Giving Voice to the 'Forgotten,' Who Pay for Elite Policies
Cronyism, or politicians and bureaucrats putting the interests of favored groups above those of average Americans, has created a two-tiered society in America. Author Amity Shlaes has referred to those compelled to pay for policies that benefit a select few as “the forgotten.” Today, we still have an entire segment of the population that falls into this category. Why have we not learned from the past, and what we can do to fix this problem going forward? On Thursday, Ms. Shlaes and I will discuss these questions in person, but what follows demonstrates why this conversation is so urgent.
In 2014, nearly half of Americans believed the American Dream no longer exists. For generations, Americans have had the opportunity to do better than their parents, but our children may not be so lucky. According to Stanford researchers, “Young people entering the workforce today are far less likely to earn more than their parents when compared to children born two generations before them.”
It is notable that young people—be they aspiring engineers, bus drivers, or cosmetologists—are struggling to find a foothold in today’s economy. The Aspen Institute estimates that one out of seven young adults is out of school and not working. Many Americans feel as if they are falling behind, and their ability to leap forward depends on a vibrant economy with few barriers to advancement.
When crony government policies protect special interests, they erode much-needed opportunity. According to the Brookings Institute, approximately one quarter of all jobs in the United States require expensive occupational licenses. These government-granted licenses usually entail hundreds of hours of training and costly fees. For example, 40 states require an average of 900 hours of education and experience to be an HVAC contractor. This benefits those currently employed as HVAC contractors and the government officials who protect them from new competition, but it locks people out of the workforce and makes the creature comforts of heating and air conditioning more expensive for almost everyone.
Cronyism also creates an unlevel playing field for specific businesses and those they employ. For instance, states offer a dizzying array of economic incentives—about $80 billion per year—to spur private investment. Politicians argue that this spending is necessary to “compete” with other states for jobs and economic growth. But in most cases, the perks go to a fortunate few while promises of jobs and growth fall by the wayside.
Even if businesses move jobs to a particular area in exchange for a state-sponsored subsidy, is it a good use of taxpayer money? Data show that such incentives rarely produce new jobs. And when government officials make investment decisions to benefit specific firms or industries, capital flows away from more productive uses.
These programs hardly ever generate the economic growth needed to offset their cost. Taxpayers get pinched and so do the businesses and their employees that do not receive a special break or subsidy. Meanwhile, the benefits of these crony programs go to the politicians cutting deals and their preferred interests—oftentimes Fortune 500 companies and wealthy investors.
In 2013, for example, the Washington state legislature approved $8.7 billion in tax carve-outs for Boeing, the largest bundle of state tax breaks ever created for a private company. However, this did not prevent Boeing from moving thousands of engineering jobs out of state. Additionally, for years Michigan offered more than $3 billion in tax credits to support incentives offered by the Michigan Economic Development Corporation, a gamble that delivered just 29 jobs for every 100 promised. In Florida, biotech company Sanford Burnham secured $350 million in state and local funds, a deal that soured after the company failed to deliver expected jobs. And in Missouri, taxpayers remain on the hook for about $100 million for an NFL stadium that no longer hosts a team, since the Rams moved to Los Angeles. The list goes on.
These types of crony policies produce lopsided benefits for those with the coziest relationships with government. And when government creates protected classes, the rest of society pays. It’s time to put an end to the inherent unfairness faced by today’s forgotten men and women by rooting out cronyism at all levels of government.
