Democrats: Free Market Capitalists-No, Crony Capitalists-Yes

by Bill O'Connell on December 3, 2010

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The latest news on the economy is not encouraging: a mere 39,000 jobs added and the unemployment creeps ever closer to 10% at 9.8%.  In spite of this, or apparently ignorant of it, the lame duck House voted yesterday for another whopping tax increase on the most productive among us. Yes, yes, they will beat the class warfare drums about tax “cuts” for the rich, when what they are voting on is not a cut at all, but either leaving things the way they are or raising taxes.  With the recovery barely showing a pulse, it is not the time to take money out of the hands of free market capitalists and put it in the hands of the government.  Who do you think can pull the economy out of the doldrums, entrepreneurs or government bureaucrats?


The “We’re For the Little Guy Myth”

We learned yesterday that Peter Orzag, the former White House Budget Director, may be taking a job at Citibank.  You remember Citibank, they got $45 billion in a taxpayer bailout.  The actual job is unimportant.  What is important for Citibank is having a guy on the payroll who can call the White House and they’ll take his call.  They guy who replaced him as budget director, Jacob Lew, worked at Citibank from 2006 to 2009. 

How about some more cronies?  There is former Treasury Secretary under Clinton, Robert Rubin who became an executive-committee chairman at Citigroup.  Treasury still owns 11% of Citi stock.  As Obama raked in the campaign cash from Goldman Sachs, we have Timothy Geithner’s replacement as head of the New York Fed, William Dudley, was a former chief economist at Goldman Sachs.  Former Democrat senator and Governor Jon Corzine was a previous chairman of Goldman Sachs.

But don’t worry the Democrats are looking out for the little guy.  They ignore Fannie Mae and Freddie Mac in the financial regulations overhaul and hand the bill to the little guy.  They bail out GM and Chrysler, turning over the bulk of the company’s ownership to the unions and hand the bill to the little guy.  TARP money goes to foreign banks to cover their losses and they hand the bill to the little guy.

Crony Capitalism Reality

The reality is that Progressives like crony capitalism.  After all, how can they possibly mount effective political campaigns without money?  From the little guy?  Forget it.  They make deals with big business.  They protect the big guys from competition from the free market capitalists and the big guys pour money into Democrat coffers.  Think of all the money that flowed into Wall Street.  Why?  Because they were “too big to fail”.  How many small and mid-sized banks were shuttered?  Since 2008 there have been 314 bank failures in the U.S., only 18% of those had assets of over $1 billion. 

The big guys can take enormous risks and if they pay off they make enormous profits and personal wealth for their management.  But if the risks don’t pay off, do they go out of business?  Hardly.  They go to the government with dire predictions of a collapse of the economy unless the government steps in and when it does, the bankers get their big bonuses and the little guy gets stuck with the bill.

Meanwhile Back at the Fed

If the Democrats are not trying to destroy the economy through fiscal policy, then they give monetary policy a try.  Take a look:


The New Congress

The Republicans are ready to take control of the House in January and narrow the majority of the Democrats in the Senate.  They have stumbled badly before when they were in the majority, but in their four year timeout, it appears they have learned something.  They seem to be on the right track and we hope they remain so.  We’ll be watching.

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