The Republican Party, judging by the latest presidential debate, is now the party positioned against crony capitalism and corporate profiteering through government.
So far, this shift is mostly rhetorical, but even that puts many of them on the record. It still represents progress for a party that has historically been more pro-big business than pro-free enterprise.
Carly Fiorina, Ted Cruz, Marco Rubio, and other GOP hopefuls all decried corporate welfare in the latest debate. The candidates also made a crucial case against over-regulation, an argument most Republicans ignored in past years: regulation and government complexity fall heaviest on Mom & Pop businesses, thus protecting the big guys from competition.
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In 2009, Republican National Committee chairman Michael Steele attacked Democrats crafting Obamacare as insufficiently deferential to industry. That critique was politically brain-dead and factually wrong. Fiorina on Tuesday night launched a more powerful salvo, calling Obamacare “crony capitalism at its worst.” She asked, “Who helped write this bill? Drug companies, insurance companies, pharmaceutical companies, every single one of those kinds of companies are bulking up to deal with big government.”
Fiorina’s historical account is mostly true: Insurers helped write the bill, then generally opposed final passage, then fought to save it after passage. Her economic point is dead-on. She continued: “That’s what happens as government gets bigger and bigger — and it has been for 50 years under Republicans and Democrats alike — and business have to bulk up to deal with big government.”
Ted Cruz applied that lesson to our ugly fruitcake of a tax code: high rates interspersed with countless exclusions, exemptions deductions, and tax credits. “Right now,” Cruz said, “with our corporate income tax, giant corporations with armies of accountants regularly are paying little to no taxes while small businesses are getting hammered.”
Regulation creates winners and losers, and Cruz on Tuesday night highlighted one loser: Mother and part-time tax preparer Sabina Loving. Loving was the victim of an Obama-administration IRS ruling aimed at cracking down on small-time tax preparers.
Cruz could have gone further and described the winners: Not only did the big guys (H&R Block and Jackson Hewitt) support the Obama regs, but Obama hired H&R Block’s former CEO to lead the IRS process of writing them.
Ben Carson put it well, saying the “stampede of regulations … hurts the poor and the middle class much more than it does the rich.”
Nearly all the candidates joined the free-market populist club when discussing Wall Street, and that’s fitting: Wall Street and the big banks thrive on implicit bailouts and explicit government backstops. A free-marketeer ought to watch financial giants with the same sort of skepticism he has for cabinet agencies.
Rubio said of the big banks: “The government made them big by adding thousands and thousands of pages of regulations. So the big banks, they have an army of lawyers, they have an army of compliance officers. They can deal with all these things.”
Cruz piled on: “The truth is, the rich do great with big government. They get in bed with big government. The big banks get bigger and bigger and bigger under Dodd-Frank and community banks are going out of business.”
Fiorina, as usual put it most concisely: “The classic of crony capitalism. The big have gotten bigger, 1,590 community banks have gone out of business.”
Jeb Bush, a veteran of the “pro-business” era of the GOP and an alumnus of Lehman Brothers, correctly pointed out that regulations, including those in Dodd-Frank, have accelerated the consolidation of banks. Consolidation in the financial industry isn’t conducive to stability, Bush said.
These Republicans often erred in their specifics on Dodd-Frank. Some of that law’s provisions actually do mitigate the Too Big to Fail problem. Fiorina has the truer tack, critiquing the nature of government intervention, whether by Republicans or Democrats. Bush’s criticisms seem to imply that it’s just the specific laws signed by Obama that cause the problem.
Subsidies, bailouts, tax complexity and protective regulations in general tend to tilt the playing field towards the large and politically connected. When Republicans note this, they risk upsetting some of their friends on K Street and in the boardrooms of those large firms, but they also begin to provide the moral defense for free enterprise. Free enterprise is fair, and it maximizes wealth in the economy. Crony capitalism is immoral, it corrupts both politics and business, and it robs from the rest of the economy to enrich insiders.
And as Fiorina points out time after time, no politician in recent memory is as caught up in cronyism as Hillary Clinton. The GOP nominee will need to not only know the words “crony capitalism,” but also understand how it works and why it is bad. And of course, he or she will need to have credibility on the matter.
This is why the GOP candidates’ weaknesses on cronyism need to be explored. Cruz began that process Tuesday night referring to Rubio’s weakness: his love of sugar subsidies.
Strong arguments against crony capitalism represent a great start. Defenders of free enterprise look forward to Republicans taking the next step.
Timothy P. Carney, The Washington Examiner’s senior political columnist, can be contacted at [email protected]. His column appears Tuesday and Thursday nights on washingtonexaminer.com.
