Earlier this week, the Washington Post reported on the disproportionate amount of federal money that seems to be going to the political battleground state of Ohio. They noted that clean energy tax credits going to Ohio were four times the average of other states. They pointed out that a Cleveland dairy received the largest loan in the history of the Small Business Administration.
The article also goes on to mention that George W. Bush and Ronald Reagan spent lots of time visiting battleground states for official events. However, Obama's showering of the state with stimulus money seems to be an evolution over previous Presidents' efforts.
The federal government isn't just cutting people in Ohio checks. Much of the spending goes to businesses. I'm sure that many of them are great companies. Some of them will use the loans and tax credits to create jobs. Some of them will be successful and the President will gladly show up to brag about how much has been spent.
He won't show up at the businesses that failed. Like the ones that received millions from taxpayers only to declare bankruptcy like battery manufacturer A123 Systems or solar panel maker Solyndra.
I don't believe that we can build a healthy economy on the foundation of crony capitalism. President Obama seems to want to change the government from the lender of last resort, to the largest venture capitalist in the nation.
The first problem is that when the government fails, elected officials and bureaucrats don't face the same consequences as private investors. A venture capital firm with a track record of investing in losing businesses will quickly lose the confidence of investors. Investors will move their money into other firms that have the ability to turn a profit.
Meanwhile, when government agencies fail they are backed with taxpayer dollars and borrowed money. The government sponsored borrowers Fannie Mae and Freddie Mac have cost the American people more than $188 billion and four years after their failure there is still no plan from the President for reform
A second major problem with crony capitalism is that political considerations become more important than financial. The Department of Energy was blind to financial risks of funding "green" energy companies because transforming the energy economy is one of the President's top priorities.
Ohioans and others living in political battlegrounds may be happy to have the attention of the President right now, but what will happen when the polls aren't so tight? Those federal dollars will move on.
The temptation for politicians to use the federal budget to smooth their own reelection is immense. In Congress, the process of earmarking money for specific districts quickly spiraled out of control. Money was appropriated to help politically vulnerable members and as favors to lobbyists.
In 2007, I was one of only 11 lawmakers who chose to give up earmarks. It was unilateral disarmament. I met some people who were upset that I was no longer pressing for projects in the 16th District, but I don't believe we can get a handle on our budget problems if Members of Congress are more concerned with parochial spending than the nation's fiscal health.
The Census Bureau reports that seven out of ten richest counties surround Washington, DC. In recent years, many companies have moved to the area to be closer to the federal government. While Ohio, Florida, or other swing states might occasionally benefit from expanded federal government spending, the big winners will always be those closest to the government.
Proximity to Capitol Hill or battleground state status shouldn't be the determiners of success. I don't want to see an America where political connections matter more than ingenuity or work ethic. The richest counties in our country should be those that host the most dynamic and successful businesses.
The federal government will never be a wise investor. Government bureaucrats will never truly be held responsible for bad investments. Politicians will always try to use taxpayer dollars to grease their reelection.
To have a healthy economy, we need to have a healthy separation between the private and public sectors. Embracing crony capitalism can only lead to spiraling public debt and political corruption.