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Can Government Cronyism Be Fought?

Would you like a raise?

For some workers, cronyism prevents receiving raises in pay. In early 2011, a Giant Eagle supermarket in Edinboro, Pennsylvania, wanted to give wage increases and higher starting wages to 25 employees. But a union wouldn’t let it do so.

Why would a union object to workers receiving higher wages? Because in this case, the increases went to “less senior” employees. The union went to arbitration and won a judgment that Giant Eagle can’t give raises “without first obtaining concurrence from the Union”—and an order to rescind those increases already given.

Today, some employees in Edinboro are earning less than their employer wants to pay them. All because of cronyism in the American economy.

This week Heritage is highlighting our opportunity agenda for conservatives. Our new report, America’s Opportunity for All, makes the case that all workers should be equal. Today we examine how to move from crony bureaucracy to free enterprise.

Yet today’s governing elites try to use government to micromanage the economy and redistribute wealth to even out inequalities. Such policies, however, end up hindering economic growth. Even worse, the expanding size and scope of government, along with its growing class of experts who are supposed to plan and oversee the regulation of the economy, leads inevitably to administrative favoritism, inequalities based on special interests and undue political influence, and the crony corruption of picking winners and losers.

Economic growth does not come from some master economic plan managed by the government. It is the result of the decisions and actions of millions of people working, creating, spending, exchanging, and pursuing millions of different avenues of individual opportunity. The best policies are those that encourage the work, savings, and investment that expand the economy and lead to more jobs and higher earnings.

To get us back on the right path, America’s Opportunity lays out detailed plans to:

  • Rein in uncontrolled bureaucracy. Sensible steps include requiring congressional approval of major new regulations before they take effect, imposing sunset dates in all newly passed regulatory legislation, and reviewing existing regulations to eliminate outdated or unnecessary ones.
  • Empower America with affordable energy. To start, policymakers should end all energy tariffs, subsidies, mandates, loan guarantees, and tax credits; should prevent the federal government from using the Clean Air Act and other statutes to regulate carbon dioxide and other greenhouse gas emissions; and should stop the war on coal.
  • Free America’s workers from outdated labor laws. Federal policy should promote programs that encourage Unemployment Insurance recipients to return to work and allow workers to determine whether or not they want to be represented by a union.
  • Overhaul financial regulation and remove barriers to investment. The federal government must create a bankruptcy-based process that allows even the largest financial institutions to fail without dragging down the financial system or passing the bill off to taxpayers. It should also phase out Fannie Mae and Freddie Mac and replace them with a genuine private-sector mortgage finance system.
  • Protect the environment through responsible stewardship. Congress should oversee regulators by requiring legislative approval before major regulations take effect at both the state and federal levels. It should also ensure that the costs of environmental regulations do not outweigh benefits.
  • Reform taxes to spur economic growth and create jobs. No more tax increases. Instead, lawmakers should improve the business climate by lowering the corporate income tax rate and by no longer taxing small businesses as individuals.
  • Cut spending, fix the debt, and reform entitlements. Spending on Medicare and Social Security are on autopilot. One way to get them under control would be to put them in the budget, forcing lawmakers to vote on them each year. Congress should also cut spending, impose spending caps, and return to passing a budget each year.

This is America’s Opportunity: a time to remove arbitrary obstacles to economic markets, break down artificial structures that prevent competition, keep tax rates low, and reduce excessive government spending. This will bring economic growth and prosperity to all Americans.

Matthew Spalding, Ph.D., is Heritage’s vice president for American Studies and director of the B. Kenneth Simon Center for Principles and Politics.

How does cronyism affect your life? Tell us in the comments.

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