Greta Weiderman at the St. Louis Business Journal writes about recent audit completed by the Missouri State Auditor into a state-sponsored insurance company that has been engaged in questionable activity:
Despite its tax-exempt status, MEM essentially operates as a private entity, the audit states. MEM compensates its officers and employees at rates that are in excess of public-sector entities, incurs expenses that are not considered acceptable in the public-sector, and does not comply with state open records laws.
Andrew Ross Sorkin at the NYT Dealbook writes about AIG’s recent profits, and how the government has manipulated the tax code to benefit the company:
But if you dug into the numbers, it quickly became clear that $17.7 billion of that profit was pure fantasy — a tax benefit, er, gift, from the United States government. The company made only $1.6 billion during the quarter from actual operations. Yet A.I.G. not only received a tax benefit, it is unlikely to pay a cent of taxes this year, nor by some estimates, for at least a decade.
Matthew Boyle at The Daily Caller writes about a case of potential cronyism occurring through the FCC’s regulations by harming the competitor of a politically connected company:
… [The FCC] demolished wireless broadband company LightSquared’s competition through a pattern of regulatory decisions apparently aimed at establishing an “open-access” Internet in the United States….
The FCC officially denied GlobalStar’s waiver extension request on Sept. 14, 2010, a move that crippled the company and cleared the way for the politically-connected LightSquared to build its own network without competition from its biggest rival.
Elliot Blair Smith, Danielle Ivory and Gopal Ratnam write an article in Bloomberg about a special program run by the Small Business Administration which gives contracts to certain groups:
…12 repeat participants…have received $412 million in preferential contracts, and more than $1 billion in total government awards, based on data compiled by Bloomberg. Because of opportunistic entrepreneurs and lax government overseers, even the wealthy profit from a taxpayer-supported program designed to bolster underprivileged segments of society.
Leann Eckroth at the Bismarck Tribune writes about how the city commission of Bismark is going to give incentives and subsidies to a specific airline in order to bring them in:
The Bismarck City Commission agreed Tuesday to provide $200,000 to bring new flights to Bismarck through a minimum revenue guarantee program. It’s hoped it will also lower the steep air rates here through more competition.
The program gives a participating new carrier assurance for 12 months if boardings fall behind a break-even point. The airline will be subsidized by the city to cover its costs.
Bismarck Airport Manager Greg Haug implied that Frontier would find the city’s decision favorable and that an announcement will be made from the carrier in the near future because of the incentive program.
“They’ll be very interested in the outcome,” Haug said. “We’ll report back to them shortly and send the agreement to them and they’ll make the announcement.”
Jennifer Gustavson at the Suffolk Times writes about how the USDA has given a grant to North Fork Potato Chips, a farm in New York.
The Consumer Product Safety Commission (CPSC) is proposing to require more stringent regulations on table saws, which many say could increase the cost of affordable versions of these tools by 100-300%. Presumably, consumers already know that table saws are sharp. Still, thousands of table saw injuries are reported every year, typically because of the removal of safety equipment.
There’s more to this story than meets the eye: this CPSC regulation was initiated by a petition from three entrepreneurs who patented the SawStop system, a technology that decreases the risk of injury from table saws. While this technology is already on the market, consumers tend to pick affordable tools over the more expensive SawStop versions, despite the safety features. By regulating standards for table saws, the SawStop innovators will have an automatic leg-up on their competitors (and the consumers who buy from them). Continue reading
Warren Meyer at the Coyote blog discusses how protectionism is just another form of cronyism, and uses sugar as an example.
Cronyism is certainly nothing new. In these flashbacks, were going to highlight examples of cronyism from the past.
In March 2002, President Bush imposed new tariffs on steel:
President Bush on Tuesday slapped punishing tariffs of 8% to 30% on several types of imported steel in an effort to help the ailing U.S. industry, drawing criticism from American allies and mixed reviews at home…
The action, while short of the 40% tariffs sought by U.S. steel companies, was generally applauded by industry.
Cronyism generally is applauded by industry, at least when it benefits them.
Paul Chesser at the National Legal and Policy Center writes about a case of cronyism (or near cronyism) involving a wealth foreigner, steel, and automakers.