myself.
But Carney and his young colleagues are unlike the “conservatives” who lead the Republican Party and who are tied to the culture of corporate welfare.
The truth, as exposed convincingly by The Big Ripoff, is that this is a bipartisan affliction transcending party and ideological lines.
The problem has expanded as the federal government has grown in the half century that I have been in Washington.
With its growth have come the giant “law” firms, with 300 or more practicioners deeply involved int he government proigrams that enrich their clients.
They are the princes of lobbyists in Washington and keep intact the system that Carney describes….
Carney reveals the intricate schemes for Washington’s transferring wealth, including the Enron scandal.
That dreadful episode offers an object lesson for businessmen eagerly seeking the embrace of big business.
Carney writes: ” While government may never quit trying to solve every problem, businessmen might be able to take a lesson from the Enron tale.
Enron was built on subsidies, gaming complex and artificial rules, and banking on environmental regulations.
This formula may work for a while, but ask [the late] Ken Lay today: It will catch up with you.”
But there is no sign that businessmen have heard a warning signal from Enron.
The country needs a white knight to take Tim Carney’s text and preach it to the nation. Carney concludes that “the blame … rests on the politicians, who unlike CEOs are supposed to answer to all the people.” After reading this book, the country ought to be looking harder.
Patrick Gavin is The Examiner’s associate editorial page editor.
