Bluegrass Beacon — Kentucky to the ‘trade deficit’: You’re fired!

BluegrassBeaconLogoConsidering the Bluegrass State last year exported $30 billion worth of goods and services – more than 33 other states – Kentuckians should vigorously oppose anything remotely associated with a “war on trade.”

American Enterprise Institute scholar Mark Perry rated the share of Kentucky’s economy in 2015 linked to imports and exports fifth-highest in the nation, comprising 34 percent – or $66 billion – of the commonwealth’s $193 billion GDP.

Perhaps Kentucky Gov. Matt Bevin, who recently conducted a trade mission to Japan, could find a way to strike up a cordial conversation with his good friend President Donald Trump to put the commander-in-chief at ease about this whole “trade-deficit” matter.

Bevin could even share some wisdom from flyover country by passing on Indiana University Southeast economics professor D. Eric Schansberg’s reason for claiming the trade deficit remains “the most misunderstood concept in economics.”

Schansberg, Ph.D., says the discussion about international trade often focuses heavily on the downside – which tends to be more visible in terms of some individuals losing out in a global economy – while nearly completely missing out on its subtle but significantly important benefits for an entire state or nation.

“Trade is good for the aggregate if not always for the individual,” he says.

Schansberg, who’s also a Bluegrass Institute scholar, notes that “exports lead to imports” and warns that attempting to artificially narrow the so-called “trade deficit” could result in fewer dollars invested in America’s economy.

“Everybody talks about the difference in goods and services exported versus imports when what really matters is investment surplus,” Schansberg says.

Shallow-thinking protectionists rarely dig deep enough to reach this important component in making their own determinations about the success or failure of free-trade relationships.

Why, these shallow paddlers must wonder, would Bevin travel to Japan to tout the commonwealth as an attractive investment option instead of chastising that nation because last year it only spent $1.1 billion in direct purchases from Kentucky while we as a state imported $5.1 billion worth of Japanese products?

Consider the rest of this trading-partnership story.

Not only are imports critical to keeping Kentucky at – or near – the top in the automotive, aerospace and pharmaceutical industries, but Japanese-owned companies now operate more than 180 facilities in our commonwealth.

And while Kentucky is the fifth-largest importer of Japanese goods – Japan is the No. 1 international investor in the Bluegrass State, having created 44,400 full-time positions in those facilities.

“Investment surplus,” anyone?

An important teaching moment could occur if our governor explained to the president why Kentucky exporting nearly $30 billion while importing almost $40 billion is worthy of replicating rather than punishing, which would only bring us more harm, anyhow.

Schansberg notes the last time America had a trade surplus was not during an uptick but when the economy tanked during the late 1970s.

“It’s because investors were looking at our economy and they didn’t see it as a great investment,” he said.

All those current imports mean more choices and better prices for consumers and industry. It means foreign investors look at today’s Kentucky and America and they like – really like – what they see.

Frenchman Frédéric Bastiat, a 19th-century champion of free-market economics, proposed reversing “the principle of the balance of trade and calculate the national profit from foreign trade in terms of the excess of imports over exports.”

Bastiat called this “excess” the “real profit,” and challenged the contemporary protectionists of his day to produce evidence showing otherwise.

“Even if our imports are infinite and our exports nothing, I defy you to prove to me that we should be the poorer for it,” he said.

Jim Waters is president of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read his weekly Bluegrass Beacon column at He can be reached at and @bipps on Twitter.

Bluegrass Beacon: Liberty boosters, busters and bragging rights

BluegrassBeaconLogoIt’s time for another edition of “Liberty Boosters and Busters.”

Liberty Booster: Federal appeals court Judge Neil Gorsuch, announced as President Trump’s pick to succeed the late Justice Antonin Scalia on the Supreme Court.

It’s one of Trump’s most important decisions as the 49-year-old Gorsuch will have a hand in shaping the court’s – and the nation’s – direction for decades and maybe even a century to come.

Former Kentucky Chief Justice Joseph Lambert called the choice “outstanding.”

“His entire career has been characterized by excellence. If any judge could replace Justice Scalia, this is the person,” Lambert told me.

Trump kept his campaign promise to nominate a Scalia-like jurist – at least per a recent study ranking Gorsuch as No. 2 out of 15 judges considered for their “Scalia-ness.”

Gorsuch wrote in a recent opinion that the Constitution “isn’t some inkblot on which litigants may project their hopes and dreams … but a carefully drafted text judges are charged with applying according to its original public meaning.”

Some of my friends on the political left won’t be big fans of Gorsuch’s belief that judges – as he states in a tribute to Scalia – should be “focusing backward, not forward.”

However, they should appreciate his willingness to restrain police powers and concerns about over-criminalizing America, which could directly impact Kentucky with its rapidly growing incarceration rate.

Gorsuch is a true believer in limited judicial power.

The “black robe,” he writes, “doesn’t make me any smarter” but it does serve “as a reminder of the relatively modest station we’re meant to occupy in a democratic society. In other places, judges wear scarlet and ermine. Here, we’re told to buy our own plain black robes.”

Liberty Busters: Uninformed defenders of Common Core State Standards.

Kimberly Kennedy in an op-ed points to two poor examples as “unbridled proof” that these mandated standards are “working”: a Harvard study, which covers a 20-year period stretching back long before Common Core began in Kentucky and Advanced Placement courses covering material well above the obligatory standards.

Kennedy, who describes herself as “a former educator and freelance writer,” fails to consider credible evidence from the National Assessment of Educational Progress (NAEP) scores not fitting her pro-Common Core narrative. Those NAEP results indicate Kentucky eighth-graders’ math and reading performance dropped between 2013 and 2015.

She endorses some nebulous education department “survey” showing 88 percent of the commonwealth’s teachers and other education stakeholders giving Common Core a “thumbs up.”

Yet that survey made it difficult and time-consuming to offer even minor recommendations regarding Common Core.

It’s much easier just to give a “thumbs up” in the online survey monkey, which does little to convince Common-Core agnostics that it’s an accurate or meaningful result.

The most reliable survey occurred in November 2015, when Gov. Matt Bevin prevailed on a platform that included replacing Common Core.

Economic bragging rights: A “thumbs up” also goes to Bevin for his personal engagement in helping land Amazon and its new $1.5 billion shipping hub in Northern Kentucky; it’s the largest capital investment in the region in 30 years.

While companies consider many factors when expanding, coincidence alone cannot be credited for the fact that this decision, which will create 2,700 direct jobs – plus untold thousands of indirect positions – comes on the heels of Kentucky lawmakers passing economic-transformative policies, including right-to-work legislation.

Speaker Jeff Hoover noted in his response to Amazon’s announcement: “This is what happens when you create a business-friendly climate with good policies.”

Leaders in Ohio, where Gov. John Kasich downplays the importance of right-to-work, lament the loss of Amazon’s expansion – for which they vigorously competed – to Kentucky.

Kasich should rethink his approach.

Who knows how many more Amazon-like announcements loom on the horizon?

Jim Waters is president of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read his weekly Bluegrass Beacon column at He can be reached at and @bipps on Twitter.

Bluegrass Beacon: Right-to-work means more jobs – in suits and boots

BluegrassBeaconLogoIn a single day during the first week of the legislative session — not to speak of the entire week itself — Bowling Green Rep. Jim DeCesare’s Economic Development and Workforce Investment Committee did more to bring meaningful growth to Kentucky than the former Democratically controlled House did in 95 years.

While labor-union representatives filled the hallway outside Room 171 at the Capitol Annex with chants of “suits in there, boots in there,” committee members – meeting for the first time under the new GOP banner flying high in Frankfort after being folded up for nearly a century – removed serious economic barriers to making Kentucky’s economy great again by fast-tracking bills that will implement right-to-work protections for employees and remove expensive prevailing-wage mandates on public projects.

The right-to-work legislation was one of seven bills — three of which involved important labor reforms — passed in the historic Saturday session held later that same week. Gov. Matt Bevin’s signature soon thereafter made Kentucky the 27th right-to-work state in America.

DeCesare handled his first meeting as committee chairman masterfully, allowing full debate from both sides while insisting on civility and a respectful tone.

“We are doing things a different way,” newly anointed House Speaker Jeff Hoover told the committee.

“Different” is an understatement.

It’s been exasperating for years to watch politicians eat up precious taxpayers’ resources in Frankfort funding a January coma in which nothing beyond filing awkward, meaningless bills got done before Groundhog Day rolled around.

Actually producing? Unheard of.

And, during the first week? Has it ever happened?

The first week of this year’s legislative session was like walking into a bright, sunny day after being stuck for nearly a century in a room darkened by the pessimism and sheer obstructionism of the past and failed ruling elite.

The initial “Whoa! That’s bright!” turned into a “Wow, what an awesome day!” which led to “What an awesome week!” after it began to sink in just how pivotal the beginning of this year’s General Assembly session would be in Kentucky’s history.

With passage of right-to-work, Kentuckians can expect solid economic improvement.

Compare what happened in West Virginia, which, like Kentucky, dragged its heels on right-to-work for years until passing it last year, to what happened in Indiana and Michigan.

Vincent Vernuccio of the Michigan-based Mackinac Center for Public Policy found:

  • Average wages in both Indiana and Michigan increased after right-to-work laws were passed.
  • Since Indiana became a right-to-work state in 2012, its average wage rose faster than West Virginia’s.
  • Between 2012 – when Michigan passed its right-to-work law – and mid-2015, incomes in the Great Lakes State rose more than 9 percent, which was faster than both West Virginia and the national average.
  • Between 2012 and 2014, average hourly wages rose by 56 cents to $19.94 in Indiana, 56 cents to $21.70 in Michigan but only 37 cents to $18.21 in West Virginia.

Vernuccio also reports that when cost-of-living is taken into consideration and “you look at what people can actually buy with their money, workers in right-to-work states have 4.1 percent higher incomes than workers in non-right-to-work states.”

But if you doubt those state-to-state comparisons, consider what’s happened right here in Kentucky.

Since passing the nation’s first local right-to-work ordinance, Warren County has landed more than $1 billion in capital investment from companies who’ve signed to expand or relocate in southcentral Kentucky.

Per Kentucky Center for Education and Workforce Statistics, there currently are 55,000 available job openings today in that one county.

Plus, Warren County Judge-Executive Mike Buchanon says he anticipates another 12,000 job prospects in the very near future.

If such growth can occur in a single county in southcentral Kentucky, imagine what will happen across the Bluegrass State with a right-to-work policy that attracts business and protects individual workers from being forced to pay union dues.

All kinds of jobs are coming to Kentucky. Some require suits; some boots.

Doesn’t Kentucky need more of both?

Jim Waters is president of the Bluegrass Institute for Public Policy Solutions, Kentucky’s free-market think tank. Read his weekly Bluegrass Beacon column at He can be reached at and @bipps on Twitter.

News release: It’s a new day in My Old Kentucky Home

For Immediate Release: Friday, January 7, 2017

Contact: Jim Waters @ 859.444-5630 (office) 270.320.4376 (cell) 

(FRANKFORT, Ky.) — Legislators today in a historic Saturday session replaced the “Closed for Business” signs that had kept opportunity out of the Bluegrass State with an unmistakable statement that the commonwealth is now “Open for Business” by passing legislation making Kentucky the nation’s 27th right-to-work state.

“Just like we saw in Thursday’s passage by the Kentucky House of Representatives, lawmakers’ courageous determination to do the right thing was on full display today with the state Senate’s final passage of House Bill 1 by a 25-12 margin,” Bluegrass Institute president Jim Waters said.

“We’re thankful for our supporters who have partnered with us for more than a decade as we made both the economic and liberty cases for right-to-work protections for hardworking Kentuckians. Without them, this day doesn’t happen,” Waters said.

The Legislature today also repealed prevailing-wage mandates on public projects and enacted paycheck protection for workers, allowing workers to choose whether to have union dues withheld from their paychecks. Currently workers must choose to opt out of having an employer withhold their dues. Legislative pension transparency also became a reality today.

“Right-to-work is good for Kentucky and good for America,” Waters said. “Incomes are up and opportunities abound in right-to-work states; but most importantly, this policy defends individual liberties of hardworking Kentuckians by giving them the right to decide how to spend their own hard-earned money.”

HB 1 was undergirded by the fact that many Kentucky counties which have passed local right-to-work ordinances during the past couple of years.

Warren County Judge-Executive Mike Buchanon says the county – the nation’s first to pass a right-to-work ordinance – has attracted more than $1 billion capital investment since passing its local ordinance in December 2014.

“With that kind of growth in one Kentucky county, just imagine what could happen across this entire commonwealth with free-market policies.” Waters said. “We’ve got counties and entire regions throughout the Bluegrass State facing Depression-like economic conditions, but it’s a new day in my old Kentucky home.”

For more information, please contact Jim Waters at, 859.444.5630 ext. 102 (office) or 270.320.4376 (cell).

Bluegrass Beacon: Kentucky’s new GOP ready to drain the swamp

BluegrassBeaconLogoSpeaker-elect Jeff Hoover, R-Jamestown, whose Republican caucus will control the Kentucky House of Representatives for the first time since 1921, made it clear: Frankfort should focus on policies that bring economic growth and employment opportunities to the Big Blue State.

Senate President Robert Stivers, R-Manchester, who presides over a body that’s passed pro-growth bills by increasingly larger numbers and wider margins for years concurs with the Speaker, as does Gov. Matt Bevin.

The fact that so many of those bills were blocked by departing Democratic Speaker Greg Stumbo’s strong-arm political tactics galvanized Republican senators.

Many senators – even those who didn’t face re-election themselves – had grown so tired of working hard to pass sound legislation only to see it die in some obscure House committee without even a hearing that they feverishly campaigned to help their fellow House Republicans win on Election Night and transform Kentucky’s political landscape.

Stumbo’s obstructionism provided a unifying force in both raising the level of and providing a common target toward which Republicans in Frankfort could aim their collective good-for-the-citizenry frustration.

It also unified and sharpened the GOP’s spear, readying the party to bolt from the gate, jabbing with job-friendly legislation while using a retro-but-relevant “it’s the economy, stupid” approach rather than simply being satisfied with some election victory, even one that put the finishing touches on making Stumbo – already a political dinosaur – extinct.

Like Max Euwe, the great 20th century Dutch chess Grandmaster and mathematician, observed: “Whoever sees no other aim in the game than that of giving checkmate to one’s opponent will never become a good chess player.”

Or an effective game-changing majority party, either.

What happened on Election Night is best viewed as an important milestone towards winning future policy battles that ultimately will change Kentucky’s economic trajectory from one of decline and dependency to growth and even greatness.

We must make Kentucky – as Hoover put it – “a state that is more attractive to companies wanting to locate here or companies wanting to expand to create jobs.”

Opposition now will arise primarily in the form of temptations common to all politicians, including placing a higher priority on getting re-elected than on doing the right thing.

Substantive debate that includes testimony from fiscal conservatives who reformed tax policies in other states – particularly ones with whom Kentucky competes for economic-development projects – is the right thing.

Why not invite former Indiana Gov. Mitch Daniels, for example, to come and tell about how he led the economic turnaround in the Hoosier State, all while reforming its tax, pension and education policies?

Temptations to limit tax-code debates to endless discussions about feeding crocodiles rather than draining the swamp in a manner that makes compliance simpler, rates lower and the commonwealth more prosperous must be resisted at all cost.

Such temptations can be easily overcome if House Republicans – especially its 23 new members – will just consider how downright fun it will be to cast votes like ones that free up millions of dollars currently sunk in that swamp by costly prevailing-wage requirements on public projects.

School Planning and Management magazine reports that during 2014 school districts in Region 4, which includes Kentucky, spent more than $900 million on construction, primarily new schools.

Tom Shelton, executive director of Kentucky Association of School Superintendents, told a state Senate committee earlier this year that prevailing-wage mandates consume “20 to 30 percent in overall cost for construction.”

Wrap it all up with a Big Blue blow consisting of happy legislators dreaming about unlocking millions of these dollars for new schools, textbooks and opportunities, and we’re on our way to the commonwealth’s best holiday season in at least 95 years.

Jim Waters is president of the Bluegrass Institute; Kentucky’s free-market think tank. Reach him at Read previously published columns at

Letters worth a look: Comparing Louisville to Austin

Diane Kolb of Louisville recently wrote to the Louisville Courier-Journal:

Austin has a thriving Charter School program and Association; Austin is in a right-to-work state; Texas did not accept the Affordable Care Act federal Medicaid expansion; and Texas has implemented Tort reform.

Several days later, Sept. 18, the CJ had an article, ‘12 Bills to watch if GOP takes KY house.’ I found it interesting that (reporter Tom) Loftus in the article reported the Republicans will offer us a charter schools bill, a right-to-work bill and tort reform through Medical Review Panels. Just sayin!

Read the entire letter here.

Bluegrass Beacon: Socialism’s Good (for nothing) Samaritans

BluegrassBeaconLogo“Jesus is no free marketeer,” social researcher Gregory Paul wrote in his On Faith column in the Washington Post.

Paul claims the early chapters of the biblical book of Acts confirm Christianity is a religion based on socialism simply because some early believers sold possessions and donated the money to help the less fortunate.

“Now folks, that’s outright socialism,” Paul trumpets about an effort that sounds more like a first-century version of Goodwill in Kentucky to me.

Paul claims “pro-capitalist Christians who are aware of these passages wave them away even though it is the only explicit description of Christian economics in the Bible.”

Lexington Herald-Leader religion columnist Paul Prather wrote in a column released during the recent Democratic primary entitled “Why Bernie Sanders is the most Christian candidate” that the curmudgeonly senator’s “positions sometimes sound a lot like Jesus and his disciples: feed the poor, love your neighbor, heal the sick, welcome the immigrant.”

If, however, the researcher Paul was right in his assertion that the Gospels contain the seeds of socialism – which Sanders blatantly planted and fertilized during his failed presidential bid – then caring for the sick and poor would not have been done voluntarily and out of a sense of personal responsibility, but rather through coercion.

Those early believers chose to help their poor brethren.

There’s strong evidence in the Gospels that Jesus not only doesn’t endorse redistribution – taking from those who earn through work, saving and investment and giving it to those who want it but to whom it doesn’t belong – he opposes it outright.

When Christ was approached by a man in Luke 12 wanting him to use his power to force his brother to share his inheritance, not only did Jesus refuse the man’s request to equalize the wealth –  asking “who made me a judge or a divider over you?” – he rebuked the man for his envy.

In his famous Good Samaritan parable, Jesus tells of a traveler who chooses to use his own resources to help a man who was beaten, robbed and left for dead alongside a road.

A socialist would have instructed the man to write a letter to the emperor or get in touch with the government to find out what program was available to help him.

Sanders’ campaign was all about how he would compel productive, successful Americans to fund such programs by using the force of government, which ultimately finds its way to the end of a gun barrel.

Lawrence Reed, president of the Foundation for Economic Education, concludes that if the Good Samaritan “had said this is not my responsibility, we need politicians to get involved here; we need some redistribution to get you some help, we wouldn’t be calling him the Good Samaritan today, we’d be calling him the Good-for-nothing Samaritan.”

How could anyone argue that socialism is working in Venezuela, where people face starvation as shelves empty, prices rise – a box of powdered milk (fresh milk is nearly impossible to find) currently costs $703 with a dozen eggs running $150 – and desperation levels reach the point where Venezuelans are turning to their own pets for food?

Did Jesus and the early believers endorse an economic policy that results in starvation and slavery as families and children descend into the abyss of poverty while their own government threatens to force everyone to go into the fields and work?

Christian economics? Hardly.

Sanders refused to respond when asked by Univision about what’s happening in Venezuela.

What a shocker.

Still, even the most committed atheist can come up with the right answer to: What’s socialism good for anyhow?

All he has to do is look at every experiment of wealth redistribution in history, and he’ll easily have the right answer: “nothing.”

Jim Waters is president of the Bluegrass Institute; Kentucky’s free-market think tank. Reach him at Read previously published columns at

The ‘veiled violence’ of minimum-wage policies

“I regard minimum wages as disgraceful. They disgracefully strip low-skilled workers of a valuable bargaining chip — namely, the ability to compete for jobs by offering to work at wages below an arbitrarily set minimum. As a means of increasing some workers’ difficulty of finding employment, minimum wages are simply less sanguinary than would be a government policy of, say, chopping off all low-skilled workers’ left hands or poking out their right eyes. Unless you believe that such overt violence against low-skilled workers would not worsen their prospects of finding employment, you should see that the veiled violence against these workers that is so sweetly called ‘the minimum wage’ disgracefully worsens their prospects for finding employment.” –Don Boudreaux on

Bluegrass Beacon – Free employers: Reduce regulatory cesspool

BluegrassBeaconLogoOnly 15 states perform more poorly than Kentucky on CNBC’s annual ranking of business climates based on 10 categories, including workforce, infrastructure and education.

It’s not a coincidence that the two states ranking highest overall among Kentucky’s neighbors – Virginia (No. 13) and Indiana (No. 16) – also rate much higher than the Bluegrass State in “business friendliness.”

Only nine states are more unfriendly toward business.

For years, politicians from both parties have constructed growth policies centered on offering taxpayer-backed goodies – called “incentives” by economic-development bureaucrats – to companies they deem “winners” and able to improve Kentucky’s rankings.

It’s not working.

Kentucky rated in the bottom 13 states in six of the latest CNBC index’s 10 categories. Worse, we’re becoming even more business-unfriendly – sliding from No. 36 in 2014 to No. 41 in 2016.

Instead of more and bigger taxpayer-backed handouts, we must instead eliminate stifling and archaic regulations that discourage entrepreneurial Kentuckians from engaging in start-ups and expanding existing businesses if we’re going to rise in the rankings.

The Bevin administration’s Red Tape Reduction initiative has been created to call out costly, ineffective or outdated rules hiding among the commonwealth’s 4,500 administrative regulations – nearly 700 of which haven’t even been evaluated for close to a half-century to determine whether they actually help, harm or serve any purpose, for that matter.

Getting rid of burdensome and obsolete rules for doing business in the commonwealth likely will do more in a year or two to improve Kentucky’s attractiveness to employers considering expanding or relocating here than overpaid, underperforming bureaucrats accomplish in decades.

Maurice McTigue, a former cabinet member in his native New Zealand, helped dramatically reform that country’s economy by reducing regulation and implementing pro-growth policies to the point the turnaround became known as the “New Zealand miracle.”

“Kentucky’s economy would be stronger if 1,000 local businesses hired an additional person than if the state created a tax handout to bring in 1,000 new jobs,” wrote McTigue, who advises state governments on streamlining their operations as vice president of outreach at George Mason University’s Mercatus Center.

Regulations were never intended to discourage employers from growing their businesses by keeping them neck-deep in cesspools of red tape and paperwork.

Instead, they were meant as common-sense measures to protect consumers, create a level playing field and help guide – and provide certainty to – business owners.

Paul Durbin, who’s owned and operated Judy’s Castle, a popular mom-and-pop diner in Bowling Green, for 22 years, says it helps him when the fire-department inspector comes twice a year to check his building and alert him to needed repairs involving wiring or equipment.

“They come in and actually help me,” Durbin said. “For example, they update their computer assessment of the building to make sure they know where the gas-shutoff switch, oven equipment and exits are so that if there’s a fire, they know what they’re getting into before they even get here.”

But he’s concerned about the costly effect some potential regulations – such as menu-labeling requirements – would have on his 13-employee operation.

“Someone would have to break down all the ingredients; I would have to print new menus and all of that would take up more space and it’s going to cost more money,” he said. “I’m either going to have to pass on the cost or eat it myself.”

Indiana, meanwhile, is knocking on the door of the top 10 business climates in the nation because its regulatory policies free employers from heavy-handed rules forcing them to decide between reducing current payroll, raising prices or just eating the cost.

The focus of Hoosier employers has become: “How many workers do we need to hire just to keep up with all of this new business?”

Are there any good reasons why similar results cannot be achieved south of the Hoosier State’s border?

Jim Waters is president of the Bluegrass Institute; Kentucky’s free-market think tank. Reach him at Read previously published columns at

Bluegrass Beacon: Sweet and sour capitalism

BluegrassBeaconLogoRetired University of Kentucky economics professor Marty Solomon in a recent Herald-Leader op-ed demonstrates noted gaps in his understanding of the free-enterprise system, which has done more than any other economic policy in history to tackle – and overcome – poverty.

Solomon defines capitalism as “an economic system that, through competition, drives the prices of goods and services to the lowest possible levels, which benefits the consumer while maximizing profits for the entrepreneur.”

By not even mentioning capitalism’s central tenet – private ownership of assets and all that entails – Solomon offers, at best, an incomplete view. Trying to follow it is like being forced to sit through an entire fuzzy, out-of-focus movie on a theater’s big screen.

This important, but missing, aspect in Bernie Sanders’ capitalism “is that owners have the freedom to utilize their assets – be it capital, land, brainpower or other resources – as they see fit, as long as they respect the like rights of others,” said John Garen, Gatton Professor of Economics at Solomon’s alma mater.

The answer to enlarging the middle-class pie is not Solomon’s solution – more government tax-and-regulatory activity that confiscates wealth or mandates artificial prices and wages.

Rather, it’s to “enable more private ownership, replete with full-throated competition so that incumbent corporations have to serve their customers to get ahead and maintain profitability,” Garen said.

Solomon’s complaint reflects the Sanders School of Economics’ mistaken notion of free-market capitalism, which actually is its very antithesis.

“Another problem with today’s capitalism is that very wealthy individuals and corporations can legally bribe elected officials to enact laws that provide lopsided economic benefits such as beneficial tax legislation, lucrative government contracts and relaxation of regulatory requirements on monopolies and environmental stewardship,” he writes.

What he rails against is “crony capitalism,” which occurs when government uses its force, as TV pundit John Stossel once described, to hand out favors to “the chosen few” while harming others in the process.

“It taxes you and me to give money and often special privileges to chosen ones – usually rich people with connections,” Stossel said. “As government grows, it gives out more favors – like handouts to so-called energy companies or union carmakers and bankers on Wall Street. This causes a great deformation and corruption of capitalism.”

Former “Tonight Show” host Jay Leno once highlighted a serious case of cronyism found in the nation’s agricultural policy, which, ironically, presidential candidates Sanders, a Democrat, and even Republicans like presidential candidate and Florida Sen. Marco Rubio continue to defend.

“The Department of Agriculture wants to use our tax money to buy 400,000 tons of sugar to limit supply and boost prices so sugar producers can pay back government loans that they could default on,” Leno jabbed. “You follow me here on this? We loan them money and now we’re giving them more money so they can pay back our loan. You still wonder why we’re $16 trillion in debt, anybody? Any questions?”


Does Solomon understand that such cronyism is the very opposite of free-market capitalism?

Does he understand that this sugar-subsidizing program forcing middle-class Americans to pay $3 billion more in sugar prices in order to prop up a few wealthy, connected individuals is the result of government doing exactly what he wants more of: controlling markets and establishing price controls?

Solomon speaks of how “the quest for profits and low costs has created an explosion of outsourcing to low-wage countries, resulting in the evaporation of millions of middle-class jobs.”

Yet does he realize that Uncle Sam’s continued abhorrent policy of propping up sugar prices results in confectioners moving abroad because of cheaper sugar?

Does he know that an Iowa State University study reports industries that depend on sugar would gain 17,000 to 20,000 new American jobs by eradicating such cronyism?

The problems Solomon laments about are not the consequences of free enterprise, but rather because government has abused its power, pushed the free-enterprise system to the side and created a crony economy in the process.

Jim Waters is president of the Bluegrass Institute, Kentucky’s free-market think tank. Reach him at Read previously published columns at