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Obama's Manufacturing Hubs Mean Cronyism, Corporate Welfare And Less Innovation

Obama's Manufacturing Hubs Mean Cronyism, Corporate Welfare And Less Innovation
Photo Credit: Forbes
 
 

It’s an endless parade, one  top-down proposal after another from Washington.

Having just presided over another 80,000 pages of regulations in the 2013 Federal Register, the launch (so called) of Obamacare, and five years of warfare against affordable energy, President Barack Obama presumes to reveal how government can spark innovation.

Obama, you see, will now establish “hubs” for manufacturing, the latest iteration of Solyndra-style corporate pork and central planning.

Announced in North Carolina and set to figure prominently (again) in the State of the Union Address, these “innovation institutes” would be great for a laugh if the concept wasn’t so perverse, and worn out already besides.

If you like your cronyism, you can keep it.

Obama’s not proposing the hubs as food for thought; he will reshape American industry without input from Congress.

CNN calls the initiative the “first step in his newly imposed “year of action” that avoids Congressional approval for measures to boost the economy.” Note the word “imposed.”

We want to make stuff and create jobs in America.

But what, really, is the national government’s role in a more robust manufacturing economy?

A “declaration of dependence” on federal dollars on the part of America’s most crucial manufacturing  and technology industries is exactly wrong.

The “new public-private manufacturing institute [will focus] on developing energy-efficient electronic chips and devices,”  courtesy of $70 million from the very same Department of Energy we were to privatize in the 1990s.

Knowledge and ideas are too widely dispersed for any, and I mean anyWashingtonian to know the right direction for American industries. Politicians in particular can’t choose projects rationally.

Energy efficient chips? Is that some kind of joke? What about 3D printing? nanotechnology? biotech? Or fuel cells and the hydrogen economy? Or robotics?

What about those bioengineered gills and one-wheeled SegWays I asked Congress about? What about elevators in every home? I’m losing my patience.

Congress can’t fund or coddle every enterprise when it comes to research and manufacturing, and it’s unfair to artificially pick winners./>/>

At its most honest, taxpayer funding sometimes wrongly fosters a view of technology as a zero-sum global race; moreover, subsidies don’t alter the ratio of gross domestic product spent on R&D, anyway.

At its least honest, federal investment invites conflicts and cronyism, on purpose. The powerful will win out and pocket cash, as in all socialistic endeavors.

Shame on the private companies  and the Republican legislators participating in this monstrosity. (The White House lists 18 firms: ABB, APEI, Avogy, Cree, Delphi, Delta Products, DfR Solutions, Gridbridge, Hesse Mechantronics, II-VI, IQE, John Deere, Monolith Semiconductor, RF Micro Devices, Toshiba International, Transphorm, USCi, Vacon.)

After the second and third “hub,” every congressman will be clamoring for one in their district, producing waste and diversion of resources for years to come.

Meanwhile, the investments and jobs that don’t materialize because of the political reassignment of taxpayer dollars and economic distortion remain unseen.

It wasn’t via the power of tax and dispense that the United States leapfrogged the world’s economies in the decades after our founding.

Government’s artificial promotion of the politically connected distorts free enterprise by creating artificial, unsustainable  booms  in subsidized sub-sectors.

Broader economic instability is a byproduct, just as occurs with destabilizing monetary, fiscal and regulatory policy.

Regulation is already a drag on the economy and regulatory strings will accompany government funding, invited by the cronies themselves who exploit scenarios exactly like this one to exclude rivals.

Taxpayer funding also undermines safety by propelling risky innovations ahead of the free market’s ability to properly assimilate them. New liability and insurance products need to evolve alongside frontier manufacturing.

Obama is making a show of a few million dollars. Actually doing something about manufacturing  and job creation is about more than spending money.

In the formulation of Competitive Enterprise Institute founder Fred L. Smith Jr., rather than trying to improve speeds by picking the particular manufacturing horses to run on the racetrack, job one is to improve the business and regulatory track so everyone can go faster. Meanwhile, let jockeys keep more of their earnings.

We need to reduce regulation generally: More than 60 agencies issue over 3,500 regulations annually, yet no pruning happens.

We need: a bipartisan regulatory reduction commission to clear underbrush; sunsetting of old and new rules; and fast-track congressional approval for controversial and expensive agency rules before they are effective (the REINS Act from Sen. Rand Paul and Rep. Todd Young would do this).

Government is not just hubs anymore, its spokes radiate everywhere.

We know we need to cut the fiscal budget; with regulations costing $1.8 trillion annually, we need to cut the regulatory budget too.

The real gains will come when we  embrace separation of business and state. That’s how to turn America into the innovation institute it once was.

Source: Forbes

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<a href="/latest_stories/all/all/31" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

 

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