Crony Capitalism, Minnesota Style
One of the most distasteful side effects of big government is crony capitalism. What is crony capitalism? It’s when business interests capitalize on their government connections and use that to get subsidizes and other tax breaks that provide them with an unfair advantage against their competitors. Another side effect is that a subsidy today grows government even larger tomorrow. It is incredibly difficult to eliminate any government program once it’s in place but it’s especially difficult when a government program becomes well-established with a constituency that can and often does appear before legislative committees begging for continuation of that program into perpetuity.
A recently published paper from The Independent Institute said that, “When those in government – bureaucrats of elected officials – are given the power to implement or enforce regulations or to spend money, they have the power to benefit some at the expense of others. This potential lays the foundation for cronyism because people have an incentive to seek government favors and to protect themselves from regulations or expenditures that will put them at a competitive disadvantage.”
This session, there appears to be a disconnect at the Capitol on the proper role of government and how markets operate. Specifically, it appears that some legislative leaders believe that if you call a government subsidy an “incentive”, then it’s acceptable as a proper function of government.
Crony capitalism isn’t new to Minnesota government. You can learn a great deal about how it’s been used through the years by studying the “success” of Minnesota Public Radio (MPR). Established in 1967 at St. John’s University, MPR has grown into a regional network consisting of over 38 radio stations with more than 83,000 members. They have created this statewide “non-profit” powerhouse by using a number of for-profit ventures as well as substantial and very direct government subsidies that built a broadcasting empire that now connects listeners border-to-border. Other radio stations throughout Minnesota were forced to build profitability the old fashioned way: one listener and one advertiser at a time and without government subsidies.
Today at the Capitol, one of the “investments” being handed out includes spending state tax dollars on very risky technologies. For example, a bi-partisan bill is working its way through the legislature that would have the state invest $2.5 million in an “Advanced Biofuel Incentive Program” that would “incentivize” producers of transportation fuels derived from cellulosic materials. You don’t have to do a lot of research to see how investing in this type of alternative fuel has worked for other states: Mississippi is currently suing a biofuel company that filed for bankruptcy last November. Mississippi went all in and loaned the company $75 million to manufacture this alternative biofuel before discovering that the fuel produced was of very low quality and cost nearly three times as much to produce as a gallon could generate in the marketplace.
Speaking of alternative fuels for vehicles, the Omnibus Employment & Economic Development legislation working its way through the Minnesota House of Representatives rewards those Minnesotans who buy the “right” kind of cars. If this bill becomes law, the state will offer $5 million per year in rebates to new electric car purchasers; compressed natural gas vehicles will be eligible for an additional $5 million in rebates; and, finally, the bill creates a new solar incentive program and appropriates an unspecified spending amount to cover the cost from the Minnesota energy investment account.
The legislature believes that Minnesotans willing to purchase a new Tesla or Volt should be given advantages that Honda purchasers aren’t privy to. And, apparently the irony is lost on legislators who dramatically advocate the need to significantly raise the gas tax while voting for legislation that promotes the sales of vehicles that won’t pay a gas tax – you know – the tax that fixes and builds roads and bridges.
And it doesn’t end there: with a $2 billion dollar projected surplus, some House members want to provide $1.9 million to give Minnesotans who “utilize” a fitness facility “additional [tax] savings.” Accepting personal responsibility for our health and slogging it out on our own treadmill won’t get you a tax break this legislative session.
The list of special interest favors pending at the Capitol continues to grow as we approach the end of the legislative session. And elected officials designing legislation that might help their re-election prospects is nothing new. Yet it’s very disappointing to think that bigger government will be the outcome of a $2 billion dollar budget surplus – a surplus that was built on the back of an oppressive and uncompetitive Minnesota tax system that is badly in need of real reform that will benefit all Minnesotans – not just those who can hire the slickest lobbyists at the Capitol.
Crony Capitalism, Union Style
One of the biggest battles at the Capitol to watch in the waning days of this legislative session will be a mighty one, indeed. It will test the strength of Education Minnesota and Governor Dayton who are supporting universal preschool in Minnesota. According to Sunday’s Star Tribune, this plan, when fully phased in, “is expected to cost $914 million in 2018 – 2019 and require 2,849 licensed teachers.” Dayton, who gave a rallying speech at Education Minnesota’s convention this past weekend, is often called the “Education Governor” by union officials which is apparently code talk for giving the union everything they ask for no matter what the cost and without any additional accountability.
DFL legislative leaders in the senate and GOP legislators in the house didn’t include the union’s plan in their education bills. It is also notable that, according to the Star Tribune, “[S]ave for Education Minnesota, no other interest group has stepped forward to support the proposal and many longtime early education advocates have come out in opposition.”
Many experts in early childhood education and several legislative leaders are instead supporting early learning scholarships. Advocates for the scholarships maintain that these targeted scholarships are the best and most effective method of preparing youngsters in “achieving school readiness” – an extremely worthy outcome.
Apparently the most important outcome for Governor Dayton is maintaining lockstep support of Education Minnesota by adding to their ranks.