Category Archives: Op-ed

Incentives? Or Cronyism?

Scott Beaulier describes cronyism and why it’s a problem for society. He also lists a few examples of cronyism in the Southeast. For instance:

Our neighbors in Mississippi have famously made use of non-tariff barriers to protect their catfish industry from competition. Back in 2008, lawmakers passed a Catfish Marketing Law that required suppliers to provide country of origin and production method of catfish to consumers. The law was ostensibly aimed at protecting consumers, but it’s real purpose was to protect Mississippi fishermen from competition from the Vietnamese swai, which is a catfish by any other name.

Andrew Huszar: Confessions of a Quantitative Easer

Andrew Huszar, the former “quarterback” of the Federal Reserve’s quantitative easing program, offers up an apology to the American people. Mr. Huszar states what many people have believed for a very long time: quantitative easing is a backdoor corporate welfare program to many of America’s largest banks:

I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street.

Should we Eliminate the Export-Import Bank?

While some say the Export-Import Bank provides a boost for the American economy, David Williams writing for Real Clear Policy, says no.  His article notes that Boeing benefits from an out-sized share of Export-Import Bank financing awards. The article also notes that the bank recently made $1 billion in profits, something that raises the question of why the government charters this bank in the first place.

If the government can make a profit in this business, then private lenders can as well. Leaving it to private lenders to finance the export of U.S. goods and services would shift the risk of these loans away from taxpayers, and would put a stop to the bank’s crony capitalism.

Corporate Welfare is Bad — Just Like Their Record

The Atlanta Falcons are a bad football team this year; they’ve won two of their seven games, so far. However, equally bad is the revised estimate for the cost of the new stadium being built for the team — about $200 million bad. This Columbus Ledger Enquirer op-ed has all of the details:

The team in the Atlanta Falcons’ corporate offices and the one down on the Georgia Dome turf need to coordinate their timing better. Because together they’re giving us some of the worst PR since the Big Three automakers took separate company jets to Washington to plead for hundreds of billions in corporate welfare.

Is Eric Holder Playing Don Corleone To Jamie Dimon’s Bonasera?

Bill Frezza remarks on J. P. Morgan’s potential $11 billion settlement deal with federal authorities.

If such a deal actually goes down, it’ll be the coup de grace to the already moribund rule of law in America. No charges. No trial. No evidence that could be evaluated by a judge or jury, much less the public. No clear indication of exactly which laws were broken and by whom. No list of fines prescribed by statute. Just fork over the cash and we’ll let you get back to business. After spending $18 billion in legal expenses since 2008, you can’t blame J. P. Morgan for seeking a deal.

MITCHELL: An Uber challenge to tacky taxis

D.C. is again threatening the operations of cab company Uber, this time with regulations aimed at its fleet of vehicles. Matthew Mitchell writes:

The rules outlaw the sort of midsize, fuel-efficient vehicles that happen to be used by UberX. This, of course, is no surprise to people who study how market players sometimes use regulators to block competition. Regulators often are captured by the very industries they are intended to regulate. In this case, it appears the commissionc is more interested in serving the extant D.C. taxi operators rather their customers.

For more on Uber’s DC troubles, see here.

The Danger of an All-Powerful Federal Reserve

The Federal Reserve posses arbitrary control over every type of financial institution, and it’s tasked with impossible goals such as stopping bubbles, speculative excesses, and overheated markets. John Cochrane warns that when these powers are exercised it could make the Fed a focus of lobbying, political pressure, and cronyism. From the Wall Street Journal (may be gated):

[When the Fed regulates companies and sectors] Will not all of these people call their lobbyists, congressmen and administration contacts, and demand change? Will not people who profit from Fed interventions do the same? Willy-nilly financial dirigisme will inevitably lead to politicization, cronyism, a sclerotic, uncompetitive financial system and political oversight.

Licensing Laws Strike Again

Benedictine monks in Louisiana are continuing their fight against occupational licensing. These monks have won two lawsuits to protect their right to produce caskets without a state license, and now the state  is appealing to the Supreme Court. From Steve Stanek:

In March, the 5th U.S. Circuit Court of Appeals upheld Judge Duval’s ruling, and in July, the Louisiana State Board of Embalmers and Funeral Directors asked the U.S. Supreme Court to overturn the ruling.

Read more about the monks’ previous success here.

I Am A Professional. I am Licensed. Am I A Crony?

Thinking about saving some money by paying your childhood friend to cut your hair? Well, think again, because it may end up costing you more than you bargained for. In California, for instance, anyone who preps, styles, cuts, or colors hair without a license will face fines up to $1,000. You might as well pay for the $100 hair cut from a salon (tip not included).

And it’s not just California. Every state requires cosmetology licenses, and various other states require licenses for skin care specialists, manicurists, make-up artists, and even shampooers.  For example, in Tennessee, to become a licensed shampooer (yes – a shampooer), individuals must have 70 days of training, pay a $140 fee, and pass two different exams.  In Idaho, make-up artists must complete 140 days of training— that’s more than 5 times the number of training days required to become an EMT.

Though these strict requirements suggest that legitimate safety concerns are driving regulators to protect the public from untrained and potentially dangerous operators, most individuals in every state manage to shampoo their own hair and apply their own makeup on a regular basis with little consequence. It’s not public outcry, but cronyism that’s driving these burdensome regulations through state legislatures.

Unfortunately, it is also cronyism that has inspired the Professional Beauty Association (PBA), a membership organization, to launch their “I Am A Professional. I Am Licensed.” awareness campaign. The campaign specifically works to combat States’ efforts to deregulate occupational licensing within the beauty industry. According to a study by the Institute for Justice, however, cosmetology is already the 4th most heavily regulated industry and has the 17th most arduous licensing requirements, compared to 102 other low-income occupations.

Special interest groups, such as PBA, use occupational licensing to shield professionals from competition. These groups hide behind the guise of public safety to justify their support of industry regulation, but their economic self-interest actually does more harm to the consumer. A study by the Reason Foundation concluded that occupational licensing requirements discourage specialization within the industry, foster artificially high prices, and reduce competition therefore removing the incentive for higher-quality work.

The PBA’s movement to keep cosmetology as one of the most regulated industries protects the beauty professionals from competition at the expense of women like Juana Gutierrez. Gutierrez is a 24-year-old mother who makes her living practicing eyebrow-threading, an ancient hair removal technique originating from India and the Middle East that is cheaper and quicker than services offered by an aesthetician. Although Gutierrez has been eyebrow-threading since she was 16, the Arizona Board of Cosmetology has sent her cease-and-desist orders unless she agrees to pay $10,000 to take 600 hours of unrelated beauty school course work.

It’s not just Gutierrez that is affected by arbitrary occupational licensing requirements; everyone loses when governments and industries work together to deter competition. Cronyism has succeeded in hampering innovation and driving up prices in the field of beauty, but cosmetology is not the only industry that is regulated. Licensing in hundreds of other occupations should be reevaluated as barriers to economic growth during a time when job creation is most needed.  In the meantime, the PBA should change their slogan to “I Am A Professional. I Am Licensed. Am I A Crony?”

Editorial: Economic Development or Corporate Welfare?

In this Watchdog Wire editorial, Karen Schoen questions the wisdom of Florida’s much-maligned Enterprise Florida economic development initiative. Is this corporate welfare? Is this even working? Ms. Schoen answers these questions head-on:

Today, Florida uses the “government vision” of pumping taxpayer dollars into businesses. The instrument of that “vision” is Enterprise Florida.

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