When Governor Dannel Malloy first came into office, some
commentators who had paid close attention to his campaign assumed he was ready
to vigorously attack spending.
He had often enough during his campaign batted around the
catch phrase “fair share.” It was generally understood that everyone in
Connecticut would, under the Malloy dispensation, be expected to contribute his
“fair share” in taxes and give-backs, and most people expected, after the new
governor had imposed on taxpayers the largest tax increase in state history,
that the consumption side of government would see proportional reductions in
spending.
The tax increase was immediate and, some would argue,
devastating to an economy in the grip of a prolonged recession: See President
Jack Kennedy’s speech to the Economic Club of New York. Mr. Malloy’s
prospective savings, as it turned out, would be distant and amorphous.
Who could have guessed, as the Malloy campaign rolled
out, that the governor would soon become Connecticut’s Crony Capitalist-in-chief?
Mr. Malloy has since dumped millions of taxpayer dollars
on the state’s economic roulette wheel; he calls this sort of thing “investing
in the future.”
Any real investor in Connecticut – and there are some
still huddled together in what used to be called Connecticut’s “Gold Coast,” many
of whom have made successful investments and consequently have contributed
their “fair share” to Connecticut’s economy – could have told Mr. Malloy that
such business investments are iffy propositions. The venture capitalist terrain
is littered with the dead bodies of venture capitalists who have gone broke
investing private dollars in failing ventures.
How does the private market identify the right
investment? Well, it consults the appropriate indicators and determines that,
taken together, all the parts of the business under review have passed rather
stringent tests that indicate its future will be a bright one. Mr. Malloy’s
investments of state tax dollars in questionable businesses depend almost
wholly on his vision of a future vibrant Connecticut economy – or, to put it in
layman’s terms, wishful thinking.
Wishful thinking is the seed bed of Crony Capitalism, and
Mr. Malloy’s thoughts concerning the future of his state certainly are grandiose.
He wants Connecticut to be a leader in advanced medical research, and to this
end he has showered favors upon – just to pick one of Mr. Malloy’s many
investments – the UConn Health Center (UCHC). For many years UCHC was a tax
sinkhole. But now that Mr. Malloy has attached Jackson Laboratories to the sink
hole, it will… what? Non-profit research facilities such as Jackson
Laboratories cannot turn a profit, which means such facilities cannot enlarge
the state’s treasury. No matter: UCHC will become a more prestigious tax
sinkhole, even if no water can be pressed out of that rock.
The winnowing process in the private economy that allows
investors to determine profitable from non-profitable investment early on, before
the investor loses his shirt and declares bankruptcy, is simply not present in
government bankrolled crony capitalists ventures – where all bets are always
for keeps.
Suppose Connecticut’s future prosperity does not lie in
medical research? Then what?
There are two inescapable problems with crony capitalism.
The first is that governors and presidents are not economic seers; they know
far less than the private economy – which is driven by supply and demand – what
the future portends. The second problem is every bit as serious. A dollar
invested in venture A by Governor Know-It-All is a dollar taken from taxpayer B
that, had it remained in the private marketplace, might have been more
profitably invested in product C, thereby producing an invigorated economy that
would have contributed more tax dollars to Governor-Know-It-All.
The private economy creates wealth; crony capitalism
creates the illusion of wealth. If you have taken a bucket of water from the
low end of the pool and dumped it into the deep end of the pool, have you
raised the water level of the pool? Transfers of wealth do not create wealth.
Some commentators have caught on to the imposture. Noting
that Mr. Malloy had favored Thompson International Speedway in Thompson,
Connecticut with a tax funded “loan of
$800,000 at a sharply discounted interest rate for improvements at the auto
racing track, $200,000 being forgivable if the track increases employment by 23
over two years,” Chris Powell of the Journal Inquirer writes in his column:
“But there are other auto racing tracks and mortgage
companies in Connecticut, and helping just one of each disadvantages the
others, and so what is created at one employer may be lost at another. This is
a ‘command economy’ approach, with government picking winners and losers and
defeating free markets. Because the ‘command economy’ approach transfers
advantages more than it creates anything, it is unlikely to help the state's
economy much.”
Well… not as much as it will help Mr. Malloy, who
dispenses tax dollars to appreciative multibillion dollar companies, haul in
campaign contributions to Connecticut’s crony capitalist Democratic Party.
It does not seem to matter much whether a carrot or a
stick is used to pry campaign contributions from redundantly rich
One-Percenters. If Obamacare ever gets off the ground, one may expect insurance
giants to show their appreciation to the crony capitalists who had forced young
people -- on pain of paying punishing fines – to purchase insurance they
neither want nor need. For similar reasons, the multi-billion dollar companies
upon which Mr. Malloy has showered millions in tax receipts or tax credits will
show their gratitude when the campaign collector comes knocking on their doors.
And that’s always good business for politicians.
Comments
But, in any case, this sort of transfer involving no alleviation of generalized individual suffering, but only of taxpayer-funded advantage to particular businesses identified by the Executive, seems on its face a violation of the spirit, if not the letter, of our State Constitution.
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ARTICLE FIRST.
DECLARATION OF RIGHTS
That the great and essential principles of liberty and free government may be recognized and established,
WE DECLARE:
SEC. 1. All men when they form a social compact, are equal in rights; and no man or set of men are entitled to exclusive public emoluments or privileges from the community.
Ralph Nader and the good-government left has long complained about corporate welfare. Noam Chomsky apparently thinks that the word "crony" is superfluous in the phrase "crony capitalism." But, have we ever had a more left-wing, progressive, dem-socialist Governor and Legislature? Where was the Nutmeg left's testicular fortitude when Malloy divvied out tax revenue to a hedge fund? Where are the Occupy Wall Street types?
I'm with Andy McCarthy in preferring the term "crony socialism."