Shrinking government would shrink corporate welfare

By Grant Bosse on April 1, 2013
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Bosse Headshot FOR THE MONITOR

When the New Hampshire Senate voted last week to tighten its control over the franchise agreements car makers sign with local car dealers, it also expanded the law to cover farm equipment dealers. The people who make farm equipment did the only logical thing they could in the face of growing government meddling in their business. They hired a lobbyist.

Last year, the Legislature voted to repeal New Hampshire Certificate of Need Board, which approves hospital construction, expansion, and capital acquisition. Forty years of experience has shown that limiting the supply of health care facilities does nothing to control costs. But the House Finance Committee this week tried to give the CON Board a deathbed reprieve, tucking an unrelated amendment into the state budget.

New Hampshire hospitals don’t like the CON Board. It’s costly and time consuming when they want to expand their facilities or buy new equipment. But it’s a maze they’ve been navigating for decades. They can run through it much faster than potential competitors. It’s a significant barrier to entry to new hospitals and medical facilities without powerful connections in state government. The CON Board stifles innovation while giving a competitive advantage to incumbent hospitals.

The Pentagon is getting $380 million this year for a missile defense program that doesn’t work, that the military doesn’t want, and that the Senate voted 94-5 to defund. Senator Kelly Ayotte dubbed it the Missile to Nowhere, and offered an amendment to strip the project from the Continuing Resolution keeping the federal government’s doors open. Since the amendment would have passed overwhelmingly, Majority Leader Harry Reid wouldn’t bring it up for a vote.

The military and the Senate have decided we don’t need this missile system. But the program survived because Sen. Chuck Schumer listens to Lockheed, and Reid listens to Schumer. Our military procurement system is hopelessly broken, corrupted by pork-barrel politics, and ignorant of military necessity.

There’s a false perception that large corporations hate government regulation, and support free market policies. In fact, the bigger a company gets, the more it counts on government to protect it from smaller, nimbler competition.

Economist Bruce Yandle’s landmark 1983 article Bootleggers and Baptists explains why big companies love regulation. By paying relatively small compliance costs, they can impose relatively large costs on their competition. They rely on their friends in government to alter the regulatory maze to their benefit. Politicians get to promote themselves as pro-business, when in fact they are simply picking one set of businesses over another.

As long as government picks winners and losers in the marketplace, any rational business owner will expand scarce resources to be one of the winners. Tractor franchises will try to get the same special treatment as car dealers. Hospitals will welcome bureaucrats that block new hospitals. And Lockheed will remind a New York Senator that an unnecessary missile system is being built in New York.

The time and money companies spend lobbying government is a deadweight loss to the economy. This is the hidden cost of big government.

I’ve written before on the futility of unconstitutional campaign finance laws. We can’t regulate away attempts to influence government while government is giving itself more and more power over our lives.

If we really want to lessen corporate influence on government, we need to lessen government influence on commerce. If the return on investment from lobbying and campaign contributions is less than the return from reinvestment in their businesses, rational corporations will shift where it spends its resources

Every time we make government bigger, we create perverse incentives for the companies with the most at stake to game the system. Do you know any small businesses with Government Affairs divisions?

I never blame people for responding to incentives. Companies that don’t use government as a shield risk their competitors using it a sword. I blame the politicians who decided to pick sides in the fight, often in the name of fairness. If you’re sick and tired of corporate welfare and sweetheart deals, shrink the budgets and bureaucracy in which they thrive.

In the 1983 movie War Games, the NORAD supercomputer controlling all the nuclear missiles finally realizes that the only way to win a game of Global Thermonuclear War is not to play. We need big government and big business to learn that same lesson.

Grant Bosse is Editor of New Hampshire Watchdog, an independent news site dedicated to New Hampshire public policy.

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