There’s nothing wrong with being wealthy. What matters is how one got to be that way. Was it the result of hard work, skill, and luck or was it through the exploitation of political connections? America is largely a meritocracy – the best people do the best – but there’s still the problem of the well-connected using their power and status to enrich themselves at the expense of the average taxpayer.
It’s called “crony capitalism” and there’s too much of it. Some people try to legitimize these activities as being well within the confines of ordinary behavior in a free market system. They’re not. They slant the playing field so that people cannot all enjoy the equality of opportunity that is their right. Instead, backed by a gaggle of lobbyists working on their behalf, these faux capitalists influence their government to twist regulations and laws to their advantage and subsidies their products. Policies intended to improve the well-being of the average American worker are thereby bastardized into big special interest giveaways funded at the expense of the hard-working averages Joes and Janes that make up the middle class.
There are countless examples of this trend. One of the most troubling led to the 2008 financial crisis. Sensing an opportunity to line their own pockets while acting in consort with the government, institutions throughout the financial sector began expanding into the banking industry, offering new products and providing lucrative home loans to applicants who previously could not get them, often for good reason and because of bad credit.
These activities culminated in the 2008 financial collapse caused by the poison injected into the system by sub-prime mortgages. It was a catastrophe that threatened America’s entire economic substructure. Washington decision-makers should permit banks to engage in this kind of behavior because individuals and private businesses have an unquestionable right to take risks, even with other people’s money, so long as everyone involved is willing and ready to face the potential consequences if things go sour.
Unfortunately, this is not what happened in 2008. The elites, fully cognizant of their unique position within the economy, assembled their lobbyists, called in their chits with the politicians, and negotiated a $700 billion bank bailouts paid for in essence by the American taxpayer.
The problem has not gone away. Shortly after the 2017 tax reform package, which involved closing loopholes to produce lower rates, the lobbyists working for the crony capitalists started talking about the need to restore some of those same loopholes. They’ve seized on an ambiguity within it to bring pressure to bear on Congress to resurrect, for example, a special interest insurance tax exemption called “Bermuda tax loophole.”
Using an insurance technique called “affiliate reinsurance,” foreign insurance companies can avoid billions of dollars in U.S. taxes by transferring their assets to countries like Bermuda and Switzerland. This way, elites and foreign insurers get away with paying little to nothing in taxes while making it even harder for American businesses to compete.
These foreign insurers want their unfair competitive advantage over American companies, which was eliminated in 2017, back. They haven’t been successful so far in their efforts to jam it into some piece of must-pass legislation, but they haven’t given up. The lobbyists are not the problem, not really, no matter what the media says. They’re hired guns doing what they’re paid to do. It’s the crony capitalists who look to them to produce these special deals that do the real damage. The favor-seekers are out to defeat tax reform at its fundamental level.
Someone needs to say “No” to these outrageous schemes. The crony capitalists must be stopped before their effort to put special interest exemptions back into the tax code succeeds. America can take a step in the right direction toward limiting the elites’ corruptive influence over our economics and politics just be adding some sunshine to the discussion.
Things like this happen every day. It might be a tall order to fight the elites on every inch of ground, but America needs “corporate welfare” reform now, and just as badly as it needed the Gingrich/Clinton welfare reform of 1996. Crony capitalist influences are corroded another facet of the American Dream. In the United States, everyone deserves the opportunity to succeed, not just the privileged few.
Peter Roff is a senior fellow at Frontiers of Freedom and a former U.S. News and World Report contributing editor who appears regularly as a commentator on the One America News network.
He can be reached by email at RoffColumns@GMAIL.com. Follow him on Twitter @PeterRoff.