It’s Time to Break the Washington Cartel
Today, what I want to address is the people versus the Washington Cartel. Restoring liberty in an age of cronyism. I want to start by thanking my friend Jim DeMint, who's a big part of the reason that all of us are talking about Washington's cronyism. Jim, when he was in the Senate, saw his colleagues eagerly packing pork into just about every bill. And he stood up and led a valiant fight against earmarks. When Jim started that fight, it was viewed as Don Quixote: tilting at windmills. And yet, today, thanks to his leadership, a Republican conference has officially sworn off earmarks.
But yet, that hasn't solved the problem of cronyism in Washington. Indeed, just yesterday, the Senate voted for cloture for the Trade Promotion Authority Act. To leadership's dismay, yesterday, I voted against it. Now I have always been for free trade, I campaigned on free trade. Free trade, I believe, creates more opportunities for Americans; when we open up foreign markets, it helps farmers, and ranchers, and manufacturers. And so I intended to support TPA. Indeed, when it first came up for a vote a couple of months ago, I did support TPA. But unfortunately when the package came back to the Senate floor, it had gone far beyond simply being about trade.
Once again, Congress has become enmeshed in backroom deals, and they were using TPA as an opportunity to promote, among other things, reauthorizing the Ex-Im bank and potentially even enabling President Obama's illegal expansion of immigration.
And this seems to be an all-too-common trend in Washington. That whatever is happening, corrupt backroom deals dominate the end product.
When American families, when small businesses, and when the most vulnerable among us are hurting, Washington has a tendency to jump to action - but not to help those who need it the most. Washington is looking for solutions - for Washington. Not solutions that empower citizens across the nation to succeed.
Instead, Washington's solutions invariably help the rich and well connected.
When the 2008 housing crisis hit millions of Americans leaving families with real estate at a fraction of the value, sunken savings accounts, and mortgages they couldn't pay back, what did Congress do? Bail out big business. It handed out hundreds of billions of dollars to banks and institutions that were deemed "too big to fail." Sadly the American workers is never deemed too big to fail.
This enabled the banks to concentrate even more power and, in fact, to buy out "weaker banks." For example, PNC received $7.5 billion while National City didn't receive anything, which then gave PNC the advantage, and then they turned around and bought out National City.
Since 2008, the big banks have only gotten bigger: As the Fed noted at the end of 2011, five banks held more than 8.5 trillion in assets... equal to 56 percent of the U.S. economy and that's up from 43 percent five years earlier. Remember, Dodd-Frank was sold to the American people as stopping "too big to fail". What do we see today? The big banks are even bigger.
As car-owners struggled with high gas prices in 2009, the federal government responded by handing over $80 billion to GM and Chrysler and its suppliers.
In 2010, as many hard-working Americans crawled out from under the financial crisis to revive their communities and regain their financial footing, Congress passed the Dodd-Frank Act, with 19,000 pages of regulations. No bill that large, no regulation that voluminous, could possibly be good for any small institutions. And since then, hundreds of community and regional banks have closed.
Now it's important to understand, that was not an unintended consequence. That wasn't, "oops, we didn't know that was going to happen." The lobbyists for big banks were sitting at the table when Dodd-Frank was written. It was designed by Washington to favor the big guys over the little guys. And I would note, the proponents of that regulations, inevitably, they claim they're helping the little guy. Now, either they're not telling the truth, or they're really, really bad at what they do. Because every single time they jump in with massive regulations, it helps the giant corporations, and the people that get hammered are the little guys.
In 2013, When Obamacare went into effect it imposed huge burdens on small business owners and young people, union bosses and members of Congress received special favors and exemptions. The very people who wrote the law-Harry Reid and the Senate Democrats--they wanted out of it- and this administration was only too happy to oblige. Today, the taxpayers subsidize their platinum plans while millions of Americans across this country have lost their jobs, have been forced into part-time work, have lost their health insurance, have lost their doctors, are facing skyrocketing premiums. Members of Congress retain their illegal exemptions from Obamacare.
Washington's favors have gone on for far too long.
If you take a look at a map of the U.S., our office took every county in the country and color coded it, for whether median income had gone up or gone down. It's quite striking, that map looks almost exactly like a geological map of shale formations across this country. Indeed on the Senate floor, I put that map up with a clear plastic overlay of the shale formations. You can see up in the Bakken, North Dakota, the counties, all of those counties median income is static. You can see the Barnett shale, and the Permian and the Eagle Ford, median income has skyrocketed, you can see the Marcellus shale, median income has skyrocketed.
Although it's interesting; Marcellus shale doesn't end at the Pennsylvania border, the jobs do. Because the politicians in New York have decided, apparently, New Yorkers don't want jobs, they don't want to provide for their family; or their idiot politicians are going to stand in the way and prohibit them. So even though they have resources in New York, the very same resources that are in Pennsylvania, the line between the states is like the finger of God drew in on the ground. South of that line, there are jobs, median income has gone up. North of that line, not a single one of those counties' median income has gone up.
You look at the Monterey shale in California-abundant resources. None of those counties have gone up because the California politicians, just like the New York politicians, think California men and women don't want to provide for their families. But do you know the one notable exception to that rule? The counties in and around Washington, D.C. are bright, bright green. Six of the 10 most affluent counties in the country are located in the D.C. metropolis. Those who live off the federal government are getting fat and happy, and almost every other county in America, median income has stagnated.
Washington has done a great job of one thing: picking winners and losers. Except, it's all too clear who the losers are each time; it's American families, who are struggling to pay skyrocketing health care premiums and tuition costs; it's our community banks and marketplaces that are going out of business; it's young entrepreneurs and small business owners.
The majority of Americans don't have the time, don't have the resources to lobby Washington politicians. They are too busy going about their daily lives, working hard to provide for their families and take care of their kids.
For example, when Tesla successfully lobbied Washington for a $1.3 billion taxpayer subsidy, average Americans were hard at work, and certainly weren't spending their time thinking about the need to subsidize rich yuppies to spend $100,000 to buy an electric car. Look, If rich people want to buy an electric car, knock yourself out. But why should we be hammering hard working taxpayers to add another car to the 4-car garage? That doesn't make any sense.
While big government looks out for the powerful and well-connected, average Americans, over and over again, get the short end of the stick. With a ruling expected any day now in King v. Burwell, the Obama Administration has already, at the behest of the insurance companies, crafted a contingency plan that allows insurers to cancel plans in the event that their subsidies go away. But the fat cat insurers are taken care of by big government. ‘You guys are fine, here's the contingency plan.' But the average American taxpayer? They don't have a contingency plan. The Obama Administration has no credible claim whatsoever for the millions of Americans who will be left to pay the full price of Obamacare's big-government mandates.
The rich and well-connected keep getting more and more favors at the behest of hard-working Americans. And we have got to stop this. Here is a very simple rule of thumb, and it is contrary to everything our friends in the media tell us. Big government benefits big business. Small government benefits small business and hard working men and women. You will never hear that on the nighttime news because the purveyors of big government always promise they're helping the little guy, and yet they keep getting the fat cats richer and richer and richer.
Lobbyists and career politicians today make up what I call the Washington Cartel. And it operates very much like other cartels. It operates like OPEC. I don't know, like sheikhs, if they actually wear robes. But they nonetheless, on a daily basis are conspiring against the American people. Let me explain to you how it works:
A bill is set to come before Congress, and career politicians' ears and wallets are open to the highest bidder. Corrupt backroom deals result in one interest group getting preferences over the other--although you give the other a chance to outbid them--or even worse, a very, very small interest group getting special carve-outs at the expense of taxpayers.
And those who don't oblige, well, they are shunned by the Cartel - effectively locked out.
Just this week, we saw a shameful example of this as House leadership threw Representative Mark Meadows out of his chairmanship because of his principled objections to TPA. Just this morning, news broke that leadership is seeking to strip Ken Buck, another conservative in the House, of his leadership position. Why is it that Republican leadership always, always, always cuts deals with the Democrats, and with Washington, and throws overboard the conservatives that, come October and November in an election year, they are desperately asking to turn out at an election?
The Washington Cartel has amassed more and more power at the expense of the American taxpayer with the same recipe repeated over and over again.
So today, I want to look at four examples of the Washington Cartel at work. I want to talk about who their schemes are hurting. And how we can restore freedom, bring back jobs and growth and opportunity, and how we can defeat the Washington Cartel.
It is hard to imagine an institution that is more emblematic of cronyism than the Export-Import Bank.
The Export-Import Bank is essentially welfare for big corporations, both foreign and domestic.
President Franklin Delano Roosevelt, who as you all know is the source of much of progressivism, instituted the Bank.
What does the bank actually do? It provides loans and loan guarantees to hand-picked corporations. It's one of the favored methods of cronyism: Washington handing out taxpayer money to selected giant corporations.
Now, on principle, there's nothing wrong with loans being given except it's not private investment. It's not people actually risking their own capital and assessing the risk and reward. Rather, it's funded on the taxpayer's dime. Prior loan guarantees from the Export-Import Bank have benefited such paragons of corporate virtue as Enron and Solyndra. As it stands now, taxpayers are currently on the hook for over $100 billion in loan guarantees. If the projects succeed, the giant corporations make a profit. If they fail, the taxpayers foot the bill. Now those are pretty good odds. In Vegas, that's called playing with the house.
As it stands, today the Ex-Im Bank funds roughly 2 percent of American exports.
And yet, of that 2 percent, from 2007 to 2013, the majority of the benefits have gone to 10 select companies. It's good to be the king and it's good to be a major donor to the king and to be gathering billions of taxpayer dollars because of it. Along with subsidies that support foreign companies it's not just domestic companies. Foreign companies do very well with the Ex-Im bank, at our expense.
For example: Air India, a state-owned company, that's right now putting at risk approximately 7,500 American jobs with the help of Ex-Im. Or Australian Roy Hill mine, to the detriment of our manufacturers and ultimately resulting in an estimated loss of $1 billion of iron ore sales here in America. That's the taxpayers funding the government, funding foreign corporations, to hurt American workers.
Ex-Im kills American jobs, and often favors foreign investment over American investment.
It also has this terrible record of subsidizing unfriendly regimes with problematic human rights records.
In 2013, just one year, the Ex-Im bank streamed $35 million to Venezuela banks and investors, $335 million to Argentina, $1 billion to Russian financiers, and $2.7 billion to communist China. Mind you, this is at the same time Russia is invading Ukraine. We're saying, "this is unacceptable, by the way, here's a billion dollars." That sort of makes the foreign policy protestations of the administration a little bit hollow.
Several companies that have received taxpayer-backed Ex-Im financing even admitted to previously doing business in Iran through their subsidiaries, undercutting efforts to sanction the Iranian regime. Moreover, the Justice Department recently indicted former Ex-Im loan officer Johnny Gutierez, with bribery chargers. More charges could be coming. And this very institution, Heritage Foundation, uncovered some 74 cases of fraud and corruption at the Ex-Im since 2009.
The Washington Cartel's favoritism and cronyism inevitably breeds corruption. When you have government officials giving out billions of dollars of taxpayer money, suddenly the people who want that taxpayer money have every incentive in the world to further that corruption both latent and blatant.
And yet, the process of passing TPA, it appears that Senate and House leadership have made a deal to schedule a vote to reauthorize the Export-Import bank, that that was part of the price of TPA. That was a major reason why I voted, "No." Now, in response to my criticism, leadership in both chambers have said, there is no deal. Excellent. If there is no deal, we should let Ex-Im expire and let it stay expired. For once, all Congress has to do is do nothing and if Congress is good at anything, it's doing nothing. If leadership, as it says this week, "there is no deal on Ex-Im," then simply do nothing, let it expire, and end the gravy train for Washington lobbyists on the Export-Import Bank.
A second example, renewable energy mandates are arbitrary government regulations that distort the free markets and artificially raise the cost for American families and job opportunities.
In 2005, Congress passed the Energy Policy Act, and one of the provisions in it was the Renewable Fuel Standard, which requires that renewable fuels be mixed into our gasoline supply.
Now, I support renewable fuels, I support biofuels, but I don't support policies from Washington that pick winners and losers in the market.
One of the mandates included was the ethanol mandate. Over the years, it has been proven there is a demand for ethanol in the market, but ethanol should stand on its own, not atop the footstool of the government.
The ethanol mandate requires 16 billion gallons of biofuels, requiring a plot of farmland roughly equal to the size of the state of Kentucky, as a result, that has diverted corn from livestock and the food supply, and has contributed to increased food prices.
Several months ago, there was an agriculture summit in the state of Iowa. Most of the Republican candidates for president attended that summit. Every single candidate but one pledged his support for continuing the Iowa ethanol mandate. It's very easy for conservative politicians to talk about ending cronyism, but when you're standing in front of people who are the beneficiaries, that's when you separate talk from action.
Big government energy mandates don't stop with ethanol. There are tax credits for almost every form of energy. Each designed to give one industry a leg up over the other. There's enhanced oil recovery credits for producing oil and gas from marginal wells. There's an advanced nuclear power generation credit. Clean coal investment credits. And a credit for plugging electric and fuel cell vehicles. And of course the infamous wind energy credit.
Talking about wind: A two-year extension of wind credits alone costs taxpayers more than $13 billion, which is enough to pay the monthly electricity bills for 124 million Americans. How about putting that up for a referendum? Do we continue to benefit one favored industry, or do we pay the electricity bill for 124 million Americans? You know, I don't think that would be a close vote for the American people. And what's interesting: it's not a close vote in Washington. Because the only people voting in Washington are the lobbyists with bags of cash, and the lawmakers in both parties eager to get that cash.
For decades, the federal government has teamed up with specific industries to pick winners and losers in the energy industry. Aside from further complicating an already Byzantine tax code, this type of corporate welfare has only distorted the price of energy and empowered failed companies like Solyndra.
My good friend, Senator Mike Lee, has taken the lead in previous Congresses to level the playing field, to end the special interest handouts, and stop the energy cronyism. How about instead of picking one industry after the other after the other, and benefitting them all to compete against each other, we take the taxpayer out of the game and let them fight it out on a fair field. Senator Lee has introduced the Energy Freedom and Economic Prosperity Act-a bill designed to eliminate all energy tax credits, and a bill that Senator Jim DeMint championed before Mike took lead.
A third example: sugar subsidies that artificially drive prices higher for the benefit of the few.
It should come as no surprise that another poster child for big government picking winners and losers traces its origins back to the New Deal. The Sugar Act imposed quotas on U.S. sugar production and restrictions on imports of sugar all while subsidizing U.S. production.
Now, I will note, this form of cronyism seems particularly un-American. After all, before the Tea and Stamp Act, came the Sugar Act in 1764. You'll recall, we fought kind of a bloody revolution over that. And it was then that the cry of "no taxation without representation" was widely voiced by the colonists.
Well you know what, we, do have representation now, but our representatives aren't representing us. They're representing large corporations and lobbyists rather than the American people. And it's the exact same circumstance of no taxation without representation. How about the representatives in Washington actually represent the men and women back home that we're supposed to be working for?
The sugar program imposes restrictions on how much sugar can be sold-it provides a "benevolent" allotment for each processor and makes it illegal to sell more than the government's designated amount.
Now, one could be forgiven for thinking this kind of centralized planning came from former Soviet apparatchiks: "You go sell that! You go sell that!" I mention the cartel. It's what OPEC does every year. They sit around a table and say, "you go sell that. You go sell that, we're going to conspire against the American taxpayers." Both cartels, by the way, have the same principal victims.
Unfortunately, both Republican and Democrat administrations have kept this program essentially unchanged for eighty years-increasing the cost of sugar for Americans.
The Wall Street Journal reported last December that at the time, sugar was 58 percent more expensive here at home than at the global market. Why should Americans pay 58 percent more for sugar than people in the rest of the world? Only because the Washington cartel is taking that additional money and giving it to the select few favored lobbyists. And it's not just sugar that you put into your coffee or your tea. Sugar is an ingredient in a great amount that we eat. From pastries to sodas-and as my two little girls will tell you, treats on a nightly basis.
And this price controlling increases food costs for businesses and families, particularly low-income households. If you're a single mom struggling to make ends meet, if you see the food costs when you go to the grocery store and try to feed your kids, prices go up and up and up and your salary doesn't seem to match it, part of the reason is that the Washington cartel isn't listening to you, and they're happy to take money from your paycheck and make fat cats even fatter. That's the corrupt game that's going on.
In fiscal year 2013, the average price for American raw sugar was 6 cents per pound higher than the average world price. As a result, Americans paid an unnecessary $1.4 billion extra for sugar. Now, there's some Americans who don't even make 1.4 billion in a year. That's real money. And every time Washington picks winners and losers, the winners are concentrated, but the losers you could identify.
From 1997 to 2011, nearly 127,000 jobs were lost in domestic sugar-using industries. 127,000 jobs-think of the men and women who were working in chocolate factories, working in bakeries, working in soda factories, who now are unemployed, and one of the reasons is, the federal government is driving up the cost of their inputs, and valuing the interests of the lobbyist more that your job.
According to a 2006 study by the U.S. Department of Commerce, for every sugar-growing job that stems from artificially high sugar prices, approximately three manufacturing jobs are lost. Now that's math that makes sense only in Washington, D.C.
And here's the kicker - you want to understand the concentration: Sugar companies make up just 0.2 percent of the farms in America, anyone know what percentage of the crop industries total lobbying expenditures come from sugar? 40 percent. 0.2 percent of the farms generate 40 percent of the lobbying. Why?
Because if your lobbying is yielding 1.8 billion dollars, that's good math. And the single mom who's paying higher food prices, the chocolate factory owner who's laying off, neither one of them have lobbyists. Neither one of them have a whole lot of representatives who are listing to them.
The fourth and final example: Internet sales tax.
We've looked at one example of how the Washington Cartel helps foreign nations and foreign investors, how it chooses winners and losers among American industries.
Now let's look to an industry that's been-blessedly-largely free from government regulators: the Internet. I want to turn to how it wants to make its network even broader and more intrusive - what's the one thing that's been left largely unmitigated by the government until now - the Internet.
The Internet has been an incubator for new ideas, it has been a haven for technological creativity. It is allowing millions of people to create small businesses. And by the way, the people who are the most freed up on the internet are the most vulnerable. It's young people, Hispanics, African Americans, single moms, people who want a better life.
You know, it used to be, 20 years ago, if you wanted to start a business, you needed some capital. You needed to be able to buy an inventory. You needed a warehouse. You needed a distribution system. That took money. If you're just getting started, if you're a teenage immigrant, like my dad was in 1957, washing dishes, making 50 cents, an hour you're not likely to have the capital to start a business. What does the internet do? It transform it. You have a good or service you want to sell-- You can set up a website and suddenly you have a worldwide market. Someone clicks on the website says, "I want to buy your good or service, you can send it on Fed-Ex and boom, you can send it anywhere in the world, You know who that terrifies? Politicians in Washington. This freedom thing is very, very scary for politicians in Washington. Washington is all about power.
Today, parents can purchase Christmas presents for their kids with the click of a button. A teenager can design an app that revolutionizes the way things are done. A mom can sell her hand-made cards on Etsy. Or with a few taps, an Uber can come to your doorstep.
And by the way, the next time you take Uber-I'll let you know, I don't have a car in Washington. Uber is transformational. The next time you take an Uber, ask the Uber driver how he or she likes his job. I have yet to find an Uber driver who isn't thrilled at the freedom of becoming a small business owner that the Internet has enabled. And yet, what is Congress talking about doing ? It's talking about passing the Orwellian-named Marketplace Fairness Act. Now, we've seen the pattern of Washington fairness. What is Washington fairness? Hammer the little guy, help the big guy. That's very fair to lobbyists.
What would the Marketplace Fairness Act do? It would take every online retailer in America and tell them you must now collect states taxes for over 9,600 taxing jurisdictions all across this country, in real time. I want you to think about it. Let's suppose you're that single mom who started the business you're selling online. You're supposed to collect the Albany school taxes. Now Bret, do you know what the Albany school tax is? Do you know there's a hearing scheduled next week to try to change it? Well, if you decide to start a small business, you're expected to know.
And you could face an audit from 9,600 jurisdictions across this country if you haven't correctly collected the Albany school tax, and you don't know that they raised it by a quarter point in their last vote., which I have no idea if they did or not.
Why does the Marketplace Fairness Act have support? It has support because it's a perfect storm for lobbyists. Number one, the Big Box stores, a major bricks and mortar retailers, they want to hammer the heck out of these online retailers. But here's the interesting thing that's shifted, so do the big online retailers. Of the 20 largest online retailers, 19 of them have physical presences, and so collect sales taxes in each of the states that has sales taxes. So suddenly you have the big box stores, the brick and mortar retailers, the big guys, and the giant online retailers, joining forces and suddenly they have a common enemy: all of these pesky little startups that have the temerity to try to take their customers.
And in Washington, there's nothing more beautiful than when the lobbyists all align. When all the money is pointing in the same direction. Suddenly you see Republicans, and Democrats saying, "that is an inspired policy." And yet, all of the millions of young people, of entrepreneurs, of people with an idea that want to topple the next giant company, they don't have a single lobbyist. The American people are with us on this. The 2013 Gallup poll showed 57 percent of likely voters opposed taxing the Internet. Among young people, the demographic that represents the future of this country, 73 percent oppose a tax on the Internet. We should stand with the people. It is time to break the Washington Cartel.
We should stand with the people. It is time to break the Washington Cartel.
Instead of cutting blue-collar jobs by investing millions in foreign mining corporations, we should welcome jobs and production here at home. Instead of giving ethanol producers an automatic check, we should let the market determine their viability, and stop hurting farms from Connecticut to California. Instead of forcing restaurants and bakers and families to pay more for sugar - and undercut competition - we should welcome lower prices. And instead of handing over more power to big corporations and regulators, let's keep the Internet free and encourage young entrepreneurs to keep innovating and to keep government's hands off the Internet.
How we beat back the Washington Cartel, how do we restore power to the people?
The answer is simple - Americans across the country rise up, they engage on the issues, and we bring back the voice of the people.
The book of Ecclesiastes tells us there's nothing new under the sun. I think where we are today is very much like the late 1970s. I think the parallels between Jimmy Carter and Barack Obama are uncanny: the same failed domestic policy, the same misery, stagnation, and malaise, and the same feckless and naiveté foreign policy. In fact, the very same countries, Russia and Iran, openly laughing at and mocking the President of the United States. The one person in America thrilled with the job Barack Obama's doing is Jimmy Carter.
Why does that analogy give me so much hope? Because we know what comes next. The late ‘70s and 1980s, there was a grassroots movement of millions of men and women who rose up and became the Reagan revolution, and it didn't come from Washington - Washington despised Ronald Reagan. If you see a candidate who Washington embraces, run and hide. And in 1980, Reagan rose up to break the Washington Cartel. How did he do it? He changed the rules: 1978, 1979, Reagan didn't get on a plane and fly to Washington and sit down with the old bulls in Congress, sit down with Republicans and say, come on guys, you got to stand for something. He recognized that then and now they weren't listening to the American people. Instead, he took the case to the American people. And it transformed this nation. How do you change, how do you break the Washington Cartel. You change the rules. You know, there's an old saying that politics is Hollywood for ugly people.
But there is nothing that focuses the minds of elected politicians like the prospect that they might be voted out of office and have to find an honest job. How do you break the Washington Cartel? You make the political price of doing the wrong thing higher than the political price of doing the right thing, and that can only come from ‘we the people.' It's the only power strong enough. That's what the Reagan revolution demonstrated. Washington despised Reagan until the revolution swept in, and suddenly a bunch of politicians said holy cow, ‘I'm not messing with that,' and magically they supported lower taxes and lower regulations and stopped the favoritism and standing up and defeating the Soviet Union.
I think 2016 will be an election like 1980. As Reagan said, we win by painting in bold colors and not pale pastels.
I am going to close with a story.
We all know the story of the Wright brothers.
But a name we don't as often hear is that of Samuel Langley. The Department of War gave him $50,000 to create a flying machine. Upon its launch, "it fell like a ton of mortar," according to one reporter.
On December 17, 1903, only 9 days after Langley's second experiment failed, two young Ohio boys with only $2,000 set out at Kitty Hawk, and to become the first men to sail in the air.
$50,000 on failed government programs picking winners and losers versus two entrepreneurs, two brothers with a vision and a dream and just $2,000. One a miserable failure; the other transformed the world. That is power of American innovators free from the government. It's the can-do spirit that has propelled scientists and entrepreneurs and immigrants who came with nothing, pioneers, and farmers to make this land the greatest nation on earth.
And it remains just that if we come together and break the Washington Cartel that is telling us far too much about what we can do and can't do. And if we instead return the power to the people so they can do what they have always done best - achieve the unimaginable and leave a landscape of greater opportunities for generations to come.