Revolving Door Crony Capitalism Spins Washington and Lansing

Tim Carney covers the crony capitalism beat for the Washington Examiner, and reported recently that former U.S. Secretary of Transportation Ray LaHood has joined the board of a company that during his tenure benefited from extensive subsidies from the department he headed.

Carney summed it up: "So LaHood used his power as a top government official to give taxpayer money to Proterra. Now he stands to personally benefit if the company succeeds."

Similar revolving door relationships are seen in this state as well. A few weeks ago former state representative Andy Coulouris appeared before a legislative committee in Lansing where he was lobbying for a bill to keep generous benefits flowing to his current employer, Hemlock Semiconductor. Coulouris resigned from the House in April 2010 to take a job lobbying for Hemlock's parent company, Dow Corning.

While holding office he introduced, and on multiple occasions, voted for legislation authorizing lucrative benefits for the firm, including the benefit he now is lobbying to extend.

As reported by Michigan Capitol Confidential, those benefits include millions of dollars worth of state tax credits, which often amount to thinly disguised cash handouts. Among the most lucrative privileges is a law enacted especially for the Hemlock, requiring other families and businesses in the same electric utility service area to pay more for electricity so that Hemlock can pay less.

Currently, the special treatment is said to be worth around $70 million annually (in 2010 the House Fiscal Agency reported a value of $53.8 million, based on a Public Service Commission determination).

This sweetheart deal is set to expire next year, which is why former state Rep. Coulouris, who is now "Area Vice President for Area Public Affairs" for Hemlock's parent firm, was in Lansing lobbying for a bill that would make it permanent. The measure was introduced by House Majority Floor Leader Jim Stamas, R-Midland, who according to the Influence Explorer website, has accepted nearly $30,000 in campaign contributions from Dow Chemical.

Nonetheless, the proposal is encountering headwinds, some from other companies that now pay more for electricity so that Hemlock can pay less. One is General Motors, which testified at the same hearing that Hemlock's special deal costs it $1 million per year. The Michigan Chamber of Commerce also opposes the bill. According to Mirs News, the chamber's representative told the committee: "This subsidy amounts to a hidden tax and energy rates at a time when Michigan businesses are trying to grow … Why should they shoulder the burden of another customer's electricity costs?"

Even "Big Green" heavies are resisting, an exception to a recurring pattern of left-leaning environmental groups cooperating with alternative energy companies to lobby for subsidies, mandates and restrictions that benefit those firms. (Michigan's windmills are in part the product of this new variation on the old "bootleggers and Baptists" dynamic.) But on this one, the Sierra Club testified against Hemlock's special electricity deal.

Coulouris isn't the only legislator with close ties to Hemlock. The wife of former Rep. Ken Horn was a lobbyist for the firm at the same time he chaired the House Energy and Technology Committee, which had jurisdiction over legislation affecting Hemlock's special privileges. Horn sponsored an earlier version of the bill Coulouris is lobbying for, which passed the House, and cast as many as 16 votes for legislation directly benefiting Hemlock. Horn reportedly received campaign contributions worth $5,950 from Hemlock's parent firm.

All this is perfectly legal and increasingly characterizes how government actually works in the current era (see: "In Congress, relatives lobby for bills before family members," Washington Post, Dec. 29, 2012). Moreover, no one should imagine that the solution is to just pass another law, or that Coulouris, Horn, Stamas, LaHood and countless other corporate subsidy friendly Washington and Lansing politicians on both sides of the aisle are unique.

The reality is instead something our Founders recognized but many today ignore: When a government grows as big and intrusive as ours, wealth redistribution to the cronies of a self-serving political class is an inevitable consequence.

There is no simple solution besides the obvious one of drastically scaling back the size and scope of government.

Until that new dawn breaks, it might help if big government's cheerleaders, including the mainstream media, incorporated the insights of the awkwardly labeled "public choice" school of economics. In essence, it simply explains that politicians and bureaucrats are just as motivated by self-interest as grasping plutocrats, and that voters, the media and policymakers darned well better take this into consideration when making political and policy choices.

In this context, it's somewhat ironic that big media voices expressing such outrage over the revolving door system have played a critical role in creating the conditions that make such vices not just possible but inevitable.

(Editor's note: This commentary has been slightly edited since its original posting. Information from the Washington Examiner was updated.)

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.