American chipmaker Intel will receive up to $19 billion in corporate welfare, the White House announced Wednesday, making it likely to be the largest recipient of taxpayer-funded aid intended to boost semiconductor manufacturing.
President Joe Biden is expected to make a formal announcement of the handout later today during a campaign stop at Intel's headquarters in Chandler, Arizona. In a statement, the White House said the subsidies would include $8.5 billion in direct grants to Intel, which will also have access to $11 billion in federal loans. For all that money, Intel is expected to create 30,000 jobs.
In other words, taxpayers will pony up over $283,000 per job created—and that's counting only the $8.5 billion in direct payments to the company.
The math gets even worse if you read Intel's press release, which clarifies that 20,000 of those 30,000 new jobs will be temporary construction jobs connected to building new facilities in four states.
But the real kicker is the fact that Intel was already planning to build those facilities—which makes sense, because there is huge demand for semiconductors and the market is growing increasingly concerned about the fact that so many of the world's high-end chips are made in Taiwan and are thus under constant threat from China. According to Intel, the federal government's handout "supports Intel's previously announced plans to invest more than $100 billion in the U.S. over five years to expand U.S. chipmaking capacity."
To sum up: The federal government is spending heavily to subsidize a successful, growing industry, is asking taxpayers to foot part of the bill for investments that the private sector was already funding, and is not spending the money in a particularly efficient way. Make it make sense!
Unfortunately, this is likely only the start. The Biden administration still has $39 billion in CHIPS Act subsidies to distribute in the coming months, according to The New York Times. Even before that money is out the door—and long before anyone has had a chance to measure how effective the spending was—administration officials and top executives at chip-making companies agree that Congress should pass another round of subsidies.
"I do think we'll need at least a CHIPS 2 to finish that job," Patrick Gelsinger, Intel's chief executive, told the Times this week, echoing comments made last month by Commerce Secretary Gina Raimondo, who is overseeing the distribution of this corporate welfare.
Even if the semiconductor industry needed government handouts—which, again, it clearly does not—directly subsidizing certain projects and companies would be a poor way to go about it.
For evidence, check out a new paper from Alex Muresianu, a senior policy analyst at the Tax Foundation (and former Reason intern), that contrasts the approaches taken by the CHIPs Act vs. the 2017 Tax Cuts and Jobs Act signed by then-President Donald Trump. By reducing corporate taxes and enacting a series of supply-side reforms, Muresianu concludes, the Trump tax cuts "caused a substantial increase in investment."
"In contrast," he writes, the targeted subsidies included in the CHIPs Act "have not led to a broad increase in private investment outside of subsidized sectors."
At National Review, Dominic Pino explains why this distinction matters. "Supply-side orthodoxy and industrial policy often have a similar goal: to increase capital investment. But they go about pursuing that goal in very different ways." Neutral reforms like tax cuts reduce the cost of capital investments and allow private markets to decide how best to allocate new investments.
On the other hand, industrial policies like the grants to Intel "requires a series of bank shots," Pino writes. The government has to pick which sector of the economy to subsidize and has to choose specific winners and losers within that sector, of course. Then, it also has to decide how much to invest in each company and make sure those subsidies aren't displacing private investments—and it has to do all of that "in the absence of reliable price signals and persist through relentless pressure from advocacy groups."
Of course, specific subsidies for certain companies create something that broader reforms for the economy do not: the chance for the president to stand in front of a construction site and take credit for the jobs being created there.
Even if they are tremendously costly to the taxpayers. And even if those jobs were going to be created anyway.
The post Federal Handout to Intel Will Cost $283,000 Per Job, and That's Being Generous appeared first on Reason.com.
]]>There was plenty of cheering in the press box after President Joe Biden's combative State of the Union address. Many pundits rushed to declare that the event had altered the course of Biden's flagging re-election campaign.
"If the Joe Biden who showed up to deliver the State of the Union address last week is the Joe Biden who shows up for the rest of the campaign, you're not going to have any more of those weak-kneed pundits suggesting he's not up to running for re-election," wrote Ezra Klein in the Sunday New York Times. Klein is at least engaging in a little self-deprecating wink there: The link in that sentence points readers to his own call, less than a month ago, for Biden to step aside.
Other reactions have been less self-aware. "People yapping for so long about Biden not being up to the job look pretty dumb," CNN analyst Jon Harwood tweeted. "A thought: the whole Biden-is-too-old thing was kind of a bubble, in the sense that people were buying it mainly because other people were buying it. Did Biden just burst that bubble?" wondered New York Times columnist Paul Krugman.
Meanwhile, CNN's insta-polling showed that just 65 percent of viewers had a positive view of the speech. Before you object that 65 percent sounds high to you: It's the lowest figure CNN has recorded in the past quarter-century, according to The Washington Post.
"The message now is that the public is wrong and must be ignored, for the sake of democracy," writes Matt Taibbi in Racket News, where he provides a rundown of some of the more "hilariously ostentatious ass-kissing ceremonies" in the wake of Biden's speech, including from MSNBC's Lawrence O'Donnell ("just astonishing") and Mika Brzezinski ("an incredible moment").
Look, I get it. Biden gave an objectively competent speech and the media love a comeback story. And if you're someone who believes that Biden's historically low approval figures have more to do with the "vibes" than with any tangible policy, maybe it's tempting to go all-in on trying to shift those vibes.
For Times columnist Ross Douthat, the lack of establishment consensus for Biden's polling struggles explains "why, perhaps, there was a rush to declare his State of the Union address a rip-roaring success, as though all Biden needs to do to right things is to talk loudly through more than an hour of prepared remarks."
Is it possible that polls in the coming weeks will show a shift in voters' opinion of Biden's presidency as a result of the State of the Union address? Sure, but I'm going to be skeptical until I see actual evidence that Biden's speech mattered to anyone whose job doesn't require watching it.
Oops! One of the more striking moments during the Republican response to Biden's speech, delivered by Sen. Katie Britt of Alabama, was a harrowing story about a woman who'd been kidnapped and repeatedly gang-raped by members of a Mexican drug cartel. Britt's speech attempted to tie the awful incident to the recent chaos along the U.S./Mexico border, but it actually happened nearly 20 years ago—and on the Mexican side of the border.
Confronted with those facts during an appearance on Fox News over the weekend, Britt suggested that the story should be taken seriously, if not literally.
Oscar night. Christopher Nolan's Oppenheimer won big Sunday night at the 96th Academy Awards. The biopic about one of the inventors of the atomic bomb claimed seven awards, including best picture, best director, best actor (Cillian Murphy), and best supporting actor (Robert Downey Jr.).
Mstyslav Chernov—the director of 20 Days in Mariupol, which won for best documentary feature—delivered a moving speech in which he said he wished he'd never had a reason to make the film about the Russian military's destruction of a city in eastern Ukraine. Human Rights Watch estimates that more than 10,000 residents of Mariupol died during the first year following Russia's invasion.
"I wish to be able to exchange this to Russia never attacking Ukraine, never occupying our cities," Chernov said. "The people of Mariupol and those who have given their lives will never be forgotten because cinema forms memories and memories form history."
#20DaysinMariupol wins best documentary feature at the 2024 #Oscars pic.twitter.com/9YvoPqWKqR
— The Hollywood Reporter (@THR) March 11, 2024
Other highlights from the big night in Hollywood included another Oscar win for once-homeschooled musical superstar Billie Eilish and her older brother Finneas O'Connell for their song "What Was I Made For," written for the Barbie movie. I'll also applaud Murphy's acceptance speech for noting that the world still lives in Oppenheimer's shadow and dedicating his award "to the peacemakers everywhere," and the filmmakers behind Zone Of Interest for their anti-war statements while accepting the best international film award. And finally, it was a historic night for Godzilla Minus One (a tremendous film with some very libertarian themes), which became the first Godzilla movie to win an Oscar when it claimed the prize for best visual effects.
Scenes from Virginia: I might not have to pay for a stupid new arena! State lawmakers in Richmond appear likely to approve a state budget bill that does not include plans for a proposed $2 billion arena in Alexandria. The structure was supposed to be a new home for the National Basketball Association's Washington Wizards and the National Hockey League's Washington Capitals.
The hero of this story seems to be state Sen. L. Louise Lucas (D–Portsmouth), whom Republican Gov. Glenn Youngkin has blamed for single-handedly stopping the arena deal. Lucas, who chairs the powerful Senate Finance and Appropriations Committee, told The Washington Post last week that she does not believe the proposed arena and its $1.5 billion in public debt are a good deal for taxpayers and that the teams' owner, Ted Leonsis, ought to pay for the stadium himself. Amen!
Update from Virginia: Last Monday, in this exact space, I noted that Youngkin had "refused to endorse [former President Donald] Trump (so far)." Two days later, Youngkin bent the knee.
The post Cheering From the Press Box appeared first on Reason.com.
]]>Voters in California went to the polls this week for a primary election that's the first step towards picking a permanent replacement for the late Sen. Dianne Feinstein, who died nearly six months ago.
In Washington, meanwhile, Feinstein is still wielding influence from beyond the grave. Her name is attached to 256 different earmarks included in the budget bill working its way through Congress this week. Those pork projects will cost taxpayers about $1.1 billion if the bill passes in its current form, the Washington Examiner reported Tuesday.
And that only scratches the surface. The partial budget deal—which contains six of the 12 appropriations bills that make up the discretionary portion of the annual federal budget—is overflowing with earmarks to fund lawmakers' pet projects. All told, there are more than 6,000 earmarks in the bill, costing taxpayers more than $12.7 billion, according to Sen. Mike Lee (R–Utah), who has urged Republicans to vote against the package.
Many of the earmarks in the package seem like things that would be better funded by local or state taxpayers, who at least might stand to benefit from projects like new sewer systems, new runways and other upgrades for tiny rural airports, and a plethora of highway projects. Some are truly head-scratching, like Sen. Tammy Baldwin's (D–Wis.) $1.4 million earmark for a solar energy project in Wisconsin, one of the places in America least well suited for a solar farm.
Plenty of others make no sense for the public to be funding at all. Like a $3.5 million earmark secured by Sen. Debbie Stabenow (D–Mich.) for The Parade Company, which runs Detroit's annual Thanksgiving Day parade. Or the $2.5 million earmark that will help build a new kayaking facility in Franklin, New Hampshire, curtsey of Sen. Jeanne Shaheen (D–N.H.), as well as $2.7 million line item to help build a bike park in White Sulfur Springs, West Virginia, a town with a population of less than 2,300 people.
For that amount of money, "you could buy EVERY resident a $1,200+ bike" Sen. Rick Scott (R–Fla.), who has become a vocal critic of the earmarks in the bill, posted on X (formerly Twitter). "There's no way they need this much of YOUR money for this."
The same could be said for several Republican-based earmarks too. Sen. Lindsey Graham (R–S.C.) has inserted at least eight earmarks into the bill, forcing federal taxpayers to put up more than $33 million for things most will never use, like a new trail at Coastal Carolina University and an ROTC facility at the University of South Carolina. Among the dozens of earmarks inserted by Sen. Lisa Murkowski (R–Alaska), perhaps the strangest is the $4 million grant for the "Alaska King Crab Enhancement Project."
Wait, you might be thinking, didn't Congress ban the use of earmarks when tea party-era Republicans controlled the government? Yep, they did. But like fiscal responsibility and concern about America's ballooning entitlement costs, those efforts to limit pork barrel spending are now distant memories. Democrats voted to reinstate earmarks in 2021, and Republicans soon followed suit.
To Congress' credit, earmarks are now handled more transparently than they used to be—which is why you can view the full list of earmarks included in the budget bills here.
Still, some things never change. Earmarks remain expensive, wasteful exercises in cronyism—and with the country $34 trillion in debt, Congress should not be putting taxpayers on the hook for frivolous handouts to politically connected friends.
The post The Budget Deal Is Overflowing With $12 Billion of Earmarks appeared first on Reason.com.
]]>The Biden administration has yet to announce how it plans to spend the $52 billion in semiconductor manufacturing subsidies that Congress approved more than 18 months ago.
But the administration is already laying the groundwork for another round of taxpayer-funded subsidies for advanced computer chips—with an argument that reveals how economically illiterate the whole effort has been all along.
"I suspect there will have to be—whether you call it Chips Two or something else—continued investment if we want to lead the world," Commerce Secretary Gina Raimondo said this week while speaking at an Intel corporate event, Bloomberg reported. "Chips Two" is a reference to the CHIPS and Science Act, that 2022 bill that authorized $52 billion in subsidies, a sizable chuck of which is expected to find its way into Intel's pockets when the White House announces its funding plans in the coming weeks.
Perhaps nothing better illustrates the way the government approaches issues than throwing an arbitrary amount of money at a perceived problem, and then declaring that more money will be needed to solve that problem even before the first pile of money has been distributed or the usefulness of the spending measured.
But the real kicker here is Raimondo's explanation for why more subsidies might be necessary.
"She pointed to the computing demands of artificial intelligence, adding that she has spoken with OpenAI Chief Executive Officer Sam Altman, who's working to secure US government approval for a massive venture to boost global manufacturing of AI chips," Bloomberg explained. "'When I talk to him or other customers in the industry, the volume of chips that they project they need is mind-boggling,' she said."
What? The argument for more federal subsidies for semiconductors is that there is suddenly a surge in demand for them? Is this a joke?
If it's not immediately clear why that argument is nonsense, think about it in any context other than semiconductors. Imagine that there was a new technology that ran on potatoes, and suddenly there was skyrocketing demand for potatoes. Would that require a massive government subsidy program to produce more potatoes, or would farmers suddenly have a huge incentive (independent of any government scheme) to grow more potatoes?
In fairness, one of the main arguments for getting the government involved in subsidizing semiconductor manufacturing is that advanced computer chips are not exactly potatoes. Building a fabrication facility for high-end chips is a major investment, the future is always somewhat uncertain, and companies like Intel might be more willing to take that risk if they weren't shouldering the whole cost. (Of course, they'll still be more than happy to collect the whole reward when the risk pays off.)
What Raimondo said this week undermines that case for government intervention too. If some of the most successful tech companies in America are telling Raimondo that they expect to need to buy a lot more semiconductors in the coming years, that should be a signal to Intel and other advanced chipmakers they can safely invest in building out capacity for chip production (in the U.S. or wherever it makes the most economic and strategic sense to do that) and rest assured that their investments will pay off because their future products will have buyers.
A more sensible industrial policy would look at the huge advances being made in AI and chip manufacturing and conclude that there's no need for the government to start picking winners and losers in what is clearly a robust, healthy marketplace.
Besides, governments can juice demand by throwing money around, but they're not very good at influencing the supply side of the equation—and that's where most of the bottlenecks in chip manufacturing continue to exist. There are only a few companies in the world, for example, with the technical skills to make the machines used to make advanced semiconductors.
Think about potatoes again. Now imagine that there were only a few places on the planet with the soil necessary to grow potatoes. Subsidizing potato production would not solve that problem.
But once the government gets involved in subsidizing an industry, that industry has a strong incentive to keep those subsidies flowing. We're already seeing that, even before the CHIPS Act funds have been distributed. Earlier this month, a spokesman for Intel told The Wall Street Journal that the company is slowing construction on a new plant in Ohio while waiting to be showered with taxpayer money.
It's foolish for the Biden administration to play along, but it appears eager to do so. Demand for advanced semiconductors remains high, but unfortunately so too does demand for taxpayer-funded handouts.
The post If Semiconductor Chip Demand Is High, Why Do We Need More Subsidies? appeared first on Reason.com.
]]>All investment is risky. What better way to avoid that risk than to use other people's money? Federal, state, and local governments dispense gifts, grants, and loans to private companies, generously funded by taxpayers and usually with vague promises of economic development in return. While politicians say they don't like to pick winners and losers, even the "winners" sometimes turn out to be losers for taxpayers.
General Motors I.T.
Innovation Center
Chandler, Arizona
General Motors announced in 2013 that it had picked Chandler for the site of its fourth Information Technology Innovation Center, an internal software development facility. The company would invest $21 million and create 1,000 jobs, and in return Chandler promised over $1 million in economic incentives between 2015 and 2017. In August 2023, G.M. announced that it would close the facility, laying off 940 out of 1,029 workers by the end of October. Chandler's development director told local news that the announcement "came as a complete surprise."
Lordstown Motors
Lordstown, Ohio
Amid the financial crisis in 2009, General Motors (G.M.) received $60 million in tax breaks to expand its Lordstown plant. All the company had to do was keep the plant open through at least 2039; instead, G.M. closed the plant in 2019. Rather than claw back the full amount, the Ohio government settled for a $20 million repayment. G.M. then sold the factory to upstart electric vehicle–maker Lordstown Motors, which received another $24.5 million in grants and tax credits. In June 2023, after delivering fewer than 40 vehicles to customers, Lordstown Motors filed for bankruptcy.
Tesla and SolarCity
Buffalo, New York
In 2013, New York pledged as much as $1 billion toward economic development projects to revitalize Buffalo as a manufacturing hub. The largest beneficiary was SolarCity, a solar panel manufacturer later acquired by Tesla in 2016. The state offered $1.25 billion in grants and tax credits in exchange for a factory that would create 5,000 jobs and generate 1,000 solar panel installations per week. But in 2023, after eight years of lowered job requirements and shifting deadlines, the factory employed just 1,700 people (mostly Tesla analysts) and averaged 21 solar panel installs per week.
Yellow Corporation
Overland Park, Kansas
In 2020, the Treasury Department was apportioned $17 billion in pandemic relief funds to disburse to companies it deemed vital to national security. It loaned $700 million of those funds to Yellow Corporation, a freight trucking company worth only $70 million that had lost $104 million the prior year. According to an audit released in 2023, Yellow had an outstanding balance of $729 million in March and had paid only a measly $230 toward the loan's principal. Yellow filed for bankruptcy in August 2023.
Amazon HQ2
Arlington, Virginia
When Amazon announced plans in 2017 to open a second headquarters ("HQ2"), it encouraged "local and state government leaders" to compete for the project. After receiving several multibillion-dollar offers, Amazon chose Arlington—directly adjacent to Washington, D.C. The state offered as much as $750 million in conditional grants for Amazon to build its campus in Virginia, and in April 2023, the company requested its first tranche of taxpayer funds—over $152 million. While phase one of the project was completed in May 2023, construction is paused indefinitely on phase two.
The post The Government Is Better at Picking Losers Than Winners appeared first on Reason.com.
]]>The Washington Post reports that Virginia state and local governments may be about to give Washington Capitals (NHL) and Washington Wizards (NBA) owner Ted Leonsis a giant $1.35 billion subsidy to build a new stadium complex in Alexandria—the largest-ever government stadium subsidy:
A Northern Virginia sports arena that would move the Washington Capitals and Wizards out of downtown D.C. would receive the largest-ever public subsidy for a project of its kind, an estimated $1.35 billion in state and local funds, if it goes forward….
The net cost to taxpayers would ultimately reach an estimated $1.35 billion, according to the study. That includes $1.15 billion directly for the project — more than any comparable facility on record, according to J.C. Bradbury, a Kennesaw State economics professor who studies sports facilities and reviewed the study for The Post.
Virginia Gov. Glenn Youngkin claims the money will mostly come from revenue that wouldn't be available in the absence of the project. I'll believe that when I see it! Among other things, that claim doesn't take account of the loss of revenue from alternative uses of the same land. The Post reports that experts who have examined the plan are skeptical of that claim as well.
There is broad cross-ideological consensus among economists and other experts that sports stadium subsidies create net losses for communities, not gains. The billionaire owners and millionaire players make out like bandits. The general public, not so much. A recent survey of 130 studies on the impact of sports stadiums, written by economists J.C. Bradbury, Dennis Coates, and Brad Humphrey, concludes that "[e]ven with added nonpecuniary social benefits from quality-of-life externalities and civic pride, welfare improvements from hosting teams tend to fall well short of covering public outlays." Bradbury is one of America's leading sports economists.
Sports stadium subsidies may be an even worse deal in northern Virginia than in most other areas. The region suffers from a serious housing shortage, and needs to build more. Arlington County (where I live), and Alexandria, where the new stadium complex would be built, recently liberalized zoning restrictions that previously severely restricted construction. But more needs to be done along these lines. If state and local authorities want to repurpose a large chunk of real estate, they should let developers build new housing there. That would simultaneously bolster our economy and enable more people—especially the lower middle class and working class—to "move to opportunity."
As a libertarian, I am skeptical of the case for providing welfare for the poor. But I can at least understand and respect the logic behind them. By contrast, there is no plausible justification for giving corporate welfare to billionaire sports team owners. If Mr. Leonsis wants to move his teams to Virginia, he should be welcome to do so. But he should pay for the stadium himself, not ask the state for handout.
I have nothing against NBA and NHL teams. Indeed, I am a big fan of both leagues. But the state shouldn't subsidize my entertainment. Team owners are more than capable of building stadiums themselves, paying for them from their profits. That is in fact how stadiums were built during the early to mid-twentieth century, until public subsidies became common, starting in the 1950s. If unsubsidized private enterprise could build Fenway Park and the original Yankee Stadium a century ago, it can surely accomplish similar feats in today's much wealthier and more technologically advanced society.
Longtime readers may recall that, though I live in Virginia, I grew up in the Boston area and am a Celtics and Bruins fan. Cynics may suspect I would be more supportive of subsidizing the Caps and Wizards if I were a fan of those franchises.
But my opposition to stadium subsidies is not dependent on any such considerations. For example, I also think the city of Worcester, Massachusetts was wrong to subsidize the construction of a Red Sox minor league stadium, even though I am a big Red Sox fan. But this Massachusetts boondoggle (which cost Worcester some $160 million) is no justification for Virginia doing a much larger one. Our region should learn from the mistakes of others, not imitate them.
Fortunately, the stadium subsidy isn't yet a done deal. Among other things, it will have to be approved by the Virginia state legislature and the Alexandria City Council. They should just say no.
The post Virginia Should Refuse to Subsidize the Construction of a New Stadium for the Capitals and Wizards appeared first on Reason.com.
]]>At tonight's Republican presidential debate, former United Nations ambassador and South Carolina governor Nikki Haley took a lot of flak for her entanglements with corporate America.
"You left government service in 2018 with just $100,000 in the bank. Five years later, you're reportedly worth $8 million, thanks to lucrative corporate speeches and board memberships like you had with Boeing," said rival candidate Vivek Ramaswamy.
Haley defended her record by saying that when Boeing started to ask for government bailouts during the pandemic, she resigned from the board on principle.
"I served [on Boeing's board] for 10 months, and then when they decided after COVID that they wanted to go for a corporate bailout. I've never supported corporate bailout, so I respectfully stepped back and got off the board," said Haley.
It's a nice statement of free market principles. If only the former governor had stuck to them throughout her career.
When governor of South Carolina, Haley felt differently about corporate subsidies. In 2013, Haley signed into law a bill that gave Boeing $120 million in bond money to support an expansion of its manufacturing facilities in the state.
Before that, as a state legislator and gubernatorial candidate in 2009, Haley supported a package of $900 million in subsidies to Boeing to locate manufacturing facilities in the state, The Wall Street Journal reported earlier this year.
Haley and her surrogates have brushed off this criticism by saying that she was happy to spend South Carolinians' tax money to create jobs in South Carolina but draws the line at federal bailouts.
Haley "was proud to support the expansion of a major South Carolina jobs provider, helping thousands of local families and South Carolina businesses. That's entirely different from a Washington bailout that is far removed from most of the taxpayers who would pay for it," a campaign spokesperson told the Journal earlier this year.
Haley herself said tonight: "I love Boeing. They build good commercial airplanes. They build airplanes for our Air Force. I am proud of them. They employ a lot of people in South Carolina."
This is a distinction without a difference.
Corporate subsidies are always a transfer from one party to another, regardless of how geographically concentrated the benefactors and beneficiaries are.
It's true that federal taxpayers are getting screwed by a bailout of Boeing. The money they're forced to spend propping up the company could have otherwise gone to goods and services they valued more. That spending would also have "created" or "saved" jobs—in industries that consumers cared about more.
The same is true of subsidies paid by South Carolina taxpayers to support a company's South Carolina manufacturing facilities. Those tax dollars could have gone to things that South Carolinians actually wanted. Instead they went to Boeing.
The major distinction between state subsidies Haley supported and the federal bailout she didn't is that the costs of the former were concentrated on her constituents.
In fact, in one way, the corporate subsidies Haley supported for Boeing while governor are worse than the federal bailout she quit Boeing's board over.
She showered money on the company when it was riding high in a good economy. It was then, when the company needed no help attracting capital and customers, that Haley decided to funnel taxpayer resources to them. Yet Haley drew the line at supporting subsidies in 2020, when the company (like the rest of the economy) was facing extreme economic uncertainty.
As it turns out, Boeing didn't end up taking a taxpayer bailout during the pandemic. It issued additional debt instead and rode out the storm.
If it could do that then, when the world seemed to be falling apart, it obviously could have done it in 2013.
The post Nikki Haley Opposed Boeing Subsidies at Tonight's GOP Debate. As Governor, She Gave Boeing Millions. appeared first on Reason.com.
]]>Each year since 2018, the Center for Economic Accountability (CEA)—a nonpartisan think tank opposed to corporate welfare—has named its Worst Economic Development Deal of the Year, a dishonor awarded to the most egregious misuse of taxpayer funds nominally intended to spur economic growth.
This year, the ignoble honor goes to Michigan, which has awarded over $1.75 billion to Ford Motor Co. and Contemporary Amperex Technology Ltd. (CATL), a Chinese battery manufacturer. The two companies are jointly developing a factory in Marshall, Michigan, that would build lithium iron phosphate batteries for the automaker's electric vehicle (E.V.) lineup.
In its announcement, the CEA breaks down what the state has pledged so far, which includes $630 million worth of road paving and site development; grants from various state funds of $210 million, $120 million, and $36 million; and a 15-year tax abatement valued at $772 million. Other estimates have put the total amount at $2.2 billion.
Last month, facing strong economic headwinds, Ford announced it was "re-timing and resizing some investments." While the Michigan plant was originally intended to create 2,500 jobs, Ford changed its pledge to 1,700 jobs and lowered its potential output by 40 percent, estimated to shrink the company's financial investment by $1 billion or more.
Since Ford originally pledged $3.5 billion, Michigan's contribution to the project could be nearly as much as what Ford plans to spend on its own factory. Gov. Gretchen Whitmer, a Democrat, told reporters that Michigan's investment may be "resized" as well, and "as Ford has had to make some changes…the state's role will change as well."
Of course, the deal's merits were questionable from the start. When the project was first announced, Whitmer's office claimed it would have "an employment multiplier of 4.38, which means that an additional 4.38 jobs in Michigan's economy are anticipated to be created for every new direct job."
This is a fanciful notion. Tim Bartik of the W.E. Upjohn Institute for Employment Research has estimated that a more typical multiplier on a local or state level is between 1.5 and 2. Last month, Bartik calculated the estimated benefits of Michigan's proposed investment; while he was broadly positive, he noted that a 4.38 multiplier was "very high," and "if the Ford project had a more typical multiplier—2.5 rather than 4.38—the project's gross benefits would be less than the incentive costs."
The automaker's announcement that it would back off on its Michigan development came just a month after the automaker announced it was delaying $12 billion in E.V. investment across the country due to financial losses. Ford, which previously estimated that it would lose as much as $4.5 billion this year on its E.V. division, revealed in October that it lost $36,000 on each E.V. it sold in the third quarter.
Notably, this marks the second year in a row that the CEA has given its highest dishonor to a plant making E.V.s or E.V. batteries: Last year's "winner" was the state of Georgia, which inked a lucrative deal with upstart E.V. manufacturer Rivian worth as much as $1.5 billion in state subsidies at a time when the company had delivered fewer than 50 vehicles to customers.
In 2020, the CEA singled out Ohio's award of over $60 million for General Motors to keep its plant in Lordstown open; the automaker closed the plant in 2019 but was only made to repay a portion of the incentives. It later sold the plant to Lordstown Motors, an E.V. manufacturer that benefited from $24.5 million in subsidies before declaring bankruptcy this year.
"It's notable that in five years, we've now had two electric vehicle battery plants and one EV assembly plant stand out as the worst economic development deals of their respective years, even during an era of unprecedentedly large and dumb subsidies by state and local governments," CEA President John Mozena noted in the press release. "Federal industrial policies promoting politically favored technologies are driving short-sighted decisions by state and local elected officials, and communities across the country will be paying the price for those deals long after the politics and policies have moved on."
The post Ford E.V. Battery Plant in Michigan Named Worst Economic Development Deal of 2023 appeared first on Reason.com.
]]>When a state gives away tax money to a private company in an attempt to sway its business decisions, the least that a taxpayer can hope for is some openness in the process.
Unfortunately, the state of Michigan's economic development agency is actively preventing transparency, leaving questions on how the state plans to spend billions of taxpayer dollars unanswered.
In December 2021, Michigan Gov. Gretchen Whitmer, a Democrat, signed legislation establishing the Strategic Outreach and Attraction Reserve (SOAR) program, intended "to ensure the state can compete for billions of dollars in investment and attract tens of thousands of jobs to bolster our economy." SOAR funds would be disbursed with approval from the state Senate Appropriations Committee and would benefit companies that chose to do business in the Great Lake State.
As Reason reported in May, SOAR disbursed $1.4 billion in its first 18 months, all to benefit companies making electric vehicles, batteries, or battery components.
This week, Beth LeBlanc of The Detroit News reported that since its founding, "at least 163 individuals or entities have signed non-disclosure agreements" (NDAs) related to SOAR projects. The agreements were required by the Michigan Economic Development Corporation (MEDC), which manages the SOAR program.
The total includes 27 sitting state lawmakers, including state House Speaker Joe Tate, state Senate Majority Leader Winnie Brinks, and the chairs of the House and Senate appropriations committees, all Democrats. It also includes the offices of Whitmer and U.S. Reps. Elissa Slotkin and Dan Kildee (both Democrats), plus 11 former lawmakers, 30 legislative staffers, and "at least three local school districts and several local governments hoping to land projects in their areas."
Multiple lawmakers "said they were required by the MEDC to sign an NDA to participate in the appropriations process," LeBlanc wrote, while others "said they signed NDAs in order to serve on task forces seeking to improve the SOAR program amid concerns over how it is administered."
LeBlanc reports that the agreements—some of which last up to five years, longer than any state lawmaker's term—prevent signers from revealing information about projects until they are publicly announced. In certain cases, this could impact lawmakers' votes: In February, the state Senate approved a spending bill that included $630 million for site preparation for a Ford battery plant in Marshall. The bill passed just five hours after it was introduced in the Senate Appropriations Committee, leaving any lawmakers not on the committee precious little time to dig into its details.
In September, Ford announced that it had paused construction on the Marshall plant, which by that point had received $1.7 billion in pledged incentive funds.
Nondisclosure agreements are not new to SOAR, unfortunately: In January 2022, barely two weeks after Whitmer signed legislation to create the program, the Detroit Free Press reported that 13 state lawmakers—including the state House speaker and minority leader as well as the Senate majority and minority leaders—had signed NDAs relating to potential SOAR projects.
State officials counter that some level of secrecy is necessary, especially when negotiating with hundreds of millions or even billions of dollars at stake. An MEDC spokesperson told The Detroit News that "this is the nature of the national landscape" and that the agency is "duty-bound to secure these strategic opportunities whenever possible in order to deliver greater prosperity to our fellow Michiganders throughout the state."
But not everybody agrees. Lonnie Scott, executive director of progressive advocacy group Progress Michigan, called such NDAs "a major red flag for working people across this state who care about accountable government," adding that "Michigan needs more transparency, not less." While state Rep. Emily Dievendorf (D–Lansing) has signed NDAs, she told The Detroit News that the use of such agreements "has really worn on the trust in our communities."
Last year, state officials offered semiconductor manufacturer Micron Technologies $27.9 billion in tax breaks and incentives over 50 years to build a "megasite" factory in Eagle Township; Micron ultimately chose to build in Syracuse after the state of New York offered even more. Earlier this year, residents filed a recall petition against Eagle Township Supervisor Patti Schafer on the grounds that she "signed a non-disclosure agreement" that "limited the information available to Eagle Township residents affected by the potential development." Last week, Schafer lost her recall election by nearly 50 points in a three-way race.
There is much evidence that these expensive giveaways of taxpayer money are a bad deal for states that reward billion-dollar companies and don't provide the promised benefits for state residents. But if states continue to insist upon making such deals, then at a bare minimum there should be transparency at every step of the process.
Taxpayers should know where and how their money is spent. Lawmakers should not be forced into silence in order to negotiate deals, and they certainly shouldn't be prevented from registering complaints about how the money is being administered.
The post Michigan Lawmakers Signed Nondisclosure Agreements, Can't Discuss Corporate Welfare Scheme appeared first on Reason.com.
]]>In the grand ballroom of American politics, Democrats have long waltzed to the melody of progressivism while ridiculing Republicans' preference for outdated tax cut tunes. Ironically, they don't want to pay for their style of big government with higher taxes on ordinary Americans, which their expansionary ambitions would require. Instead, they loudly proclaim that they want to tax the rich. It remains to be seen how true this is.
Indeed, while Democrats profess their devotion to social justice and fight against income inequality, they often push for policies that favor the rich. Take their nonstop battle over the last five years to ease the tax burden of their high-income constituents.
The State and Local Tax (SALT) deduction cap, part of the 2017 Tax Cuts and Jobs Act (TCJA), placed a $10,000 limit on the amount of state and local taxes that can be deducted from federal taxable income. This move predominantly affected high earners in high-tax states like New York, California, and many others that are Democratic strongholds.
That's a tax hike on the rich. This shouldn't bother Democrats, who are usually happy to demonstrate their egalitarian chops by clamoring for that very thing. Yet this time, by demanding repeal of the SALT cap, they are on the front lines of a battle to restore tax breaks for the rich. As it turns out, when affluent Californians and Northeasterners felt the pinch, Democrats were ready to cha-cha for tax relief.
Contrast this with the refusal by moderate New York Republicans to vote for Jim Jordan (R–Ohio) for House speaker in exchange for doubling the deduction cap to $20,000 for individuals and $40,000 for married couples. Now, this might mean these guys really didn't want Jordan as speaker, but they wouldn't roll over even in exchange for tax cuts for their own constituencies.
Would New York Democrats be so principled? Back in 2021, 17 of 19 members of this delegation threatened to block a Democrat-sponsored infrastructure bill if the SALT deduction cap wasn't entirely repealed. I would have been OK with that crony bill failing; I highlight this incident only to reveal some Democrats' commitment to tax breaks for rich blue-state voters.
Add to this the fact that big government tends to work out well for people with big bank accounts. Billions of dollars in tax credits and subsidies have gone de facto to high-income taxpayers to buy expensive electric cars, or to large, well-connected companies to build green infrastructure or semiconductors they would have produced anyway.
For all the populist huffing and puffing, many big-government policies squarely hurt middle-class and poorer Americans. A good example is Democrats' starring role in Congress' refusal to reform insolvent entitlement spending. It amounts to supporting an enormous transfer of money, through regressive payroll taxes, from the young and poor to the old and rich.
Even Democrats' support for raising the corporate income tax rate from its current 21 percent to 25 percent is inconsistent with their populist self-identification. As economists have long known, most, if not all, of the economic burden of corporate income taxes is shouldered by primarily middle-class workers in the form of lower wages. It's wrong to call this a tax on the rich.
There are other instances in which Democrats balk at the notion of raising taxes or even, in Republican-like fashion, support tax cuts. In 2010, they heralded the passage of the Affordable Care Act. However, one key funding mechanism was a 2.3 percent excise tax on medical devices.
Many Democrats eventually joined Republicans in calling for this tax's repeal, citing the potential negative impact on the medical device industry. By 2015, even liberal stalwarts like Sen. Elizabeth Warren (D–Mass.) were advocating to suspend the tax. It was permanently repealed in 2019 as part of a year-end spending package.
In 2011, Democrats, led by then-President Barack Obama, pushed for an extension of the payroll tax cut, a policy that provided relief to millions of working families. While this move aligned with their commitment to supporting the middle class, it marked another significant departure from their traditional stance on tax cuts, showing a willingness to embrace tax relief when politically expedient.
Soon, Congress must debate the sunset of the TCJA's tax relief provisions in 2025, which are scheduled to raise taxes by roughly $3 trillion over a 10-year period. It will be entertaining to watch Democrats extend a vast majority of these policies, including some for the benefit of very well-off Americans, while continuing to blame former President Donald Trump's tax cuts for raising the deficit.
COPYRIGHT 2023 CREATORS.COM.
The post Democrats Say They're Fighting Inequality. But Many of Their Policies Favor the Rich. appeared first on Reason.com.
]]>As the Nevada Legislature was considering a bill earlier this week that would give the Oakland Athletics about $600 million in public money for a new stadium in Las Vegas, the team inadvertently made a pretty good argument for why it doesn't need the handout.
Here's what happened: On Tuesday, Athletics fans in Oakland staged a "reverse boycott" in an attempt to demonstrate that the team—which has for years lagged near the bottom of the MLB in terms of attendance—actually could put butts in the seats if the on-field product was any good. The Athletics have one of the worst records in the majors this year and have posted an average attendance of about 9,000 per game, but more than 27,000 people showed up for Tuesday's reverse boycott, The Mercury News reported. That's still only about three-quarters of the capacity of their current home, Oakland-Alameda County Coliseum.
Perhaps not wanting to be seen as profiting from a protest staged against the team's owners, the Athletics announced that they would donate all ticket sale revenue from Tuesday's game to a local food bank. A noble gesture, sure, but a revealing one too. In a tweet, the team said ticket revenue from the game totaled $811,107.
That's over $800,000 in ticket revenue—a total that does not include sales of overpriced beers, $7.79 hot dogs, team merchandise, etc.—from a single not-sold-out game. Each team gets 81 home games in an MLB season. It's not hard to do the math.
There's nothing wrong with the Athletics potentially earning hundreds of millions of dollars in ticket sales every year, of course. Quite the opposite: It's a testament to America's prosperity that even a struggling professional baseball franchise is still, by any normal measure, a very lucrative business.
But it's more than a little awkward for the Athletics to broadcast that fact this week, after months of telling lawmakers in Nevada that the team—more specifically, team owner John Fisher—requires taxpayers to pick up a sizable portion of the tab for a new ballpark.
It didn't make much of a difference in the end. Nevada lawmakers approved the stadium bill this week, and Gov. Joe Lombardo, a Republican, signed it. The bill provides $380 million in direct subsidies from the state to the team, but the actual tab for the public is $600 million once tax breaks and other financing are included. At his Field of Schemes blog, stadium subsidy critic Neil deMause estimates this to be the third-largest stadium subsidy ever awarded to an MLB franchise.
Even though it is common knowledge that the public never comes out ahead on stadium deals, the Athletics have hired consultants to promise that this time is different. It's true that there's no other city quite like Las Vegas—stadium backers say the 40 million annual tourists flowing through town make the math work in ways that it doesn't in other places.
Unfortunately for them, it's possible to check the math on those claims. Berry College economist E.F. Stephenson found that there is no statistically significant increase in hotel room occupancy rates when the Vegas Golden Knights, the city's NHL team, play home games. Maybe more visitors will flock to Las Vegas to see a bad baseball team play, but that seems unlikely. Instead, as is almost always the case, any economic activity directed toward the new ballpark will be shifted away from other entertainment options in the area.
"People will always say, 'Oh, but this one is different.' Every single stadium deal I've ever looked at the people who are supporting this say, 'This one will be different.' And when we look at it 15 to 20 years later, it's exactly the same as they always are," J.C. Bradbury, a sports economics professor at Kennesaw State University, told The Nevada Independent earlier this month. "There's always an excuse, and the reason is that there's a lot of money to be made by getting this stadium funded. And so the owner is going to benefit tremendously."
The Athletics don't need a handout. The public money being thrown at the stadium deal is a bad investment. All those facts are right out in the open, but lawmakers in Nevada didn't bother to notice.
The post The Oakland Athletics Just Showed Why They Don't Need Taxpayers To Buy Their New Stadium appeared first on Reason.com.
]]>The ongoing vendetta between Florida Gov. Ron DeSantis and Disney escalated yet again today when Disney filed a federal lawsuit accusing DeSantis of unconstitutional retaliation against the entertainment behemoth for protected speech.
In a lawsuit filed in the U.S. District Court for the Northern District of Florida, Disney says it has been subjected to "a targeted campaign of government retaliation—orchestrated at every step by Governor DeSantis as punishment for Disney's protected speech," which "now threatens Disney's business operations, jeopardizes its economic future in the region, and violates its constitutional rights."
DeSantis, who is widely expected to run for the 2024 GOP presidential nomination, has made his high-profile feud with Disney one of the centerpieces of his "war on woke," which also included unconstitutional bills prohibiting private companies from mandating diversity training and efforts to remold public universities to fit his brash, conservative ideology.
"We are unaware of any legal right that a company has to operate its own government or maintain special privileges not held by other businesses in the state," DeSantis communications director Taryn Fenske says in a statement to Reason, responding to news of the suit. "This lawsuit is yet another unfortunate example of their hope to undermine the will of the Florida voters and operate outside the bounds of the law."
The 77-page complaint details the DeSantis administration and Republican-controlled state legislature's efforts to punish Disney, which began after former CEO Bob Chapek publicly criticized Florida's so-called "Don't Say Gay" law last year.
DeSantis responded by asking the state legislature to repeal Disney's special tax status and revoke the company's authority to operate its own local government, known as the Reedy Creek Improvement District (RCID), which covers more than 25,000 acres in Central Florida. The legislature quickly obliged the governor.
"You're a corporation based in Burbank, California, and you're going to marshal your economic might to attack the parents of my state," DeSantis said when he signed the resulting legislation last April. "We view that as a provocation, and we're going to fight back against that."
Last fall, the legislature passed a bill allowing DeSantis to take over the RCID board with hand-picked appointees, one of whom said that homosexuality was "evil" and caused by drinking tap water.
But the Disney-controlled RCID board passed an 11th-hour agreement stripping the incoming appointees of most of their powers before they could be seated.
DeSantis and the legislature fired back again this month, crafting a bill that would void the RCID development agreement.
In its lawsuit, Disney argues the DeSantis-controlled board has no right to abrogate its contract with the RCID and asks the court to enjoin Florida from enforcing both laws. It also claims First Amendment and due process violations.
"Disney finds itself in this regrettable position because it expressed a viewpoint the Governor and his allies did not like," the lawsuit says. "Disney wishes that things could have been resolved a different way. But Disney also knows that it is fortunate to have the resources to take a stand against the State's retaliation—a stand smaller businesses and individuals might not be able to take when the State comes after them for expressing their own views. In America, the government cannot punish you for speaking your mind."
The post Disney Sues Ron DeSantis, Claiming 'Targeted Campaign of Retaliation' appeared first on Reason.com.
]]>One of the nation's largest automakers has some big construction projects in the pipeline, and the Tennessee state government isn't going to let anything stand in the way—even the private property rights of black farmers.
In September 2021, Ford Motor Co. announced a slate of new development projects, committing $11.4 billion toward expanding electric vehicle (E.V.) production. In addition to two E.V. battery factories in Kentucky, the auto giant would build a $5.6-billion "mega campus" in western Tennessee named "BlueOval City," which would manufacture both electric trucks and batteries. Ford boasted that the project would be operational in 2025 and employ about 5,800 people.
In return for picking Tennessee, state lawmakers overwhelmingly approved legislation that would grant Ford $884 million in state incentives. That includes a $500 million grant from the state's current budget surplus and $384 million for site preparation, including $200 million for road improvements and $138.2 million for infrastructure and demolition services.
The bill also apportioned $745,100 to fund the Megasite Authority of West Tennessee, an 11-person board with the power to execute contracts on behalf of the development. It can also take privately-owned land, via eminent domain, in order to facilitate construction of the facility and supporting infrastructure.
According to Tennessee Lookout, the state is planning to seize privately-owned farmland while only paying a pittance to the owners—far from fair market value.
In order to reach the new facility, the North Carolina Department of Transportation plans to build a highway interchange, plus a road leading from the interstate to BlueOval City. But the path that the state chose for the road cuts through an area of farmland whose residents are disproportionately black. Of the 35 total tracts of land affected, the state still needs 20. It has filed seven lawsuits so far.
For example, the state sued Ray Jones for an acre of his land. But while land in the area sells for $200,000 or more per acre, the state offered Jones a measly $8,165. It also sued Marvin Sanderlin for 10 acres of his property: two acres that would be used to build the road and eight that would become inaccessible once it was built. Sanderlin was only offered $37,500, or $3,750 per acre. Speaking to the Tennessee Lookout's Anita Wadhwani, Sanderlin called the offer a "ripoff," saying, "you can't buy a swamp here for $3,500."
Ironically, Jones and Sanderlin both support the plant and are optimistic that it will bring additional commerce to the area—but they're less enthused that the state feels entitled to take their land along the way.
Tennessee is not alone: In neighboring North Carolina, Vietnamese automaker VinFast is building an E.V. factory on rural land. In addition to providing $1.2 billion in financial incentives, the North Carolina government is currently trying to take 27 homes, five businesses, and a church using eminent domain.
It's bad enough when a state decides to give hundreds of millions of dollars in taxpayer money to companies worth billions. But it's truly abhorrent to seize land from private hands simply because the state feels that a company should use it instead.
The post Tennessee Will Use Eminent Domain To Evict Black Farmers for Ford E.V. Factory appeared first on Reason.com.
]]>Over 100 million people watch the Super Bowl each year, more than any other single broadcast. Commercials that run during the game therefore command a high price: During this week's Super Bowl, a 30-second ad cost between $6 million and $7 million.
One 60-second spot titled "Premature Electrification" humorously addressed concerns about how far electric vehicles (E.V.s) can go between charges. In a parody of a pharmaceutical ad, actor Jason Jones spoke to viewers worried about being "unsatisfied" by an E.V. if it was "unable to last as long as you'd like." The solution: a Ram 1500 REV pickup truck, manufactured by Big Three automaker Stellantis (formerly Fiat Chrysler).
The all-electric version of the 40-year-old Ram will not be available until late next year, but it boasts of a 500-mile range between charges, which is currently unheard of for a truck. Its closest competitors, Rivian's R1T and Ford's F-150 Lightning, can each only go around 320 miles on a single charge.
It makes perfect sense for Stellantis, a company with a market cap currently valued over $50 billion, to shell out a few million bucks to promote its upcoming entrant into the high-tech electric vehicle market. What doesn't make sense is that some of those trucks will likely be made with considerable help from taxpayers.
In May 2022, the company announced a $2.5 billion joint development deal with Samsung SDI in which the companies would build an E.V. battery manufacturing facility in Kokomo, Indiana. The factory, which is expected to begin production in early 2025, will "supply battery modules for a range of vehicles produced at Stellantis' North American assembly plants."
That same day, the Indiana Economic Development Corporation (IEDC), a state development agency chaired by Gov. Eric Holcomb, committed to state incentives totaling over $186 million in grants, tax credits, and site preparation. The city and county also offered 100% property tax abatements worth up to $1.175 billion over 20 years.
The incentives seem to have made Indiana a more attractive location than Michigan, which a Stellantis executive said was "in play" earlier the same month.
While $186 million is a lot of money, it constitutes a small fraction of the $2.5 billion Stellantis and Samsung committed to the project and which over time could increase to more than $3 billion. It also pales in comparison to the €48.134 billion ($51.584 billion USD) that Stellantis reported in cash on hand in June 2022. For comparison, the state of Indiana's total expenditures in the 2021 fiscal year added up to $44.7 billion.
Unfortunately, offering taxpayer money to billion-dollar automakers is all too common. In October, Gov. Mike DeWine announced that Ohio would kick in $150 million toward a $4 billion Honda investment in E.V. factories. Last year, the state of Georgia committed as much as $1.5 billion in state incentives for a Rivian plant at a time when the company had $16 billion in cash.
The post Electric Truck Manufacturer Featured in Super Bowl Ad Got $186 Million in Taxpayer Subsidies appeared first on Reason.com.
]]>The Biden administration's rush to engage in more centrally planned industrial policy, particularly when it comes to the production of semiconductor chips and other high-tech manufacturing, has always been framed as an attempt to counter China.
In fact, it's right there in bold print at the top of a White House's "fact sheet" about the passage of the CHIPS and Science Act of 2022, the legislation that will funnel $52 billion of public subsidies into the pockets of semiconductor manufacturers in the coming years. The bill will "lower costs, create jobs, strengthen supply chains, and counter China," according to the White House. When The New York Times covered the bill's passage in August, it dutifully reported right in the headline that the massive "industrial policy bill" would "counter China."
The idea that China's own massive public investments into high-tech manufacturing require a response from the U.S. is also accepted as fact by many Republicans. The bill passed both chambers of Congress with bipartisan support. Rep. Michael McCaul (R–Texas), the highest-ranking GOP member on the House Foreign Affairs Committee during the last session, told Politico that the bill was "vitally important to our national security."
"There are nation states—in Europe, in Asia, particularly China—that are heavily investing in both science and in advanced manufacturing," Senate Majority Leader Chuck Schumer (D–N.Y.) said in July, summing up the case for the bill and for greater industrial policy in general. "If we sit on our hands and do nothing, America will become a second-rate economic power."
To defeat China, the argument goes, the U.S. must adopt the tactics of the Chinese Communist Party, at least when it comes to high-end manufacturing.
How's that going on the far side of the Pacific? Not so great, actually.
"China is pausing massive investments aimed at building a chip industry to compete with the U.S.," Bloomberg reported last week. "Top officials are discussing ways to move away from costly subsidies that have so far borne little fruit and encouraged both graft and American sanctions, people familiar with the matter said."
Industrial subsidies bearing little fruit and encouraging graft? What an unexpected outcome!
Of course, that's exactly what top-down industrial policy tends to be best at producing. China might be relatively new to this game, but industrial policy has a long, mostly ugly history in other parts of the world—including right here in the U.S.—and there's little reason to think that this time will be different.
China's shift away from industrial policy seems to be driven, according to Bloomberg, by the strain that COVID-19 has put on the country's economy and fiscal policies rather than by any sudden rediscovery of the benefits of free markets. Even so, there's a certain irony to the Chinese government changing course just months after U.S. policy makers decided that we had to copy China in order to compete with it.
Writing for National Review, Veronique de Rugy notes that the hugely expensive subsidies included in the CHIPS and Science Act are intended to take the American share of semiconductor manufacturing from 12 percent of the global share all the way up to 14 percent by 2030. That's not a lot of bang for the taxpayers' truckloads of bucks.
"I have always believed that this mimicking of Beijing's economic policies is nuts. I don't see how becoming more like Communist China, with its warm embrace of central planning under President Xi, will strengthen us economically," writes de Rugy, a Reason contributor and economist at the Mercatus Center. "In fact, as similar historical episodes suggest, it will weaken our economy. And it will do so for the very same reason that Beijing's own heavy-handed interventions are now weakening the Chinese economy—a realization that appears to be dawning on Chinese leadership."
The Bloomberg report says Xi is becoming frustrated about how tens of billions of dollars dumped into the semiconductor industry in recent years haven't produced major breakthroughs that allow the country's domestic chipmakers, like the Semiconductor Manufacturing International Corporation, to compete with the world's top producers.
America's foray into high-tech industrial policy seems to be on the same trajectory. The New York Times, for example, reported last week that "new chip factories would take years to build and might not be able to offer the industry's most advanced manufacturing technology when they begin operations." Meanwhile, everything from federal permitting requirements to America's broken immigration system is creating huge hurdles for the semiconductor manufacturers that are planning to expand their capacity in the United States.
It's relatively easy to shower an industry with public money, it turns out, but that's not all it takes to shift a global semiconductor market that's worth $528 billion. Indeed, if public subsidies were the answer, China would be "winning" the semiconductor manufacturing race by now.
In the rush to copy China, American policy makers may have missed what actually brought China to near the top of the global economy in the first place. It greatly liberalized its economy in the 1990s and early 2000s, and success followed.
"If the government targeted specific industries, this was done at the local and provincial level, as in the U.S," wrote columnist Noah Smith in his Substack newsletter today. "In other words, the leftist story that China's economic growth was a victory for central planning just doesn't make any sense for that period." China's industrial policy, he concludes, has mostly been "a flop."
Unfortunately, American policy makers were in such a rush to copy China's success that they didn't stop to ask whether they were ripping off the right part of the country's recent economic history. What started out as a nonsense plan to counter China is looking more and more like an excuse to simply provide piles of corporate welfare to domestic chipmakers.
The post China Is Scaling Back Its Failed Semiconductor Industrial Policies. America Should Do the Same. appeared first on Reason.com.
]]>Dealing with high inflation and an increasingly shaky economy, Americans are forced to make tougher spending choices. With public debt at an all-time high, government should do the same. This feat isn't that hard now that the Congressional Budget Office (CBO) has released a series of budget options showing Congress how to do it.
It's worth repeating that maintaining spending at the current level is not a viable option. Given the dramatic increase in annual federal government spending over the next 30 years—from 22.3 percent of GDP to 30.2 percent—combined with federal tax revenues that have remained fairly constant at around 19 percent, CBO projects that future deficits will explode. It's forecasted to triple from 3.7 percent of GDP today to 11.1 percent in 2052. Over the next 10 years, primary deficits (deficits excluding interest payment on the debt) amount to $7.7 trillion. Meanwhile, deficits with interest payments total $15.8 trillion—roughly $1.6 trillion a year.
Note, by the way, that half of our future total deficits will be driven by interest payments on the debt. This fact isn't surprising considering the size of our deficits and the rise in interest rates.
Given these realities, no one will be surprised that the ratio of debt to GDP, now roughly 100 percent, will, under the most conservative estimations, jump to 110 percent in 10 years. In the next 30 years it will likely double. More realistically, in 2052 debt as a share of GDP will be 260 percent. And that's assuming no major recessions or emergencies.
Despite these awful numbers, legislators in both parties are currently debating how best to add trillions more to the country's credit card balance. Many, for instance, want to add a new entitlement program in the form of the extended child tax credit.
It is in this setting that the CBO published its report on budget options. The two-volume document highlights options for deficit reduction. One volume details large possible spending reductions while the other lays out small ones—so the options are plenty. They include important reforms of some of the major drivers of future debt: Medicare, Medicaid, and Social Security.
All told, it's possible to achieve deficit reduction of $7.7 trillion over 10 years. That's enough to accomplish what some people mistakenly believe to be out of reach: balancing the budget without raising taxes. There are also a few options to simplify the tax code by removing or reducing unfair individual tax deductions and by cutting corporate welfare.
For instance, it's high time for Congress to end tax deductions for employer-paid health insurance. This tax deduction is one of the biggest of what we wrongly call "tax expenditures." It's responsible for many of the gargantuan distortions in the health care market and the resulting enormous rise in health care costs. The CBO report doesn't eliminate this deduction; instead, it limits the income and payroll tax exclusion to the 50th percentile of premiums (i.e. annual contributions exceeding $8,900 for individual coverage and $21,600 a year for family coverage). The savings from this reform alone would reduce the deficit by roughly $900 billion.
A second good option is to cap the federal contribution to state-administered Medicaid programs. That federal block grant encourages states to expand the program's benefits and eligibility standards—unreasonably in some cases—since they don't have to shoulder the full bill. CBO estimates that this reform would save $871 billion.
CBO also projects that Uncle Sam could reduce the budget deficit by $121 billion by raising the federal retirement age. CBO's option would up this age "from 67 by two months per birth year for workers born between 1962 and 1978. As a result, for all workers born in 1978 or later, the FRA would be 70." Considering that seniors today live much longer than in the past and can work for many more years, this reform is a low-hanging fruit.
Congress could save another $184 billion by reducing Social Security benefits for high-income earners. I support a move away from an age-based program altogether since seniors are overrepresented in the top income quintile. Social Security should be transformed into a need-based program (akin to welfare). Nevertheless, the CBO's option would be a step in the right direction.
There are so many more options for long-term deficit reduction. All Congress needs is a backbone. Considering the end-of-year spending bill going through Congress right now, I am not holding my breath.
COPYRIGHT 2022 CREATORS.COM.
The post Congress Can Reduce the Deficit by $7.7 Trillion in 10 Years appeared first on Reason.com.
]]>When people throw around the phrase welfare fraud, it usually refers to individuals bilking the system by falsely claiming to be in need. A lawsuit in Mississippi alleges that it also includes funding for a college volleyball facility and cash payouts to a Pro Football Hall of Fame quarterback.
Phil Bryant, a Republican, served as Mississippi's governor from 2012–2020. During that time, the state's poverty rate hovered between 20–25 percent. Today, it has the highest rate of any state in the country, with more than 19 percent of residents living under the poverty line.
The Mississippi Department of Human Services (MDHS) administers Temporary Assistance for Needy Families (TANF), a welfare program funded by a federal block grant. It spent over $77 million in 2020, just over half of what it spent two years earlier.
But during that time, the MDHS was rocked by scandal: In February 2020, the Office of the State Auditor arrested six people on charges including fraud and embezzlement, including John Davis, former MDHS director, and Nancy New, director of the nonprofit Mississippi Community Education Center. New and her son Zach have pleaded guilty and are cooperating with prosecutors.
In all, the state alleged that nearly $100 million was diverted from anti-poverty programs, to the benefit of local officials and well-connected individuals. One of those individuals was allegedly Brett Favre, a native Mississippian and one of the most decorated quarterbacks in the history of the NFL.
In January 2020, Favre bragged that "it's hard to get people to donate for volleyball. But we'll be opening an $8 million facility that will be as good as any in the country" at the University of Southern Mississippi (USM), his alma mater and the school where his daughter played volleyball. But as Mississippi Today reported at the time, at least $5 million of that total came from New's nonprofit, which according to the state auditor acted as a funnel through which MDHS officials illicitly laundered state funds. Between 2016 and 2019, the nonprofit received more than $60 million in funding from the state's welfare programs, while raising less than $1.6 million from any other sources. In all, the auditor alleges that New misused at least $77 million, the same amount the state spent on welfare funding in 2020.
According to the state auditor, Favre was also paid more than $1.1 million in speaking fees for appearances he never made, paid by the nonprofit with money from state welfare funds. The state auditor claimed that Favre was unaware of the money's origin, and Favre agreed to pay the money back (though he has struggled to do so in a timely manner).
But a state civil lawsuit reveals that Favre was intimately aware of the misuse of state funds, and even enlisted Bryant's help.
The MDHS agreed in 2017 to help Favre fund the volleyball facility, even structuring the deal to circumvent regulations that prevent TANF funds from being used toward construction. But the MDHS funds were not enough: In July 2019, Bryant texted New, "Just left Brett Favre…Can we help him with his project." Favre's $1.1 million payment for speaking fees was actually intended to finance the project as well, in exchange for ads for the state welfare agency. In a text to New, Favre offered, "I could record a few radio spots…and whatever compensation could go to USM." He also worried, "If you were to pay me is there anyway the media can find out where it came from and how much?"
This is not even the first whiff of scandal. In April, Mississippi Today reported that Bryant had set up a meeting in December 2018 between Favre and MDHS officials in order to secure $1.7 million for Favre to invest in a pharmaceutical startup, Prevacus. Just days before the meeting, the former football star texted Bryant, "It's 3rd and long and we need you to make it happen!!" That money was laundered through New's organization as well. After Bryant left office in 2020, he agreed to a "company package" including Prevacus shares in exchange for introducing the company to investors.
Neither Favre nor Bryant has been charged, though Favre has apparently been questioned by the FBI.
The entire saga, in which a legendary professional athlete uses state funds in a purely personal endeavor that eventually draws the attention of law enforcement, is reminiscent of Curt Schilling's foray into video game development. After helping the Boston Red Sox clinch their first World Series win in 86 years, Schilling founded video game company 38 Studios, which he established in Rhode Island after the state offered him a $75 million loan. The company ultimately defaulted on the loan, leaving the state on the hook for over $100 million.
But Favre's deal is considerably worse: For all of the faults in Schilling's deal, it was overwhelmingly approved by the state legislature. Meanwhile, Favre took part in a series of backroom deals meant to benefit a few well-connected players from the largesse of the state's coffers.
The post Brett Favre Goes on Welfare appeared first on Reason.com.
]]>If you had any doubts that those in power have dropped the pretense of fighting for the working class, you can dispense with them after President Joe Biden administration's latest concessions to the laptop class. From student loan forgiveness to subsidies for people who drive pricey electric cars and profitable semiconductor company CEOs, this administration is working hard to shower its friends with handouts paid for by hardworking lower-wage Americans.
We learned of the most outrageous handout of them all, of course, when Biden announced that he will—unilaterally, mind you, and for no apparent reason that I can see—extend the pause on student loan payments until the end of the year and forgive up to $10,000 for those persons making less than $125,000 a year. This generosity with other people's money extends up to $20,000 for Pell Grant recipients.
As David Stockman, a former director of the Congressional Office of Management and Budget, reported recently, "Only 37% of Americans have a 4-year college degree, only 13% have graduate degrees and just 3% have a PhD or similar professional degree. Yet a full 56% of student loan debt is held by people who went to grad school and 20% is owed by the tiny 3% sliver with PhDs."
Picture two young married lawyers who together earn just under $250,000 and are on their way to making even more money in the future. They will be able to collect from Uncle Joe a nice bonus of $40,000, taken from the pockets of the many people who didn't go to college—perhaps because they did not want to take on debt—and from those who have responsibly already paid back their debt.
It's no wonder that so many left-leaning economists and policy wonks have loudly criticized this so-called student loan forgiveness. The Washington Post, for instance, editorialized that the decision is "regressive," "expensive" and "likely inflationary," nullifying "nearly a decade's worth of deficit reduction from the Inflation Reduction Act."
Meanwhile, Jason Furman, who headed former President Barack Obama's Council of Economic Advisers, napalmed the plan in a brutal Twitter thread. He explained that, thanks to Biden's move, interest rates would have to rise by an additional 50 to 75 basis points to counteract the added inflationary effect. Furman made clear that he regards this outcome as remarkably unfair and regressive.
Then there's the Inflation Reduction Act's gusher of green subsidies, many of which disproportionately benefit wealthier Americans. Take the extension of the tax credit of up to $7,500 for the purchase of new electric vehicles. For those buying used EVs, the tax credit is now $4,000, little consolation for people who can't afford the luxury of buying electric cars, which remain much pricier than their gasoline-powered alternatives. The bill hopes to address this issue by making expensive EV cars ineligible for the credit, but it counteracts this provision with a requirement that only cars assembled in the United States are eligible.
To underscore how disconnected policymakers are from average Americans, the vehicle credits are limited to those making less than $150,000 annually (single filing) and $300,000 (joint filing), presumably to avoid criticism for subsidizing the rich. That still leaves about 93 percent of individuals or 97 percent of households able to seize the subsidy. And given that it's mainly been taxpayers with annual incomes over $100,000 using the credit in the past, this subsidy will mostly still serve a swath of fairly well-off people.
But politicians are not just showering higher-income individuals with subsidies; they do the same for companies. A quick look at the semiconductor subsidies in the CHIPS Act reveals that the well-publicized $52 billion giveaway will benefit well-connected and rich companies.
We could go on and on with more examples, such as Democrats' incessant demand to restore remarkably regressive state and local tax ("SALT") deductions to their pre-2017 heights. The only persons who will gain are high-income earners—and their big-spending elected officials—in high-tax blue states. They lost parts of these deductions when the Trump tax cuts were implemented, and they want them back.
If you're surprised by any of this, you haven't been paying attention to Democrats' recent record. Few are even pretending to be the party of anyone other than the privileged laptop class.
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The post The Biden Administration Is Taking From the Poor and Giving to the Rich appeared first on Reason.com.
]]>Congress' annual August recess is a good time to think about the big picture. Most Americans want government reformed for the better. We notice its many breakdowns, dysfunctions and failures to deliver on promises. Yet politicians of both parties usually only talk about more new programs, more spending, and more regulations. Will either party listen, or will they continue down their destructive and unpopular path?
In case some of them are listening, I have a few ideas.
Paul Light, a scholar at the Brookings Institution, writes that while a small majority of Americans prefer that government shrink, what they want more is reform. He reports that public demand for "very major" government reform is up to 60 percent from 37 percent in 1997, when the Pew Research Center first asked this question. Meanwhile, those who believe the government is "basically sound and needs only some reform" is down to 28 precent from 58 percent. All of that while confidence in government to do the right thing hovers around a historic low.
In that context, it makes sense that so many policy proposals from both parties are met with skepticism about the ability of a bloated and debt-burdened government to deliver. The good news is that scholars and policy people have plenty of sound reform ideas. In the 1980s and '90s, Republicans, for instance, talked about getting rid of various agencies or stopping the federal government's accumulation of power by devolving functions back to the states and the private sector. Later, they tried to reform Social Security by moving to a system of private accounts. While it failed, these politicians put forward a plan to try to improve, and not just grow, the government.
None of that is being proposed today. Republicans and conservatives are now more interested in expanding rather than reforming the government with programs straight out of the Democrats' agenda (for example: federal paid leave, the expanded child tax credit, subsidies to businesses, and various cronyist regulations packaged as a way to fight China).
That's why today I will propose three specific reforms. They aren't all new, but each is important.
First, I would end all forms of government-granted privileges, whether these are subsidies, guaranteed loans, tax credits, or bailouts. Each type of handout is unfair not only to the taxpayers who foot the bill, but also to the many companies that do not receive them. Such privileges are typically directed to companies that are not just big and politically well-connected but are already very successful at doing what they are given the handouts to do. These handouts distort the economy in all kinds of ways without even, in many cases, producing the promised results.
This reform might require a constitutional amendment forbidding Congress from producing any law or regulation that discriminates among firms that are similarly situated. Such an amendment would require that taxes, regulations, and subsidies apply to all firms, and not just a few, of a certain type. Ideally, this nondiscrimination clause should apply also to individuals.
But our world isn't ideal, so I'll reduce the scope of my second reform to the tax code. Indeed, this code now unfairly treats individuals who make the same income differently. Depending on whether they have kids or paid for their homes with mortgages or not, how they earn their incomes and how much they save or invest, two people making the exact same amount can face very different tax burdens.
This complicated and unfair tax system leads to tax avoidance, evasion and distortions—and thus lower economic growth. Our tax code needs fundamental reform. There are many ways to go about it but ignoring the problem shouldn't be an option.
Finally, we should move away from all age-based eligibility criteria, such as the ones used for Social Security and Medicare. Hear me out: Age-based programs made sense when not working due to old age meant being poor (and in fact seniors used to be overrepresented in the lowest income quintile). But no longer. Seniors today disproportionately occupy the top income quintile. So, we should now move all programs to need-based criteria, which would still allow poor seniors to receive benefits.
Many will disagree with these three ideas. That's fine. But please, let's keep the conversation focused on making government better and not just bigger. That's what Americans want.
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The post A Few Ideas for the Better Government Americans Desperately Want appeared first on Reason.com.
]]>Another week, another reminder that heavy-handed government industrial policy is in fashion. Nobel Prize-winning economist Michael Spence recently endorsed it as embodied in the newly passed "CHIPS+" legislation, an attempt to bolster America's semiconductor industry. The endorsement, like so many, rests not on evidence or economics, but on blind faith in Congress and President Joe Biden's administration.
Spence writes that "the infrastructure bill, the CHIPS Act, and the [Inflation Reduction Act] amount to a stunning increase in long-term investment in America's growth potential, and in balancing out the various dimensions of its growth pattern, prominently for carbon dioxide emissions reduction and sustainability."
In other words, these new expenditures—amounting to more than $1 trillion—spent by the same government that can't deliver the mail efficiently or run trains for a profit are supposed to generate the advertised abundance of goodies. We're to trust that these monies, disbursed by the same administration that botched the withdrawal from Afghanistan, will achieve only successful results.
Color me unconvinced.
Why should we believe that this latest round of subsidies will succeed when we know that the $54 billion given to the airlines to ensure their travel-readiness at the end of the pandemic failed? Why should we believe that this subsidy boondoggle will produce better results than hundreds of corporate welfare programs for well-to-do companies like Boeing and General Electric have produced so far?
Specifically, why should we believe that the Inflation Reduction Act's massive swelling of "investment" in climate action will succeed as advertised and completely ignore the long record of failure of government subsidies of green energy? A recent editorial in The Wall Street Journal, citing a scholar who plugged the law's carbon dioxide reduction estimates into the United Nations climate model, noted that "the bill will reduce the estimated global temperature rise at the end of this century by all of 0.028 degrees Fahrenheit in the optimistic case. In the pessimistic case, the temperature difference will be 0.0009 degrees Fahrenheit."
That's effectively nothing. But once you trace where the money is going, you quickly realize that CO2 reduction isn't the whole story. This legislation is a cornucopia of subsidies and tax credits to green energy companies, as well as to consumers who don't need the handouts. Even if by some miracle the Inflation Reduction Act produces the desired environmental effect, don't count on it to reduce inflation. The faith in these policies is baffling.
What about the semiconductor industry? It certainly is the hero of the lavishly praised CHIPS Act. Spence believes that doling out $52 billion in the form of tax credits and subsidies—all of course with bureaucratic strings attached—"will unleash a surge in private investment in key areas" and insists that "this is not mere speculation." But again, where's the evidence?
In fact, the evidence suggests the opposite. As the Cato Institute's Scott Lincicome and Alfredo Carrillo Obregon explain, "there has been even more chipmaking investment dedicated to the U.S. market, even as federal subsidies have languished. Construction is now underway at four major U.S. facilities and will continue with or without subsidies.…This is because, as numerous experts have explained over the last year, there are real economic and geopolitical reasons to invest in additional U.S. semiconductor production—no federal subsidies needed."
Other private sector research-and-development investment increased too. George Mason University's Don Boudreaux calculated that in 2019, "inflation-adjusted R&D spending (at least in the physical sciences, the life sciences, and engineering) was 38 percent higher than it was only three years earlier." Before that, private sector research and development increased steadily for decades even though federal investment in R&D remained flat. Anyone who believes American companies need subsidies to invest and be productive is unfamiliar with the facts.
Still, the most shocking claim from a Nobel-laureate economist is that this corporate welfare is necessary for the United States to compete with China. Such zero-sum thinking about international trade is bunk. As Paul Krugman, another Nobel-laureate economist, noted in his 1996 book, Pop Internationalism, it is "simply not the case that the world's leading nations are to any important degree in economic competition with each other, or that any of their major economic problems can be attributed to failures to compete on world markets."
I don't often agree with Paul Krugman, but in this case, Michael Spence should consider doing so.
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The post How To Waste $1 Trillion appeared first on Reason.com.
]]>Renewal of the dreaded Farm Bill looms anew. "Even though there is still over a year remaining on the current Farm Bill, discussions have already been ongoing since earlier this year on developing the next Farm Bill," Kent Thiesse, a columnist with Farm Forum, wrote this week.
As I've detailed in my book Biting the Hands that Feed Us: How Fewer, Smarter Laws Would Make Our Food System More Sustainable and in countless columns (including, for example, here), the Farm Bill is a recurring nightmare that's generally passed by Congress every five years. It was first introduced as a temporary measure nearly 90 years ago during the New Deal era—the same year of singer Willie Nelson's birth. Today, the overwhelming majority of costs come from directives to the U.S. Department of Agriculture to provide taxpayer funds to some American farmers and many low-income Americans.
While my writings on the Farm Bill generally focus on payments to farmers (including in this column), in the case of food and nutrition funding for low-income Americans, "[t]he government should do no more and no less than giving cash to those in need," I explained in 2018. "They're best positioned to determine their food needs and—objectively—are the only ones who know their food preferences and those of their families."
As for taxpayer payments to farmers, while the makeup of those payments has changed over the years, today, farm subsidies operate by allocating tens of billions of taxpayer dollars each year to pay for approximately two-thirds of an eligible farmer's crop insurance premium payments.
Now, Congress is gearing up to consider a new Farm Bill. "We only do a Farm Bill every five years, and that…. gives our producers the kind of predictability that they need to make decisions," Rep. Dusty Johnson (R–S.D.) told Forum News Service this week. "We don't want farm policy changing every election or every quarter. But it puts extra pressure on us to get it right."
When it comes to the Farm Bill, get it right they do not. Not once. Not ever
There are many reasons this Farm Bill will likely just be a bigger and smellier heaping of manure than the last one. Cost is one such reason. Though Democrats and Republicans in Congress always claim the next Farm Bill will be the one to save taxpayers money, that's never the case, I explain in my 2016 book. The falsehood that the Farm Bill will save money will no doubt be repeated this year.
Another shopworn Farm Bill myth is the notion that America's small farmers need and benefit from the bill. Nope. Rather, because farm subsidy handouts typically go to America's largest and wealthiest farms, they've helped promote consolidation and upsizing of America's farms. While I'd oppose farm subsidies with equal fervor if more, most, or all of them went to small farmers, the fact is nearly 7 in 10 American farms receive no subsidies. While it's great to know that the great majority of American farmers are still in business without receiving farm subsidies—which maybe suggests the big guys don't need subsidies, either—the massive influx of cash to a small number of big farmers widens the competitive gap between the bigger haves and smaller have-nots in American farming.
There are other reasons to detest farm subsidies. As I also detail in my book, farm subsidies have had a profound negative impact on everything from Americans' diets to our waistlines and wallets and the environment.
It is no exaggeration to say that farm subsidies have been a disaster for America. Despite that fact, powerful Members of Congress and the big farming lobbies who back them make the continuation of farm subsidies (in the form of crop insurance) all but a certainty.
"Major U.S. agricultural production groups are pulling together their requests for the next farm bill… with crop insurance… on the top of their lists," The Pulse reported this month. "The really important thing to our members is to make sure that crop insurance survives the way it is," a top American Farm Bureau Federation official told Farm Week Now earlier this month. "Maybe we can improve it some, but the bumper sticker message on crop insurance is 'Do no harm.'" Elsewhere, a Montana Farm Bureau Federation official said the group's greatest priority for the upcoming Farm Bill would be "protecting risk management tools," or crop insurance payments.
Sen. Amy Klobuchar (D–M.N.), who sits on the powerful Senate Agriculture Committee, assuaged these special interests' gratuitous concerns this week, suggesting the current pork-laden Farm Bill will form the basis of the next one.
Though most Democrats and Republicans in Congress vote in favor of the Farm Bill each cycle—hence why it generally becomes law—criticism of farm subsidies crosses partisan boundaries. You'll find Farm Bill critics everywhere, from the conservative Heritage Foundation to the (pro-Klobuchar) editorial board of the Minneapolis Star-Tribune (which a decade ago dubbed subsidized crop insurance a "boondoggle [that] throw[s] money at farmers, whether they need it or not").
At a time of sky-high food costs, the Farm Bill should be a means to help Americans grow and buy more food for less money. But that would require the government to both regulate and spend less. Alas, given the fact the Farm Bill is, well, the Farm Bill, it instead helps Americans spend more money than we should to grow more food than we need.
There's nothing inherently strange or wrong about the fact many farmers want to insure their crops against loss. It may be a smart idea for farm owners to buy insurance. But that decision should be up to individual farmers, who should choose either to buy insurance with their own money or to operate at a higher risk. Forcing taxpayers to subsidize farmers' insurance makes no sense. Farm subsidies generally and subsidized crop insurance specifically constitute wasteful spending that should be abolished—entirely and immediately.
The post The Next Farm Bill Will Probably Stink Worse and Cost More appeared first on Reason.com.
]]>As Major League Baseball on Thursday takes to a remote Iowa cornfield for its second annual Field of Dreams game in commemoration of the nostalgic 1989 Kevin Costner film, it's worth reflecting that at least five different governments are cobbling together a deal to spend a combined $45 million in taxpayer money on a proposed 3,000-capacity stadium to be built on the site of the movie and game.
And, if politicians get their way, the finishing touches on the financing will come from the federal government's coronavirus relief fund.
The details, as laid out last week in a terrific Des Moines Register article, are, with the exception of the COVID-19 twist, distressingly familiar for anyone who has followed the $20 billion sports-facility-welfare building boom that began almost immediately after Field of Dreams wrapped its theatrical run. There's the tax increment financing, the gauzy promises of future economic development ("a very good investment in the future"), the hand-waving at the overwhelming evidence to the contrary, the extraction and proposed expenditure of hotel taxes, and the hand-over-heart appeals to the hoariest of Americana.
"We have to fund projects that can bring us together," Dubuque Mayor Brad Cavanagh told the newspaper. "We have to find things that are going to lead us in a direction of unification rather than tearing us apart."
As you read the dizzying Register passage below about the overlapping governmental shovelings into this heartland sinkhole, here are some contextual data points to keep in mind: Dyersville, Iowa, the site of the project, has 4,000 residents; its annual budget in fiscal year 2021–22 was $9.5 million. Dubuque, the nearest city (25 miles away) of any size (60,000), had an operating budget that year of $139 million. The government of Dubuque County (pop. 99,000) spent about $70 million in 2021–22.
So that's around $220 million a year the relevant local administrations spend, compared to a price tag of $50 million for a stadium whose main projected revenue would come from one (currently non-guaranteed) baseball game per year.
We may be talking Iowa here, but the governmental financing package is positively Byzantine:
In an application to the Iowa Economic Development Authority, submitted in May and adjusted in June, the city of Dyersville asked for $12.5 million in funding through Destination Iowa, Gov. Kim Reynolds' $100 million pool for tourism projects, funded with federal American Rescue Plan Act coronavirus relief money. …
A Destination Iowa award is only one piece of potential taxpayer funding for the project. The city of Dubuque committed $1 million. Dubuque County committed $5 million. The city of Dyersville committed $1 million and plans to offer another $13 million in tax increment financing.
The U.S. Economic Development Administration granted Dyersville $1.5 million to build water and sewer lines last September. The state of Iowa kicked in another $11 million of federal funds for the same purpose in January.
All told, the Destination Iowa grant would raise the amount of public funding to $45 million—90% of the budget for the $50 million stadium. That does not count $500,000 contributed by Travel Dubuque, a local tourism nonprofit largely funded with hotel-motel tax revenue.
Remember when politicians used to complain about austerity?
The $1.9 trillion American Rescue Plan, enacted in March 2021, was sold as helping the country and the economy to recover from COVID-19, not building sparsely-used entertainment venues years in the future. (In actuality, the money has been used to bail out government-run golf courses and hand out bonuses to state employees, among other boondoggles.)
Instead of rescuing America, the proposed repurposed Rescue Plan funds would greatly help the bottom line of Hall of Fame White Sox slugger, television personality, and testosterone-booster pitchman Frank Thomas, who earned more than $100 million during his playing career alone.
The stadium would be owned by This is Iowa Ballpark, a new nonprofit controlled by the city of Dyersville, Dubuque County, Travel Dubuque, the Dyersville Economic Development Corp. and Go The Distance, a development group helmed by MLB Hall of Famer Frank Thomas.
Go The Distance, which owns the movie site, announced in April that it plans to spend $80 million to develop the area surrounding where the stadium would stand. Its plans call for nine baseball and softball fields, dorms, a fieldhouse, a fishing pond, walking trails, an RV park, an amphitheater and a 104-room hotel.
According to Dyersville's application for Destination Iowa funds, This is Iowa Ballpark would lease the stadium to Go The Distance.
The history of local governments building sports facilities and then leasing them to private (and oftentimes, rich) owners is filled with sorrow. Especially in smaller towns.
"These partners have heard the message from the movie Field of Dreams: 'If you build it, they will come,'" New Jersey Gov. Christine Todd Whitman said in 2000, paraphrasing the movie's most famous line while breaking ground on a $24 million minor league ballpark in Camden, one of seven the Garden State financed from 1994 to 2001. "Soon we will see a field of dreams right here in Camden, and my prediction is they will come."
By 2015, Whitman's taxpayer-financed stadium stood empty. (Read Eric Boehm's 2019 article about New Jersey's calamitous stadium welfare binge.)
All of this wasted human effort has been depressingly predictable and exhaustively documented, for decades. Back in 2000, economist Raymond Keating made the stone-obvious yet apparently still elusive point that, "Another major downside to government-built and -owned ballparks is that clubs are transformed from owners to renters. It is always easier for a renter to move to get a better deal. So, government officials who advocate taxpayer-funded sports facilities to attract or keep a team virtually ensure that teams will continue issuing threats and moving."
Kennesaw State University economist J.C. Bradbury (who wrote for Reason about Atlanta Braves stadium welfare back in April) collaborated with fellow academics Dennis Coates and Brad Humphreys on a paper earlier this year surveying more than 130 studies of the economic effects of subsidized sports-venue construction over the past three decades. Conclusion?
"Nearly all empirical studies find little to no tangible impacts of sports teams and facilities on local economic activity, and the level of venue subsidies typically provided far exceeds any observed economic benefits," the authors wrote. "In total, the deep agreement in research findings demonstrates that sports venues are not an appropriate channel for local economic development policy."
But also: "Despite the consensus findings of economic studies that the benefits of hosting professional sports franchises are not sufficient to justify large public subsidies, taxpayer funding for these subsidies continues to grow. This paradox reveals a disconnect between findings in economic research and policy applications that requires correcting."
Bradbury's Twitter reaction to the Register article (in which he's quoted): "Another nomination for the Hall of Terrible Ideas."
When grown men choke up as they recount Field of Dreams, no doubt they are thinking of the film's final scene, where Kevin Costner, in the ballpark he irrationally plowed a cornfield to build after listening to the voices in his head, is finally able to play a restorative game of catch with his long-dead dad. As the camera pans out we see a line of cars in the distance, heading toward the Dyersville ballpark, in fulfillment of a prophecy given just minutes before by the novelist character played by James Earl Jones:
People will come, Ray. They'll come to Iowa for reasons they can't even fathom. They'll turn up in your driveway not knowing for sure why they're doing it. They'll arrive at your door as innocent as children, longing for the past. Of course, we won't mind if you look around, you'll say. It's only $20 per person. They'll pass over the money without even thinking about it.
If baseball fans and cineastes want to cough up $20 ($48 in today's money) to feel the magical realism up close, I'm all in favor. But taxpayers with all manner of entertainment tastes have for too long been unwittingly passing their money to subsidize rich people profiting off the nostalgia industry. There is nothing "innocent" about this racket; it's morally obscene.
As Dan Moore concluded last week in an outstanding retrospective of Camden Yards, the heavily subsidized and deeply influential Baltimore Orioles stadium that just celebrated its 30th anniversary: "At a certain point—stretched too far, tested by too many unignorable, ignominious costs—the hypnosis becomes untenable, and losing yourself earnestly in a game, a season, or in the longer-tail travails of your favorite team becomes impossible, no matter how beautiful or beloved your surroundings. You find yourself thinking, instead, about how much the person sitting in the owner's box behind home plate or above the 50-yard line has profited from the one-sided partnership that you, as a taxpayer and fan, have unwittingly borne the economic brunt of."
BONUS LINKS: I critiqued Field of Dreams last week on the Gutting the Sacred Cow podcast. And Nick Gillespie interviewed Bradbury in 2013 about why stadium subsidies always win:
The post Field of Welfare: How COVID Funds Might Build a Money-Losing Ballpark in a Cornfield appeared first on Reason.com.
]]>The once-beleaguered CHIPS Act has finally passed and will soon receive President Joe Biden's enthusiastic signature. The big ticket item in that legislation is $52 billion worth of subsidies for computer chip manufacturers, but once the bill's passage looked inevitable, it was stuffed full of additional spending. The CHIPS and Science Act's cost has now ballooned to $280 billion. And emboldened Democrats have already moved on to another spending spree with the Inflation Reduction Act, a slimmed-down version of Biden's "build back better" initiative.
Both bills reflect a cross-party shift toward embracing industrial policy—the idea that the government should jump into the economy with both feet and have fun getting wet. Facetiousness aside, the neoliberal era from the late 1970s through the 1990s—when economic thinking carried more political sway and resulted in massive deregulation of airlines, railroads, and interstate trucking and the privatization of the internet—is far behind us.
This change can be seen in former President Donald Trump's embrace of tariffs, Biden's continuation of many of those tariffs, and officials' apparent reluctance toward even the minimal deregulation which would have quickly solved the ongoing infant formula crisis. But we don't need to infer anything. Consider this recent quote from a senior administration official: "Part of our effort is to create space again for very serious people to really go to bat for the idea that the government has a rightful role to play" when it comes to industrial development. Yikes.
The political zeitgeist has been moving back toward industrial policy, seemingly coincident with rising populism since the 1990s—despite abundant evidence that central planning is poisonous to innovation. Whether it's encouragement via subsidies or constraint via regulation, using the government to guide the economy is akin to thinking that just a little bit of cyanide won't hurt.
To armchair economists, industrial policy seems like a solution for the country's economic woes: "Infuse money into Industry A, add trade protections for Industry B, protect workers in Industry C from automation, and the economy will soar! New technology will arrive sooner, domestic firms will outcompete foreigners, and steady employment will ensure a chicken in every pot." That indeed was the thinking behind Depression-era policies which extended that crisis by seven years.
Economies are not deterministic like physics or chemistry. You can't pull a lever to achieve a particular effect. A better analog is biological or ecological systems, where there are second- and third-order effects to any given stimulus.
Think about the reintroduction of wolves to Yellowstone National Park: Increased predatory pressure keeps elk herds on the move, leaving more young willow trees for beavers. Growing beaver populations dam more waterways, altering the habitat and spurring additional difficult-to-predict effects. That's economic policy: You must plan for unexpected downstream effects (pun intended).
That thinking has been missing in Congress this past month. I don't know what microchip subsidies or a mistitled inflation-fighting bill will ultimately do, but neither do our elected officials.
Compounding the problem is that people, not some agnostic supercomputer, determine which industries and companies are considered worthy of a boost. Humans are subject to influence and pressure, turning industrial policy into a contest of who can secure the most government favoritism—a political game of Hungry Hungry Hippos.
Policies protecting companies from competitive pressure, like subsidies or tariffs, allow them to take their eye off the ball. This "X-inefficiency" means they're less efficient and pay less attention to customers' desires.
Intel, the definitive winner of CHIPS Act subsidies, understands this all too well. After decades as the market leader of commercial computer chips, a series of fumbles and failure to focus on customers caused the company to lose its edge over Advanced Micro Devices (AMD) and Apple, which were working hard to design a better mousetrap.
X-inefficiency leads to "dynamic inefficiency"—the lack of motivation to adapt to changing market conditions. The result is reduced innovation, slowed economic development, and increased vulnerability to socioeconomic shocks.
Given enough time, the politics surrounding the CHIPS Act—and politicians' inability to reverse mistakes—will almost surely lock some companies into less effective decisions. Intel has doubled down on manufacturing—understandable if it's getting subsidies for it—while AMD and Apple have seen success by focusing on design and outsourcing production. We'll see which approach works best, but the political baggage will make it harder for Intel to adapt if needed.
Lastly, industrial policy motivates "unproductive entrepreneurship." Some of the best and brightest minds inevitably withdraw from productive activities premised on voluntary exchange, and instead use their skills to find autocratic mechanisms to extract political payoffs—the entrepreneurial version of the dark side. Their skill grows with experience, meaning the effect increases the longer this continues.
The government can encourage particular results during times of crisis—as it did with Operation Warp Speed—but any such policy should focus on allowing markets to function and removing obstacles rather than trying to predict the future. The crystal balls policy makers peer into are easily clouded by charlatans, and we all lose when they win.
The post Industrial Policy Stifles Progress appeared first on Reason.com.
]]>Industrial policy is making a comeback. For those of you under the age of 50, this is just another term for corporate welfare—a lovely name for the unlovely practice of a government granting subsidies, protective tariffs, and other privileges to politically influential industries or companies. It's often done in the name of some lofty goal such as strengthening national security or ensuring that America is a leader in the "industries of the future." But the outcome is always the same: wasteful, unfair, unsuccessful, and unjustified. Oh, and it invariably grows the budget deficit.
The latest form of industrial policy is Congress's CHIPS Act of 2022, a bill meant to subsidize the semiconductor industry by channeling taxpayer money to build up domestic production capacity and combat feared Chinese computer-chip supremacy.
This chapter began with the disruption caused by lockdowns to global supply chains. Unsurprisingly, that led to a series of semiconductor shortages aggravated by a surge in demand for automobiles. Automakers wrongly assumed that the original drop in demand would persist, canceled orders for semiconductors, and then could not keep up with the buying public.
Now, Congress is responding to this temporary chip shortage with $52 billion in subsidies and $24 billion in tax credits mostly directed at semiconductor industry beggars.
Never mind that chip firms have already expanded production without subsidies. In fact, two years into negotiating this bill, it's obvious that it has little to do with any alleged structural deficiencies in the semiconductor market. For instance, the initial chip subsidy proposal had a $16 billion price tag. Since then, the industry has announced its own investments totaling over $800 billion, with $80 billion committed for near-term investment in U.S.-based fabrication facilities. Yet somehow, the bill more than tripled in price to target a problem that's already being solved.
What about the argument that China is subsidizing its chip producers and thus threatening our technological leadership? Yes, China subsidizes its chip industry, but this doesn't guarantee their subsidies will work. If U.S. politicians could for a moment stop treating every Chinese action as a threat, they would see that the Chinese semiconductor industry is both quantitatively and qualitatively weak. In fact, many of the companies subsidized would go under without the government's help. That's hardly the sign of a vibrant industry. These subsidies are more like life support than super-vitamins.
China not only imports somewhere around 84 percent of its chips, but its civilian sector is dominated by those made in America. Chinese-made chips are used mostly by the military; these chips are absent from nearly all the high-value industry segments. In other words, Beijing's efforts to create a powerful chip industry have failed for two decades. We can safely assume that this failure will continue for decades to come.
By contrast, the U.S. chip industry is extremely profitable. These firms invest massive amounts of money in research and development—18 times the dollar amount of their Chinese-subsidized competitors. The result, as Stevens Institute of Technology professor George Calhoun writes, is that if the semiconductor industry "is de-constructed into its key segments, the picture is clear. There is no significant capacity or capability problem for the U.S., which is dominant in every segment of the industry" except one.
Furthermore, as my colleagues Weifeng Zhong and Christine McDaniel point out in a recent op-ed, believing that these subsidies will promote our national security by helping companies relocate production to the United States is rooted in faith rather than facts. Noting that "only 1 in 8 interventions change a company's location choice," they write:
Any resulting new operations would still face deep-rooted issues hindering American manufacturing. Large-scale environmental assessments will be required, but over the years, the costs and delays have become excessive. Recent trends promoting or requiring unionized workers for federal contracts, combined with the current labor shortage, will hinder chipmakers' ability to find talent and could exacerbate the cost of domestic production.
In other words, if you believe that moving most of our chip production onshore is important for national security reasons, you should labor for regulatory reforms rather than subsidies.
It's easy for politicians to talk about industrial policy in terms of sweeping national goals. But in the real world, what these policies do is add to our deficit, fuel more inflation, waste resources, breed unfairness, and hinder growth.
COPYRIGHT 2022 CREATORS.COM.
The post The CHIPS Act Is Corporate Welfare Disguised as Industrial Policy appeared first on Reason.com.
]]>It seems that in North Carolina, cronyism is a bipartisan virtue.
A new report by CNBC lists North Carolina as America's Top State for Business, based on a wide range of metrics. The site, which has compiled the list annually since 2007, noted the Tar Heel State has finished in the top 10 nearly every single year, coming in a close second for 2021. As for what put it over the top this year: "state leaders keep managing to put aside their very deep political divisions to boost business and the economy."
The article goes on to extol the virtues of North Carolina's current exercise in divided government, in which Democratic Gov. Roy Cooper and a Republican-dominated General Assembly have worked together to craft financial incentives intended to lure companies to the state. Most recently, the article cites a deal from March in which VinFast, a Vietnamese electric vehicle manufacturer, will build a $2 billion factory in North Carolina's Chatham County, in exchange for $1.2 billion in subsidies. Additionally, the article lists a deal from 2021 in which Apple agreed to build "its first East Coast hub" in exchange for incentives totaling up to $846 million.
But despite CNBC's breathless praise, these types of deals have downsides.
In exchange for that $2 billion investment, the state had to agree to over $316 million in "reimbursement" to the company over 30 years, equaling 90 percent of the state income taxes withheld from its employees over that time. It also agreed to $450 million "to cover site preparations, road improvements, and additional water and sewer infrastructure." Additionally, Chatham County chipped in "over $400 million" in additional subsidies.
It's unclear why a company that is currently pursuing an IPO valuing itself at $60 billion would need that kind of help.
Meanwhile, the Center for Economic Accountability, which opposes corporate welfare, ranked North Carolina's deal with Apple as 2021's "Worst Economic Development Deal of the Year." The think tank cited, among other factors, the decision to remove nearly a billion dollars of taxpayer funds from state and county coffers in order to court a company that "has more money than North Carolina does."
Such lopsided deals are not uncommon. Typical beneficiaries include sports franchises, which despite being worth billions often receive hundreds of millions in taxpayer-funded subsidies to build new stadiums, even when existing stadiums are doing just fine. Last month, Charlotte approved a $215 million subsidy toward renovating the stadium used by the Charlotte Hornets. The city plans to fund the difference through increased taxes on rental cars and hotel rooms, but according to J.C. Bradbury, an economist from Georgia's Kennesaw State University, "The Charlotte Hornets do not bring a lot of tourism to Charlotte whatsoever." Any funds not recouped through the extra taxes will simply be borne by the city's residents.
Perhaps the most galling example is Wisconsin's Foxconn plant, announced in 2017 by then-Gov. Scott Walker. In exchange for the tech giant spending $10 billion on a factory which would employ over 13,000 people, the state pledged $3 billion in state subsidies, including $1 billion from the nearby town of Mt. Pleasant. Four years later, the company admitted that it would ultimately invest less than $700 million, and employ fewer than 1,500 people. The state was able to rescind and recoup most of the tax subsidy, but Mt. Pleasant had already seized and bulldozed homes and taken on hundreds of millions in debt in preparation for the factory. Ultimately, the town's credit rating was downgraded.
There are plenty of things that a state can do to entice businesses, like streamlining its tax code or modernizing its infrastructure. But by doling out taxpayer dollars to companies as an incentive, state governments subvert the market and set their citizens up to foot the bill for anything that goes wrong. As the Tax Foundation wrote in 2006, "targeted tax preferences…may provide short-term economic stimulus, but ultimately they increase tax complexity and compliance costs, encourage costly industry rent seeking, and raise tax burdens elsewhere in the economy."
The post Crony Capitalism Is Apparently Business-Friendly appeared first on Reason.com.
]]>In the latest Reason Roundtable, editors Matt Welch, Peter Suderman, Katherine Mangu-Ward, and Nick Gillespie discuss the broad implications of the unfolding DeSantis vs. Disney saga.
1:26: DeSantis vs. Disney continues.
33:39: Weekly Listener Question: I'm wondering when it becomes ethical and even required under one's belief in liberty to begin enacting civil disobedience? In this case, I was thinking about riding the U-Bahn maskless, as a forty-something man publicly disobeying the most visible of the restrictions might invite others to question the wisdom of the policy. It's relatively low-risk as I'm triple-vaxxed, as is 75 percent of Hamburg, so I wouldn't be unnecessarily risking others' health, and they can wear a mask anyway. It's also a 40-euro fine, but I'd be willing to eat that cost for the statement of principle.
I acknowledge that state power is strongest in a time of emergency, but we're two years in at this point and have had vaccines for almost a year. And I realize that I could cause myself visa headaches. But, aside from that, is there any ethical reason not to begin a personal campaign of civil disobedience if I object strongly enough to the rules that look like they'll never go away or, at least, that the people in charge hope will never go away?
44:51: Media recommendations for the week.
This week's links:
"Rethinking the Social Responsibility of Business" by Milton Friedman, John Mackey, and T.J. Rodgers
"DeSantis Calls for End of Walt Disney World's Self-Rule" by Scott Shackford
"DeSantis Understands the Best Defense Is a Good Offense" by Jon Gabriel
Send your questions to roundtable@reason.com. Be sure to include your social media handle and the correct pronunciation of your name.
Today's sponsors:
Audio production by Ian Keyser
Assistant production by Hunt Beaty
Music: "Angeline," by The Brothers Steve
The post Why Conservatives Are Wrong To Punish Disney appeared first on Reason.com.
]]>Phil Harvey—erotica and contraceptive entrepreneur, philanthropist, novelist, and supporter of Reason Foundation (the nonprofit that publishes this magazine)—died last week at age 83. His work and giving combined an eagerness to help people achieve pleasure with an enthusiasm for helping them widen and manage the choices they could make to live and reproduce responsibly.
Harvey worked for decades in institutions he founded or co-founded that were dedicated to promoting reproductive choice, including Population Services International and DKT International. In 1972, he founded Adam & Eve, a groundbreaking mail order business specializing in erotic literature, film, and objects.
A constant thread in his business and avocations has been fighting government attempts to quash expression and action. He wrote a 2001 book on that topic, The Government vs. Erotica: The Siege of Adam & Eve. As detailed in a review of the book by Nick Gillespie in Reason:
In 1986, Adam & Eve was invaded by law enforcement officials on the hunt for "obscene" materials. Thus began an eight-year battle, in which Harvey fought the federal government for the right to sell dirty movies, condoms, and other sexual aids to willing adults. After winning an obscenity trial in conservative Alamance County (during which prosecutors made a show of entering into evidence a "foot-long double dong" sold by Adam & Eve), Harvey found himself up against the U.S. Department of Justice under Attorney General Edwin Meese.
The Meese DOJ pursued a nationwide strategy, "Project Postporn," in which it filed simultaneous, multiple-district prosecutions against porn sellers. The goal—often successful—was to scare vendors into quickly accepting draconian settlements that allowed them to avoid or reduce jail time by shuttering their doors. Harvey took a different tack: He fought the federal obscenity charges (eventually spending some $3 million on legal fees), and brought a civil suit against the feds, ultimately settling all matters largely on his terms.
That wasn't Harvey's only legal fight for greater liberty of expression and action for himself and others. He got to the Supreme Court in 1977 with a challenge to New York state's laws against nonprescription contraception, Carey v. Population Services International, and won a victory for the free spread and advertisement of contraceptives, even to the unmarried. He also fought one legal battle in the long, twisted fight over the government's insistence that nongovernmental organizations that get federal funding cannot promote or perform abortions.
He fought another legal battle against compelled speech in one of his bailiwicks, an officious government policy demanding that any recipient of government money to fight AIDS must publicly state they are opposed to prostitution. Harvey's DKT International was a philanthropic nonprofit that also believed in healthy business models, not just pure charity, dedicated to selling low-cost birth control tools and knowledge to the poorer parts of the world. The company used both its own income and other private money and some federal funds, which Harvey thought should not dictate he be forced to say something he did not believe. He won the case at first, then lost on appeal, though later a legal challenge from another source finally overthrew the demand in a 2013 Supreme Court case.
As The Economist described Harvey in a 2004 profile, he was a curious combination of fervent defender and provider of "sexual pleasures of the rich" as well as "family-planning and AIDS-prevention problems of the African poor." He insisted his goal was not to lower the birth rate per se, though he acknowledged that evidence indicated giving more contraceptive choice to people of any income level tended to do that. His goal was to empower people to make whatever reproductive choice they wanted.
Harvey was a defender and supporter of free speech and expression in general, and produced movies dedicated to free speech and expression such as Can We Take a Joke? (2015) and Mighty Ira (2020), the latter about the American Civil Liberties Union's free-speech paladin Ira Glasser. He openly regretted seeing some of America's mainline sources of cultural power and indoctrination such as Harvard University and prominent public universities adopting speech codes.
Free expression and matters directly affecting his erotic and contraceptive enterprises were not his only political concerns, however. Most recently, in a 2020 book he co-authored, Welfare for the Rich, Harvey focused on the ways government power and money often end up lining the pockets of the powerful, wealthy, and well-connected, shaking any naive belief that big government is surely necessary to help the little guy fight back against market or corporate power.
As Harvey told Gillespie in a 2016 interview discussing another book he co-authored, The Human Cost of Welfare, he was concerned as well about a disturbing pattern in welfare state incentives for the less-well-off that made people see working and bettering themselves through their own efforts as a high-risk choice, since it meant they risked losing welfare benefits. That dynamic, Harvey thought, vitiates people's built-in desire to accomplish things for themselves and thus build up their dignity and self-worth.
Harvey's work and philanthropy were dedicated to freedom, and to the power and ability to manage those freedoms responsibly; a delightfully and quintessentially American combination that helped bring pleasure, choice, and control to countless people in America and across the world.
A video of Gillespie's 2012 interview with Harvey:
The post RIP Phil Harvey, Entrepreneur and Philanthropist Who Expanded Human Pleasure and Human Choice appeared first on Reason.com.
]]>President Joe Biden has defended the tax increases he's proposed to pay for his Build Back Better plan on the grounds that they'll level the playing field between the rich and the rest of us.
"It's fiscally responsible, because our investments are paid for that by making sure that corporations and the wealthy Americans pay their fair share," said the president in a White House speech Thursday.
That rhetoric is in friction with some of the details of the $3.5 billion Build Back Better bill currently working its way through the House. It would alter the tax code to provide new subsidies to a biofuel industry that's already received $12 billion in government support since 2016.
The bill would create a new "sustainable aviation fuel tax credit" program, which would provide a minimum $1.25 credit to fuel blenders for every gallon of biofuel they include in their fuel mixes intended for use in aviation.
To qualify for the tax credit, these fuel mixtures would have to be produced in the U.S. and produce half as much life cycle greenhouse gas compared to traditional petroleum-based jet fuel. Fuels that produce even less greenhouse gas could qualify for as much as $1.75 in tax credits per gallon.
The program is closely modeled on the federal government's existing biodiesel tax credit program, which provides fuel blenders with a $1 tax credit for every gallon of biodiesel they include in their fuel mixtures. That program costs taxpayers about $3 billion a year.
How much a biofuel tax credit just for the aviation industry will cost is anyone's guess.
In May, Congress' Joint Committee on Taxation said a $2 per gallon sustainable aviation fuel credit included in Senate Democrats' Clean Energy for America Act would cost only about $300 million over ten years. The White House budget proposal for fiscal year 2022, however, estimated a $1.75 per gallon tax credit would cost $6.6 billion over ten years.
The credit in the House's Build Back Better bill is estimated to cost $600 million, says Sheila Karpf with Taxpayers for Common Sense. But, she says, "the cost could increase significantly."
A lot depends on how much biofuel airlines end up using. Currently, they use very little. Earlier in September, Airlines for America, a trade association representing major airlines, set a goal for its members to use 3 billion gallons of sustainable aviation fuel a year by 2030.
Which fuels actually qualify for the subsidy also matters a lot. Biofuels made from palm oil—which produce less greenhouse gas when used but also require leveling rainforests to make—aren't eligible for the tax credit in the House's Build Back Better bill.
The House bill's method for calculating a fuel's carbon emissions would also likely exclude ethanol and soybean-based biofuels. Reuters reports that some representatives are trying to amend the bill to let the Biden administration decide how to calculate carbon emissions, likely so that more fuels make the cut.
The very idea of trying to cut carbon emission by boosting biofuel use is controversial in environmental circles. You need to use more agricultural land to grow the crops they're derived from, which counter the lower carbon emissions of the fuel.
Prior to Biden's endorsement of subsidies for sustainable aviation fuel, airlines themselves were split on using more biofuels. United has been trying to increase its usage since 2019. American Airlines CEO Doug Parker has argued that his company has done more for the environment by flying a fleet of newer, more fuel-efficient planes.
Forbes contributor Gary Leff argues that the one way to lessen the carbon emissions of the airline industry is to keep ticket prices low. That helps keep individual flights full, lowering the per-passenger emissions of each flight. It also makes air travel more competitive against carbon-spewing cars.
If more biofuel use increases airlines' operating costs, and thus ticket prices, that could have a negative impact on carbon emissions and the environment, even if the fuel itself lets off less greenhouse gas.
Environmental impacts aside, proposals for an aviation biofuels subsidy would still end up giving a lot of taxpayer support to well-heeled corporations.
"The industry does not need any more subsidies. We've already subsidized biofuels for four decades," says Karpf. "The industry is already very mature. It doesn't need more government support."
The post Build Back Better Bill Would Lavish New Corporate Subsidies on Biofuel Industry appeared first on Reason.com.
]]>Today's politicians want to spend more on EVERYTHING: Amtrak subsidies, sports stadium subsidies, green energy subsidies, even fossil fuel subsidies…
President Joe Biden says the handouts will "put more money in your pocket." House Speaker Nancy Pelosi (D–Calif.) claims they will "protect the planet for the children."
They might. But a disproportionate amount of the money will end up in the hands of big companies—the ones with the most lawyers and lobbyists.
A new documentary, Corporate Welfare: Where's the Outrage?, gives examples of this. This week, my new video covers two of the worst.
First, tax "breaks."
Memphis, Tennessee, has a program called the Economic Development Growth Engine, meant to entice new businesses to move to Memphis by giving them tax breaks.
The Growth Engine gave Swedish furniture maker IKEA a $9.5 million tax break. In exchange, IKEA agreed to create 175 new jobs.
Local furniture sellers pushed back.
"What about us?" asks Ron Becker, owner of The Great American Home Store. "We pay taxes here. Where is our financial incentive?
Good question. Lower taxes would be a good incentive. But Memphis politicians can't lower taxes when they're giving big companies tax breaks.
Such tax breaks are complex, so it's big companies with plenty of tax accountants that generally get them.
Memphis is "pitting these gigantic corporations who know the government and have tons of lobbyists against mom and pop shops in our community that we're trying to save," complains Mark Cunningham of the Beacon Center, Tennessee's free market think tank. "You're basically asking people to pay more tax dollars in order for their competitor to succeed over them."
"These are our tax dollars," he adds. "We work really hard for them. They should go to things we need: essential government services, roads, schools, police, fire….It's just not the role of government to give money to big corporations."
Two years later, IKEA still hasn't created all the jobs they promised, and several local furniture stores closed.
"Such programs begin with good intentions," documentary host Johan Norberg points out, "but they result in unintended consequences."
He covers another handout with nasty unintended consequences: farm subsidies.
Farm Bill supporters claim handouts and special crop insurance deals are needed to guarantee America's stable food supply.
That's bunk. Fruit and vegetable farmers get no subsidies. There are no shortages of apples or pears. Crops do fine without subsidies.
"Only the big guys who have the resources" get subsidies, explains Mercatus Center economist Veronique de Rugy.
Some are not even American companies.
"The largest pork producer in the U.S., Chinese-owned Smithfield Foods, increased consumer prices," says Norberg. "Yet they still benefited from the government subsidy system, heavily lobbying to keep feed prices low. It's estimated that in 2019 alone, agribusiness spent over $135 million on lobbying."
It's worth spending $135 million to get billions in return.
By contrast, Jeff Hawkins spends nothing on lobbying.
Hawkins owns a farm in Indiana. He sells chicken to restaurant owner Pete Eshleman. The Indiana legislature asked Hawkins and Eshleman to give a presentation on farmer's markets and local restaurants.
When they finished speaking, Indiana politicians told them that selling chicken directly to restaurants is "illegal." The Indiana Farm Bureau, State Poultry Association, and Pork Producers Association all testified in favor of banning direct farm-to-restaurant sales.
"They basically came up with a story that small farms processing chicken on the farm is a health risk," complains Eshleman.
What really happened was that bigger, politically connected farms used the legislature to ban competition.
But Hawkins' chicken was popular. His customers complained on social media and flooded the phone lines of state representatives.
In a rare twist, the politicians gave in.
Now, says Norberg, "restaurants like Pete Eshelman's can serve locally sourced poultry, and neighbors have a choice in the food that they eat."
It was a small victory against America's anti-freedom, pro-big business, welfare-for-the-rich regulations.
You can watch Norberg's full documentary at FreeToChooseNetwork.org.
COPYRIGHT 2021 BY JFS PRODUCTIONS INC.
The post Memphis Gave IKEA $9.5 Million While Several Smaller Furniture Stores Went Under appeared first on Reason.com.
]]>Congress passed the $2.2 trillion HEROES Act.
House Democrats said it gives money to "governments who desperately need funds."
But it also gives lots of money to people who don't need funds.
Maryland, which even The Washington Post admits is "flush with cash," got enough extra money to pass a budget that "hands bonuses to every state worker."
Even Atherton, California, where the median home price is $6 million, got HEROES Act money.
"There was no means test!" complains Lisa Conyers, author of Welfare for the Rich, in my latest video.
Omni Hotels & Resorts received $68 million in loans. Major airlines got $25 billion in loans from the CARES Act.
"Who wouldn't like to play Santa Claus?" asks Conyers. "Who wouldn't like to just be able to give everybody some money?"
Welfare for the rich didn't start with coronavirus relief bills. Politicians have done it for years, and a pandemic didn't stop them.
Nevada politicians gave Oakland Raiders owner Mark Davis $750 million for a new stadium. A stadium designer says Davis insisted on the very best, including natural grass on a field that "moves in and out of the building in one piece."
Cool. But why didn't Davis pay for it himself?
"I'm not a billionaire," he said.
But he is. The team is valued at more than $3 billion, and Davis and his mom co-own 47 percent of it.
Politicians screw taxpayers to build stadiums for lots of rich people.
Minnesota gave the Minnesota Vikings $348 million for their new stadium. Santa Clara, California, gave the San Francisco 49ers $114 million, plus $850 million in loans. Team co-owner Denise York and her family are worth $3.5 billion, says Forbes. She ought to fund her own stadium.
"The taxpayers often vote for this stuff," I say to Conyers, "so they must like it."
"They're promised there's going to be all these jobs," she replies, "not only at the stadium but at the hotels that are going to rise up around the stadium."
Politicians always promise that public investment will return more in benefits to taxpayers. But it's not true.
A study by the Federal Reserve Bank of Kansas City found new stadiums bring in about $40 million in jobs and tax benefits, much less than the $188 million that taxpayers pay.
Handouts to other corporations fare no better.
Ohio politicians gave General Motors millions in tax credits to keep its Lordstown plant open. GM then closed the plant. Politicians let GM keep a third of the money.
Wisconsin gave nearly $3 billion in tax breaks to Foxconn because it promised to create 13,000 jobs. Now the company promises to create only 1,454.
"If you look at the cost of each job, it was a million dollars," Conyers points out.
Actually, it was more than a million.
Politicians often justify this corporate welfare by saying, "We didn't give cash, just tax breaks."
But "if some big company is in that town and they are not paying property tax, that means every other taxpayer is covering for them," Conyers points out. "Fire departments still have to be paid for. Police departments still have to be paid for. Schools still have to be paid for!"
Then there's the farm subsidy scam.
Both Republicans and Democrats eagerly give your money to agribusiness, even though farmers are now richer than the average American.
The politicians claim the handouts are not a payoff for political contributions but to "make sure there's enough food to go around," since "farmers have no control over price fluctuations and the weather."
But that's absurd. Other businesses adjust to price fluctuations and weather. America doesn't subsidize fruit and vegetable farmers—yet we have plenty of fruits and vegetables.
The politicians claim they want to help "small family farms," but they give 90 percent of the subsidies to the biggest farms.
Such welfare for the rich persists because, years ago, politicians voted for a handout, and once they start giving your money away, they never stop.
"I'm an American taxpayer," says Conyers. "I don't understand why money is leaving my pocket and going into the pocket of somebody who is wealthy."
Me either.
COPYRIGHT 2021 BY JFS PRODUCTIONS INC.
The post Corporations Are Getting Rich off Government Aid appeared first on Reason.com.
]]>Sen. Marco Rubio (R–Fla.) presented a not-even-veiled threat to American Corporations in the New York Post Sunday evening: Support the Republican Party's policies or face some sort of undescribed punishment.
Rubio doesn't say "the Republican Party's policies," of course. He insists that the GOP's goals are actually "American values." If companies resist them and instead embrace "woke politics"—of, say, Major League Baseball pulls the All-Star Game out of Georgia to protest the state's new voting law—that makes them somehow anti-American.
Rubio's commentary exhibits nostalgia for a wholly imaginary past where corporations and government were always on the same side about what is good for America—which, coincidentally, was also whatever the GOP stood for. But then, apparently, corporations greedy and stopped caring about Americans and their values:
Corporate America began to view these good jobs, families, communities and even the nation as an afterthought. American workers of all backgrounds suffered as a result. Corporate greed annihilated an entire way of life.
Then a culture shift followed. It became trendy for executives to view themselves as "citizens of the world." Love of country, free speech and traditional faith and other bedrock American ideals became unfashionable.
Tellingly, the New York Post links the words "culture shift" to a story about CEOs attending a Zoom seminar to discuss how to respond to states considering new voting laws, particularly those who propose making it harder for Americans to vote via new restrictions or identification demands. The Post notes that some of the CEOs came away saying that they'll reconsidering campaign donations and investments in states where lawmakers pass such laws.
To Rubio, this is apparently un-American. The senator is apparently under the delusion that all the previous political logrolling throughout our history was politically neutral. He also seems to think it was for the benefit of all Americans, not just a select group of connected people who had the ears of Congress.
Rubio opens the piece talking about how "What's good for GM is good for America" was a "defining adage for the last century, because it was true." Except that it wasn't, at least as far as U.S. policy-making is concerned.
It's true that when GM does well by meeting market needs efficiently, the financial windfall radiated outward and benefited large swathes of the population. Alas, that isn't all that GM did. For example, it got a bailout from President Barack Obama's administration, and taxpayers took it in the shorts. The company and the unions got paid; the rest of us got hosed.
Americans do not, in fact, all benefit from federal subsidies and other forms of largesse directed to corporations. Those should be curtailed, because they redirect our tax dollars in ways that help a small group of Americans at the expense of all the rest. That's bad whether or not corporate leaders hold positions at odds with those of Marco Rubio.
The Republican response to allegedly "woke" politics influencing corporate decision-making has the inadvertent consequence that politicians are actually saying out loud that a company's treatment by government is dependent on how these companies treat politicians.
Points for honesty, I guess. This has always been the case, right? Corporations and unions influence policies that benefit themselves and often harm potential rivals and upstarts by introducing regulatory barriers and various occupational licensing demands that punish competitors, especially overseas ones. And the politicians are rewarded with donations.
In the meantime, corporate leaders, athletes, and celebrities have the same First Amendment rights as every other American, and it's flat-out grotesque for politicians to threaten punishments because of those disagreements.
By all means, Rubio (and everybody else) should feel to critique the hypocrisy of American corporations exercising their free speech and free association rights here while acquiescing to China's totalitarian rule in order to do business there. Rubio spends several graphs criticizing Facebook and other countries who do just that.
Alas, Rubio thinks the solution is a trade war with China—and he seems to be using this attack on "woke" corporations to push that part of his policy agenda as well. Meanwhile, he's espousing ideas that would make America more like China. "America's laws should keep our nation's corporations firmly ordered to our national common good," he creepily concludes. Senator, if you're going to attack Mark Zuckerberg for cozying up to Xi Jinping, maybe you should try harder not to sound like a Chinese dictator.
The post Marco Rubio Echoes the Chinese Tyrants He Supposedly Hates appeared first on Reason.com.
]]>Tech billionaire Elon Musk is known for leading Tesla and SpaceX, as one of the visionaries behind PayPal, and for hyping bitcoin and a bold plan to colonize Mars.
He's not just one of the planet's richest people, he's one of its biggest recipients of government handouts, according to Lisa Conyers and Phil Harvey, authors of Welfare for the Rich: How Your Tax Dollars End Up in Millionaires' Pockets—And What You Can do About It. Conyers is a veteran journalist and co-author with Harvey of 2016's The Human Cost of Welfare. Harvey is a successful businessman and philanthropist who supports many libertarian organizations, including Reason Foundation, the nonprofit that publishes this website.
By 2015, companies led by Musk had already gotten billions in subsidies, tax breaks, and other handouts. He's not alone. There are thousands of other immensely rich people who are constantly milking the government for special perks, carveouts, and handouts.
Here are five of the very worst ways they do that.
1. Agricultural Subsidies
Since 1933, when Congress passed the first farm support bill, the government has been shoveling billions of dollars in the form of crop insurance, cash payouts, and other subsidies to the smaller and smaller number of American farmers. As Conyers and Harvey document, former Obama commerce secretary and billionaire Penny Pritzker received $1.6 million in subsidies between 1996 and 2006, and current Republican South Dakota Gov. Kristi Noem was part of a family business that got over $3 million in subsidies between 1995 and 2008.
2. Sugar Subsidies
Because of protectionist tariffs and price supports, Americans pay around triple the world price for sugar, thanks to efforts by billionaires like Fanjul brothers, Alfy and Pepe, dubbed "the first family of corporate welfare" by Time magazine.
3. Stadium Deals
Many, if not most, major pro sports team owners are billionaires.
Yet between 1997 and 2015, almost half of all construction costs for new NFL stadiums were covered by taxpayers. In the case of Raymond James Stadium, home to Super Bowl champs the Tampa Bay Buccaneers, taxpayers ponied up 100 percent of building costs. Plus, the team basically gets all revenue generated at the stadium too.
4. Mickey Mouse Subsidies
The Walt Disney Corporation, with a market cap of $368 billion, is the heavyweight champ among theme park operators when it comes to sweetheart deals. Disney "returned $2.3 billion to investors in 2017 alone" write Conyers and Harvey, and Bob Iger, chairman and CEO, "earns $45 million a year." So of course Disneyland, located in Anaheim, California, needs handouts.
Twenty-five years ago, Anaheim built Disney a new parking structure that cost $108 million and then leased it to the company for the high price of $1 a year. In 2015, the city agreed to exempt the park from paying entertainment taxes for 45 years, and in 2016, it agreed to a $650 million tax rebate on a luxury hotel Disney built near "the happiest place on Earth."
5. Energy Freebies
Over the past decade, Peabody, the largest private coal company in the world, pulled in around $275 million in state and federal subsidies while generating $5.6 billion in revenue in 2017. Exelon, a power company that specializes in nuclear energy, generated $34 billion in revenue in 2017, the year after it gulled New York state into giving it $7.6 billion to keep four aging and underperforming nuclear power plants going.
A few years back, New York state also shelled out $750 million to build a factory for Elon Musk's renewable energy company Solar City. Elected officials then decreed the company would pay no property taxes for a decade, saving the billionaire another $260 million.
But as Conyers and Harvey argue, in our information-rich world, citizen activists are fighting back. In Louisiana, when one group learned that Exxon and other gas and oil companies were getting away without paying property taxes, it led to a new public accountability law.
They also point to websites that track subsidies and handouts, empowering citizens to protest the use of tax dollars to gild the pockets of mega-corporations and the billionaires who own them.
If and when Elon Musk actually makes it to Mars, let's make sure he buys his own ticket.
Narrated by Nick Gillespie. Edited by John Osterhoudt. Additional graphics by Paul Detrick and Meredith Bragg. Color correction by Regan Taylor.
Photo: Steve Jurvetson/Flickr/Creative Commons; Daniel Oberhaus/Flickr/Creative Commons; JD Lasica/Flickr/Creative Commons; Maurizio Pesce/Flickr/Creative Commons; Airman Magazine/Flickr/Creative Commons; Commerce Department/ZUMA Press/Newscom; JOE MARINO/UPI/Newscom; Taylor Jones/ZUMA Press/Newscom; Taylor Jones/ZUMA Press/Newscom; K.C. Alfred/ZUMA Press/Newscom; Bill Bachmann/DanitaDelimont.com "Danita Delimont Photography"/Airman 1st Class Jacob Wrightsma/2nd Bomb Wing Public Affairs/Newscom; Stephen M. Dowell/TNS/Newscom; Douglas R. Clifford/ZUMA Press/Newscom; Xavier Collin/Image Press Agency/MEGA; Mark Eades/ZUMA Press/Newscom; Clem Murray/TNS/Newscom; Heather Charles/MCT/Newscom; RASHID ABBASI/REUTERS/Newscom; LEE CELANO/REUTERS/Newscom; LEE CELANO/REUTERS/Newscom
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]]>Tech billionaire Elon Musk is known for leading Tesla and SpaceX, as one of the visionaries behind PayPal, and for hyping bitcoin and a bold plan to colonize Mars.
He's not just the planet's richest person, he's one of its biggest recipients of government handouts, according to Lisa Conyers and Phil Harvey, authors of Welfare for the Rich: How Your Tax Dollars End Up in Millionaires' Pockets—And What You Can do About It. Conyers is a veteran journalist and co-author with Harvey of 2016's The Human Cost of Welfare. Harvey is a successful businessman and philanthropist who supports many libertarian organizations, including Reason Foundation, the nonprofit that publishes this website.
By 2015, they write, companies led by Musk had already gotten billions of dollars in subsidies, tax breaks, and other handouts. New York state even shelled out $750 million to build a factory for Musk's troubled SolarCity operation and then said the company would pay no property taxes for a decade, saving Musk another $260 million. "He seems to have a magic touch," says Harvey. "He's gotten so good at raising money from state governments, getting subsidies, tax abatements, and so on, that sometimes it seems as though the states are lining up to offer him money to come and do business."
Musk is far from alone. There are thousands of other immensely rich people who are constantly bilking governments at all levels for special perks, carveouts, and handouts.
Here are five of the very worst ways they do that.
1. Agricultural Subsidies
Since 1933, when Congress passed the first farm support bill, the government has been shoveling billions of dollars in the form of crop insurance, cash payouts, and other subsidies to the smaller and smaller number of American farmers. Recipients have included billionaire Penny Pritzker, who served as President Obama's commerce secretary and received $1.6 million in subsidies between 1996 and 2006, and Republican South Dakota Gov. Kristi Noem, who was part of a family business that got over $3 million in subsidies between 1995 and 2008.
2. Sugar Subsidies
If general agricultural subsidies aren't bad enough, the amount of government largesse specifically going to sugar producers is almost beyond comprehension. Because of protectionist tariffs and price supports, Americans pay around double the world price for sugar, thanks to efforts by billionaires like the Fanjul brothers, Alfy and Pepe, who were dubbed "the first family of corporate welfare" by Time magazine. "The Fanjul brothers give millions and millions of dollars to both sides of the aisle," explains Conyers. "That's how a lot of this stuff happens. You make friends on the Hill and you just make sure that your subsidy is renewed every year or every four years or whatever the case may be."
3. Stadium Deals
The typical NFL, MLB, or NBA team owner is worth at least hundreds of millions of dollars but they rarely shy away from shaking down cities, states, and even the feds to pay for new stadiums. That explains why between 1997 and 2015, almost half of all construction costs for new NFL stadiums were covered by taxpayers. In the case of Raymond James Stadium, home to Super Bowl champs the Tampa Bay Buccaneers, taxpayers ponied up 100 percent of building costs. The team basically gets all revenue generated at the stadium too.
But it's not just big-league teams that rip off taxpayers. There's the case of the minor league baseball team the Hartford Yard Goats, who bilked that perennially broke city for a new home. The millionaire owners of the team convinced city officials to pony up for a new stadium in 2016, explains Conyers. "The stadium ended up costing the city $67 million," she says. "Which is exactly the amount of money that the city is in the hole right now."
4. Mickey Mouse Subsidies
Nobody will be surprised that Mickey Mouse's owner, The Walt Disney Company, is the heavyweight champ among theme park operators when it comes to sweetheart deals. Disney "holds assets worth over $92 billion, has a stock market value of $152 billion, and returned $2.3 billion to investors in 2017 alone," write Conyers and Harvey. "Bob Iger, chairman and CEO, earns $45 million a year." So of course Disneyland, located in Anaheim, California, needs handouts.
Twenty-five years ago, Anaheim built Disney a new parking structure that cost $108 million and then leased it to the company for the high price of $1 a year. In 2015, the city agreed to exempt the park from paying entertainment taxes for 45 years, and in 2016, it agreed to a $650 million tax rebate on a luxury hotel Disney built near "The Happiest Place on Earth."
5. Energy Freebies
As Conyers and Harvey note, the energy industry has been the best performing sector of the S&P 500 for many years, with revenues topping $238 billion in 2018. Over the past decade, Peabody Energy, the largest private coal company in the world, sucked up around $275 million in state and federal subsidies while generating $5.6 billion in revenue in 2017 alone. Exelon, a power company that specializes in nuclear energy, generated $34 billion in revenue in 2017, the year after it gulled New York state into giving it $7.6 billion to keep four aging and underperforming nuclear power plants going. And when it comes to renewable resources like wind and solar, Elon Musk's ability to make it rain with tax dollars speaks for itself.
All is not darkness, insist Conyers and Harvey, even as they catalog how the tax code, zoning laws, and other sorts of government policies routinely get revised to specifically and uniquely benefit the ultra-rich. One success story they point to involves residents in Louisiana who pushed back against the decades-long exemption from property taxes that major oil and gas producers like ExxonMobil had. The exemptions were a well-kept secret until a group of citizen activists stumbled across their existence and then kicked up a fuss that led to reform.
"They stumbled upon this little committee that was rubber-stamping requests for from these oil companies," relates Conyers. "They started a public education campaign just saying, 'Hey, you know, how much better would our schools be, how much better would our police forces be…how much better would our roads be if those guys would just pay their fair share?' They managed to get the law changed so that now when those companies go and ask for those tax breaks, they have to make presentations to local school boards and fire departments and police departments and say: 'Hey, we don't want to pay taxes and support you because we don't think we should.'"
The authors of Welfare for the Rich point to the growing number of websites such as Good Jobs First and Sunlight Foundation that track subsidies and handouts as places both to get energized by and to get information about how to claw back public dollars that are going to gild the pockets of mega-corporations and the billionaires who own them.
By the time Elon Musk makes it to Mars, hopefully he'll be paying his full fare.
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]]>Tech billionaire Elon Musk is known for creating bold new companies such as PayPal, Tesla, and SpaceX, championing liberating technologies like Bitcoin, and hyping visionary plans to colonize Mars.
But with a net worth of around $200 billion, he's not just the planet's richest person. He's one of its biggest welfare recipients, report Lisa Conyers and Phil Harvey, authors of Welfare for the Rich: How Your Tax Dollars End Up in Millionaires' Pockets—And What You Can do About It. By 2015, they write, companies led by Musk had gotten billions of dollars in subsidies, tax breaks, and other handouts. New York state even shelled out $750 million to build a solar panel factory for Musk's Solar City operation and said the company would pay no property taxes for a decade, saving another $260 million.
Musk is not alone say Conyers, a veteran journalist, and Harvey, a successful businessman who donates to many libertarian organizations, including Reason Foundation, the nonprofit that publishes this podcast. There are literally thousands of other immensely rich people who are constantly bilking governments at all levels for special perks, carve-outs, and handouts paid for by middle-class and poor people.
In exhaustively documented and perpetually enraging prose, Conyers and Harvey show how millionaire "farmers," billionaire team owners, and filthy rich oil-and-gas-and-wind-power barons lobby Congress, rewrite zoning laws, and plunder the public fisc like it's a bodily function. They also outline realistic and effective ways to fight back and level a playing field that benefits the people who need the least help from government.
The post Elon Musk, Welfare King! appeared first on Reason.com.
]]>With the presidential election now just over two weeks away, President Donald Trump has mounted a frantic effort to ensure America's farmers, a key Trump voting bloc, will support his flagging re-election campaign. In short, he's shoving piles of cash their way.
The New York Times details the "gush of funds" Trump has promised U.S. farmers—with more on the way. Some say total farm subsidies could top $40 billion this year. The Times says the figure may be as high as $46 billion. Either figure would be a record.
Generally, it appears Trump may see this sort of "massive pre-election stimulus" as his best hope for reelection.
Critics have seized on the manner in which the Trump administration is subsidizing farmers—mostly outside of the traditional (though also lousy) programs funded under the five-year Farm Bill.
"[T]he bulk of USDA payments to farmers since 2017 have flowed through stop-gap programs created by the Trump administration, with payment limits far larger than those that apply to the traditional farm program," Successful Farming reported in August.
The combination of farm subsidies included in the current Farm Bill and subsidies doled out under Trump's executive order means, the Times reports, that two out of every five dollars American farmers receive this year will come directly from taxpayers.
Critics, including many Democrats, argue the funds are being doled out as political favors. They appear to have a point. Last month, for example, during an election rally in Wisconsin, Trump announced additional payments to farmers totaling $13 billion.
Non-partisan observers have also labeled them political handouts. "The Government Accountability Office found last month that $14.5 billion of farm aid in 2019 had been handed out with politics in mind," The Week reports. The Times, citing the same GAO report, also highlighted by some Democrats, shows farm subsidies last year appeared to be directed to "big farms in the Midwest and southern states," mirroring at least some segments of Trump's farm base.
That same base has been hit hard by tariffs championed by Trump. In 2018, I predicted (as did many others) that Trump's international trade tariffs would spur retaliatory tariffs and harm U.S. farmers and consumers in the process. They did just that.
But because Trump's tariffs hurt U.S. farmers, and because he wants them to vote for him again, he's sending them cash. That cash even has a name. Last year, one farmer NPR food-policy writer Dan Charles spoke with says he and his fellow farmers have taken to referring to the tariff-induced subsidies as "Trump money."
"The U.S. Department of Agriculture simply sent [the farmer] a check to compensate him for the low prices resulting from the trade war," Charles explains.
Most of Trump's subsidies have gone to large producers.
"Despite the record amount of farm welfare payments doled out by this administration, the smaller struggling family farmers get next to nothing while wealthy landowners and massive, highly profitable agribusiness hoover up most of the federal dollars," says Don Carr, a senior advisor with the Environmental Working Group, in an email to me this week. "I'm old enough to remember when a Minnesota millionaire qualifying for a puny food stamp benefit was a scandal, yet few feathers get ruffled when rich land barons collect million-dollar government welfare checks."
All of these payments are wrongheaded and unnecessary—whether to big or small producers—as I detail in my book, Biting the Hands that Feed Us.
In a Chicago Tribune op-ed this week, Wisconsin farmer and advocate Danielle Endvick explains that while the record farm subsidies are "deeply appreciated," taking buckets of "Trump money"—she notes federal farm payments have "nearly tripled since 2017″— "feels just a little bit dirty" during the election season.
She's right. Everything feels dirty during the election season. But Trump's taxpayer handouts to farmers just feels a little bit dirtier.
The post The Feds Have Doled Out Record Farm Subsidies To Save Trump's Campaign appeared first on Reason.com.
]]>In April, the White House released a statement boasting that President Trump had signed into law a bill authorizing an additional $320 billion in spending on the Paycheck Protection Program (PPP). The additional funds, which were intended to provide forgivable loans to small businesses negatively impacted by the pandemic, would bring the program's total funding to about $670 billion, making it one of the largest emergency government spending measures ever undertaken.
The White House argued that the spending was justified, as the program had already proven to be "incredibly successful" aiding "countless small businesses and millions of American workers." The program, the statement said, had "already experienced unprecedented success in protecting American jobs and small businesses." More recently, the administration has attempted to place a figure on the number of jobs saved, saying it supported more than 51 million positions, and deeming the program a "wild success."
That was the argument: support for jobs and small businesses in a time of crisis. Yet as more details about the program have slowly been released, it has become clear that the administration's claims are unreliable and inflated, perhaps wildly so. Indeed, there is reason to believe that thousands of the jobs the administration claims to have saved do not exist at all.
In addition to small businesses, a number of large employers and wealthy firms received loans under the program, according to the administration's own data.
Kanye West's Yeezy clothing company received a loan of at least $2 million through the program, as did various well-connected political organizations and consulting groups, national restaurant chains like P.F. Chang's, and pricey educational institutions like the Sidwell Friends School in Washington, D.C. Several companies that received government loans were owned by billionaires.
These loans were loans in name only; as long as recipients followed certain rules, they were fully forgivable, making them more like federally funded grants. Meanwhile, there were few if any checks or verification procedures built into the program, meaning that loan approvers did little to determine if recipients actually needed the loans to stay afloat. This was essentially free government money for any business that asked for it and could navigate the application process.
Meanwhile, the administration's jobs-saved claims are almost certainly inflated. The Washington Post reports that multiple businesses have total employment that is far lower than the figures shown in White House data. A fire protection company based in Washington state, for example, supposedly saved 500 jobs with its PPP loans. The company employs just 20 people. A manufacturer in Georgia has just seven employees and two owners, but according to White House data somehow saved more than 500 jobs. The owner appears to be as confused by this as anyone, telling the Post, "I don't know where you got the 500."
The problems don't appear to be just one-off data entry errors. The Post also notes that administration data claims the PPP saved 114,000 landscape architecture jobs. That's somewhat suspicious, as it's more than triple the total number of people in the field, according to separate government data. The administration is claiming that it saved far more landscape architecture jobs than there are in the country.
Nor is this discrepancy limited to a single field. The Post reports that in multiple employment sectors—such as oilseed and grain farming, employment placement, and performing arts—Trump administration data shows thousands more jobs saved by PPP than actually exist.
The data is questionable in other ways as well. As Reuters recently reported, an unusually large number of recipients reported saving exactly 50 jobs.
None of this has stopped Trump from declaring that the program has been a runaway hit. "This has been a tremendous success; levels that nobody has ever seen before," he said earlier this month. Given the general shoddiness of the administration's data, it's worth taking these presidential brags with considerable skepticism. But it is probably true that no one has ever seen levels of success that include saving jobs that never existed in the first place.
Still, these sorts of dubious and likely inflated claims are far from unprecedented. Following the passage of the 2009 stimulus bill, the Obama administration repeatedly bragged about the millions of jobs "created or saved" by the program.
But the jobs figures were based on models and extrapolations from the Congressional Budget Office that simply assumed that certain government spending levels always created a particular number of jobs, rather than actual measurements of jobs created. Attempts to actually measure employment created by the program, in contrast, showed a much more complex picture, in which many of the jobs created were just hired away from other firms, rather than jobs for people who had been out of work.
Like Trump, however, the Obama administration declared the program a success anyway. The point person for the oversight effort? Trump's presumed Democratic rival for the presidency, Joe Biden.
The post Trump Administration Data Claims Coronavirus Relief Program Saved Tens of Thousands of Jobs That Probably Don't Exist appeared first on Reason.com.
]]>The list of companies and organizations that received loans through the federal government's flagship coronavirus relief program includes firms linked to powerful politicians, celebrities, lobbyists, and government spending hawks.
On Monday, the Small Business Administration (SBA) released a list of organizations that each received more than $150,000 through the Paycheck Protection Program (PPP).
That program, first approved as part of the $2.3 trillion CARES Act in late March, allocated $670 billion to purchase loans made by banks to businesses and non-profits with fewer than 500 employees. The government would forgive those loans so long as the recipients spent a certain portion of the money on retaining or hiring back employees.
Politico reports that PPP borrowers included companies owned or founded by members of Congress, as well as the educational arms of the Congressional Black Caucus and the Congressional Hispanic Caucus. Several lobbying firms, technically barred from receiving loans if over half their revenue comes from lobbying, also benefited from PPP.
On the executive side of things, the Daily Beast reports that several companies linked to the family of White House Special Adviser (and President Donald Trump's son-in-law) Jared Kushner received PPP loans.
That list includes Observer Holdings LLC, a media company once owned by Kushner himself and currently held by an investment firm run by his brother-in-law. The Beast reports that hotels owned by Kushner Companies, a real estate investment firm owned by members of Kushner's family, also received PPP loans.
Aspiring presidents have had their turn at the trough too. Clothing brand Yeezy, which is owned by rapper and recently announced presidential candidate Kanye West, received a loan of between $2 million and $5 million. (The SBA did not release exact loan amounts.)
Even advocacy groups have been cashing in, including some noted critics of profligate government, spending such as Americans for Tax Reform and the Ayn Rand Institute (ARI).
The latter's acceptance of government aid provoked a lot of jeering on Twitter about the alleged hypocrisy at play, although ARI has said since late May that it would gladly accept PPP loans as an effective return of stolen goods.
Other free market organizations have taken a different approach.
"Central to this mission is our view that the scope and power of government should be limited. Our ability to make that case with credibility and integrity would be irreparably compromised if we accepted a loan right now," wrote Peter Goettler and Robert Levy, president and chairman of the Cato Institute respectively, of their refusal to apply for PPP funds in a Wall Street Journal op-ed. (The Reason Foundation, which publishes Reason, also declined to apply for a PPP loan.)
The list of PPP beneficiaries also includes progressive watchdogs like Public Citizen Foundation, the research and litigation wing of Public Citizen Inc., which received between $350,000 and $1 million from the program. Just yesterday, the group released a report on lobbyists with connections to the Trump administration benefiting from coronavirus relief funds.
Public Citizen notes on its website that it takes "no government or corporate money, which enables us to remain fiercely independent and call out bad actors." Like nearly all the organizations mentioned here, including Reason Foundation, Public Citizen benefits from other tax breaks and incentives, including those that encourage charitable giving.
NBC News reports that 43 Planned Parenthood affiliate organizations received between $65 million and $150 million in PPP loans. Congressional Republicans have argued that these affiliates are too closely tied to the national Planned Parenthood organization to qualify for the small business program. The SBA has demanded that these affiliates return the PPP money they received.
NARAL Pro-Choice America Foundation, an advocacy group, and the National Abortion Federation, which represents abortion providers, also both received PPP loans.
Critical headlines about connected businesses and lobbyists receiving PPP money has sparked a backlash of sorts against "PPP shaming."
The point of PPP was to finance the payrolls of institutions with less than 500 employees and I find it bizarre that people find it interesting that any particular institution of that size got money from it.
— Josh Barro (@jbarro) July 7, 2020
My hot take is that PPP shaming is dumb, the program was designed to keep people employed and I'm happy to see high utilization if it preserved people's jobs!
— Chris Hayes (@chrislhayes) July 6, 2020
The basic argument here is that so long as these funds kept employees on an organization's payroll—whatever type of organization it is—then PPP was a success on its own terms. By accepting aid, these organizations fulfilled the public purpose of the program.
"The PPP was designed to reduce the number of people laid off as a result of the pandemic and lockdowns. It did that," writes Henry Blodget at Business Insider. "Stop blaming companies for doing what the government wanted them to do."
But there are always trade-offs when the government spends money, "money printer goes brrr" memes notwithstanding.
Any PPP loan that went to a politically connected lobbying firm or a billionaire-owned shoe company is a loan that did not go to the government-shuttered restaurant or similar small business down the street. All those PPP dollars could have gone towards relief programs better targeted at the least well off. The money could have also gone straight back into the hands of taxpayers.
Congress has tried to reform PPP by passing a law that gives recipients more time and flexibility when it comes to spending the money received from the program. But Congress has devoted very little time to winnowing down who is actually eligible for the program in the first place.
To be sure, that's a difficult task. Any government program of sufficient size and complexity is going to send some benefits to those who don't deserve them or who won't use them efficiently. Stricter eligibility requirements necessitate more red tape that can slow down or deny relief to even the most worthy recipients. Or maybe ARI is right and anyone who paid taxes is definitionally a worthy recipient.
But there's no doubt the administration of this program has been slapdash and ill-conceived. A lot of ink has already been spilled detailing the lax oversight, excessive red tape, and frequently incompetent administration of PPP. This week's news makes clear exactly what sorts of individuals, businesses, and organizations have benefited from this government dysfunction.
The post The Paycheck Protection Program Is a Mess. Here's Who Is Benefitting From the Dysfunction. appeared first on Reason.com.
]]>In many places in the U.S., it's neither safe nor legal to conduct business right now due to the threat posed by the coronavirus pandemic (for more on this, see Editor in Chief Katherine Mangu-Ward's "The Seen and the Unseen of COVID-19"). But the damage done by the virus has been made worse by an incompetent government response, impositions on people's civil liberties, and an ongoing trade war with China. What follows is Reason's explanation of what went wrong and which rules, regulations, and parts of life people are getting the opportunity to rethink.
The United States is home to the most innovative biotech companies and university research laboratories in the world. That should have provided us with a huge advantage with respect to detecting and monitoring emerging cases of COVID-19 caused by the coronavirus pandemic. Public health officials had the opportunity to slow, if not contain, the outbreak: By tracing the contacts of diagnosed people and quarantining those who in turn tested positive, they could have severed the person-to-person chains of disease transmission.
South Korea demonstrates that such a campaign can work. While both countries detected their first cases of COVID-19 on January 20, the trajectories in the U.S. and South Korea have since sharply diverged. By the beginning of March, South Korea had "flattened the curve"—that is, substantially reduced the number of people being diagnosed each day with coronavirus infections—whereas the United States was still struggling to do so when this article went to press six weeks later.
South Korean health officials met on January 27 with private biomedical companies, urging them to develop coronavirus diagnostic tests and assuring them of speedy regulatory approval. The first commercial test was approved in that country a week later. South Korea's now-famous drive-through testing sites were soon testing tens of thousands for the virus. By the first week in March, the country had tested more than 150,000 people, compared to just 2,150 in the United States. Testing and contact tracing helped daily diagnosed cases in South Korea peak at 909 on February 29.
In stark contrast, officials at the U.S. Food and Drug Administration (FDA) and the Centers for Disease Control and Prevention (CDC) stymied private and academic development of diagnostic tests. Much to the contrary, the CDC required that public health officials use only a diagnostic test designed by the agency. That test—released on February 5—turned out to be contaminated by a reagent that made it impossible for outside labs to tell if the virus was present in a sample or not. The CDC's insistence on top-down centralized testing meant there were no available alternatives, which greatly slowed down disease detection just as the infection rate was accelerating.
This massive bureaucratic failure is a big part of why a larger proportion of Americans than of South Koreans will suffer and die from the viral illness.
On February 29, the FDA finally moved to allow academic labs and private companies to develop and deploy their own diagnostic tests. But in the meantime, the Trump administration had begun lying about the availability of tests. On March 2, FDA Commissioner Stephen Hahn declared that "by the end of this week, close to 1 million tests will be able to be performed." During a tour of CDC headquarters on March 6, President Donald Trump asserted that "anyone who wants a test can get a test." In fact, it took until the end of March for 1 million tests to be administered in the United States.
Once the FDA got out of the way, diagnostics companies LabCorp and Quest rolled out tests almost immediately. Many academic labs followed suit. Unfortunately, pent-up demand led to significant delays in reporting results.
By the end of March, companies such as Abbott Laboratories had introduced tests that report results in less than 15 minutes. But after four startups began offering at-home testing, promising to further improve access, an obstinate FDA shut them down.
The FDA has finally managed to smooth the way for private companies to begin introducing blood tests for antibodies to the virus produced by people's immune systems. General population screening using these tests will reveal undetected cases, providing a better idea of the actual extent of the pandemic. The tests will also identify people who have recovered and probably can go safely back to their lives beyond quarantine.
In the absence of effective treatments for COVID-19, testing and contact tracing on a massive scale will be vital to restoring economic activity—assuming the epidemic is beaten back, in the meantime, by social distancing. But due to red tape, the coronavirus outbreak in the U.S. has turned out to be far more deadly than it could, and should, have been.
State and local officials have taken sweeping emergency actions to combat the spread of COVID-19, including shelter-in-place orders, bans on large gatherings, and widespread business closures. Such measures may well fall under the traditional police powers of the states to regulate actions on behalf of public health, safety, and welfare. But even the most necessary of emergency actions may still pose a significant risk to liberty.
The U.S. experience during World War I offers a cautionary tale about how government restrictions passed in the heat of a national emergency can linger for years afterward—a lesson that must be quickly learned if we are to avoid repeating some grave mistakes in 2020.
When President Woodrow Wilson took the nation to war against Germany in 1917, he did so in the name of making the world safe for democracy. But the president also targeted certain enemies much closer to home. "There are citizens of the United States, I blush to admit," Wilson said at the time, "who have poured the poison of disloyalty into the very arteries of our national life….The hand of our power should close over them at once."
At Wilson's urging, Congress passed the Espionage Act of 1917, a notorious law that effectively criminalized most forms of anti-war speech. Among those snared in its net was the left-wing leader Eugene Debs, who was arrested in 1918 and sentenced to 10 years in federal prison. His crime had been to exercise his First Amendment rights by giving a mildly anti-war speech at an afternoon picnic. In 1919, the same year that the U.S. government signed the peace treaty that formally ended World War I, the U.S. Supreme Court upheld Debs' conviction for speaking out against the war. Debs would rot in federal prison until he was pardoned by President Warren G. Harding in 1921. As for the Espionage Act, while it has been amended several times over the years, it remains on the books.
State governments imposed various restrictions of their own. Nebraska's legislature responded to America's entry into the Great War by cracking down on the civil liberties of its German immigrant communities. Most notably, the state banned both public and private school teachers from instructing children in a foreign language. That law was aimed directly at the state's extensive system of Lutheran parochial schools, where teachers and students commonly spoke German.
Robert Meyer, who taught the Bible in German at the Zion Evangelical Lutheran Parochial School, sued the state for violating his constitutional rights. But the Nebraska Supreme Court waved his objections away. "The salutary purpose of the statute is clear," that court said. "The legislature had seen the baleful effects of permitting foreigners, who had taken residence in this country, to rear and educate their children in the language of their native land."
The U.S. Supreme Court reversed that ruling in 1923. Thankfully, the rights of Meyer and others were ultimately restored. But the offending restriction was not eliminated until well after the war was over.
We should all be on guard to make sure that temporary COVID-19 restrictions—as necessary as they may be—remain temporary.
President Donald Trump's trade war with China has been costly for Americans—and the COVID-19 outbreak reveals that we might be paying with more than just our money.
What's worse, the White House knew the risk it was running. "These products are essential to protecting health care providers and their patients every single day," Matt Rowan, president of the Health Industry Distributors Association, told the Office of the U.S. Trade Representative in August 2018. At the time, the office was considering a wide-ranging set of new tariffs targeting hundreds of billions of dollars' worth of annual imports from China. Among the products that would be hit with those higher duties were thermometers, breathing masks, hand sanitizer, patient monitors, and medical-grade personal protective equipment, including masks and sterile gloves. Those products "are a critical component of our nation's response to public health emergencies," Rowan warned.
Other medical professionals at the hearing similarly pleaded for the Trump administration to drop the proposed tariffs. Alternative suppliers could not be found quickly, they said, in no small part because Food and Drug Administration (FDA) approval was required before other sources could be used. The likely result of Trump's proposed tariffs would be higher prices for medical gear and decreased availability of critical supplies.
The warnings went unheeded. The tariffs did what tariffs do.
In 2017, the last full year before Trump's tariffs were imposed, more than a quarter of all medical equipment imported to the U.S. came from China. By 2019, imports of Chinese-made medical products had fallen by 16 percent, according to an analysis from the Peterson Institute for International Economics (PIIE), a trade-focused think tank. While U.S. imports from the rest of the world increased during the same period, according to PIIE, the increase was not sufficient to offset the tariff-induced decline in imports from China. It's likely that hospitals drew down on existing inventories, hoping that the trade war would end before they had to restock.
"In many instances, Americans had no choice but to continue to buy from China, which meant paying an additional cost due to the tariff," says Chad Bown, a senior fellow at the think tank. "Medical equipment cannot instantaneously sprout up at another plant in some other country."
Trump's so-called "phase one" trade deal with China, signed in December, did not lift tariffs on medical gear. But when the coronavirus outbreak reached America, the White House finally took action. On March 10, the administration quietly dropped its tariffs on Chinese-made medical equipment in a too-little, too-late effort to allow American hospitals to stock up as the coronavirus pandemic took hold. Later in the month, the White House announced it would postpone all other tariff payments for at least three months as a form of economic stimulus.
Together, those two actions are an admission of guilt. They demonstrate that the administration is well aware that tariffs are paid by Americans—and that they harmed America's preparation for a pandemic. Trump's reversals, says Bown, serve as "an implicit indictment of his administration's own policy."
Recall that officials were warned about exactly this possibility. Their hubris and economic illiteracy may well have led to the deaths of innocent Americans.
"It reveals the foolishness of the administration's shoot-first-and-ask-questions-later approach" to the trade war, says Scott Lincicome, a trade lawyer and scholar with the Cato Institute. "There was clearly no thought given to how this would actually work in practice, and now you're seeing the consequences."
It didn't take long after the coronavirus crisis began for the smart set to write off small-government types in articles with such snarky headlines as "There Are No Libertarians in a Pandemic." By now, it seems more correct to believe there are only libertarians in a pandemic, including many public officials, who suddenly find themselves willing and able to waive all sorts of ostensibly important rules and procedures in the name of helping people out.
How else to explain the decision by the much-loathed and irrelevant-to-safety Transportation Security Administration (TSA) to allow family-sized jugs of hand sanitizer onto planes? The TSA isn't going full Milton Friedman—it's reminding visitors to its website "that all other liquids, gels and aerosols brought to a checkpoint continue to be allowed at the limit of 3.4 ounces or 100 milliliters carried in a one quart-size bag." But it's a start.
Something similar is going on in Massachusetts, a state well-known for high levels of regulation, including in the medical sector. Expecting a crush in health care needs due the coronavirus, Republican Gov. Charlie Baker has seen the light and agreed to streamline the Bay State's recognition of "nurses and other medical professionals" who are registered in other parts of the United States, something that 34 states do on a regular basis.
As Walter Olson of the Cato Institute observes, that move "should help get medical professionals to where they are most needed, and it is one of many good ideas that should be kept on as policy after the pandemic emergency passes. After Superstorm Sandy in 2012, by contrast, when storm-ravaged ocean-side homeowners badly needed skilled labor to restore their premises to usable condition, local laws in places like Long Island forbade them to bring in skilled electricians even from other counties of New York, let alone other states."
The group Americans for Tax Reform has published a list of more than 170 regulations that have been suspended in response to the current crisis: Secretary of Health and Human Services Alex Azar has waived certain laws in order to facilitate "telehealth," or the use of videoconferencing and other technologies to allow doctors to see patients remotely; the Department of Education is making it easier for colleges and universities to move their classes online; cities are doing away with open-container restrictions and allowing home delivery of beer, wine, and spirits in places where it was previously prohibited; the Federal Emergency Management Agency belatedly permitted Puerto Rico and other U.S. territories to acquire personal protective equipment from sources outside the country; and on and on.
You can probably see where this is headed: If the policies above are worth tossing out in an emergency, maybe they ought to be sidelined during normal times too.
Situations like the 9/11 terrorist attacks and the coronavirus outbreak often open the door to naked power grabs whose terrible consequences stick around long after the events that inspired them. Governments rarely return power once they've amassed it. But if you listen carefully, you can hear them telling us which restrictions they realize can be safely tossed.
When the infection rates come down and life begins to get back to normal, it may be tempting just to go back to the way we were. Resist the temptation: Many of the rules we put up with every day are worth re-evaluating. And not only during an emergency.
Crony capitalism triumphed as members of Congress voted in March on a massive COVID-19 response bill. The $2.3 trillion package was unanimously approved in the Senate before clearing the U.S. House of Representatives 419 to 6.
Getting the most attention in the new Coronavirus Aid, Relief, and Economic Security (CARES) Act is a stipulation that many Americans will be getting $1,200 apiece from Uncle Sam. People making less than $75,000 individually or $150,000 as a couple will receive the full amount, with prorated amounts available to single earners making up to $99,0000 and couples up to $198,000. Families with kids will get an additional $500 for every child 16 and under.
But the 880-page bill is also brimming with handouts for government-favored industries.
For airlines, the CARES Act includes a $25 billion grant plus $29 billion in loans and loan guarantees. Grant money is also available for agricultural companies, to the tune of $33.5 billion.
Government institutions—including some far removed from direct COVID-19 relief efforts—will also be getting cash infusions. For instance, the legislation includes $150 million for the National Endowment for the Arts and the National Endowment for the Humanities. The CARES Act also inexplicably provides $10.5 billion for the Department of Defense, though only $1.5 billion of that is directed at coronavirus-related National Guard deployment, and just $415 million is for vaccine and antiviral medicine research and development by the agency.
Rep. Justin Amash (I–Mich.), one of the few in Congress to vote against the CARES Act, rightly called it "corporate welfare" that "reflects government conceit. Only consumers, not politicians, can appropriately determine which companies deserve to succeed."
Amash supports payments to individual Americans in this time of crisis but opposes the carve-outs for favored industries. If the federal government is going to spend $2 trillion, "then the best way to do it, by far, is a direct cash transfer that otherwise keeps government out of the way," Amash tweeted.
The bill has been celebrated by many Democrats and Republicans as a measure to help working Americans and ordinary people in the face of the new coronavirus. But the corporatist bent means that ordinary people will be paying more in the long run for this "help."
The total cost of the measure leaves every American "on the hook for over $6,000 in debt for these 'investments,'" commented Libertarian Party Chairman Nicholas Sarwark on Twitter, "but it's the businesses that will receive the rewards." He called the measure a "socialist" bailout for "corporate cronies."
Rep. Thomas Massie (R–Ky.) strikes a similar theme. "When we were attacked at Pearl Harbor, did we come up with a $2 trillion stimulus package, or did we declare a war on our enemies?" he asked. "We declared war on our enemies. Why have we not declared war on this virus? Why is our first instinct to make sure that the rich people get to keep all their riches?"
Microsoft founder and philanthropist Bill Gates saw the pandemic coming. In a February 28 New England Journal of Medicine article, he warned that "COVID-19 has started behaving a lot like the once-in-a-century pathogen we've been worried about." He called for public health agencies across the board to take steps to slow the virus's spread. He argued for the importance of accelerating work on treatments and vaccines.
At the same time, the U.S. Food and Drug Administration (FDA) was slowly—so very slowly—swinging into action. On February 4, the agency formally acknowledged the public emergency and agreed that the situation called for a quicker-than-usual response to entities seeking emergency approval for new COVID-19 diagnostic tests. Nevertheless, it took the FDA almost a whole month to provide guidance on exactly how laboratories and commercial companies could accelerate that process.
By then, private-sector leaders were already putting plans in motion. The first confirmed case of COVID-19 in the United States was in January in Washington state, where Gates' philanthropic organization, the Bill and Melinda Gates Foundation, is based. On March 10, the Gates Foundation announced a partnership with MasterCard and Wellcome, a U.K.-based research charity, to commit $125 million to a "COVID-19 Therapeutics Accelerator" that hoped to speed up the response by "identifying, assessing, developing, and scaling-up treatments." The private response would turn out to be critical. A group of Seattle doctors had already had to defy the U.S. Centers for Disease Control and Prevention in order to implement the tests that caught the virus's arrival in America.
On the same day of the Gates Foundation announcement, the Kaiser Family Foundation, a nonprofit health policy think tank, put together a tracker showing how much private philanthropy was going into the worldwide response. The group calculated that at least $725 million had then been committed by private nonprofits, businesses, and foundations to aid in international relief efforts. Candid, a foundation that helps nonprofits and foundations connect to donors, calculated that $4.3 billion in grants had been funded by early April for coronavirus responses around the world.
Early on, much of the assistance was directed toward China. But as COVID-19 spread everywhere, so did private philanthropy and innovation. As hospitals and health providers ran out of face masks (thanks in part, again, to FDA regulations that made it hard to ramp up production in response to demand), businesses donated their unused stockpiles. Soon, the private sector was iterating novel solutions as well. Across the world, companies and crafters with access to 3D printers and sewing machines began designing and producing masks of their own.
The number of breathing devices at hospitals became one of the more dangerous chokepoints in the COVID-19 response, leading to rationing and difficult medical choices in areas with high concentrations of infections. Again, innovators went to work. In Italy, for example, volunteers reverse-engineered a respirator valve that was in short supply, began manufacturing it with a 3D printer, and donated a stock to local hospitals.
As the spread of COVID-19 shut down auto manufacturing in the United States, companies such as GM and Tesla stepped up to suggest repurposing some unused spaces in their plants to help produce more ventilators. While President Donald Trump was a big fan of this response, both logistical and bureaucratic barriers got in the way. Yet again, the FDA's slow response was a problem. It wasn't until March 23, when the FDA announced it was relaxing some guidelines that strictly regulated where, how, and with what materials ventilators could be manufactured, that this problem could even begin to be solved.
Meanwhile, the worldwide collapse of tourism due to the spread of COVID-19 left hotels and short-term rental services such as Airbnb bereft of customers. Some hotels near medical centers were converted into clinics. Others, like the Four Seasons Hotel in New York City, announced plans to let medical personnel responding to the pandemic stay there free of charge. Airbnb offered to waive its fees if its hosts would likewise volunteer to house medical personnel and aid workers responding to the crisis. The company claims to have gotten 20,000 such offers by the end of March.
Beyond the philanthropic response, the ability of citizens to abide by shelter-in-place or stay-at-home recommendations and continue to thrive is entirely due to private-sector responses. While some small restaurants have had to shut their doors, many others are surviving thanks to delivery services such as Grubhub, DoorDash, and Postmates. Mass runs on grocery stores cleared shelves of staples, but within a week America's truck drivers and warehouse workers had gone into overdrive to get things back to a certain level of normalcy. There continued to be shortages of some goods, but even amid a deadly pandemic, almost no one had to worry about starving. For those stuck without companionship, Pornhub even offered one-month premium subscriptions for free.
The colossal response from the private sector most certainly helped make it possible for greater numbers of people to work from home, spend less time interacting with others, and "flatten the curve" to reduce the spread of COVID-19. While the government was still trying to figure out its messaging and untangle its bureaucracy, countless individuals, businesses, and community groups were quickly adapting to solve problems on the ground.
The post America Wasn't Ready for Coronavirus appeared first on Reason.com.
]]>Despite the best efforts of Rep. Thomas Massie (R–Ky.), the House of Representatives just passed the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act by a voice vote. The Senate had already approved the bill by a 96–0 vote on Wednesday, so it now goes to President Donald Trump's desk.
That's good news for the country's airlines, which are set to receive roughly $60 billion in financial assistance.
That includes $32 billion in cash grants to air carriers to prevent employee layoffs, with $25 billion of that going to passenger airlines and $4 billion to cargo carriers. The bill also gives $3 billion for contract workers hired by the airlines. Passenger and cargo carriers will also be eligible for another $29 billion in government loans.
Companies that take advantage of these grants and loans are forbidden from laying off workers or cutting pay through September 30 of this year. They are also barred from buying back their own stock. Executive compensation is also capped at 2019 levels.
This is pretty much everything the industry asked for. The CEOs of 10 major air carriers, including Delta, American, and Southwest, sent a letter to congressional leaders on Saturday asking for $58 billion in aid split evenly between grants and loans.
"We applaud the Administration and the U.S. Congress for reaching agreement on bipartisan legislation intended to assist the U.S. airline industry in continuing to make payroll and protect the jobs of hardworking men and women despite devastating impacts to the industry," declared Airlines for America chief Nicholas E. Calio in a statement after the Senate passed the bill. The unions representing pilots and flight attendants praised the stimulus package as well.
Less pleased is Robert Poole, director of transportation policy at the Reason Foundation (which publishes this website). He argues that airlines do not deserve special treatment.
"The airlines don't have a significant claim that they are a more vital business than railroads, trucking, all sorts of things that make the economy go," says Poole. "All the others don't have a special program."
This line of criticism has been echoed by a range of bipartisan voices. Reps. Justin Amash (I–Mich.) and Alexandria Ocasio-Cortez (D–New York) have both criticized the CARES Act giving too much away to corporations.
This bipartisan deal is a raw deal for the people. It does far too little for those who need the most help, while providing hundreds of billions in corporate welfare, massively growing government, inhibiting economic adaptation, and widening the gap between the rich and the poor.
— Justin Amash (@justinamash) March 25, 2020
.@AOC notes that 13 ppl died in Elmhurst Hospital in NY last night before ripping into $2 trillion bill. "What did the senate majority fight for? One of the largest corporate bailouts…in American history. Shameful. The greed of that fight is wrong, for crumbs for our families!"
— Yamiche Alcindor (@Yamiche) March 27, 2020
Amash has argued against any direct assistance to corporations, saying all aid should be given as cash subsidies to individuals.
Poole thinks loans to businesses—provided they are given at a reasonable rate of interest—are an appropriate way to help otherwise profitable firms injured by government-enforced closures and quarantines. Loans help "separate the wheat from the chaff," says Poole, by targeting aid at companies that actually have a chance of paying taxpayers back. Grants, he says, do a poor job of distinguishing between poorly managed companies that would be in financial difficulty anyway and competently run outfits that need only short-term liquidity to ride out the immediate crisis.
The coronavirus outbreak has radically upended American politics to an almost unthinkable degree. The near-unanimous passage of a $2.3 trillion economic assistance bill is evidence of that. But with corporate special interests extracting the lion's share of benefits coming out of Washington, some things still feel normal.
The post Airlines Make Out Like Bandits in $2.3 Trillion Coronavirus Aid Bill appeared first on Reason.com.
]]>Unanimous corporatism in Congress. After a day of performative fussing and fighting over partisan particulars in the COVID-19 relief bill, U.S. senators last night passed—96 to 0—the $2 trillion spending measure largely unchanged.
The part getting the most attention is the direct payments: $1,200 each for single Americans who made under $75,000, dual-income married couples who made under $150,000, or single-income heads of household who made under $112,500 in annual adjusted gross income in 2019. Pro-rated amounts will go to single filers making up to $99,000 and couples making up to $198,000. Families get an additional $500 for each child age 16 and under. (More details here.)
But the 880-page bill is brimming with bailouts for government-favored corporations, too.
"Do you trust politicians to make investment decisions with your children's future?" tweeted Libertarian Party Chairman Nicholas Sarwark, who has been fiercely critical of business bailouts. "Each American would be the hook for over $6,000 in debt for these 'investments,' but it's the businesses that will receive the rewards. Say no to socialist bailouts of corporate cronies."
Libertarian-leaning Rep. Justin Amash (I–Mich.) has also been hitting this theme. "Neither Congress nor the Treasury secretary should be picking winners and losers," Amash tweeted on Tuesday. "Corporate welfare is not only unjust but also reflects government conceit. Only consumers, not politicians, can appropriately determine which companies deserve to succeed."
If Democrats and Republicans are going to spend $2 trillion, "then the best way to do it, by far, is a direct cash transfer that otherwise keeps government out of the way," he wrote yesterday. "That's the bottom line for me."
For $2 trillion, we could double the figures below and give every family of four $7,000 per month for three months.
This would be far more helpful to the people than the Senate bill. It would aid everyone, prevent favoritism, and ensure the economy has the flexibility it needs. https://t.co/CymATWNrGQ
— Justin Amash (@justinamash) March 25, 2020
After the Senate's vote last night, this is Amash's pinned tweet:
And they cheered, because leaders assured them that the corporatism was good and necessary and bipartisan.
— Justin Amash (@justinamash) March 26, 2020
The Libertarian Party has been appealing to the House to fix the Senate's mess:
We ask all reasonable Reps who plan to vote on the Senate's #stimulusbill by Friday, from conservatives like @RepThomasMassie, to progressives like @AOC, to independent @justinamash: cut the nonsense in this bill, use it to responsibly help people, and send it back to the Senate.
— Libertarian Party (@LPNational) March 26, 2020
Coronavirus in prisons and jails. As of yesterday morning, "New York City's Department of Correction reported that 75 people in the city's jail system have been diagnosed with COVID-19, and that 37 of them are facility personnel," writes Reason's Scott Shackford. "This is a dramatic increase since the weekend, when officials reported 17 workers and 21 prisoners were infected." But carceral systems across the country continue to drag their feet on recognizing the huge risks posed to prisoners, staff, and communities at large.
Meanwhile, overseers of federal prisons are fighting inmate petitions and judge orders concerning temporary transfers to home confinement during the pandemic. Reason's C.J. Ciaramella tells the tale:
A Maryland defense attorney says the Bureau of Prisons (BOP) is refusing to release one of his clients into home confinement earlier than scheduled, despite a judge's order to do so. Meanwhile, federal prosecutors in Maryland filed motions today in that case and a similar case opposing inmates' petitions to be transferred from a halfway house to home confinement.
Last Friday, a U.S. District Judge ordered Erica Cook, a federal inmate currently residing at a halfway house in Baltimore, to be released into home confinement following an emergency motion for her immediate transfer. Cook was scheduled to be released into home confinement on April 22.
However, Cook's attorney, Brian Stekloff, says the BOP hasn't budged to move Cook since the judge's order, and today the U.S. Attorney's Office for the District of Maryland filed a motion asking the judge to reconsider the order.
The motion notes that "residents in halfway houses typically live in close quarters with many other people, just like in nursing homes and prisons [and] eat, socialize, and participate in programming in common areas, just like in nursing homes and prisons. Similarly, workers and residents frequently come and go from halfway houses, potentially carrying with them any diseases or viruses to which they were exposed."
Immigration authorities are also needlessly putting people at risk:
They are reopening Newark and Seattle immigration courts tomorrow. In the middle of a shelter in place order, during a pandemic, in the midst of the two epicenters of this crisis. Juuuuust to speed up the deportation machine.
— josie duffy rice (@jduffyrice) March 26, 2020
Top-down doesn't work in a pandemic. Officials shouldn't overlook the fact that different states, regions, and communities in the U.S. have different needs when it comes to stopping the spread of the new coronavirus, as J.D. Tuccille wrote here yesterday. Here's more evidence to bolster the case that one-size-fits-all solutions won't work—and, less happily, that internal travel controls may be on their way:
As these curves grow and separate, the US will be divided into red and green zones.
States which have the virus somewhat under control will be green zones. They will quarantine or outright prohibit visitors from red zones. AK and HI are already doing this. https://t.co/gFn26oQjc8 pic.twitter.com/QDUNXfhLxq
— Balaji S. Srinivasan (@balajis) March 26, 2020
The Trump campaign just released a cease and desist letter demanding that TV stations immediately pull this ad. https://t.co/BG5NHKJBzd https://t.co/j0A4JoztFL
— Sahil Kapur (@sahilkapur) March 25, 2020
This week, Texas clarified an abortion ban under the guise that it's not an essential health care service and stopping abortions will help free up the demand for personal protective equipment (PPE) like gloves, masks, and gowns. But this is a baseless argument. I'll explain:
— Dr. Daniel Grossman (@DrDGrossman) March 25, 2020
WHO once again spreading lies and unscientific speculation in the midst of a pandemic! Maybe trying to deflect attention away from how you failed the world? https://t.co/XmHWTwwrdF https://t.co/CYwy3tkhex
— michelleminton (@michelleminton) March 26, 2020
The post The Senate's COVID-19 Relief Bill Is a Crony Capitalist Dream appeared first on Reason.com.
]]>Earlier this month, as part of his annual budget, President Donald Trump proposed significant cuts to federal crop insurance subsidies.
The cuts, which were similar to ones included in a previous budget proposal, would carve 31 percent out of the annual budget for the subsidies. Estimates suggest the cuts would save more than $21 billion over 10 years.
While the cuts target the wealthiest farmers, they would also impact every recipient.
"This time, the White House said the wealthiest operators, with an adjusted gross income of more than $500,000 a year, should pay full price for crop insurance," Successful Farming reports. "And it said producers with an AGI of less than $500,000 annually should pay a larger share of the premium."
That's a good start. I call it a start because crop-insurance subsidies (and farm subsidies generally) should be eliminated entirely, at once, for every farmer, rich and poor alike. Still, Trump's call for cuts to the wasteful program—particularly in eliminating crop-insurance subsidies for the wealthiest farmers—is worth celebrating.
"Typically, subsidies have benefited wealthy, larger farmers who farm just a handful of crops and who should not—and, flatly, do not—need them to succeed," I detail in my book, Biting the Hands that Feed Us: How Fewer, Smarter Laws Would Make Our Food System More Sustainable.
In a subsequent column in 2018, I highlighted that Republicans in Congress had sought "passage of another bloated farm bill, [which] would attempt to eliminate an Obama-era change that had reined in taxpayer-funded farm subsidies paid to many of the wealthiest American farmers."
The non-partisan Congressional Budget Office is one of many offices and groups that's long urged a reduction in crop-insurance subsidies. The nonprofit Environmental Working Group (EWG) is another.
"Crop insurance premiums are so heavily subsidized that participating farmers receive $2 in indemnities for every $1 they spend to share the cost of premiums," EWG noted in a 2018 fact sheet calling for reforms to crop-insurance subsidies.
Not surprisingly, supporters of crop-insurance subsidies are angry at Trump's proposal.
"This is what happens when ideologues decide to cut programs just for the sake of cutting," said Rep. Collin Peterson (D–Minn.), the powerful chairman of the House agriculture committee. "We will make sure that the farm bill isn't cut during this year's budget process."
Tom Philpott of Mother Jones lamented the cuts to what he dubbed "a key support for corn and soybean farmers during extended periods of low prices, such as the one currently in effect."
Nearly every administration promises to make some cuts to farm subsidy programs. Yet the cost of farm subsidies almost always balloons.
Back in 2013, Sen. Debbie Stabenow (D–Mich.), who chaired the Senate Agriculture Committee, called the Farm Bill she championed "an opportunity to cut spending." How'd that work out? In 2015, one pundit wrote that the same Farm Bill "will prove to be the most expensive ever thanks to new subsidies Congress added on top of the already costly crop insurance program[], new research suggests."
Thirty-five years ago, the 1985 Farm Bill, signed by President Ronald Reagan, was then the most expensive to date.
"Since the Reagan administration took office in 1981, the cost of farm programs has soared, reaching more than $100 billion by the end of last year," the Chicago Tribune reported in 1988. "That's more than six times the cost of such programs in the four years of President Jimmy Carter`s administration."
Many farmers want and need crop insurance. And those that want or need it should have it. By all means.
Insurance isn't the problem; taxpayer subsidies are. In the same way that government car insurance subsidies would encourage more and riskier driving, crop insurance subsidies encourage overproduction of subsidized crops and discourage diversification and conservation. Cutting these subsidies, as Trump has proposed, is a worthwhile start.
The post Trump's Proposed Cuts to Farm Subsidies Don't Go Nearly Deep Enough appeared first on Reason.com.
]]>Georgia's film industry gets some big tax credits from the state government—$800 million's worth in 2018. Both the government and the movie production companies love to claim that these subsidies bring a huge return. The eye-popping figure you usually see claims that the credits produced $9.5 billion in economic benefits in 2018 alone.
But that number is almost certaily wrong. It includes less than $3 billion in direct spending from the film industry. The rest is supposed to come from the multiplier effect, in which each dollar spent creates more spending throughout the economy. And economists have some serious questions about how valid that estimate is.
J.C. Bradbury of Kennesaw State University has argued that using a more realistic multiplier, the film industry generates, at most, $4.2 billion in annual economic output. Similarly, Bruce Seaman of Georgia State University thinks the film industry is responsible for just $6 billion in economic benefits. The state Department of Economic Development estimates that for every dollar the film industry spends in the state, overall spending increases by $3.57; Seaman argues the real value is closer to $1.87.
Georgia isn't the only state to inflate the benefits of film production.
One especially dubious study of film tax credits, prepared for the New Mexico State Film Office, claimed that tourism alone driven by the filming of No Country for Old Men, 3:10 to Yuma, Indiana Jones and the Kingdom of the Crystal Skull, and Wild Hogs (a forgettable 2007 comedy starring Tim Allen, Martin Lawrence, William H. Macy, and John Travolta as an over-the-hill biker gang) generated more than $100 million in income for state residents over a four-year span.
In other words, a lot of people supposedly wanted to see where Indiana Jones survived a nuclear blast by hiding in a fridge or where John Travolta dressed like this:
Color me skeptical.
Most research on film tax credits show that they don't have much of an impact on economic growth. A National Bureau of Economic Research study from this June found that film subsidies only have a marginal impact on where TV series are filmed, and that they do not increase feature film location, employment, economic growth, or wages. Studies from Michigan and Massachusetts have found that the average length of a job credited to a film tax incentive program lasts less than a month.
Subsidies can even hurt a state economy, by shifting economic resources away from productive industries and toward politically connected ones. If it weren't for the tax subsidies, the money that Georgia directs to film production could instead go to reducing taxes broadly, allowing the people of the state to decide which businesses to support. In the meantime, there's a good chance production companies would come even without the subsidies.
The post Deceptive Data Make Georgia's Film Tax Credit Program Look Less Wasteful appeared first on Reason.com.
]]>Excessive partisanship and endless acrimony are common complaints lodged against the political class. There's a lot to be said in favor of this narrative, but bipartisanship isn't always what it's cracked up to be, either. As evidence, consider the latest attempt to extend corporate handouts for electric vehicle (EV) manufacturers.
The Driving America Forward Act was recently introduced to extend the existing EV tax credit well beyond its current limits. Unsurprisingly, its sponsors include both Michigan Senators, Democrats Debbie Stabenow and Gary Peters, as well as Republican Senators Lamar Alexander of Tennessee and Susan Collins of Maine. A companion version was introduced in the House of Representatives by Rep. Dan Kildee, also a Democrat from a district in Michigan.
Under current law, a federal tax credit of up to $7,500 is available to consumers of the first 200,000 vehicles sold by each manufacturer, after which the credit is phased out. Both Tesla and General Motors have exceeded the cap, a fact that has driven a lobbying frenzy to extend the benefit. This wouldn't be the first time the credit was expanded, as the original incarnation of the credit applied only to the first 250,000 electric vehicles sold across all manufacturers.
This new legislation will allow for the purchase of an additional 400,000 vehicles to be eligible for a $7,000 credit, but it might as well be permanent. If Congress passes the bill and it's signed into law, Washington will be sending a clear signal to manufacturers that the gravy train may never end. All the EV makers must then do is flood Washington with lobbying and campaign donations once the next deadline approaches and the cycle could no doubt continue.
The current credit is expected to cost $7.5 billion in federal revenue from last year through 2022, according to the Congressional Research Service and the Joint Committee on Taxation. The costs of the newly expanded credit are not yet available but would be considerably higher.
Almost 80 percent of those utilizing the EV tax credit have incomes over $100,000, making it not just a corporate handout but also a transfer from all workers to wealthier Americans. And despite its advocates' claims, the EV tax credit fails to reduce the alleged threat of climate change.
Because all personal vehicles in the United States account for only a small fraction of global greenhouse gas emissions, even an unrealistic influx of electric vehicles would prove to be negligible. Besides, standard internal combustion engines emit far less pollution today than they have in the past. Simply replacing older cars can do as much or more to benefit the environment than even entirely switching over to electric vehicles.
This is at least the third major push to extend EV tax credits over the last year. The persistence of the issue is indicative of a political reality less obvious than the typical Republican versus Democrat framework. In economic parlance, it's called concentrated benefits and diffuse costs. The benefits are conveyed to EV manufacturers and those few consumers (most of whom make over $100,000), but the costs are spread out across the larger population.
While the manufacturers and relatively wealthier consumers of electric vehicles have a strong incentive to support the tax credits, the average cost per taxpayer is low and thus of little political concern. Yet, when all the crony handouts that come about because of this same dynamic are added up, it represents a more significant sum and is a more obvious problem. But translating that burden into a political force that's capable of resisting the well-funded pleading of special interests is extremely difficult.
In this case, the fact that the handouts are already set to end if Congress just does nothing should benefit the taxpayers. That's often not the case, and it explains why the special interests have failed several times already in their attempts to preserve their benefit. Unfortunately, it's readily apparent that they're going to keep trying again and again to enrich themselves at the expense of the taxpaying public.
COPYRIGHT 2019 CREATORS.COM
The post Bipartisan Support for Electric Vehicle Handouts Betrays Taxpayers appeared first on Reason.com.
]]>When I hear "welfare payments," I think "poor people."
But America's biggest welfare recipients are often politically connected corporations—like America's sugar producers.
The industry gets billions of dollars in special deals while deceitfully running ads that say, "American farmers don't get subsidy checks."
That ad confused me. If they "don't get subsidy checks," then what is America's multibillion-dollar sugar program?
"It costs taxpayers nothing," claim ads from the American Sugar Alliance. "We are a no-cost program, no cost to the taxpayer."
"That's absolutely bogus," says Ross Marchand of the Taxpayers Protection Alliance in my newest video. Americans "pay as customers and they pay as taxpayers." He's right.
We pay several billion dollars extra every year, with "all of that money going to that handful of rich politically connected growers."
Several companies—Amalgamated Sugar, Michigan Sugar, and Western Sugar Cooperative—get three forms of handouts:
1. Subsidies when sugar prices fall below a certain level.
2. Protection from foreign competition (a limit on imports).
3. A guarantee that prices stay high (the sugar program imposes quotas on how much sugar may be produced in America).
"These are Stalin-style price controls and supply controls," says Marchand. "It does not help anyone."
Well, it helps big sugar.
The price of its product is roughly doubled by these rules, so Americans pay the politically connected owners about $4 billion dollars extra.
Why does such a scam persist?
One reason it hasn't been repealed is, well, Washington rarely repeals any handout. But also, this one costs most of us just $10 or $20 a year. We won't go to Washington to lobby over that.
But companies that get the subsidies sure do. Creighton University economist Diana Thomas says, "Each American sugar farmer made roughly $3 million a year extra" from America's sugar program. "Each is willing to spend a lot of time and money making sure that the law stays that way."
Finally, Big Sugar is very good at deceiving politicians and the media.
The American Sugar Alliance has the nerve to run ads claiming that without its corporate welfare Americans will suffer food shortages. They use images of World War II food rationing while an announcer proclaims, "Depending on other countries for a food staple was a recipe for disaster… Does America really want to give foreign countries control over its food?"
Give me a break. Imports obviously increase our supply of food. There are no import restrictions on most other foods. Yet America doesn't suffer shortages.
In fact, if there's a problem, it's that Americans eat too much, and much too much sugar.
This multibillion-dollar handout is simply welfare for the rich.
Protecting the handouts provides welfare for politicians, too—pols from both parties.
Sen. Debbie Stabenow (D–Mich.) and Reps. Mike Conaway (R–Texas) and Collin Peterson (D–Minn.) get the most money from big sugar. No. 9 on the list is Sen. Marco Rubio (R–Fla.), who has criticized welfare payments to poor people, saying (correctly) that handouts discourage honest work.
"I'm prepared to get rid of the sugar program tomorrow," says Rubio, "if the countries we compete against get rid of theirs." In other words: "Since other countries subsidize sugar, America must retaliate!"
Marchand had a good answer to that: "Is it fair for customers to pay double the world rate for sugar? Is it fair for taxpayers to have to bail out a handful of super-rich, super-connected sugar processors? No!"
It's also not fair that all businesses that buy sugar must pay the sugar-makers' artificially inflated prices. Candy-makers are hurt most. "There is only one candy cane producer left in Ohio. That's absolutely ridiculous," says Marchand. "Look at all those jobs!"
About 20,000 American jobs are lost every year because politicians keep sugar prices artificially high, says a University of Iowa study.
It's not just candy-makers who suffer. There's added sugar in bread, beer, yogurt, ketchup, cereal, and lots of other foods.
Consumers pay more and almost every food business suffers because a few big sugar companies have the political clout to get themselves a sweet deal.
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]]>The U.S. sugar program is "Stalin-style price controls," Ross Marchand of the Taxpayers Protection Alliance tells John Stossel.
The U.S. government uses a complex system of loans, domestic quotas, and limits on how much sugar we can import. The goal is to control the price of sugar.
Stossel calls it "welfare for the rich." Economists say the program costs consumers billions a year. And yet the sugar industry makes videos that say "it costs taxpayers nothing."
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The views expressed in this video are solely those of John Stossel; his independent production company, Stossel Productions; and the people he interviews. The claims and opinions set forth in the video and accompanying text are not necessarily those of Reason.
The post Stossel: Sugar's Sweetheart Deal appeared first on Reason.com.
]]>After a week of speculation, Amazon announced yesterday that it would be pulling the plug on its plans to open a new 25,000-person headquarters in New York City in exchange for $3 billion in local and state incentives.
"After much thought and deliberation, we've decided not to move forward with our plans to build a headquarters for Amazon in Long Island City, Queens," read the company's statement.
Amazon's initial decision to open a new headquarters in New York City had been greeted with enthusiasm by both Gov. Andrew Cuomo and Mayor Bill De Blasio, both of whom promised the company some $3 billion in subsidies and tax abatements to seal the deal.
Most New Yorkers seemed pleased with the deal as well, despite the corporate welfare baked into the deal. A Seina College poll from earlier in the week found that 58 percent of New York City residents approved of the plan.
But opposition from a few key local and state officials helped to sink the otherwise popular deal. That includes both New York City Council Speaker Corey Johnson and state Sen. Michael Gianaris (D–Queens).
Johnson's support would have been crucial for shepherding the promised local incentives, which included nearly $1.3 billion in income and property tax breaks, through the city council. Gianaris, a fierce critic of the deal struck by Cuomo and De Blasio, was appointed in early February to the state's Public Authorities Control Board, a position he could have used to block the $1.7 billion in state incentives, which included $1.2 billion in tax breaks plus between $300 and $500 million in cash grants pegged to job creation targets.
Neither Amazon nor Cuomo were shy about blaming recalcitrant politicians for killing the deal.
"A number of state and local politicians have made it clear that they oppose our presence and will not work with us to build the type of relationships that are required to go forward with the project," said Amazon in its statement.
"A small group [of] politicians put their own narrow political interests above their community—which poll after poll showed overwhelmingly supported bringing Amazon to Long Island City—the state's economic future and the best interests of the people of this state," echoed Cuomo.
Most of the deal's critics were triumphant at the news that Amazon was cancelling its plans.
"Today's behavior by Amazon shows why they would have been a bad partner for New York in any event," Gianaris itold CNBC. "It is time for a national dialogue about the perils of these types of corporate subsidies."
How New Yorkers themselves should feel about the Amazon deal falling through is a harder thing to say. It's no doubt a good thing that taxpayers in the state will be spared from having to give direct cash subsidies to one of the largest, most successful companies in the world.
It is also true, however, that most the incentives on offer were simple tax abatements, meaning the state and local governments are no richer for the Amazon deal not going through. The city will also lose out on the jobs and investment that would have come from the e-commerce giant locating in the city.
What the company itself will do next remains to be seen. So far, Amazon has said that it has no plans to solicit bids from more cities for a new headquarters. Nor will it be shifting NYC-bound workers to its other planned campuses in Arlington, Virginia, and in Nashville, Tennessee, even though both locations offer per-job subsidies beyond what Amazon has already committed.
Last week, Virginia Gov. Ralph Northam signed an incentive deal that promises per-job subsidies for up to 37,250 Amazon employees, even though Amazon has said it had planned only to add 25,000 jobs to the area. Should Amazon expand its workforce to that 37,250 threshold, it could reap an extra $200 million in cash subsidies.
Something similar could be said of Nashville. The local government there has yet to sign off on any finalized deal. But the original incentive package offered by then–Mayor Megan Barry in November 2017 promised the company a $500 annual grant per job created for 15 years. That offer makes it explicit that this deal was good for an unlimited amount of jobs.
That Amazon is leaving this cash on the table suggests that corporate subsidies—while obviously appreciated by the company—are not the main force driving its decision.
The Mercatus Center's Michael Farren made this exact point to The New York Times in November when Amazon announced it would be opening a headquarters in Arlington, Virginia, and not nearby Montgomery County, Maryland—which had offered substantially more in subsidies.
"An additional $7.5 billion in subsidies wasn't enough to get Amazon to move across the river. That just says that subsidies were never what mattered in the first place," Farren told the Times.
The same thing can be said for Amazon's initial plans to open up in New York City, which came with $3 billion in incentives, rather than Newark, New Jersey, which was offering $7 billion in local and state sweeteners.
Given that one of the primary reasons Amazon looked to open campuses beyond Seattle was to avoid local politicians blaming them for all the city's problems, it shouldn't be too surprising that the company pulled out of New York after they realizing they'd be getting much the same treatment there.
That corporate subsides seem to have been a minor factor in this whole saga should be a lesson to politicians everywhere who are eager to give away the farm in order to attract the next corporate titan.
The post Amazon Kills NYC Headquarters Plans After Opposition From Local Pols appeared first on Reason.com.
]]>Embattled Virginia Gov. Ralph Northam has signed a huge incentive package aimed at online retailer Amazon that could see the company get millions in taxpayer-funded grants.
On Tuesday, the Richmond-Times Dispatch reported that Northam signed Senate Bill 1255, which creates a new "Major Headquarters Workforce Grant Fund" that will make available $550 million in grants to any "qualified e-commerce company" that invests at least $2 billion in an Arlington County, Virginia headquarters, and adds a minimum of 25,000 jobs paying an average of $150,000 a year.
Should this "qualified e-commerce company" add up to 37,580 jobs at its new Arlington headquarters, it could receive an additional $200 million in subsidies, bringing the grand total of taxpayer assistance authorized by the bill to $750 million.
The intended recipient of the bill is obviously Amazon, which announced plans to add 25,000 jobs at a new Arlington headquarters complex in November of last year.
That same month, Northam publicly released a "Memorandum of Understanding" between the Virginia state government and the e-commerce giant, promising the company an identical deal to what the governor signed today. That memorandum also included a promise of $295 million in state infrastructure investments in and around Amazon's new headquarters.
Offering massive subsidies to companies as a way of luring jobs and investment is hardly a practice unique to Virginia, although this specific proposal to award Amazon nearly a $1 billion in cash payments—as opposed to tax credits or abatements—is somewhat unusual.
The $3 billion in government incentives offered to Amazon to set up another 25,000-person headquarters in New York City, for instance, were mostly city and state tax breaks.
A bill ratifying Northam's Memorandum of Understanding with the online retailer flew through the state legislature. The state senate passed the bill in a lopsided 35-to-5 vote. The state's House of Delegates approved the bill with an equally uneven 83-to-16 vote.
No one was more pleased with the signing of the bill today than its sole recipient.
"This is an investment in the growth of Virginia. It will help diversify the economy and serve as a catalyst for drawing in other businesses and sought-after jobs," said Amazon spokesperson Jill Kerr to the Times-Dispatch.
The subsidy bill signed into law by Northam today, while sizable, is far less than some of the other subsidy deals offered by other states and municipalities in their desperate bid to lure Amazon to town.
One of the last acts of Chris Christie's tenure as governor of New Jersey was to sign a bill greenlighting $5 billion in incentives should Amazon set up shop in the Garden State. Maryland Gov. Larry Hogan floated a similarly sized $5 billion incentive package in January 2018.
The fact that Amazon passed on these more generous bids suggests that the subsidies signed by Northam today were not all that necessary.
"At the end of the day, it suggests that even New York City and Virginia and Nashville didn't really need to offer those subsidies, because Amazon is chasing other factors," Michael Farren, a research fellow at the Mercatus Center, a free market think tank housed at George Mason University, told Reason's Eric Boehm back in November 2018.
(Amazon was awarded $102 million in state and local incentives for adding a smaller, 5,000-person headquarters in Nashville, Tennessee.)
Certainly, one would think that a company capable of hiring 25,000 people at an average salary of $150,000 would be the last entity to need taxpayer support. The money Virginia taxpayers will be spending on Amazon either means fewer dollars for genuine public services, or higher taxes for the state's residents.
Northam is receiving a lot of heat right now for a photo in his medical school yearbook showing a person in blackface standing next to a person in a KKK costume. Northam has forcefully denied being in that picture, but has admitted to wearing blackface during a 1984 dance competition.
These revelations have spurred calls for Northam to resign, something the governor has so far resisted.
His signing over of as much as $750 million in taxpayer subsidies to one of the most successful private companies in the world is a reminder of how terrible politicians can be even when going about the normal business of policy-making.
The post Embattled Virginia Gov. Ralph Northam Signs Bill Authorizing $750 Million in Cash Subsidies to Amazon appeared first on Reason.com.
]]>Sunday is the Super Bowl.
I look forward to playing poker and watching. It's easy to do both because in a three-hour-plus NFL game there are just 11 minutes of actual football action.
So we'll have plenty of time to watch Atlanta politicians take credit for the stadium that will host the game. Atlanta's former mayor calls it "simply the best facility in the world."
But politicians aren't likely to talk about what I explain in my latest video—how taxpayers were forced to donate more than $700 million to the owner of Atlanta's football team, billionaire Arthur Blank, to get him to build the stadium.
In addition to the subsidies, the Falcons get all the money from parking, restaurants, and merchandise sales. Sweet deal.
But not an unusual one. Some NFL teams collect even more in government subsidies than it cost to build their stadiums.
So taxpayers, most of whom never attend a game, subsidize billionaires.
Seems like a scam.
I don't fault Blank for grabbing the money. I like the guy. He made our lives better by founding Home Depot. We're both stutterers who donate money to AIS, a stuttering treatment program.
Since politicians give money away, Blank's shareholders would consider him irresponsible not to take it.
The problem is that politicians give away your money in the first place.
I understand why they do it.
They like going to games and telling voters, "I brought the team to our town!"
Las Vegas Mayor Carolyn Goodman and her cronies recently funneled $750 million of taxpayer money to the owners of the Oakland Raiders to get them to move the team to Vegas.
Reporter Jon Ralston asked her, "Why should there be one cent of public money when you have two guys who could pay for this themselves?"
The mayor replied lamely, "I think it really is a benefit to us that really could spill over into something."
Spill over into…something. Politicians always claim giving taxpayer money to team owners will "spill over" to the whole community.
They call their handouts investments—a "terrific investment," as the mayor of Atlanta put it.
But it's not a good investment. It's a bad one.
Politicians point to that extra business activity that occurs when the football team plays at home, but the Atlanta Falcons, like most NFL teams, play just 10 home games. The stadium is used for some concerts and soccer games, but most days little or nothing happens there.
That's why economists who study stadium subsidies call them a bad deal for taxpayers.
The problem is the seen vs. the unseen, as economist Frederic Bastiat put it. All of us see the people at the games buying beer and hotdogs.
But we don't see the larger number of citizens, who had their money taken from them to spend on the stadium, not buying things.
We don't see two fewer customers in a restaurant or the home remodeling that never got done. Those humbler projects lack the political clout and don't get the media attention that politicians and the stadium-builders get.
So this Sunday, when Atlanta politicians brag about their beautiful stadium, and clueless media claim that it created lots of jobs, let's also remember the jobs the subsidies destroyed—and the tax money that was given to rich people.
The problem isn't just Atlanta, and it isn't just sports.
Most every time government presumes to tell us where and how our money should be spent rather than leaving it up to free individuals, it creates a loss.
Politicians announce whatever project they fund with great fanfare, implying you should be thankful to them—as if football, or the arts, or whatever is unveiled in the latest ribbon-cutting ceremony, couldn't exist without politicians moving money from your pocket to the pockets of their cronies.
But really, government shrinks your ability to make choices every time it steers money away from what you might choose to spend it on.
Football is popular enough to thrive without politicians subsidizing it.
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The post The Super Bowl of Corporate Welfare appeared first on Reason.com.
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