Free Markets, Not Pro-Business

Timothy Carney has a really interesting deconstruction of the US Chamber of Commerce agenda, and it is a good reminder of the forces at work pushing this country towards a corporate state (similar to France and Germany).  When large corporations lobby via the Chamber of Commerce, it is apparently not for low taxes and free markets, but rather targeted interventions and subsidies.  The article does not have a money quote I could find, but this should give you an idea of what the author discovered in the Chamber of Commerce rankings of Congressmen:

On the House side, it's a similar picture. The Republican with the lowest Chamber score was [Ron] Paul.   Even Rep. Barney Frank, D-MA, who wants to regulate everything except Fannie Mae, scored 14 points higher than Paul on the Chamber's scorecard.

Suffice it to say a ranking system that has folks like Ron Paul last is not based on free markets and small government.  Apparently, the Chamber marks down Congressmen who did not vote for all the bailout and stimulus packages, did not vote for various alternative energy subsidies, and did not vote to expand college loan subsidies.

The victor of almost any new regulation or licensing program is typically incumbents, and particularly large incumbents.  In my own business, there have been a series of new government regulations added over the years, with the effect that an industry formerly dominated by hundreds of ma and pa operators has consolidated to barely four or five players.  No one else can afford the compliance costs.  Licensing is almost always incumbent protection, and the government even frequently turns over the approval process for new entrants to the current incumbents (e.g. medicine and law).  And subsidies are almost by definition support incumbents over potential new entrants.

Postscript: In terms of incumbent protection, keep an eye on carbon permits.  There will be a ton of pressure to give free or discounted permits to current incumbents, as was done in Europe.  This would be a huge structural barrier to competition, as incumbents can service their current market share for free but new entrants (or expansions of existing entrants) will require expensive new permits.

  • morganovich

    there is a long history of things like this. another big one is a coal process called "spray and pray". originally conceived to promote synfuels, it just turned out to be a huge grab bag of tax breaks.

    essentially, through IRS magic, spray anything at all on coal and it is now "chemically treated" and qualifies as synfuel. notably pine tar, diesel fuel, acid, and resins were used. none do anything useful. you get a huge tax credit. there were loads of companies in the 90's that were losing money mining coal but a $400mm loss on coal would yield an $800mm+ tax credit. progress energy in NC was a notable participant in this.

    the problem is that a tax credit is useless to a company losing money. so what do you do? sell it to a profitable company. these credits are transferable. many were sold to hotel chains etc. buying $800mm in tax credits for $600mm is a nice little dodge.

    once more, inefficient activity is promoted and taxes are dodge by unrelated industries while the bill comes to unsuspecting taxpayers who think they are pushing alternative energy.

    in light of things like this, how anyone can believe that something as large and complex as carbon trading will be anything but a fiasco is beyond me.

  • morganovich

    oops, sorry. posted to wrong thread.

  • DrTorch

    It doesn't take long to work in the DC area before you recognize that business doesn't favor free markets. It has been my assertion that people like Ted Turner, Bill Gates, and others often espouse views of the political left b/c they know that will make it harder for their business competition. They have theirs, they want to block others.

    That may be a tad too cynical, but I doubt it's that far from the truth.

    Sadly, all of these state inititatives that promise to "promote innovation" (Like Ohio's 3rd Frontier Program) make it very difficult for new competition to emerge. High taxes, oppressive regulations, and expensive oversight and compliance, means you have to have a big stake before you can even begin to innovate, and thus out-compete.

  • Dr. T

    "Licensing is almost always incumbent protection, and the government even frequently turns over the approval process for new entrants to the current incumbents (e.g. medicine and law)."

    Medical licensure is not controlled by physicians. Each state has its own licensing process that usually is overseen by bureaucrats. After filling out the forms and paying the fees, any physician who passed the national board exams, isn't a felon, and does not have multiple malpractice judgments against him gets licensed (in most states).

    However, the state medical boards (which are not licensure boards) typically are controlled by physicians. They determine whether licensed physicians committed malpractice or serious infractions (inappropriate relationships with patients, billing fraud, prescription fraud, etc.). These boards are tough on infractions and wimpy on malpractice. They hate acting against even the most incompetent physicians. So, medicine has exactly the opposite licensure problem: the doctors on the board want to keep everyone practicing; there is no attempt to reduce competition by yanking licenses.