Tuesday, May 07, 2019

Crony Capitalism, Not Down And Out In Connecticut

Ned Lamont
Six years ago, Jim Powell wrote what many in Connecticut considered at the time a stunning piece in Forbes Magazine titled “How Did Rich Connecticut Morph Into One Of America's Worst Performing Economies?

The piece was mentioned in Connecticut Commentary and columns two months after it had been published in August 2013. This is what was said about it at the time: “All the red flags fluttering in the Powell piece “point to an economically diminished and bleak future – unless and until the grown-ups take charge of Connecticut’s tax grubbing, high spending, crony capitalist government… Far from being a solution to our economic woes, crony capitalism – in which [then Governor Dannel] Malloy and leaders in the General Assembly plunder the private economy of entrepreneurial capital they then bestow on favored companies – encourages polite bribery between tax dispensers and large corporations, while introducing toxic levels of moral uncertainty into a business-governmental relationship that should be even-handed and just. Crony capitalism tilts in favor of large, resource rich companies what U.S. Senator Dick Blumenthal might regard, if he thought about it, as the economic ‘even playing field.’ It is the work of a day for large politically connected companies to use the agencies of government to drive healthy competition from the field.”

Two questions arise: 1) Have Connecticut politicians heeded Powell’s red flags, and 2) Since present Governor Ned Lamont appears to have sworn off the kind of crony capitalism referenced above, should we be thrilled?

Lamont has decided to pull the plug on one of former Governor Dannel Malloy’s poor investments, FuelCell Energy Inc., which has not honored its extremely fungible contract with the state and has not turned a profit in two decades, both before and after Malloy had invested scarce tax money in the failing company.

According to a Courant story, “Gov. Ned Lamont says he wants to end Connecticut’s past policy of giving big state subsidies to businesses that promise to create jobs…” But Lamont has not sworn off the crony capitalist elixir; he simply thinks that spending crony capitalist tax dollars after a company has hired additional workers would provide a much sounder footing for the expenditure of crony capitalist tax bucks.

And after the crony capitalist budget of Connecticut progressives kick in, there will be plenty of tax bucks to distribute to companies that -- in a wondrous loop – cut their costs through the infusion of tax dollars and then show their appreciation for politicians providing succor, always deep pocket incumbents, by diverting some profits towards campaign contributions to their benefactors, lazy incumbents of both parties who have survived the state’s campaign finance strictures, a spider’s web into which has been dropped the weighty anvil of political ambition.

Connecticut has had three governors who have answered budget problems through major tax increases: Lowell Weicker, who forever changed the nature of Connecticut’s competitive relationship with contiguous states by introducing an income tax; Dannel Malloy, who introduced two major tax increases that relieved legislators of the need to cut spending; and Lamont, whose massive tax increases make him competitive with both Weicker and Malloy. No one in Connecticut, but for politically marginalized Republicans, are interested in long-term, permanent cuts in spending – because that would place them on a collision course with their traditional campaign benefactors, state employee unions and generous companies.   

There are two sound reasons for kicking crony capitalism – fascism on a manageable scale -- to the curb. First, if the tax dollars are dispensed before a company turns a profit and begins to produce jobs, the tax money dispensed is usually “invested” – ha, ha – in a chancy business proposition that ordinary banks tend to discount. If the crony capitalist bucks, on the other hand, are “invested” – ha, ha -- in a company that has made a profit and consequently hired workers, the investment is unnecessary for other than political reasons. Crony capitalism ALWAYS introduces a destructive moral uncertainty into a competitive economic theatre of action: tax money given to companies by politicians, always mutually beneficial to both,  introduces into a free market system a corrupt activity designed to give a competitive advantage to both the crony capitalist provider and the crony capitalist receiver. Crony capitalism marks the difference between pro-business policies and pro-free-market policies.

The answer to the  more important question raised by Powell’s six year old piece in Forbes – has anyone in Connecticut adjusted policies to confront the red flag problems displayed in his  story – is NO, exclamation point. The Great Recession, which began in December 2007 and ended elsewhere in the nation in June 2009, is with us still in Connecticut, very likely for reasons stated by Weicker when he hinted broadly during his campaign for governor that he would not institute an income tax because doing so “would be like pouring gas on a fire.” We are living in the flames of repetitive tax increases that, Powell would agree, prolong recessions.

Cut spending.

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