For President-elect Donald Trump to deliver on his “make American great again,” promise, economic growth must again exceed today’s anemic rate. Reforming tax policy, reducing spending, repealing preferential regulations – all will be needed – but, perhaps, most important will be to attack the unholy alliances of economic and ideological special interest groups that have promoted and now defend these anti-growth tumors. When cronyism determines economic results, capital, resources, labor, and scarce entrepreneurial talents are misallocated, shifted from wealth creation to wealth and power privileges benefiting special interests.
America’s Founders recognized this cronyist danger and sought to craft a Constitution that would check special interests (“factions” was their term). Those protections limited the ability of such interests (acting alone or as cartels) to use government to gain privileges. Unfortunately, as states have established effective grant-seeking cartels and Washington has gained ever greater power, those protections have been radically weakened. The Founders were concerned about a single tyrant handing out rewards to his family and friends. Today, the federal government and the states routinely hand out tax abatements, loan guarantees, subsidies and preferential regulations to anyone with an appealing economic or ideological argument.
Mr. Trump, taking account of past failed economic reforms, should sort through these cronyist policies and restore the Founder’s protections.