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Monday, November 28, 2011

The Source of Cronyism Is *Not* Social Programs for the Poor

Jeff Sachs:

Fairness and the Occupy Movement Revisited, by Jeff Sachs: A recent Wall Street Journal article by Arthur C. Brooks on the Occupy Movement and fairness says some interesting things about potential common ground between free-market ideas and the Occupy movement. Yet Brooks also commits some very important errors. ...
Brooks, the head of the American Enterprise Institute, denounces crony capitalism as the dark side of American politics and economics. On this we should all agree. The level of corruption in Washington is staggering, growing, and rife in both parties. ...
The Republicans answer to crony capitalism is to slash government. Yet by this they mean mainly an attack on the remaining social programs. This is a kind of bait-and-switch strategy: rev up the anger against government corruption, and then kill the life-support programs of the poor and working class. Crony capitalism exists mainly in the big-ticket sectors of the economy -- banking, oil, real estate, private health insurance, military contractors, and infrastructure -- not in the essential but much smaller parts of the economy: malnutrition of poor children, lack of quality pre-school, insufficient job training, and inadequate student loan coverage.
Yes, crony capitalism should be confronted anywhere in the economy, yet cutting the life-support systems for the working class and poor won't fix government, but instead would cripple the prospects of more than 100 million poor and near-poor Americans. To control crony capitalism, we need to direct our attention where it belongs: the wealth-support systems of the rich, not the life-support systems of the poor. ...
Yes, Mr. Brooks, let us find common ground. We all agree on the need to end crony capitalism. But let us also work together not to cripple government but to make it work for all Americans.

The hope for common ground where there is none can lead to Obama like one-sided concessionary behavior, and we have more than enough of that already. Yes, let's find common ground where it exists, but let's also be careful not to try to meet in the middle when the other side is pursuing a bait and switch strategy. The Republican goal of reducing the size of government through reductions in social programs is unwavering, and they will pursue any argument handy at the moment to bring this about. In recessions, they tell us tax cuts are needed to stimulate the economy, but the real goal is to cut funding for the government permanently. Once the taxes are reduced, they won't agree to increase them again (unless it's to protect their cronies, i.e. an increase in payroll taxes is fine so long as it prevents the increase in taxes on the wealthy needed to fund it). In normal times, we're told tax cuts stimulate economic growth even though there's not much evidence to support this claim. Presently, it's the cronyism argument, and tomorrow it will be something else. The Republicans have their eyes on the ball, and the rules of the game are to be adjusted as necessary to allow them the best opportunity to take the ball across the goal line. Winning is all that matters. Fairness for both sides playing the game, etc. has nothing to do with it and we'd be wise to keep our eyes on the ball as well.

The other thing to note is that the location of common ground has shifted to the right from where it used to be. "Meet us in the middle" now means meeting on ground that would have been considered on the right not all that long ago. Democrats have already conceded too much in the ideological war, and there comes time when leaders in the party must take a stand and hold their ground. That time is long past.

    Posted by on Monday, November 28, 2011 at 11:34 AM in Economics, Equity, Income Distribution, Regulation, Social Insurance | Permalink  Comments (21)


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