Crony Capitalism

[philunderwood]

The worst thing about ‘crony capitalism’ isn't the tens of billions of taxpayer dollars wasted or stolen

By Jack Kelly

www.JewishWorldReview.com |

In most countries for most of history, people were pretty much locked into the social class into which they were born. But in America men and women of modest means could become rich -- if they had an idea for making life better, and worked tirelessly to make their vision real.

Entrepreneurs such as Thomas Edison, Henry Ford, Bill Gates and Steven Jobs became very, very rich. The rest of us were enriched, too, by the fruits of their genius and their labor -- the electric light, the automobile and the computer, and tens of thousands of other inventions and new, better ways of organizing things.

People who don't have good ideas and who don't want to work hard want to be rich, too. Some have found a way.

CBS' 60 Minutes program broadcast a report Nov. 13 on insider trading by Members of Congress. Among the worst offenders are House Democratic Leader Nancy Pelosi of California and Rep. Spencer Bachus, the Alabama Republican who chairs the House Financial Services Committee.

There are many, many others. Trades by U.S. Senators beat the market by an average of 10 percent a year, according to a study by Georgia State University economist Alan Ziobrowski. Corporate insiders, trading their own stock, beat the market by only 6 percent.

No law forbids insider trading. But if you aren't a Member of Congress or on a congressional staff, Securities & Exchange Commission regulations prohibit it.

Nearly half (261) the 535 Senators and Representatives are millionaires. Most were rich before they got to Washington. But a large and growing number got rich while in Congress. Few get poorer from "public service." In the last two years, while middle class Americans have been struggling, the net worth of Members of Congress increased 25 percent.

"How do politicians who arrive in Washington D.C. as men and women of modest means leave as millionaires?" Sarah Palin asked. "How do they miraculously accumulate wealth at a rate faster than the rest of us?"

The Hoover Institution's Peter Schweizer has answers. The 60 Minutes segment was based on his book, "Throw Them All Out." (Buy the book at a 40% discount by clicking here or in Kindle Edition at a 46%discount by clicking here) Insider trading is just one of many -- and by no means the most important -- ways in which politicians enrich themselves and their friends at the expense of the public they claim to serve.

Countrywide Mortgage, the fly-by-night firm at the epicenter of the subprime mortgage crisis, gave below market home loans to powerful Democrats in the Senate, who resisted reforms that might have reined in firms like Countrywide before they crashed the economy.

The Wall Street investment banks whose recklessness converted crisis into catastrophe received bailouts instead of bankruptcy. They've made more money under President Obama than they did in eight years under President Bush.

The top fundraisers for President Barack Obama raised $457,834 for his 2008 campaign -- and were approved for federal grants and loans of $11.4 billion. Of the $20.4 billion in loan guarantees the Department of Energy gave to "green" businesses, $16.4 billion went to firms either run or owned by Obama donors, Mr. Schweizer found.

Several, like the now notorious Solyndra, already are bankrupt. Others, like the company owned by Robert F. Kennedy Jr. which received a $1.4 billion bailout, aren't likely ever to stand on their own.

"How are experimental technologies based on ideological fantasies supposed to achieve commercial sustainability by being rushed to market for purely political considerations?" asked engineer and venture capitalist Bill Frezza.

The answer, of course, is that they won't. But when the purpose of federal aid is to reward political allies, commercial viability is rarely much of a consideration.

The worst thing about "crony capitalism" isn't the tens of billions of taxpayer dollars wasted or stolen.

Competing in a free market is tough. It's easier to make money when you have friends in Washington who will subsidize you, throw legal hurdles in the path of your competition, and bail you out when you get into trouble.

But when businessmen seek to profit by currying favor with politicians rather than by serving their customers better, the result is corruption and economic stagnation.

"Would a farmer who put out a trough of slop be surprised if it attracted a bunch of pigs?" Mr. Frezza asked.

[philunderwood]

www.qando.net/?tag=long-term-viability

Obama’s UAW speech fantasy, Kaus’s auto industry reality

Published February 29, 2012 | By Bruce McQuain


Trying to justify the unjustifiable with a pep-rally like political speech to the UAW, Obama points to what he contends are the favorable results of his decision to intrude into the auto market and rearrange the bankruptcy process to favor his cronies.


I know our bet was a good one because I had seen it pay off firsthand. But here’s the thing. You don’t have to take my word for it. Ask the Chrysler workers near Kokomo — (applause) — who were brought on to make sure the newest high-tech transmissions and fuel-efficient engines are made in America. Or ask the GM workers in Spring Hill, Tennessee, whose jobs were saved from being sent abroad. (Applause.) Ask the Ford workers in Kansas City coming on to make the F-150 — America’s best-selling truck, a more fuel-efficient truck. (Applause.) And you ask all the suppliers who are expanding and hiring, and the communities that rely on them, if America’s investment in you was a good bet. They’ll tell you the right answer.

Of course Chrysler is now owned by a foreign auto company, courtesy of the Obama administration, Ford took no federal money and, had normal bankruptcy proceeded, taxpayers wouldn’t be out $80 billion dollars (still unpaid despite claims to the contrary) and a leaner, more competitive GM would be in existence. Those suppliers would still be supplying and after the shakeout a more viable corporation would have come into existence.

Instead, the same GM is in existence boosted by taxpayer money. As Micky Kaus points out, “You’d be successful in the short run too if the government gave you $80 billion dollars.”

Speaking of those GM workers in Spring Hill, TN, Kaus lays out another reality that the president doesn’t present:


Toyota and Honda are coming back online after the tsunami and Southeast Asia floods crippled production. VW is building roomy American-style cars in Tennessee using $14.50/hour non-union workers instead of $28/hour UAW workers. Hyundai is expanding rapidly. Competition is going to be vicious–it’s widely believed there’s still overcapacity in the industry. A new oil price spike could crimp sales of high-profit trucks. Will GM still be making money in 5 years? Or, I should say, will GM still be making money building cars in the U.S. (as opposed to importing them from China) in 5 years? I’m skeptical. I don’t think deficient corporate cultures change that easily. Normally we rely on the market to simply kill them off.

The two points to be made here are important. One, GM’s current “success” is a result of huge infusion of taxpayer money. Its problem was/is its corporate culture and its unions. Neither problem have been addressed or fixed. Instead, like Solyndra, they’ve simply been given an extension via the taxpayer that will eventually run out. Secondly, as competing auto companies using non-union labor continue to locate in right to work states and pay a competitive wage (but not the high end union wage), they will continue to take market share from GM, who is still stuck with that toxic corporate culture and grasping unions.

But, of course, Obama won’t care because he’ll be out of office. This is the usual short term vote buying, just on a grander scale than we’ve ever seen it before. Crony capitalism at its worst.

Long term viability?

Who cares? Certainly not President Obama.

~McQ

[philunderwood]

drsanity.blogspot.com/

Dr. Sanity
Shining a psychological spotlight on a few of the insanities of life


Wednesday, February 29, 2012

PERFECT CRONY CAPITALISM = PERFECT CRONY SOCIALISM/FASCISM

At Zero Hedge, there is a guest post by Charles Hughes Smith on Crony Capitalism. Smith's point is straightforward:
In the U.S. we now have the perfection of cloaked crony capitalism: corporate cartels use their vast concentrations of capital and revenue to buy the political leverage needed to write regulations specifically designed to eliminate competition.

Recall that the most profitable business model is a monopoly or cartel protected from competition by the coercive Central State. Imposing complex regulations on small business competitors effectively cripples an entire class competitors, but does so in "stealth mode"--after all, more regulations are a "good thing" (especially to credulous Liberals) which "protect the public" (and every politico loves claiming his/her new raft of regulations will "protect the public.")

This masks the key dynamic of crony capitalism: gaming the government is the most profitable business model. Where else can you "invest" a few hundred thousand dollars (to buy political "access" and lobbying) and "earn" a return in the millions of dollars, and eliminate potential competitors, too? No other "investment" even comes close.

From Investopedia:
A description of capitalist society as being based on the close relationships between businessmen and the state. Instead of success being determined by a free market and the rule of law, the success of a business is dependent on the favoritism that is shown to it by the ruling government in the form of tax breaks, government grants and other incentives.
[...]
Both socialists and capitalists have been at odds with each other over assigning blame to the opposite group for the rise of crony capitalism. Socialists believe that crony capitalism is the inevitable result of pure capitalism. This belief is supported by their claims that people in power, whether business or government, look to stay in power and the only way to do this is to create networks between government and business that support each other.

On the other hand, capitalists believe that crony capitalism arises from the need of socialist governments to control the state. This requires businesses to operate closely with the government to acheive the greatest success. [Emphasis mine]

Let's think about that last emphasized bit above.

First off, the "cronies" come from both sides of the political aisle, it is true; but we have seen an unprecedented expansion of this sort of behavior in the 3 short years of Obamanomics. Even the media is noticing this reality with some alarm:
During the 2008 campaign, Mr. Obama promised to “end the abuse of no-bid contracts once and for all.” Don’t tell that to his friends. In May 2011, the pharmaceutical firm Siga Technologies, headed by Obama intimate Ronald Perelman, received a $443 million sole-source, no-bid, no-questions-asked government contract for an unnecessary anti-smallpox pill. Siga previously had been awarded a $3 billion contract after placing former Service Employees International Union boss and frequent White House visitor Andy Stern on its board.

Never in modern history has the U.S. government been used so extensively as a vehicle for benefiting political cronies at the expense of the rest of us. In his speech, Mr. Obama said America shouldn’t “settle for a country where a shrinking number of people do really well while a growing number of Americans barely get by.” Given this administration’s rampant favoritism, special treatment and backroom deals, restoring fairness is a major argument against Mr. Obama’s re-election.

Next,when you consider Solyndra, LightSquared and the other cronies who are capitalizing on Obama's ecofanatacism (algae companies are next!); when you consider Government Motors and the large-scale political paybacks to unions; indeed, when you consider how Obama deliberately manipulates business (denouncing it on the one hand, while the other is pocketing the campaign contributions from them) and issues commandments from Mt. Olympus (e.g., Insurance companies will eat the cost of birth control; etc.) then it is very easy to understand why business is "gaming the system" and why developing a cozy relationship with Obama and his band of merry regulators and redistributors is a key aspect of the new, improved business model.

This is not to say that there aren't and haven't been businesses and "capitalists" who eagerly suck up to power in order to destroy their competitors throughout history. But that is not a function of capitalism any more than it is a function of socialism or any utopian system.

It is a function of the darker side of human nature.

And, let's remember that human nature is the same whether it is operating under a socialist system or whether a capitalist system. However there are some crucial difference between those systems that hinge on their differing attitudes toward human nature.

I have said it before and I will say it again: Among all known social, political and economic systems, democratic capitalism is the one that is most consistent with human nature.

-Far from encouraging the "survival of the fittest" or even a "dog-eat-dog" animal mentality, capitalism simultaneously encourages cooperation for mutually beneficial trade and for competition.

-Far from encouraging war and dominance; capitalism encourages trust and human cooperation; as well as alliances to maximize productivity and wealth creation.

-In a capitalist system, you must persuade others that your products and services are better or cheaper than others--otherwise they will not buy it. In a socialist system, you have to always resort to force to get people to buy or use the state-approved product or service.

-Far from concentrating all wealth in the hands of a few, capitalism makes it possible for anyone to accumulate wealth (contrast for example the number of people who earn over $100,000 a year in the U.S., with those do in Cuba. The only really wealthy person there is Fidel Castro and his cronies. Likewise, in any collectivist system you will find that the only wealthy people are the thugs in control and their cronies. It is certainly true that "the rich get richer" under capitalism--but so do the poor; and, that happens because the creation of wealth is not a zero-sum game.

Envy is a real human emotion that is often destructive socially and personally, but only in a capitalist system can one transform one's psychological envy or greed into socially acceptable and personally positive actions that improve one's own lot without stealing or looting from others, or attacking and destroying them.

The problem with the underlying ideology of socialism/communism/Marxism and the "crony socialism" that we enjoy here in the U.S., is that they all inevitably breed and encourages envy, greed, and a lust for power and wealth--emotions that tend to drive ALL economic and political systems. But these emotions are unrestrained in the utopian wonderlands mentioned above; and they exist in a pure, unadulterated, undiluted, and particularly vicious form.

Yes, to be sure, capitalism also thrives on envy--and even greed, power, and wealth. Those emotions are part and parcel of human nature, after all. But, (and this is important) capitalism does not condemn human nature or expect a "new man" to emerge in order for it to be successful for individuals or society as a whole. And, capitalism is not blind to them, like collectivist systems are.

Instead, unlike those other systems that seek to perfect human beings, capitalism offers a healthy channel for the redirection of negative emotions like envy and greed into something positive for both the individual and the larger society. There is no healthy channel in crony socialism. To survive, you have to do what the State and its Masters say as they pocket your bribe money and pretend that their motives are "for the good of all."

Capitalism does not pretend that those messy negative human emotions can be "stamped out" merely by the Will of the State. It does not pretend these emotions don't exist; nor does it hide them under the mask of "We're doing it for YOUR OWN GOOD".

Instead, it human nature as a given and simply provides a system through which humans are able to sublimate and redirect those negative emotions to better both themselves and incidentally the larger society.

As economic systems go, this is a miraculous psychological breakthrough; and it is why capitalism dovetails so nicely with political systems that promote individual freedom, democracy, and the rule of law. Taken all together, democratic capitalism is about as close to "perfection" as humans are likely to get.

Human nature is what it is. This is not tragic, it is simple truth. History is littered with the corpses of the people whose nature the left has tried to "perfect" in some way; and all those utopian fantasies about changing human nature always end in misery, suffering and death for large numbers of imperfect homo sapiens wherever it is implemented.

In short, when you have perfected crony capitalism to the point that the Obama Administration has, you have really instituted perfect crony socialism and are well on your way to national socialism or some other redistributive utopian fantasy.

UPDATE: See what I mean here about how these virtuous, anti-capitalist utopians (i.e., the entire "Occupy" movement and their enablers) are perfectly OK with the dark side of human nature? Or, how about the environmental activist who hired a hit man to kill a random person wearing fur? She was very kind and sensitive about it, though.

- Diagnosed by Dr. Sanity

[philunderwood]

drsanity.blogspot.com/

Dr. Sanity
Shining a psychological spotlight on a few of the insanities of life


Wednesday, March 28, 2012

MEANWHILE....

If we can get our national attention off the Flukes and Martins and focus for a moment back on the economic disaster this country (and the world) is approaching:
You can listen to CNBC, and the president, drone on about the recovery, about the wealth effect, about trickle-down economics, about why adding $150 billion in debt per month is perfectly acceptable, and about a brighter future for America and the world... or you can take a quick look at these two charts and immediately grasp the sad reality of where we stand, and even sadder, where we are headed.

[take a look at the graphs at the link]

According to Obama and his dedicated leftist base in the Democratic party (and, to be fair, not a few deluded Republicans), the whole financial mess proves once and for all that capitalism doesn't work.

I almost completely agree but with one caveat: CAPITLISM DOES NOT WORK WHEN IT IS CONTROLLED BY GOVERNMENT.

The left would like to blame the global economic meltdown on capitalism--at least when they briefly become conscious of a whisper of a possibility of a mere hint that they can't spend spend spend forever and ever money they don't have.

Unfortunately, though, that waxing and waning awareness takes the form of: "CAPITALISM IS BROKE SO WE HAVE TO SPEND EVEN MORE MONEY WE DON'T HAVE TO FIX IT!!!" Just go and read any article from the delusional, Nobel-Prize winning (is that redundant?) economist, Paul Krugman, for example.

What never seems to permeate their awareness is that THEIR BEHAVIOR AND UNDERLYING IDEOLOGY have something to do with the meltdown. Indeed, the vast Congressional-Industrial Complex that has been created (which is sometimes called "crony capitalism", but I prefer to call it "crony socialism") is the driving force behind the economic meltdown here and abroad.

The market cannot rebound from their interference because it isn't free to do so.

This political-industrial complex is composed of know-it-all, do-gooder elitist leaders in Congress (a toxic mixture of "selfless" and "selfish" narcissists) who conspire and collude with the money-grubbing, unethical and elitist leaders (selfish narcissists) in the business world to deviate from and otherwise ignore the fundamental laws of supply and demand; and substitute their own whims. They enrich themselves while sanctimoniously insisting their actions are for the benefit of the disadvantaged and poor; the helpless and the weak.

I wonder how the diadvantaged and poor; the helpless and the weak will fare when the economy finally collapses under the weight of the benevolent left?

Both sets of narcissists firmly believe they can manipulate the market indefinitely and personally enrich themselves while supposedly "doing good for others" without invoking any adverse consequences at all.

Frankly, while a free market has its glitches and bumps and individual failures and losses; it is simply not capable of screwing up the entire economy without the devoted and sanctimonious assistance from unrestrained and malignant politicians colluding with unethical and malignant businessmen, both of whom believe they are insulated (for a while, at least) from the rule of law and from reality. The very act of suppressing fluctuations and controlling those glitches and bumps so "nothing bad" ever happens is what renders systems like the market extremely prone to large-scale disruptions.

But, you cannot ignore or manipulate reality for very long before it comes back to smack you in the face--and I fear we are headed for an extremely large scale disruption unless something is done now.

- Diagnosed by Dr. Sanity

[philunderwood]

www.qando.net/?tag=gm

Spinning Obama’s record

Published July 9, 2012 | By Bruce McQuain

E. J. Dionne, naturally, makes an effort today in the WaPo to do exactly that. Speaking of Obama and Democrats in Ohio and Colorado, he talks indirectly about the auto bailout:


None of this surprises Sen. Brown, a proud pro-union liberal who campaigned with Obama in Ohio last week. Brown notes that Obama has gained ground in his state both by being tough in enforcing trade rules on behalf of American companies and by pursuing a “high-end manufacturing strategy” that appeals to the nation’s “historical pride in manufacturing, and in making things.”

For Brown, who faces reelection this year, one of the voters he keeps in mind is the “guy in Zanesville who made big things with his hands and now has gone from $17 an hour to $11 an hour.”

The candidate who speaks to voters like Brown’s Zanesville worker — and to his white-collar equivalent in Colorado — is likely to win the election. Mitt Romney hopes the national unemployment rate will get them to vote Republican. Obama’s challenge is to offer an economics of national pride and renewal that answers the sense of betrayal these voters began feeling long before he took office.

That outlines some of the problem the Obama record has. Of course, unspoken here is the auto bailout and how that effected workers. The implication is the bailout was a net positive. Of course Obama, et al, think that workers will reward him for that move.

But the entire record of the auto bailout on the left has been one of spin. And most of that spin has been about as disingenuous as one can imagine. Even Dionne creeps around it by mentioning that the workers took a haircut in average salary (well, at least for new workers).

However, the assumption is that’s the worst that happened (hey, at least they still have a job) and workers will be grateful. Or, business as usual, a politician used taxpayer money and debt to buy votes, you have a problem with that?

Well yes, I do.

In fact, the auto bailout is a case study in crony capitalism. It is a situation where government interfered and overruled normal bankruptcy procedures, reorganized the payback priorities so debt holders were stiffed, bought up the majority of the stock in the new company (GM) and handed much of the control to a favored constituency (labor).

Then they told an absolute lie (GM has paid back its debt) and have consistently pretended that all is well with the company when it is not. This is the real result of the bailout:


General Motors (GM) shares fell to a fresh 2012 closing low of 19.57 on Monday. The stock hit 19 in mid-December, the lowest since the auto giant came public at $33 in November 2010 following its June 2009 bankruptcy.

Normally you might say, tough luck investors. But this is Government Motors. The Treasury still owns 26.5% of GM, or 500 million shares. Taxpayers are still out $26.4 billion in direct aid. Shares would have to hit $53 for the government to break even.

Those shares were worth about $9.8 billion as of Monday. That would leave taxpayers with a loss of $16.6 billion.

But that’s not the full tally. Obama let GM keep $45 billion in past losses to offset future profits. Those are usually wiped out or slashed, along with debts, in bankruptcy. But the administration essentially gifted $45 billion in write-offs (book value $18 billion) to GM. So when GM earned a $7.6 billion profit in 2011 (more on that below), it paid no taxes.

Include that $18 billion gift, and taxpayers’ true loss climbs to nearly $35 billion.

So that’s ground truth on where GM stands today. But that’s not helpful to Obama, is it? So how can Obama and company make this picture seem a little brighter? Well good old crony capitalism, that’s how. We have the end of the 2nd quarter nearing and it is critical to the spin of how well GM is doing to see good 2nd quarter results, no?


The upcoming earnings announcement by GM is, politically, the most important to date. The pressure is on Government Motors to appear financially strong as this may be the last earnings report before November elections and sets the stage for how "successful" GM is.

Well guess who is buying GM vehicles in huge quantities (HT: Steve)?


We now learn that government purchases of GM vehicles rose a whopping 79% in June.

The discovery of the pick-up in government fleet purchases at the taxpayers’ expense comes just weeks before GM announces its second quarter earnings. Overall fleet sales (which are typically less profitable than retail sales) at Government Motors rose a full 36% for the month, helping to drive decent sales improvements year over year.

Wow. What a surprise. Add a few accounting gimmicks:


One of GM’s past tricks to help fudge earnings numbers has been to stuff truck inventory channels. Old habits die hard at GM. According to a Bloomberg report, "GM said inventory of its full-size pickups, which will be refreshed next year, climbed to 238,194 at the end of June, a 135 days supply, up from 116 days at the end of May." 135 days supply is huge, the accepted norm is a 60 day supply. The trick here is that GM records revenue when vehicles go into dealership inventories, not when actually sold to consumers.

And you’re likely to see a “good” earnings report even when the stock is at an all time low, inventories are huge and crony capitalism instead of real sales is the means of spinning the news in a positive direction.

Remember that when you hear the GM “success story”.

Forward.

~McQ

[philunderwood]

www.qando.net/?tag=bruce-bartlett

Call it crony capitalism or venture socialism, either way, it sucks

Published July 19, 2012 | By Bruce McQuain

And neither have anything in common with real capitalism. But they do have a tendency to privatize profits while socializing losses.

Examples abound, and unsurprisingly, most come in the “green” industries associated with long-time Democratic fund raisers and Obama supporters. For instance, one with which we’re all familiar:


The most publicized instance of so-called “crony capitalism”—investing taxpayer dollars in firms tied to political donors—is the failed solar panel company Solyndra. The Fremont, Calif., firm was the first to receive a taxpayer-backed loan guarantee from the Department of Energy (DOE) in September 2009, worth more than $530 million. The funding for the loan was allocated in the controversial stimulus package passed earlier that year.

Obama bundler George Kaiser was a major stakeholder in Solyndra through his Kaiser Family Foundation, and made several trips to the White House in March 2009 to meet with senior administration officials. In July 2009, Kaiser bragged about securing face time with “all the key players in the West Wing of the White House,” as well as his “almost unique advantage” when it came to steering taxpayer funds toward his pet causes.

“There’s never been more money shoved out of the government’s door in world history, and probably never will be again, than in the last few months and in the next 18 months,” Kaiser told members of the Tulsa Rotary Club. “And our selfish parochial goal is to get as much as it for Tulsa and Oklahoma as we possibly can.”

Although things did not pan out for Solyndra—the company filed for bankruptcy in September 2011—Kaiser can expect to see a better return on his investment than American taxpayers. As part of an agreement to restructure Solyndra’s loan agreement in 2010, Obama’s DOE granted priority status to private investors like Kaiser with respect to the first $75 million recovered in the event of the firm’s bankruptcy, a move that many suspect violated federal law.

Taxpayers, meanwhile, are unlikely to recover much of the money invested on their behalf.

Sound familiar (*cough* GM *cough*). There the bankruptcy laws were tinkered with as well. And in the case of Solyndra, that isn’t the full extent of the cronyism:


Emails uncovered by Congressional investigators reveal that Solyndra helped secure its $535 million loan guarantee with the help of Steve Spinner, another prominent Obama donor. After bundling more than $500,000 for Obama in 2008, Spinner was named to the White House transition team and later served as “chief strategic operations officer” of the DOE loan program that funded Solyndra.

Here’s the other shoe:


Spinner’s wife Allison worked for a law firm that represented Solyndra and several other green energy outfits that applied for taxpayer funding. Records show that her firm, Wilson Sonsini Goodrich & Rosati, received $2.4 million in federal funds in legal fees associated with Solyndra’s loan application.

Ethical questions? Conflict of interest? Bah. And what in the world is the Federal government doing paying a law firm of an applicant for legal services in relation to their loan application?

Like I said, Solyndra is just one of many examples. It just happens to be the best known of the bunch. I would bet you never heard of this little bit of cronyism:


California investment guru John Doerr, for example, has personally contributed more than $170,000 to Democratic campaigns and committees since 2008, and more than $2 million over the past 20 years. His investment firm, Kleiner Perkins Caufield & Byers (KPCB), which lists former Vice President Al Gore as a partner, has given more than $1 million to Democrats since 2005.

An early and outspoken advocate for federal investment in “green” technology, Doerr was named to the president’s Economic Recovery Advisory Board in 2009, where he helped craft the $787 billion stimulus package. Of the 27 companies list in KPCB’s “green-tech” portfolio, 16 received some form of taxpayer support.

And:


Another prominent Obama donor who has benefitted handsomely from the president’s policies is Steve Westly. A frequent guest at White House events and state dinners, Westley served as California co-chair and a National Finance Committee member of Obama’s 2008 campaign and currently sits on the DOE’s Energy Advisory Board.

He has bundled at least $700,000 in campaign donations for Obama since 2008 and personally given about $260,000 to Democratic campaigns and committees since 2007.

Westley’s investment firm, the Westly Group, had a financial stake in four green energy companies that received more than half a billion dollars in federal funding in 2009. The group’s website once touted the firm as being “uniquely positioned” to take advantage of the influx of taxpayer funding in green technology, and currently notes that “To win in the clean technology space, a company must navigate the halls of government.”

Westly has openly acknowledged that knowledge of federal policy is key to investing in green technology. In response to a reporter’s question about which green energy companies he likes to invest in, Westly said: “Who cares what I think. Let’s talk about ‘what does Obama like? Here’s what he likes,’ because here’s where the federal government is putting money. And let me tell you, whatever he likes, that’s what I like.”

Access and a relationship equal profit. Nice, if you’re an insider, huh?

Here’s something Obama “liked”:


One of the companies Obama “liked” was the Exelon Corporation, a Chicago-based utility and recipient of hundreds of millions of dollars in stimulus funding. One of the most politically connected firms in the country, Exelon employees have made up one of President Obama’s top sources of campaign contributions throughout his career.

Exelon was Obama’s fourth-largest campaign donor when he ran for Senate in 2004, contributing more than $73,000, according to the Center for Responsive Politics. The firm donated $326,000 to Obama’s presidential campaign in 2008. The firm has ties to several top Obama bundlers, as well as to Obama campaign adviser David Axelrod and former White House chief of staff and current Chicago mayor Rahm Emmanuel.

As the Washington Free Beacon reported in June, an Exelon subsidiary was recently awarded a lucrative 20-year contract to install solar panels manufactured by federal inmates on government facilities.

The “Chicago way”.

Finally, cronyism comes in many forms:


DreamWorks Animation CEO Jeffrey Katzenberg has bundled at least $500,000 for Obama’s reelection campaign, and is the largest contributor to Priorities USA, the Obama-allied Super PAC.

The Securities and Exchange Commission is currently investigating whether DreamWorks made illegal payments to Chinese officials in order to secure exclusive film rights in the communist nation. The New York Times reported that Katzenberg, as well as Vice President Joe Biden, were intimately involved in negotiating an agreement under which China would up its annual quota of foreign-produced films from 20 to 34 and allow studios to keep a greater percentage of box-office revenue.

DreamWorks announced a $2 billion deal with the Chinese government in February to build a production studio in Shanghai just days after Chinese Vice President Xi Jinping held an extensive meeting with Barack Obama in Washington, D.C.

Nice to have the leverage to engage the president and VP in your business pitch, no? Guess 500K bundles help make that happen.

So, wondering what happened to all the money? Still perplexed as to what the stimulus was spent on? Bruce Bartlett knows:


“As of March 31, $452.6 billion of net stimulus funds had been disbursed in ways that show up in the national income accounts. Of this, the vast bulk, $399.7 billion, went for transfer payments. Another $9.6 billion went for subsidies and $68.1 billion for capital transfers to state and local governments. Only $37.8 billion went for consumption and $11.8 billion for investment — the only two categories of outlays that we know add to growth.”

And in the “investment” category, most of that apparently went to cronies.

That’s no way to run a government – an honest government, that is.

~McQ

[philunderwood]

www.qando.net/?tag=agriculture

Crop cronyism’s destructive results

Published July 20, 2012 | By Bruce McQuain

We talk about it. Politicians condemn it. Nothing ever happens to change it though.

This year’s agriculture bill again redistributes your money to rent seekers:


Combine a Midwestern drought with pointless ethanol mandates, and the supplies of corn inevitably dwindle, driving prices sky high. Politicians like Sen. Claire McCaskill, Missouri Democrat, are citing the crop crisis as an excuse to ram through a near-$1 trillion farm bill. While a bit of that cash might find its way to a small farmer, the bulk of the loot will be transferred to individuals who are anything but poor. Like the bank bailouts and TARP, the farm bill illustrates the capture of the legislative process by special interests.

The last farm bill in 2008 was the focus of $173.5 million in lobbying expenditure, according to a report released Tuesday by Food & Water Watch. This is all money spent on what the Mercatus Center’s Matthew Mitchell calls “unproductive entrepreneurship” where people are organizing and expending their talent to become rent seekers, and the end result is wealth redistribution, not wealth creation. Real entrepreneurship innovates in ways that are socially useful. Cronyism diverts resources — both money and talent — into a system that rewards privileges to favored groups. In the case of the 2008 farm bill, recipients of subsidies of $30,000 or more had an average household income of $210,000.

Mr. Mitchell argues that “government-granted privilege is an extraordinarily destructive force” because it not only results in a misallocation of resources and slower growth, it undermines civil society and the legitimacy of government by providing a rich soil for corruption.”

She’s absolutely right. And, of course, when you mess with markets, like has been done with the corn market and mandated ethanol, the expected results occur when something unanticipated, like a drought, happens:


Corn and soybeans soared to record highs on Thursday as the worsening drought in the U.S. farm belt stirred fears of a food crisis, with prices coming off peaks after investors cashed out of the biggest grains rally since 2008.

Corn prices crossed into uncharted territory above $8 per bushel — about three-and-a-half times the average price 10 years ago of $2.28. Soybeans punched past $17 for the first time — also three-and-a-half times the 2002 average.

Analysts said that while forecasts for continued dry weather are expected to sustain the rally, corn prices could be vulnerable to any move by the government to lower the amount of corn-based ethanol blenders are required to mix with gasoline.

Notice what entity is mentioned in the last paragraph? Yes, government. A key player in the increase in corn prices (yes, understood, they’d be higher with the drought alone, but government’s ethanol mandate has driven them even higher yet).

Meanwhile, as mentioned above, we’re subsidizing agriculture to the tune of $1 trillion dollars of your money (in cash or in debt to be paid back in the future). Meanwhile, you’ll be paying more for corn based products at the grocery store as well.

Nita Ghei lays out the bottom line problem with this sort of cronyism and rent seeking:


Government privileges come in many forms, direct and indirect. It might be a monopoly, such as the one granted to utilities like Pepco. Regulations such as licensing can be used to limit entry to a particular field to the benefit of existing businesses. Lobbying and the revolving door in Washington create what economists call “regulatory capture,” which is what happens when existing firms use regulatory agencies to benefit themselves. Tax breaks, loan guarantees and subsidies are the most direct signs of a government’s favor. Bailouts of big banks under TARP, and Fannie Mae and Freddie Mac when the housing bubble burst, are the most recent examples of direct action.

Extending each of these privileges reduces America’s economic competitiveness. A monopoly protected by the government has little incentive to provide good service. The greater the availability of privileges, the greater is the incentive to indulge in rent seeking, which diverts resources from truly productive activities. In the long run, the result of anti-competitive policies is less innovation, lower growth and a smaller pie to share.

The greatest scourge to the honest Midwest farmer is not unfavorable weather, pestilence or disease. Far worse for them is the plague of politicians who create an artificial market in which only those with influence can truly compete. Defeating the budget-busting 2012 farm bill is the best chance at a good harvest.

The chances of that happening, however, are slim to none. Regulatory capture is as common now as government debt and unemployment. It is a systemic problem that rewards rent seekers and the well connected to the detriment of innovators and competition. It is the antithesis of capitalism.

Unless we have the will to stop this sort of cronyism, we’re on a short road to failure. This is another, in a long line of government programs, that are unsustainable, destructive and just flat something government shouldn’t be involved in.

But my guess is, this time next year, we’ll still be talking about it, politicians will still be condemning it and nothing will change except the higher national debt number.

~McQ

[philunderwood]

This wouldn't copy well so you'll have to go there; it's well worth the trip.

www.qando.net/?tag=cronyism

[philunderwood]

www.qando.net/?tag=energy-cost

Nevada’s epic “green energy” failure

Published August 7, 2012 | By Bruce McQuain


Unfortunately these stories are all too common now:


As U.S. Senate Majority Leader Harry Reid prepares to host his fifth annual National Clean Energy Summit on Aug. 7, a Nevada Journal examination of Nevada’s renewable energy sector shows that over $1.3 billion in federal funds funneled into geothermal, solar and wind projects since 2009 has yielded and is projected to yield just 288 permanent, full-time jobs.

That’s an initial cost of over $4.6 million per job.

So as the Senator from Nevada tries today to justify his profligacy in his home state at your expense via this sham “National Clean Energy Summit”, you can be assured of one thing – No one in government will be held accountable for this, at least not legally.

The performance of many of these “sons of cronyism” is as dismal as the cost per job is outrageous.


Auditors for Nevada Geothermal Power, a federally subsidized green-energy firm in Nevada, are raising questions about whether that firm is going to fail.

As of last October, Nevada Geothermal Power had 22 employees in Nevada, and, according to the New York Times, had received $145 million in federal subsidies — composed of a loan guarantee of nearly $79 million for its Blue Mountain geothermal project and at least $66 million in grants to the company itself.

The Times called the company a “politically connected clean energy start-up that has relied heavily on an Obama administration loan guarantee,” and said it “… is now facing financial turmoil.”

Today, three quarters later, the latest company audit again questions the “company’s ability to continue as a going concern.”

The firm’s survival, wrote auditors on March 31, will depend “on its available cash and its ability to continue to raise funds….”

And that’s not the only example:


The most recent “clean energy” company failure in Nevada occurred three weeks ago when Amonix, a North Las Vegas solar manufacturing plant that had received more than $20 million in federal tax credits and grants, closed after only 14 months of operation.

Hailed upon its opening by Sen. Reid, U.S. Rep. Shelley Berkley and Gov. Brian Sandoval, the 214,000-square-foot Amonix facility had, at its height, employed some 700 individuals. In 2010, even President Barack Obama praised the Amonix plant, saying the “stimulus” tax credits it received had made an “extraordinary impact.”

Today, the company is bankrupt.

The result is something out of an Orwellian nightmare and the ultimate victim? The people of Nevada:


In Nevada, consumer energy rates climb higher and higher. According to the Energy Information Administration (EIA), Nevada now has the highest residential electricity rates in the Intermountain West region.

Moreover, so long as present government policies — such as the state’s Renewable Portfolio Standard — remain in place, rates will continue upward.

While Sen. Reid helped Salazar fast-track government-approved renewable projects in 2009, he also used his influence as Senate majority leader to delay and ultimately kill a coal power plant planned for White Pine County.

Coal-powered plants produce electricity at a much lower price than do renewable-powered plants, according to the EIA and NV Energy.

Currently, NV Energy pays 3 to 5 cents per kilowatt-hour for natural gas and coal-fueled power, 8 to 10 cents per kWh for geothermal energy and for wind energy and 11 to 13 cents per kWh for solar photovoltaic energy. Wind and solar photovoltaic energy also require backup power for “intermittency issues.”

The higher costs from renewable-energy production are passed on to Nevada ratepayers in the form of residential electricity rates that are 26 percent higher than those of other Intermountain West states and 7 percent higher than the national average, says the EIA.

Obviously cronyism isn’t just limited to Democrats. It’s just their turn in the barrel because their cronyism has been such a spectacular disaster here lately.

What none of our elected officials who regularly indulge in cronyism seem to understand is that they call certain things economic principles or economic laws for a reason – they aren’t something you can ignore and expect, for some reason, to be successful in ignoring them.

In this case Richard Epstein of the Hoover Institute again states why what is again being attempted, and failing, is a lesson that the government seems never to learn:


These subsidies programs have failed for mundane but compelling reasons. No government has ever succeeded in trying to shape industrial policy with state subsidies, for the simple reason that it has neither the knowledge nor the incentives to pick which fields make sense to invest in or which firms in these fields have latched onto a viable technology.

No government should, of course, ban investments in solar and wind energy, but the prudent strategy is to let these investments be made by venture capitalists and other entrepreneurs who might actually know what they are doing. And currently, the smart money seems to be steering clear of renewable energy technologies.

And yet we continue to see these sorts of attempts by government to do something it is entirely unequipped (and unneeded) to do.

You know, act like it has better information than … markets. It never has, it never will. The results are just about as predictable as sunrise.

Failure. In some cases epic failure.

In the case of Nevada, government intrusion, at the cost of $1.3 billion of your dollars, has created a whopping 288 jobs and managed to quadruple energy costs for the state’s residents.

And yes, I put that in the epic failure column – but then we’re talking Harry Reid here, so one should be used to epic failure when his name is mentioned.

~McQ

[philunderwood]

www.qando.net/?cat=18

Government cronyism in full bloom is the US west

Published August 15, 2012 | By Bruce McQuain

Last month I pointed this out:


The Obama administration will open public lands in six Western states to more solar projects as part of a solar energy road map it publicized Tuesday.

The Interior Department set aside 285,000 acres in Arizona, California, Colorado, Nevada, New Mexico and Utah for the initiative. Firms can apply for waivers to develop projects on an additional 19 million acres.

At the same time the administration opens those lands up (19 million acres!? For solar?), it has essentially closed federal land to oil and gas exploration and exploitation.

The Wall Street Journal (subscription) explains:


Several weeks ago in a remarkable but little-noticed policy directive, the Interior Department announced that it will allow construction permitting on 285,000 acres of public land in Arizona, California, Colorado, Nevada, New Mexico and Utah for solar energy projects. Even more remarkable, Interior said that energy firms can petition Interior to build solar installations "on approximately 19 million acres"—a larger land mass than Connecticut, Massachusetts, New Hampshire and Vermont combined.

Interior boasts that "this represents a major step forward in the permitting of utility-scale solar energy on public lands throughout the west." This means opening up huge chunks of U.S. desert and wilderness to the installation and long-term placement of hundreds of thousands of solar panels. The dirty secret of solar and wind power is that they are extremely land intensive, especially compared to coal mining, oil and gas drilling or building a nuclear power plant.

Question: Where are the environmentalists? I can’t imagine anything more disruptive to “fragile eco-systems” and endangered species than carpeting hundreds of thousands or millions of acres with solar panels. And yet I’m finding little to nothing in the press about their protests of projects of such a scale.


What’s surprising is that few if any nature groups are protesting this regulatory rush to approve renewable energy projects. Environmental groups have never hesitated to block a dam to save a snail darter, or oppose a forest-clearing to save an owl, but desert tortoises and bighorn sheep are apparently expendable as sacrifices to the gods of green energy. So much for protecting wildlife from big, bad profit-making industry.

Those groups are complicit in the cronyism and have abandoned their so-called calling (protecting the environment and wild life) for politics. Like happened to the National Organization of Women during the Clinton years, the environmental movement’s complacency and silence regarding this move by the administration destroys their credibility.

Not only that:


That’s only part of the special treatment for solar companies. Interior says it plans to expedite solar-project approval and cut up-front costs for developers. The agency is also streamlining National Environmental Policy Act approval and facilitating the linking of solar electricity generation to transmission lines that will carry the electricity to substations. All of this is on top of the $9 billion in taxpayer handouts for solar and wind projects that were approved between 2009 and 2011.

In short, green energy is getting an EZ Pass through the Administration’s costly regulatory tolls. Since taking office in 2009, the Obama Administration has approved 17 major solar projects on public lands. All of this is facilitated through a program called the "roadmap for solar energy development."

Apparently the costly and lengthy environmental impact studies required of fossil fuel or nuclear projects just don’t need to be done by “approved” energy sources, even if it is clear that in terms of real environmental impact (just by footprint alone) these projects are far more intrusive than fossil fuel projects.

But hey, that’s where cronyism comes in. That’s where we socialize (subsidize) the cost and privatize the profit. That’s where the taxpayer pays the difference while the government streamlines its procedures (or doesn’t enforce its own regulations) in favor of its chosen industry.

Interior is just not going to entertain the same sort of nonsense it imposes on fossil fuel projects when it is a project it favors.

Oil shale though? Oh, we have regulatory hoops, more hoops and requirements out the wazoo if you want to do that:


Meanwhile, the Institute for Energy Research notices that the new solar policy is "in sharp contrast to the Obama Administration’s canceling lease sales for oil shale deposits in Colorado, Wyoming and Utah early in the President’s term and significantly downsizing development plans for those resources since then."



This is roughly the same list of western states that got the green light for solar, but with different results. Oil shale—not to be confused with shale oil, which is extracted through hydraulic fracturing—is recovered by heating rock at high temperatures, which releases petroleum. The U.S. has the largest oil shale deposits in the world, totaling a little under one trillion recoverable barrels, or about 150 years worth of supply. But most of it is located on public lands and is still off limits.

Consider the 2005 Energy Policy Act that authorized oil shale leasing on public lands. In 2008 the Bush Administration issued rules on oil shale exploration, but in February 2009 Interior Secretary Ken Salazar said those rules would be delayed. Only this year, says Mary Hutzler, former acting administrator of the Energy Information Agency, "did the Interior Department announce its plan for shale drilling, but the administration closed off 75% of the federal land containing oil shale resources that were to be offered for lease under the Bush rules."

Remember the post from yesterday in which I pointed to the promise of fossil fuel if government would just get out of the way? 3.6 million jobs and a 3% increase in GDP by 2020.

Instead, this is the way this administration has chosen to go. An unproven and land intensive energy source instead of backing a tried and true one. Like it has done in the medical field it is wreaking havoc in the energy field pushing its favored industry that can only survive by government subsidy.

And this administration has the gall to call anyone else “ideologically” driven?

Really?

~McQ

[philunderwood]

Government Plays Favorites

By John Stossel

www.JewishWorldReview.com |

People say government must "help the little guy, promote equality, level the playing field."

People often go into government to do that. But even when people mean well, it's natural for them to help out their cronies.

David Stockman, who ran the Office of Management and Budget under Ronald Reagan, was criticized for saying the government's budget numbers didn't add up. But he was right.

Now, in his book "The Great Deformation," he says both major political parties failed ordinary Americans when the housing bubble burst, and they rushed to bail out cronies at big banks. Government continues to threaten our future by printing gobs of money and guaranteeing trillions in loans to banks, homeowners, students and other politically connected groups.

The political class claims the economy would have been destroyed in 2008 without a bailout of the big banks. Stockman says that's a myth: "The Main Street banks were not going to go into a huge retail bank run ... and (Fed chairman Ben) Bernanke is totally wrong when he says we were on the verge of Depression 2.0. We weren't close. We would have worked our way through it. We've done it many times in history."

Worked our way through it? Without the bailouts, there might have been a bigger stock market drop, and more businesses would have closed! But Stockman says, so what? It would have been worth it. And I agree with him.

Today, taxpayers would be $1 trillion richer and not on the hook for trillions in loan guarantees. Prices would now have found a natural floor, business would be eagerly hiring again, and America would be free of moral hazards like "too big to fail" banks.

What do I mean by "moral hazard"? I once built a beach house on the edge of the ocean — a very risky place to build — but I did so because federal flood insurance guaranteed my investment. Eventually, a storm swept away my house, but I didn't lose a penny. Government "insurance" covered my loss. Thanks, taxpayers!

Now that I'm wiser — and more libertarian — I'm ashamed that I took your money and understand that the whole program is a mistake. The same government that worries about global warming causing flooding spends billions to compensate risk-takers who live next to oceans. That's moral hazard.

But beachfront property owners have political connections. They make desperate calls to legislators. Politicians respond to whoever screams loudest.

When the housing bubble burst, politicians got panicked calls from their friends on Wall Street — in many cases former colleagues. Instead of letting their old friends take big losses and trusting smaller banks to expand and take their customers, the political class propped up risk-takers who made bad bets.

It's not that those who move back and forth between Wall Street and government are evil. But when you are close to a problem, you are quicker to panic. A few years back, brilliant scientists who studied SARS or bird flu sincerely thought a mass epidemic was coming, and therefore government had to "do something." (It didn't hurt that "doing something" meant spending more on their area of research.)

In 1999, computer techs really believed computers would freeze when the calendar turned to 2000, causing planes to fall from the sky. Killer-bee researchers were convinced bees would sting us to death. Anti-pesticide environmentalists, flesh-eating bacteria researchers and today's global warming fanatics are all sincere in their fear.

But unlike Wall Street bankers, none could confiscate a trillion of your dollars and give them to their cronies. Believe me: If Al Gore could have done that, he would have.

Politicians accuse those of us who advocate limited government of being heartless when we say that government should not protect us against loss. But government efforts to "protect" us create a moral hazard that just makes our problems bigger over time.

Politicians say, "Yes, we can!" But don't be fooled: "No, They Can't."