Q&A: Peter Schweizer Lashes Out At Obama 'Cronyism'4:00 PM EST Fri. Oct. 05, 2012
As part of a six month investigation into the job creation impact of the $840 billion American Recovery and Reinvestment Act (ARRA) on technology companies, CRN Editor News Steven Burke spoke with Peter Schweizer, a William Casey Fellow at the Hoover Institution, Stanford University, who was the first to document the stimulus windfalls for companies and politically connected one-percenters in his landmark 2011 book "Throw Them All Out -- How Politicians and Their Friends Get Rich Off Insider Stock Tips, Land Deals and Cronyism That Would Send the Rest Of Us To Prison."
Schweizer's book was instrumental in shining the spotlight on congressional insider trading, leading to the passage of the STOCK Act earlier this year, which makes it illegal for members of Congress to trade on non-public information.
[Related: 10 Top Tech Execs Visiting The White House]
For a closer look at how companies are playing the political game, see a preview of our exclusive report, "5 Companies That Milked The Stimulus." The full article will run Monday exclusively in the CRN Tech News app, available now in the Apple App Store.
Below is an excerpt from the interview.
Has there been a marked increase in corporate cronyism under President Obama given the $840 billion ARRA?
It has been huge. There is no question about it. And it is the stimulus. We were at a point where there was a very serious crisis, a financial crisis, and we're still debating now what the roots of that were. There is just no question that people were concerned about what the future was. This Keynesian economic notion -- which I don't tend to agree with -- the idea that if you spend money you are going to stimulate jobs, people are attracted to that idea.
And then, if you layer on top of that the attractive notion, for example, let's lessen our dependence on fossil fuels, fossil fuels from overseas and clean up the environment, that is a very, very attractive idea. And, that is really how it was packaged. So, with the stimulus you really had for the first time in American history an American president and his administration that had the opportunity to literally hand out hundreds of billions of dollars to companies whether it was related to infrastructure, whether it was related to high-speed Internet in rural areas or whether it was related to clean energy. So, this is an unprecedented level of cronyism.
Is the technology industry unusual in the level of corporate cronyism vs. other industries?
I think part of the reason too that cronyism prevails in the technology sector is that for politicians, the idea that you are spending money to help America's technological development sounds very exciting and very attractive. That is why I think there is more money in those areas, and here cronyism tends to be more prevalent.
You talked in the book about the success rate of companies backed by technology venture capitalist John Doerr in receiving government money. How unusual is that hit rate?
There is no question that John Doerr is a very smart investor. That is how he has made his money. But in this particular case, you have highly risky investments in this sector, and he has benefited from the political connections that he has enjoyed. This is extraordinary. I don't really know of any other single investment house -- and there are many that invest in green technologies -- that has anything even remotely approaching the success record that he has had in securing access to government money.
NEXT: Google Founder's BrightSource Investment And The Stimulus
Talk about Google founders Sergey Brin and Larry Page's investments and the stimulus.
BrightSource Energy got $1.6 billion for a solar facility that is going to be built on federal land. They got a sweetheart land deal from the federal government. They received $1.6 billion, and the Google founders are two of the largest investors in that venture. What happens a lot of times with crony capitalism is you end up getting middle-class taxpayers, in effect, subsidizing the business ventures of billionaires. I think it is hard in any fashion to try to determine why that is a good thing or to say that is a good thing. They are obviously very, very smart. They took risks in developing Google. They got handsome rewards. And if they feel that they can have some more success in the energy sector or other sectors, let them. But, don't expect the taxpayers to subsidize your financial risk taking.
An interesting case is Salesforce.com, which hired the former Federal CIO Vivek Kundra and has boasted about getting a significant share of the Federal Cabinet to adopt cloud computing with Salesforce.com CEO Marc Benioff also acting as a bundler for the Obama campaign. Is that a matter of "all is fair in love and politics" or a big conflict of interest?
I think it represents a huge conflict of interest. Unfortunately all the incentives seem to be for corporations to continue to move in this direction. The big [losers are] the taxpayer and the company that doesn't like to play these sorts of games. The big winners are those that raise money for political candidates and play the game of hiring lobbyists. Salesforce is a good example of that.
Often times we like to think that government contracts are always sort of sealed bid contracts, but in reality they are often not because bureaucrats get to write the rules and say this is the kind of product we want, this is the kind of technology we want, and suddenly there is only one firm or maybe two firms that actually fit that bill.
It is hard to quantify the jobs created from the $840 billion spent. Is there any way to determine how many jobs were created and how much money was wasted?
If you look, for example, at the green energy jobs when you go to recovery.gov, you can [search] on certain projects, and they are required to report jobs created. And, you'll find that often times the numbers are amazingly low, extraordinarily low. I think that is where, again, people were sold a kind of bill of goods with green jobs. The reality is that green energy companies are not labor-intensive companies.
Where does this end? We are in a political election season. Is there any end in sight to corporate cronyism?
I am encouraged that it has become part of the public lexicon. The American people are increasingly aware of it. And they don't like it. They don't like it instinctively. And so, the old arguments that we need to do this in the name of energy independence or we need to do this in the interest of the name of protecting jobs are viewed as increasingly suspect. So, I am very encouraged that it has become much more a part of the debate than it was even six months or a year ago.
PUBLISHED OCT. 5, 2012