New Year’s Pork, Served Up By Congress

Roast pork is a common New Year’s Day dish, and in the fiscal cliff bill Congress held firm to this old tradition.

Tim Carney of the Washington Examiner is the best reporter following the continuing sage of crony capitalism in the capital. He provided detail in How corporate tax credits got in the ‘cliff’ deal:

The “fiscal cliff” legislation passed this week included $76 billion in special-interest tax credits for the likes of General Electric, Hollywood and even Captain Morgan. But these subsidies weren’t the fruit of eleventh-hour lobbying conducted on the cliff’s edge — they were crafted back in August in a Senate committee, and they sat dormant until the White House reportedly insisted on them this week.

The Family and Business Tax Cut Certainty Act of 2012, which passed through the Senate Finance Committee in August, was copied and pasted into the fiscal cliff legislation, yielding a victory for biotech companies, wind-turbine-makers, biodiesel producers, film studios — and their lobbyists. So, if you’re wondering how algae subsidies became part of a must-pass package to avert the dreaded fiscal cliff, credit the Biotechnology Industry Organization’s lobbying last summer.

The enabler was Max Baucus, Chair of Senate Finance, who set it up last August. The chief cronies were former senators John Breaux D-LA) and Trent Lott (R-MS), plus:

The K Street firm Capitol Tax Partners, led by Treasury Department alumni from the Clinton administration, represented an even more impressive list of tax clients, who paid CTP more than $1.68 million in the third quarter. . .  Besides financial clients like Citi, Goldman Sachs and Morgan Stanley, CTP represented green energy companies like GE and the American Wind Energy Association. . . . Hollywood hired CTP, too: The Motion Picture Association of America won an extension on tax credits for film production.

CTP staff is here — Tim’s reference to the Clinton Treasury is not fair, actually, as CTP has lots of Republicans as well. DC influence peddling is conducted by dual-partisan tag teams.

As Sarah Palin has said: “So many of them, they arrive in Washington, DC of modest means and then miraculously throughout the years they end up becoming very, very wealthy. Well, it’s because they derive power and their wealth from their access to our money, to taxpayer dollars.”

What Carney does not explain — nor does anyone else — is how this obscure August exercise, which many lobbyists ignored, then suddenly got put into the fiscal cliff bill. Who did it, specifically? And how were they paid off?  And why did the House go along?  One of the astonishing things about DC reporting is how few reporters (Carney excepted) are interested in such questions. Basically, the press is part of the problem.

The Wall Street Journal is also willing to call foul.

The great joke here is that Washington pretends to want to pass “comprehensive tax reform,” even as each year it adds more tax giveaways that distort the tax code and keep tax rates higher than they have to be. Even as he praised the bill full of this stuff, Mr. Obama called Tuesday night for “further reforms to our tax code so that the wealthiest corporations and individuals can’t take advantage of loopholes and deductions that aren’t available to most Americans.”

One of Mr. Obama’s political gifts is that he can sound so plausible describing the opposite of his real intentions. . . . The costs of all this are far greater than the estimates conjured by the Joint Tax Committee. They include slower economic growth from misallocated capital, lower revenues for the Treasury and thus more pressure to raise rates on everyone, and greater public cynicism that government mainly serves the powerful. . . . Republicans who are looking for a new populist message have one waiting here, and they could start by repudiating the corporate welfare in this New Year disgrace.

Every time such things happen, the political legitimacy of the American Republic takes another hit. If you are a company,should you invest in a plant or, like GE, invest “more on lobbying than any other corporation — $120 million so far in Obama’s administration”? How can these absurd tax breaks for nonsense pass at the same time that Congress has decided to hamstring the productive and vital medical devices industry by singling it out for a punitive gross receipts tax? We subsidize windmills and movies, and penalize medical devices? These are the people who rule us?

Historian John Joseph Wallis characterizes such favoritism as “systemic corruption,” in which “a group of politicians deliberately create rents by limiting entry into valuable economic activities, through grants of monopoly, restrictive corporate charters, tariffs, quotas, regulations, and the like.” He adds:

Systematically corrupt governments are rent creating, not rent seeking, governments. The survival of a systematically corrupt government depends on limiting access to markets and resources in order to create rents that bind the interests of the ruling coalition together. Systematic corruption prevents development because it cripples markets.

So good luck, USA — our politicians have achieved a bi-partisan consensus that we should turn into an underdeveloped country in which the cronies drive out the productive.

(65 Posts)

Author: "Ending 'Big SIS' (The Special Interest State) and Renewing the American Republic" (2012) [] and "Property Matters--How Property Rights Are Under Assault and Why You Should Care" (1997). Some former jobs: Assistant Director of Consumer Protection in FTC; member of the Program Analysis Staff of the US Bureau of the Budget; Research Director of the Administrative Conference of the United States; Director of IPCentral at the Progress & Freedom Foundation; VP & GC of the National Legal Center for the Public Interest. Graduate of Harvard College and Harvard Law School, former Book Review Editor of the Harvard Law Review.

Leave a Reply