Fiscal Cliff Resolution Proves Crony Capitalism Wins

Thursday, 03 Jan 2013 07:53 AM

By Jacob Wolinsky

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
There is a lot that can and has been said about the fiscal cliff deal reached late Tuesday night. The bottom line is that the middle class, rich and poor are all losers in the deal. The agreement is bad for the economy, and everyone will suffer. However, there is a tiny group of people who are likely extremely happy about the deal.

I want to focus on a point I brought up in a Moneynews article several weeks ago. According to the fiscal cliff agreement, eight large companies received subsidies from your taxpayer money. At the time, I mentioned that the reason CEOs were desperate for a deal was not out of altruism, but because they wanted the government to continue its borrow-and-spend policies, which help the majority of these companies (at least in the short term).

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

There are many conspiracy theories about Goldman Sachs, and I am not a proponent of them. However, I specifically noted several weeks ago that CEO Lloyd Blankfein would be happy to pay higher taxes if he could get the government to continue its low interest rate and pro-bank friendly policies. The news broke the other day that confirmed my suspicion beyond my belief. Lo and behold, one of those eight companies to receive government subsidies was none other than Goldman Sachs.

The subsidy is far from pocket change. Subsides were stuffed in an opaque bill that the Senate spent three minutes to read before voting on. The subsidies are specifically for Goldman Sachs’ headquarters, as the “tax exempt financing for York Liberty Zone” — a program to provide post-9/11 recovery funds — was renewed. Bloomberg reports that Goldman Sachs has used $1.5 billion from the fund for low-cost funding to build a new Manhattan office tower.

Goldman Sachs is also the top career contributor to Senate Finance Committee Chair Max Baucus, D-Mont. I think it is farfetched to think to say that when Blankfein begged for a fiscal cliff resolution he expected to be one of eight companies to actually get a ridiculous subsidy, but he knew a fiscal cliff deal would be in Goldman Sachs’ (and his) interest.

Blankfein made $16 million in 2011 (2012 numbers have not been disclosed yet). As a result of the bill, he will have to pay a few million more in taxes, but Goldman Sachs reaps billions indirectly (and it turned out in this case to be directly).

Editor's Note: 5 Signs Stock Market Will Collapse in 2013

Just some quick math shows how insignificant a million or two in extra taxes is to Blankfein compared with what he gained. Goldman Sachs’ market cap increased $2 billion on Wednesday. There was no big company news, besides for the subsidies and the market generally rallying on the fiscal cliff resolution. This one-day rise alone is worth much more than a whole year of extra taxes.

The point of this article is not to attack Goldman Sachs specifically, or any of the companies. It is to point out what the fiscal cliff resolution (and many other policies) are all about — crony capitalism.

Just like President Barack Obama accused Mitt Romney of being a “neoconservative,” while keeping a secret kill list and launching drone strikes in numerous countries across the globe, so too Obama is a hypocrite here. While Obama can call himself a progressive all day, he is nothing more than a hypocrite who rewards his cronies and punishes his opponents.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved