Category Archive 'Crony Capitalism'

18 Sep 2016

Trump Built His Empire on Political Connections

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Look at the expression on Trump’s face!

I rarely agree with the New York Times, but this story has Trump’s record as businessman accurately pegged.

The way Donald J. Trump tells it, his first solo project as a real estate developer, the conversion of a faded railroad hotel on 42nd Street into the sleek, 30-story Grand Hyatt, was a triumph from the very beginning.

The hotel, Mr. Trump bragged in “Trump: The Art of the Deal,” his 1987 best seller, “was a hit from the first day. Gross operating profits now exceed $30 million a year.”

But that book, and numerous interviews over the years, make little mention of a crucial factor in getting the hotel built: an extraordinary 40-year tax break that has cost New York City $360 million to date in forgiven, or uncollected, taxes, with four years still to run, on a property that cost only $120 million to build in 1980.

The project set the pattern for Mr. Trump’s New York career: He used his father’s, and, later, his own, extensive political connections, and relied on a huge amount of assistance from the government and taxpayers in the form of tax breaks, grants and incentives to benefit the 15 buildings at the core of his Manhattan real estate empire.

Since then, Mr. Trump has reaped at least $885 million in tax breaks, grants and other subsidies for luxury apartments, hotels and office buildings in New York, according to city tax, housing and finance records. The subsidies helped him lower his own costs and sell apartments at higher prices because of their reduced taxes.

Mr. Trump, the Republican nominee for president, has made clear over the course of his campaign how proud he is that “as a businessman I want to pay as little tax as possible.”

While it is impossible to assess how much Mr. Trump pays in personal or corporate income taxes, because he has refused to release his tax returns, an examination of his record as a New York developer shows how aggressively he has fought to lower the taxes on his projects.

Mr. Trump successfully sued the administration of Mayor Edward I. Koch after being denied a tax break for Trump Tower, his signature building on Fifth Avenue. Two decades later, in a lawsuit that spanned the administrations of Mayors Rudolph W. Giuliani and Michael R. Bloomberg, he won a similar tax break for Trump World Tower, a building on First Avenue with some of the city’s highest-priced condominiums in 2001.

The tax breaks for those two projects alone totaled $157 million.

The tax break at the 44-story Trump International Hotel and Tower at Columbus Circle came to $15.9 million.

No possible subsidy was left untapped. After the terrorist attacks on the World Trade Center, Mr. Trump lined up a $150,000 grant for one of his buildings near ground zero, taking advantage of a program to help small businesses in the area recover, even though he had acknowledged on the day of the attacks that his building was undamaged.

“Donald Trump is probably worse than any other developer in his relentless pursuit of every single dime of taxpayer subsidies he can get his paws on,” said Alicia Glen, Mayor Bill de Blasio’s deputy mayor for housing and economic development, who first battled Mr. Trump when she worked in Mr. Giuliani’s administration.

Read the whole thing.

31 Jan 2016

Ted Cruz Ad Has Trump Dead to Rights

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07 Dec 2011

Letter to the Left

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Libertarian (sounds like the modern California version to me) Jason Brennan is in a position make his liberals allies uncomfortable, when he connects the dots between liberal statist policy prescriptions and the kind of crony capitalism in which fat cat banks and corporations get to use the state as their servant and ally to build deeper regulatory moats and higher walls against competitors.

Dear members of the moderate left,

America is suffering from rampant, run-away corporatism and crony capitalism. We are increasingly a plutocracy in which government serves the interests of elite financiers and CEOs at the expense of everyone else.

You know this and you complain loudly about it. But the problem is your fault. You caused this state of affairs. Stop it.

Unlike we libertarianish people, you people actually hold and have been holding significant political power in the US over the past 50 years. What have you done with this power? You’ve greased the corporatist machine every chance you’ve gotten. You’ve made things worse, not better. Our current problems are your fault. You need to stop.

We told you this would happen, but you wouldn’t listen. You complain, rightly, that regulatory agencies are controlled by the very corporations they are supposed to constrain. Well, yeah, we told you that would happen. When you create power—and you people love to create power—the unscrupulous seek to capture that power for their personal benefit. Time and time again, they succeed. We told you that would happen, and we gave you an accurate account of how it would happen.

You complain, perhaps rightly, that corporations are just too big. Well, yeah, we told you that would happen. When you create complicated tax codes, complicated regulatory regimes, and complicated licensing rules, these regulations naturally select for larger and larger corporations. We told you that would happen. Of course, these increasingly large corporations then capture these rules, codes, and regulations to disadvantage their competitors and exploit the rest of us. We told you that would happen.

It’s not rocket science. It’s public choice economics. You recognized, rightly, that public choice economics was a threat to your ideology. So, you didn’t listen, because you didn’t want to be wrong. Public choice predicted that the government programs you created with the goal of fixing problems would often instead exacerbate those problems. Well, the evidence is in. You were wrong and public choice theory was right. If you have any decency, it is time to admit you were wrong and change. Stop making things worse.

You spent the past fifty years empowering corporations and the most unscrupulous of the rich. You created rampant moral hazard in the financial sector. You created the system that socializes risks but privatizes profit. You created the system that creates a revolving door between Obama’s staff and Goldman Sachs. There’s a reason why Wall Street throws money at Obama. It’s because you, the moderate left, are Wall Street’s biggest supporters. Oh, I know you complain about Wall Street. But your actions speak louder than your words.

14 Jun 2011

Banning the Incandescent Bulb

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Big Brother is coming soon to take away your 100w incandescent light bulbs, and he’s planning to remove the rest of them by 2014. Virginia Postrel explains that Congress and George W. Bush did one of their crony capitalism deals at the expense of your freedom of choice (and your interior decor).

When compact fluorescent light bulbs were new, promoters sold them as a market-oriented, win-win proposition. They were like “lite” beer: the same great illumination, for a fraction of the electric bill.

But, as with beer, not everyone was convinced. Some consumers didn’t like the high out-of-pocket cost. (A basic CFL runs about three times the initial price of the equivalent incandescent.) Some didn’t like that bulbs could take a while to build up to full intensity.

Some didn’t like the occasional flicker. And a lot didn’t like the light. Its bluish cast lacks the warmth of traditional incandescents and gives skin tones a somewhat deathly tinge. “Fluorescent is just not attractive,” a resolute restaurant designer once told me. “I don’t care what they say.” …

By the end of last year, CFLs had managed to capture only 25 percent of the general-purpose light-bulb market — a decent business, sure, but hardly the radical transformation evangelists were going for. Most Americans, for most purposes, have stuck to traditional incandescents.

So the activists offended by the public’s presumed wastefulness took a more direct approach. They joined forces with the big bulb producers, who had an interest in replacing low-margin commodities with high-margin specialty wares, and, with help from Congress and President George W. Bush, banned the bulbs people prefer.

It was an inside job. Neither ordinary consumers nor even organized interior designers had a say. Lawmakers buried the ban in the 300-plus pages of the 2007 energy bill, and very few talked about it in public. It was crony capitalism with a touch of green.

Of such deals are Tea Parties born.

Read the whole thing.

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