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Thursday, June 09, 2011

Democrats and the power to grant exceptions

Earlier this week we learned that there is actually no authority in the Obamacare bill for HHS to grant waivers from law’s annual minimum health care coverage requirements. But the Obama administration doesn't need no stinkin' authorization. They're above such mundane concerns. So far they've granted 1,372 waivers. And they have stalled on telling Congress what are the criteria that they've used to decide who gets a waiver.
Heritage Foundation health policy expert Edmund Haislmaier said HHS “exceeded its statutory authority” by issuing such waivers.

“The first problem is that it appears HHS has exceeded its statutory authority in creating this waiver process,” Haislmaier said in testimony before the House Oversight Committee’s subcommittee on Health Care. “The statute does not explicitly grant HHS authority to waive the application of this provision. In contrast, I count twenty-one other sections of PPACA [Patient Protection and Affordable Care Act] in which Congress did grant HHS explicit, new waiver authority with respect to specific provisions. Thus, it is reasonable to presume that if Congress had intended the department to institute a waiver process as part of its implementation of this particular provision, Congress would have said so in the statute.”

The Obama administration, which touts itself as the most transparent in American history, hasn’t answered many questions about who’s been getting waivers and why, who’s been denied and why or who’s still in line.
Transparency is for show, not tell.

But the Obama administration is not the only Democratic group who impose some terrible policy on their constituents and then uses their power to grant selected entities exemptions from those restrictions. Illinois governor Pat Quinn singed a law raising the personal income tax rate 67% and the corporate tax rate to 9.5%. There were predictions at the time that the higher tax rate would drive companies to leave Illinois. So we've witnessed a steady stream of Illinois companies of threatening to leave the state and then being granted corporate subsidies by the governor to keep them in Illinois.
The ink was barely dry on the new taxes before major employers announced their unhappiness. The equipment giant Caterpillar, the spinal cord of the Peoria economy, says the higher business and personal income taxes will cost the company and its 23,000 Illinois employees $40 million a year. "I want to stay here, but as the leader of this business I have to do what's right for Caterpillar when making decisions about where to invest," CEO Doug Oberhelman said in the wake of the tax increase, adding that Illinois "is not favorable to business."

Caterpillar has long built new facilities outside Illinois to avoid the United Auto Workers, most recently in Texas. And after the Quinn tax hike, at least six states—from Virginia to zero income tax South Dakota—offered lower costs if the firm relocated. Caterpillar is staying put for now.

When the cellphone business Motorola Mobility hinted this spring that it might leave for San Diego, Mr. Quinn bounced into action. "I know how to work with the big businesses," he declared to the media, as he rushed—taxpayer checkbook in hand—to keep the company in the state. Motorola pocketed $100 million in tax incentives last month to stay in Libertyville.

Mr. Quinn's latest quest is to keep Sears in the state. In May, the retailer—based in Hoffman Estates with some 6,000 workers—hinted that it may look for a new home because of expiring tax breaks. The suitors include Georgia, North Carolina, Tennessee, Texas and even New Jersey. "We will sit down with the Sears people," Mr. Quinn promised. "I'm sure we'll work something out."

No doubt he will, since in two years in office Mr. Quinn has doled out corporate welfare to at least 80 firms, costing the state nearly $500 million, according to a tally by the Chicago Tribune.
Note the policy shift. They passed a higher corporate tax rate because Illinois is in desperate financial straits. however, it is the large companies that have the political pull to yank the governor's chain. The last thing he needs is for there to be a regular drip-drip of stories about large employers leaving the state. So he shells out the corporate welfare.

The ones who don't get the political favors are the small companies who don't have similar appeal.
Illinois voters who were sold the historic tax hike on grounds that profitable corporations should pay "their fair share" might wonder how tilting the playing field in favor of those with the highest-priced lobbyists is fair. "Why should we pay the taxes that Motorola and other corporations don't?" asks Jack Roeser, the owner of Otto Engineering, an employer of 600 workers in Carpentersville. Good question.

But for Mr. Quinn and the political class, this is precisely the point. Politicians love high tax rates because they can act as brokers to offer tax breaks to the lucky few. Mr. Quinn poses as a populist for unions and the Democratic left in supporting high tax rates, while he then takes credit a second time for doling out tax favors that he claims will keep jobs in the state.

The victims are the thousands of businesses that don't get the favors, and an overall state economy that is less attractive for employers. That's one reason Illinois has ranked 47th of the 50 states in job creation in the last decade, and has lost more private jobs (360,000) than the entire private work force of Delaware, according to the Illinois Policy Institute.

Illinois is proving what bookshelves full of studies have found: Handing out special favors one business at a time is politically corrupting and an ineffective economic development strategy. A sounder way to create jobs is to provide a welcome tax and regulatory climate for all businesses. Some states, such as Arizona, constitutionally prohibit politicians from granting special favors to a business or citizen.

That's a sharp contrast to Illinois, where all businesses are treated badly but, if the Governor deems you worthy, you get treated a little less badly than the others.
And that was the whole point. What's the point of having power if you can't use it to dispense favors and reap a nice feedback loop when you need support running for reelection?


LarryD said...

"Handing out special favors one business at a time is politically corrupting and an ineffective economic development strategy. A sounder way to create jobs is to provide a welcome tax and regulatory climate for all businesses. "

Now, if we can just get that spread around to the voters, maybe they'll stop electing politicians who think handing out favors is a good idea.

Pat Patterson said...

Unlike the mixed success of MITI in Japan the present administration has adopted that most simplest of industrial policies. Lavish money on the businesses that want to leave and take it away from those that want to stay.