Friday, May 30, 2014

Why Republicans Are Useless In The Battle Against Crony Capitalism—Witness The Michigan GOP Sell-Out To The Restaurant Lobby

By David Stockman

Michigan’s purportedly conservative governor just signed a 25% increase in the minimum wage—a move guaranteed to destroy jobs within the state and which is as clean a repudiation of free market economics as any Republican state legislature could possibly enact. Why? Can you say restaurant lobby?

The Michigan Restaurant Association, which staunchly opposed the petition drive and other efforts to raise the tipped wage, praised the Legislature for reaching a compromise. “The MRA has made it clear from the beginning that the total elimination of the tipped minimum wage as proposed in the ballot initiative was gross negligence and would result in the closure of countless full-service restaurants – especially independent ‘mom & pop’ places least capable of absorbing a nearly quadrupling of their labor costs,” spokesman Justin Winslow said in a statement. “The compromise legislation sustains a 38 percent ratio that will require adjustments by the full-service sector of the industry, but should prevent mass closure of restaurants.”
That’s it in a nutshell.  The minimum wage is one of the most pernicious forms of statist intervention there is because it attacks society’s most vulnerable citizens. That is, it outlaws jobs that have low economic value, thereby condemning the young, poor and marginally skilled to unemployment, dependency and deprivation.

Yet when push came to shove, the Michigan restaurant lobby cast its lot with the special privilege it obtains under current law—the so-called tip credit—-in order to avoid a voter referendum that would have put restaurants on par with everyone else. Yes, the proposed referendum’s plan for Obama’s “$10.10″ minimum wage would have been onerous for the state’s restaurateurs—especially the moms and pops. But why didn’t the industry stand-up and fight on principle?

The answer is simple. They didn’t have to because the GOP offered to bail-out their chestnuts via the so-called bipartisan compromise. Admittedly, that capitulation is not going to garner Gov. Snyder a corporal’s guard worth of extra votes next November. There’s about 80 years of history that prove minimum wage workers mostly don’t vote, and almost never for the GOP.

No matter. The Michigan Republicans’ craven maneuver wasn’t about a few thousand votes; it was about tens of millions of campaign funds and the vast campaign resources of the restaurant industry. More specifically, the Michigan GOP threw free market principles to the wind because it did want the restaurant lobby’s massive campaign resources diverted out of the GOP coffers and into a life-and-death fight against the Obama minimum wage referendum.
To be sure, the sacrifice of principle for political expediency is an endemic fact of life in a democracy. But doing so should at least require that heavy duty electoral considerations are involved—-not merely the slight inconvenience that the Michigan GOP would have had to work a little harder to fill its war chest.

But after decades of betraying free market principles through endless compromise, expediency, rationalizations and short-term ploys, the Republican party is no longer capable of making wise and productive tradeoffs.

In the state of Michigan in particular, the abandonment of free market principles by the GOP has been especially endemic and long-standing. It goes all the way back to the first bailout of Chrysler in 1979 when Michigan had a large GOP delegation, and all voted for it except your writer.

Back then, I also voted against every one of Jimmy Carter’s proposals to raise the Federal minimum wage and suffered no electoral setback from either stance.  In fact, 40 years ago the Republican rank and file in Michigan—the restaurant industry included—-would have been appalled at this weeks spineless action by the GOP.

In the decades since, the Michigan GOP delegation has gone on to vote for nearly every Federal energy boondoggle which came down the pike including he lunatic “cash-for-trash” tax credit for junk cars; most of the Freddie/Fannie/FHA housing subsidies and market manipulations; the abominable Wall Street bailouts of 2008; and then the utterly uncalled for rescue of GM, the UAW and Chrysler for the second time.

In short, the GOP has become as statist as the Democrats. It is no wonder that the free market is fast fading in America, and is being replaced by a crony capitalist regime in which both parties play the game permission.

David Stockman was the Director of the Office of Management and Budget during part of the Reagan Administration, from 1981 to 1985. He is the author of The Great Deformation: The Corruption of Capitaism in America and The Triumph of Politics: Why the Reagan Revolution Failed.

 The above originally appeared at David Stockman's Contra Corner and is reprinted with permission.


  1. As usual Stockman get's it right. The conservative movement is a joke and will always will be. I've heard the phrase "controlled opposition" a few times and that would describe the Republican Party and the conservative movement. For all the bluster we hear from them that they're going to "take the country back" we know that they'll go right back to sleep once their thug is in the White House in 2016

  2. become statist? They've been completely statist since dishonest abe was running for office. Just how they are statist has become indistinguishable from the other party. They both mutated such that there's no telling Obama and Bush jr administrations apart.They are just one big long continuum.

  3. Here in Georgia, our "free market" small government republican Gov and Congress have made the tax-payers pay for a 3 million real-estate site, 200 miles of road improvement, and 6 week salaries of hundreds of people to train so that Catepillar can be more competitive.
    Average pay of the workers?..........12 dollars an hour.