… even when uttered by the First Lady of the American Screen, any blather about the constellations leaves me as cold as Neptune. Yes, as a teenager, I obediently watched Cosmos like everyone else. But neither Carl Sagan’s corduroy charisma nor those glossy special effects fired up my heart and brain, any more than all those NASA expeditions to vacant rocks in the sky that had punctuated my childhood (and interrupted my cartoons).
The space program was a spectacular waste of extorted tax dollars, a WPA for engineers instead of artists. Watching nerdy small-government libertarians swoon in pathetic conformity over Apollo and SpaceX proves once again that Conquest’s Laws are bunk: Everyone is, in fact, a raving liberal when it comes to his pet passion. Elon Musk is a welfare queen.
Bores insist that the space program has spun off a host of indispensable inventions, but these they can rarely name, and besides, such wonders, if truly crucial, would have been developed anyhow — perhaps even faster, and more cheaply, had the government left trillions in stolen cash in the hands of private enterprise.
Perhaps some readers will find my opinions more palatable if phrased this way: “Federally funded spaceflight is the quintessential neoconservative project: a giant, wasteful crusade designed to fill Americans’ supposedly empty lives with meaning.”
Kathy Shaidle, “The Lovers, the Dreamers, Not Me”, Taki’s Magazine, 2016-08-23.
September 8, 2016
QotD: The US space program was “a WPA for engineers instead of artists”
August 10, 2016
QotD: “Pro-business” versus “Pro-consumer”
In popular discourse, America is said to be more “pro-business” than is France. When people use this term “pro-business” they typically have in mind some vague notion of a government policy made up of low-ish taxes and not a great deal of government regulation. That is, “pro-business” is commonly used to mean a free, or free-ish, market.
But such language is mistaken.
A true free market is at its core pro-consumer. In a genuinely free-market economy, businesses are valued only insofar as they serve consumers. The performance of a genuinely free-market economy is assessed by how well it satisfies, over time, the demands of consumers spending their own money and not by how well it satisfies the demands of business owners and managers.
Obviously, because businesses are a useful – indeed, practically indispensable – means of abundantly satisfying consumers’ demands, government policies that obstruct the smooth operation of these means are undesirable. But such policies that obstruct or discourage business operations are economically undesirable not because they harm businesses but, rather, because they harm consumers.
Anyway, for all of its faults, American culture and policy are actually much less pro-business than are the culture and policy of France. If you’re really looking for a government that is deeply pro-business – one that regards the protection of existing businesses as a worthy end in and of itself – one that forcibly transfers resources from taxpayers, consumers, and other non-businesses in order to promote the material interests of existing businesses – look at France. You’ll find there what you seek. In France you’ll find one of the most business-friendly policy regimes on the face of the earth. (HT Chris Meisenzahl)
Pity the French.
Don Boudreaux, “Pity the French Consumer and Worker”, Café Hayek, 2016-06-27.
December 3, 2015
Even the IPCC agrees that corn ethanol is a waste of effort and resources
In Forbes, James Conca wraps up the latest IPCC Working Group reports’ comments on the viability of biofuel production from corn:
OK, can we please stop pretending biofuel made from corn is helping the planet and the environment? The United Nations Intergovernmental Panel on Climate Change released two of its Working Group reports at the end of last month (WGI and WGIII), and their short discussion of biofuels has ignited a fierce debate as to whether they’re of any environmental benefit at all.
The IPCC was quite diplomatic in its discussion, saying “Biofuels have direct, fuel‐cycle GHG emissions that are typically 30-90% lower than those for gasoline or diesel fuels. However, since for some biofuels indirect emissions — including from land use change — can lead to greater total emissions than when using petroleum products, policy support needs to be considered on a case by case basis” (IPCC 2014 Chapter 8).
The summary in the new report also states, “Increasing bioenergy crop cultivation poses risks to ecosystems and biodiversity” (WGIII).
The report lists many potential negative risks of development, such as direct conflicts between land for fuels and land for food, other land-use changes, water scarcity, loss of biodiversity and nitrogen pollution through the excessive use of fertilizers (Scientific American).
The International Institute for Sustainable Development was not so diplomatic, and estimates that the CO2 and climate benefits from replacing petroleum fuels with biofuels like ethanol are basically zero (IISD). They claim that it would be almost 100 times more effective, and much less costly, to significantly reduce vehicle emissions through more stringent standards, and to increase CAFE standards on all cars and light trucks to over 40 miles per gallon as was done in Japan just a few years ago.
September 15, 2015
QotD: The Ex-Im Bank
… every time the Ex-Im Bank gets involved in a deal, there are only two possibilities: The government is needlessly subsidizing something that would have happened anyway, giving away cheap money to a huge corporation. Or else it’s subsidizing a deal that wouldn’t have happened anyway, in which case we are defending the use of taxpayer dollars to sell cheap manufactured goods to foreigners. It’s not even as if we’re picking out especially needy foreigners, who may require a charitable contribution from the prosperous citizens of the United States; the subsidy is distributed on the basis of who is willing to, say, buy cut-rate U.S. airframes. And guess who benefits? U.S. corporations that export a lot.
This is not a good use of taxpayer dollars, and conservative ideologues, bless their hearts, are quite right to want to get rid of it. Their passion is a little out of proportion to the harm that this agency does, but even a small step in the right direction is better than none. The bank’s opponents concede that. For them, the appeal of taking on Ex-Im is that they might be able to take it down.
Against this impeccable economic and political logic, the bank’s supporters marshal a few arguments. First, they often claim (as Nocera implies) that the Ex-Im Bank generates a lot of money for the Treasury. Which is sort of true … except. First of all, it doesn’t account for the opportunity costs of the distortion; resources are diverted into production of certain goods, and away from others. And second of all, government accounting for loans is rather weird. According to the Congressional Budget Office, if we used a fair value accounting method, which would account for the risk of changing market conditions, the Ex-Im Bank’s six largest programs would be generating a deficit, not a surplus.
We are also told that Ex-Im is a vital matter of national security. I’m going out on a limb here, but I’m pretty sure that if the U.S. government needs to find some money to give foreigners as a vital matter of national security, they will manage to find it even if the Ex-Im Bank is shuttered and its silent halls hold only the lingering ghosts of departed exporters.
Megan McArdle, “Ex-Im Bank Is a Tiny But Tempting Target”, Bloomberg View, 2015-08-03.
September 1, 2015
June 30, 2015
Elon Musk – high tech messiah or grasping crony capitalist?
Sean Noble says that the subsidies Elon Musk’s high-tech Tesla and Solar City firms are much higher than he implies:
Tesla, SpaceX, and Solar City head Elon Musk lashed out at the Los Angeles Times following an article that totaled up all the government support that his three-headed corporate-welfare monster receives. The number the Times reported was nearly $5 billion in combined support for his companies, including subsidies for those who purchase Musk’s products, such as the high-priced solar panels of Solar City and the supercars of Tesla.
Musk responded by arguing, “If I cared about subsidies, I would have entered the oil and gas industry.” He further asserted that his competitors in the oil-and-gas industry haul in 1,000 times more in subsidies in a single year than his companies have received in total. Such statements reveal that Musk seems to care as little for facts as he purports to care about the taxpayer dollars propping up his various businesses.
Earlier this year, the U.S. Energy Information Administration (EIA) released the most recent data available regarding energy subsidies provided by the federal government. The data, covering the year 2013, broke down total taxpayer subsidies across the different sectors of the energy industry. While fossil fuels did enjoy some government support through various direct expenditures, tax credits, and R&D programs, the data stands in sharp contrast to Musk’s claims.
Data from the EIA report, combined with numbers from an anti-oil advocacy group regarding state-level government support, reveals that total state and federal support for the oil-and-gas industry is no more than $5.5 billion each year. As stated, Musk’s companies combine for $5 billion in subsidies, a number that he has yet to dispute. Clearly, the difference is much smaller than Musk’s outlandish 1,000-to-one claim.
May 24, 2015
Mitchell’s First Theorem of Government
Dan Mitchell clearly understands what modern western government is really all about:
May 23, 2015
Debunking the “GM killed the streetcars” conspiracy theory
There are many railfans who still believe, strongly and passionately, that General Motors was involved in a devious plot to kill off the streetcars across North America in order to sell more buses. At Vox.com, Joseph Stromberg explains that this wasn’t the case — in fact, the killer of the streetcar/interurban/radial railway systems was their willingness to lock in to long-term uneconomic agreements with local governments in exchange for monopoly privileges:
Back in the 1920s, most American city-dwellers took public transportation to work every day.
There were 17,000 miles of streetcar lines across the country, running through virtually every major American city. That included cities we don’t think of as hubs for mass transit today: Atlanta, Raleigh, and Los Angeles.
Nowadays, by contrast, just 5 percent or so of workers commute via public transit, and they’re disproportionately clustered in a handful of dense cities like New York, Boston, and Chicago. Just a handful of cities still have extensive streetcar systems — and several others are now spending millions trying to build new, smaller ones.
So whatever happened to all those streetcars?
“There’s this widespread conspiracy theory that the streetcars were bought up by a company National City Lines, which was effectively controlled by GM, so that they could be torn up and converted into bus lines,” says Peter Norton, a historian at the University of Virginia and author of Fighting Traffic: The Dawn of the Motor Age in the American City.
But that’s not actually the full story, he says. “By the time National City Lines was buying up these streetcar companies, they were already in bankruptcy.”
Surprisingly, though, streetcars didn’t solely go bankrupt because people chose cars over rail. The real reasons for the streetcar’s demise are much less nefarious than a GM-driven conspiracy — they include gridlock and city rules that kept fares artificially low — but they’re fascinating in their own right, and if you’re a transit fan, they’re even more frustrating.
This is one of the reasons I’m generally against new plans to re-introduce streetcars (or their modern incarnations generally grouped under the term “light rail”), because they fail to address one of the key reasons that the old street railway/interurban/radial systems died: they were sharing road space with private vehicles. Light rail can provide a useful urban transportation option if they have their own right-of-way, but not if they are merely adding to the gridlock of already overcrowded city streets.
And once again, I’m not anti-rail … I founded a railway historical society and I commute most work days on a heavy rail commuter network. I don’t hold this position due to some anti-rail animus. If anything, I regret the passing of railway systems more than most people do, but I recognize that they have to be self-supporting (or close to self-supporting) to have a chance to survive. Being both more expensive and less convenient than alternative transportation options is a sure-fire path to extinction.
April 28, 2015
Tax credits that benefit almost nobody
Last week, Michael Geist pointed out that the tax credits and other inducements offered by state and provincial governments to attract TV and movie business are a bad deal for everyone except the media companies:
The widespread use of film and television production tax subsidies dates back more than two decades as states and provinces used them to lure productions with the promise of new jobs and increased economic activity. The proliferation of subsidies and tax credits created a race to the bottom, where ever-increasing incentives were required to distinguish one province or state from the other.
In recent years, governments have begun to rethink the strategy. States such as Arizona, Michigan, New Mexico, and Iowa suspended or capped their programs. Louisiana found that it lost $170 million in tax revenue in a single year. In Canada, the Quebec government’s taxation review committee recently admitted that its provincial film production tax credit was not profitable and that numerous studies find that there is little economic spinoff activity.
But the most notable Canadian study on the issue has never been publicly released and is rarely discussed. The Ontario government’s Ministry of Finance conducted a detailed review of the issue in 2011, delivering a sharply negative verdict on the benefits associated with spending hundreds of millions of dollars each year in tax credits. It recommended eliminating a 25 per cent tax credit for foreign and non-certified domestic productions that would have saved $155 million per year.
April 11, 2015
America’s biggest welfare queen
It’s not nice to call someone a welfare queen, but this is a case where it’s hard to find a more accurate way of putting it:
America’s biggest welfare queen is someone you’ve probably never heard of. She’s Hispanic. She’s been living off other people’s hard-earned tax money for years. And she’s gotten rich doing it.
Her name is Iberdrola. She’s a Spanish energy company that has invested in U.S. power facilities. And according to the advocacy group Good Jobs First, she’s raked in more than $2 billion from Uncle Sam in just the past few years.
Good Jobs First maintains a subsidy tracker where you can look up which companies are getting rich from public funds. It recently issued a report on “Uncle Sam’s Favorite Corporations — the companies that have gained the most from federal grants, special tax preferences, loans, and loan guarantees.
The biggest beneficiaries (“by an order of magnitude”) are Bank of America, Citigroup, and other major financial institutions that were bailed out during the 2008 financial crisis. The Federal Reserve, the Troubled Asset Relief Program, and so on threw trillions of dollars at U.S. and foreign banks in a desperate effort to stabilize the financial system. It worked. In many cases (though not all), the institutions repaid the money. In some cases the federal government actually earned a profit.
But hundreds of other companies have raked in billions of dollars in direct grants. Along with Iberdrola, NextEra Energy, NRG Energy, Southern Company, Summit Power, and SCS Energy all have reaped more than $1 billion in federal largess, often receiving payments through programs meant to boost renewable energy. At the same time, many coal companies have taken huge sums from Washington through grants and coal production tax credits. So, as with farm programs—some of which subsidize farmers to farm more and some of which pay farmers to not farm at all—Washington thwarts its own objectives by subsidizing both renewable fuel sources and the fossil fuels they’re supposed to replace.
March 25, 2015
Reason.tv – Sports Stadiums Are Bad Public Investments. So Why Are Cities Still Paying for Them?
Published on 17 Mar 2015
“Anybody that drives around Southern California can tell you the infrastructure is falling apart,” says Joel Kotkin, a fellow of urban studies at Chapman University and author of the book The New Class Conflict. “And then we’re going to give money so a bunch of corporate executives can watch a football game eight times a year? It’s absurd.”
When the Inglewood City Council voted unanimously to approve a $1.8 billion stadium plan on February 24th, hundreds of football fans in attendance cheered for the prospect of a team finally returning to the Los Angeles area.
On it’s face, the deal for the city of Inglewood is unprecedented — Rams owner Stan Kroenke has agreed to finance construction of the stadium entirely with private funds. The deal makes the stadium one of the most expensive facilities ever built and is an oddity in the sports world, where most stadiums require millions in public dollars to be constructed.
And while the city still waits to hear if it will indeed inherit an NFL team, the progress on the new privately-funded Inglewood stadium has set off a bidding war between other cities that are offering up millions in public subsidies to keep (or attract) pro-sports franchises to their area.
St. Louis has proposed a billion dollar waterfront stadium financed with $400 million in tax money to keep the Rams in Missouri. And the San Diego Chargers and Oakland Raiders have unveiled a plan to turn a former landfill in Carson, California, into a $1.7 billion stadium to keep the Rams from encroaching on their turf. While full details of the plan have yet to be released, it’s been reported that the financing would be similar to the San Francisco 49er’s deal in Santa Clara, which saw the team receive $621 million in construction loans paid for with public money.
Even the fiscally conservative Scott Walker is not immune to the stadium spending craze. The Wisconsin governor wants to allocate $220 million in public bonds to keep the Milwaukee Bucks basketball franchise in the area. Walker has dubbed the financing scheme as the “Pay Their Way” plan, but professional sports teams rarely pay their fair share when it comes to stadiums and instead use public money to generate private revenue.
Pacific Standard magazine has reported that in the last 20 years, the U.S. has opened 101 new sports facilities and stadium finance experts say that almost all of them have received public funding totaling billions of dollars. Politicians generally rationalize this expense by stating that stadiums will generate economic revenue and job opportunities for the city, but Kotkin says those promises are rarely realized.
“I think this is sort of a fanciful approach towards economic development instead of building really good jobs. And except for the construction, the jobs created by stadia are generally low wage occasional work.”
“The important thing that we’ve forgotten is ‘What is the purpose of a government?'” asks Kotkin. “Cities instead of fixing their schools, fixing their roads or fixing their sewers or fixing their water are putting money into ephemera like stadia. And in the end, what’s more important?”
March 22, 2015
March 13, 2015
US corporate welfare by state
Reason posted an infographic showing which corporation gets the most state support for every state in the union:
Click to enlarge
March 6, 2015
Politicians spend your money and hope some of the glamour attaches to them
At Coyote Blog, Warren Meyer wonders why so many states and cities are so eager to throw taxpayer money at movie and TV productions:
I am always amazed that the media will credulously run stories against “corporate welfare” for oil companies (which usually mostly includes things like LIFO accounting and investment tax credits that are not oil industry specific) but then beg and plead for us taxpayers to subsidize movie producers.
I wish I understood the reason for the proliferation of government subsidies for film production. Is it as simple as politicians wanting to hobnob with Hollywood types? Our local papers often go into full sales mode for sports team subsidies, but that is understandable from a bottom-line perspective — sports are about the only thing that sells dead-tree papers any more, and so more local sports has a direct benefit on local newspapers. Is it the same reasoning for proposed subsidies for Hollywood moguls?
Whatever the reason, our local paper made yet another pitch for throwing tax dollars at movie producers
Notwithstanding a recent flurry of Super Bowl-related documentaries and commercials that got 2015 off to a good start, Arizona appears to be falling behind in a competitive and lucrative business. The entertainment industry pays well, supports considerable indirect employment and offers the chance for cities and states to shine on a global stage.
Seriously? I am sure setting up the craft table pays better than catering a party at my home, but it is a job that lasts 2 months and is then gone. Ditto everything else on the production. And I am sick of the “shines on the world stage thing.” Who cares? And is this really even true? The movie Chicago was filmed in Toronto — did everyone who watched Chicago suddenly want to go to Toronto? The TV animated series Archer gets a big subsidy from the state of Georgia. Have they even mentioned Georgia in the series? Given the tone of the show, would they even want to be mentioned?
When government subsidizes an industry, it is explicitly saying that resources are better and more productively invested in the subsidized industry than in other industries in which the money would have been spent in a free market. Does the author really have evidence that the money I would have spent to improve the campgrounds we operate in Arizona is better taken from me and spent to get a Hollywood movie shot here instead? Which investment will still be here 6 months from now?
August 8, 2014
Revisiting the economic brain-fart that was “Cash for Clunkers”
If you listen to big government fans, you’ll often hear how much better it is for the economy for the government to spend money — much better than letting the taxpayers spend that money themselves — because the government is able to get a much higher “multiple” for every dollar that it spends. The “Cash for Clunkers” story may support that theory, but only if you reverse the sign: the program may have been more economically helpful to the auto makers and the taxpayers if they’d just piled up a few billion bank notes and set them on fire. The program ran for two months, and the government doled out $3 billion in subsidies to new car buyers (their old cars were destroyed). The new car owners benefitted, although it seems to merely have brought forward intended new car purchases in most cases, and the auto makers seemed to benefit by moving out a lot of unsold inventory.
However, a new National Bureau of Economic Research working paper shows that the program actually ended up costing the auto makers between $2.6 and $4 billion. Coyote Blog quotes the WSJ‘s summary:
The irony is that the goals were to help Detroit through the recession by subsidizing sales and to please the green lobby by putting more fuel-efficient cars on the road. By pulling forward purchases that consumers would make later anyway, the Obama Administration also hoped to add to GDP. Christina Romer, then chair of the Council of Economic Advisers, called Cash for Clunkers “very nearly the best possible countercyclical fiscal policy in an economy suffering from temporarily low aggregate demand.”
The A&M economists had the elegant idea of comparing the buying behavior of Texas drivers who owned cars that barely qualified for cash (those that got 18 miles per gallon of gas or less) and those that barely did not (19 mph). Using state DMV sales records, this counterfactual allowed them to isolate the effects of the Cash for Clunkers incentives and show what would have happened without the program.
The two groups were equally likely to purchase a new vehicle over the nine month period that started with Cash for Clunkers, so the subsidy did not create any extra auto business. But in order to meet the fuel efficiency mandate, consumers who got the subsidy were induced to purchase smaller vehicle models with less horsepower that cost on average $2,500 to $3,000 less than those bought by their ineligible peers. The clunkers bought more Corollas, and everybody else more Chevys.
Extrapolated nationally, auto revenues may have plunged by more than what the government spent. And any environmental benefits cannot be justified under the federal social cost of carbon estimate of $33 a ton. Prior research from 2009 and 2013 has shown that the program cost between $237 and $288 a carbon ton.
By taking all those used cars off the road and destroying them, the program also created a nasty price spike in the used car market (which hurt the poor almost exclusively). As P.J. O’Rourke said:
… cash for clunkers was just sinful. You’re taking a bunch of perfectly good vehicles, inexpensive vehicles that could be used by people without much in the way of material means, and crushing them. If someone took a valuable resource — something that could really be useful to people — and destroyed it, they’d be in jail if they were private citizens.
Steve Chapman probably put it best back in 2009, “Cash for Clunkers has been a thrilling moment for advocates of expanded government, who say it proves what we can accomplish when our leaders put their minds to it. They are absolutely right. The program proves the federal government is unsurpassed at two things: dispersing money and destroying things.”
