“It’s no coincidence that the realm of crony capitalism is populated by billionaire financiers and large corporations. As the economist Will Wilkinson puts it, “The more power the government has to pick winners and losers, the more power rich people will have relative to poor people.” And crony capitalism is the ultimate system of wealth redistribution: poor and middle-class taxpayers subsidize the superrich. Call it trickle up economics.

It is the nature of crony capitalism to expand. Politicians want more campaign money and personal wealth, so they leverage their position and hand out favors. Corporations and financiers need those favors to get ahead, so they flock to Washington. If you can get early access to market-moving information, if you can secure government grants or subsidies or loans, if you can create regulation roadblocks for your competitors, why not? It is probably more cost-effective than developing a new product or service.

Crony capitalism also breeds inefficiency and confusion, blurring lines between the public and private sectors. The more complex the laws, the better it is for the Permanent Political Class and crony capitalists. A bloated bill of two thousand pages makes it easier to insert and hide things. For example, the massive health care reform bill included a provision, section 2711, that made it possible for certain entities to obtain waivers from the law. Did anyone outside the crony system understand the implications of that provision? The secretary of the Department of Health and Human Services has granted more than a thousand waivers under section 2711. Many of these have gone to President Obama’s political allies: labor unions and connected companies.

Had the health care bill been twelve pages long, it would have been a lot more difficult to hide the subject of waivers. Furthermore, a massive bill means more people hire lobbyists and experts to help them navigate it when it becomes a complex new law. A couple of years ago, National Journal analyzed the number of family members of sitting senators who were working as lobbyists. Fully thirty-three senators had family members who were registered as lobbyists or who worked for lobbying firms. That’s one-third of the United States Senate.”

Excerpt From: Schweizer, Peter. “Throw Them All Out.” Houghton Mifflin Harcourt (www.hmhco.com). iBooks.

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Crony capitalism is to capitalism as National Socialism is to socialism.