Wednesday, July 28, 2010

Free to Fail

In the August 2nd edition of National Review Ramesh Ponnuru reminds Republicans that supporting free markets does not mean blindly supporting big business (sub req):

"The problem we have had as a party is we have often confused being pro-market with being pro-business," says Rep. Paul Ryan (R., Wis.). When businesses ask for earmarks, too many of his colleagues think that saying yes is the right thing to do. Ryan believes that Republicans should run against "crony capitalism," in which government selects some firms for favors.

Most Republicans already favor a policy of "no more bailouts." It is a popular position. Arthur Brooks, the author of The Battle, a new book about the cultural dimension of our economic debates, explains, "Most bailouts are seen as indefensible morally because they attenuate accountability." But to make the Republicans' slogan credible requires two additional steps. First, they have to push for policies that prevent financial firms from reaching the point at which bailouts are necessary to prevent economy-wide instability. Tighter limits on leverage should probably be on that list. Second, they ought to have plans to reprivatize the economy: to unwind the government's ownership stake in the automakers, for example.

Corporate welfare is also an inviting target. The Overseas Private Investment Corporation, the Export-Import Bank, the Market Access Program: These federal programs are taxpayer subsidies to corporations. If an investment makes economic sense, a company should make it on its own. If it doesn't, no one should. Tax breaks for corporations should be reformed, too, with some extended to all companies and some abolished.

With corporations facing almost daily assaults from Democrats and the Obama Administration (when they're not busy accepting campaign contributions from the same companies they vilify), it's almost an instinctive reaction for Republican pols to step in and seek to defend corporate interests. And sometimes these interests do deserve defending. But the GOP needs to be careful not to fall into the trap of standing up for big business solely because of the Democrats' public demagoguery against it. Many of the same businesses that are now feeling the scorpion's sting were all too happy to sign on for the trip across the river once the Democrats were in power.