Tag Archives: Subsidies

“Putting green lipstick on a pig doesn’t turn that pig into Ralph Nader.”

Mead on green subsidies:

Advocates of industrial policy have been pointing to ‘smart subsidies’ for green technology as proof that government can function as an effective venture capitalist, directing subsidies effectively toward ‘sunrise’ industries.

We will probably be hearing less of those claims now as the public digests the massive excess, failure and fraud that have turned the Obama administration’s green subsidy program into a symbol of good intentions gone awry.  It turns out public policy is hard, and not every green minded NGO apparatchik is very good at hard things.

Decrying what it calls a “gold rush” mentality that primarily benefited companies like Goldman Sachs and others in need of no special help, a recent article in the New York Times surveyed a range of projects where taxpayer and ratepayer subsidies have taken all risk from the private sector and all but guaranteed large profits “for years to come.”  Even some of the companies involved in the porkfest acknowledge that things got a little out of hand; some projects that have been heavily subsidized “would have been built anyway,” they say.  The drunken sailor on shore leave style economic stimulus spending gets special attention as wasteful, misguided and lavished on corporate welfare for energy giants.

Read the rest here.

President Obama was recently asked my George Stephanopoulos on GMA if he regretted the Solyndra loan. No, he said, because you have to look at the whole portfolio of investments. They knew that some of the loans would fail, as many investments do.

First, based on recent investigations, the White House team feared that Solyndra was a failing business model before the loan guarantee was granted. Second, the government should play a minimal role, if a role at all, in venture capitalism. As was noted, many of the projects that were heavily subsidized would have been built anyway, but now the government can claim the credit for the success and growth. With that credit comes a license to spend more, and with increased spending comes increased waste.

When looking at the whole portfolio, as President Obama instructs us to do, we should see a stronger case for the government to cut many such green subsidies.


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Filed under Energy

Food Follies

BY ANY reasonable measure, the current system of federal support for agricultural is a scandalous misuse of taxpayer dollars. In fiscal 2010, the federal government spent about $5.1 billion on payments to commodity producers — regardless of need — and another $13 billion on “counter-cyclical” aid, heavily subsidized crop insurance and “disaster” programs. Most recipients were far from poor. The payments distort markets and antagonize our trading partners while encouraging wasteful farming.

If there were ever a time to eliminate them for good, now would be it. Farm income, buoyed by high prices and strong exports, is projected at a record $137 billion for fiscal 2011. Meanwhile, the country faces a dire, long-term deficit. Reflecting these new realities, the budget drafted by House Republicans last spring called for $30 billion in cuts in the next 10 years; last month President Obama proposed $33 billion in net savings to the House-Senate budget supercommittee.

Yet there are signs the political will may be fading.

Of course there are.

There remains no “daunting” challenge faced by U.S. agriculture and there never has been a compelling economic argument for farm subsidies. Like so much beltway rhetoric, it is political speak without roots in economic reality. These subsidies should have been cut from the budget yesterday. Unfortunately, unless Washington, especially the Democrats, is serious about cutting wasteful spending, they are probably here to stay.

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Filed under Domestic Politics, Economics

Don’t Tax the Rich…

before you at least stop subsidizing them. Lawmakers are currently planning to cut farm subsidies, and then “in the same breath”, are arguing to send those savings right back to the farmers.

American farm subsidies are a shame and a disgrace.  According to the Times report, Farm households earn substantially more than other Americans; large farmers, who get the most from subsidy programs, make more than $200,000 a year.

If senators can’t bring themselves to slash programs like these, and are dishonest enough to try to cover their tracks, there are a lot of incumbents in both parties who need to be sent home in disgrace.

These subsidies have been buying corruption, dependency and obesity since the New Deal. If our lawmakers had even minimal traces of principle and economic literacy such farm programs would have gone away long ago. Those programs are here to stay.

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Filed under Economics, Economy

“We may as well try to enjoy it while it lasts.”

China is producing cheap solar panels and essentially subsidizing our green energy. Should we rejoice at the free panels or feel a Sputnik moment for fear of letting this future industry slip away?

Megan McArdle:

But won’t they gain a permanent strategic advantage over us, I hear you cry?

Well, this does sometimes happen. But it’s actually really rare. Notice how all the electronics goods seem to be manufactured in China? Even though we invented many of them (and the Japanese are responsible for a lot of the rest?)  Notice that all the jobs assembling sneakers and looming textiles seem to have moved along with them?  Sure, we had know-how and strategic supplier networks.  But these were no competition for enormously cheap labor.

Green energy will only be the next great industry for us if we are the ones to profit from it. Being the first mover in an industry does not guarantee the profits. Subsidies do, however, guarantee that we pay the R&D costs. Let China continue to subsidize our solar power consumption while we work on advancements in industries in which we have a comparative advantage.

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Filed under China, Energy

Who Besides Solyndra Got Loan Guarantees?

Megan McArdle explains, with many helpful infographics.

She also explains why the program’s success rate is misleading. Most of the firms receiving the money don’t need the help. They’d succeed with our without it. Those that most need the help – e.g. Solyndra – may fail, but the failure rate is hidden by the “success” of the other loans.

That is, I hope that the infographic will be broadly useful to people who support the program: I figure everyone should be interested to know where the money went.  (And here’s a spreadsheet for those who want to trundle through the data themselves). But I have highlighted what jumped out at me: most of the money has gone to enormous companies that should have no trouble accessing capital.  Established utilities, large multinational auto manufacturers, a global warehouse owner.  The bulk of these funds are not going to rectify some gap in the capital markets.  They’re straight subsidies to huge corporations.  Even some of the smaller firms/deals are owned by large corporations like Total SA.
Giving large, established companies extra-cheap loans to build power plants, run transmission lines, and fix up the roofs of their warehouses is, in the immortal words of P.J. O’Rourke, like paying a Dairy Queen owner to keep his ice cream freezers on.

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Filed under Domestic Politics, Economy, Energy, Role of Government