Tag: subsidy

Categories
too much government

Spoiled Sports

Americans get riled up by the slightest things.

As numerous Facebook posts pointed out last week, feminists across the country were incensed that their beloved president complimented a prominent woman on her looks … yet remained unfazed by that same presidents’ policy of killing innocent women and children with drone strikes. Amongst conservatives, Fox News host Bill O’Reilly got harsh condemnations for using the phrase “thump the Bible,” despite “The No Spin Zone” host’s long service in defense of what he calls “Judeo-​Christian” culture, and his lack of any malign intent. And, in sports news, Rutgers Coach Mike Rice got the pink slip for his violent, offensive treatment of his players . . .

But there’s no “but” with this story, except as identified by Nick Gillespie at Reason​.com: “there’s another, more subtle and yet more profound way that Division I college sports is abusing most college students at most schools … even if they never suit up for a practice or attend a single varsity competition of any sort.”

What is Gillespie driving at? Subsidy. Particularly, subsidies from government-​subsidized student payments:

The vast majority of colleges — public and private — massively subsidize varsity sports directly out of mandatory student fees and other school funds. Despite the ability of top-​tier teams to earn a lot of revenue via television contracts, ticket sales, merchandise sales, and other activities, most schools still hit up students in both direct and indirect ways.

Gillespie gives us some disturbing numbers: In 2011, Rutgers siphoned off $9 million in student fees and $19.4 million in general school funds while producing about $23 million in non-​donation revenue. George Mason University students pay $12 million a year for sports teams that pulled in much less than a million. Only eight Division I schools balk at subsidizing their athletics departments.

I love college sports. It’s sad to think that they are corrupting academic economies, just as pro sports corrupt city and metropolitan economics around the country. All by reliance upon subsidy … that sports programs can do without.

This is Common Sense. I’m Paul Jacob.

Categories
education and schooling free trade & free markets

Will They Ever Learn?

In which industries do prices and costs rise fastest? Those in which government is most involved.

The process is no mystery. Regulate supply by limiting entry into the business — to “increase quality,” of course — will raise prices, as producers behave oligopolistically. Government does this with health care providers, and have done so increasingly for the last century. If, at the same time, you subsidize the consumption, that amounts to increasing demand, which also puts upward pressure on prices. This has been accelerated in America since the beginning of Medicare, and with each additional healthcare program.

Typical government intervention double whammy.

Higher education is also not exempt from the play of supply and demand. One policy advocate’s explanation of this, which you can read excerpted, online, at National Review’s site, is worth considering. He explains what happens as vendors rake in profits under a regulated-​and-​subsidized system: they

sponsor crowd-​pleasing sports events on weekends, building public goodwill. Other profits are used to hire professional lobbyists to plead for both more subsidies and more freedom to set prices. You also convince the government to allow you and other incumbent … sellers to form a private organization with the authority to decide whether new sellers can become “approved … vendors” for the purposes of receiving public subsidies. Unsurprisingly, few new sellers are approved.

Predictably, the analysis is followed by halfway measures that don’t lead to a free market in education at all. That’s just too radical.

Education policy wonks, like educators themselves, seem never to learn … economics.

This is Common Sense. I’m Paul Jacob.

Categories
tax policy

Two Forms of Subsidy

Ronald Bailey, online at Reason​.com, quotes a press release from a group of renewable energy outfits whining and moaning to keep their huge tax breaks. It’s all for the good of the country, they say.

But Bailey notes that when such tax credits go to businesses not favored by environmental activists and the New York Times, they get branded subsidies.

What is the difference?

A. Barton Hinkle, also working in the vineyards of Reason, clarified one such kerfuffle last year, showing that most of the allegedly shocking subsidies accruing to Big Oil were, in actual fact, general tax rules applicable to all sorts of companies. Hinkle readily concedes that maybe

these are dumb rules. Maybe they need changing. But in no sense can they be called subsidies — i.e., money taken from Smith and given to Jones. The failure to tax Exxon more does not increase your payment to the IRS by one red cent.

Hinkle concludes that if partisans, left or right, are going to treat tax breaks as subsidies, then they should do so across the board, without ideological cherry-picking.

And yes, there is an argument for calling all tax breaks “subsidies.” The lobbying for them looks about the same. They favor some businesses (or, more often, industries) over others. Politicians get the benefits from the special interests in the exact same way.

Perhaps we should define two broad categories of subsidy: Direct benefits and negated detriments. A tax sure is a detriment to the taxpayer. A tax credit or other break is a “negated detriment.” That is, an indirect benefit.

And those negative detriments sure can affect the bottom line.

This is Common Sense. I’m Paul Jacob.

Categories
national politics & policies too much government

Volt Gives Taxpayers a Jolt

Government Motors — er, I mean General Motors — has sold approximately 6,000 Chevy Volts, its plug-​in electric/​hybrid gas-​burner car. Is that good or bad?

Analyzing the various state and federal government subsidies to GM as well as to suppliers of batteries and other parts for the Volt, James Hohman with Michigan’s Mackinac Center for Public Policy estimates that each car sold could cost taxpayers $250,000.The Obamobile!

Hohman admits it’s hard to be certain of the precise subsidy level because of various government incentives that may or may not get triggered, but whether $50,000 per car or $250,000, a lot of taxpayer cash has been sunk into a make that still sells for over $30,000 (and usually closer to $40,000). Nor does Hohman’s analysis include a penny of the $50 billion dollars in TARP funds taxpayers put into GM, giving the federal government an ownership stake in the automaker.

Twisting the knife another turn, GM now lobbies state governments for more handouts. Justin Owen, president of the Beacon Center of Tennessee, wrote recently in the Daily Caller: “Rather than retool its business model to become competitive in the free enterprise system, GM turned to … another $1.7 billion in taxpayer-​funded grants and tax abatements, not from the federal government, but from states across the country.”

When GM built cars without subsidies, it produced jobs and profits and wealth. That’s all good. But having auto companies sell cars at a couple hundred thousand dollar loss per vehicle sorta takes the fun out of it.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Pacé Richard Dreyfuss

In Suffolk County, Massachusetts, a new wrinkle on the old Producers-like scam hit the spotlight as a grand jury indicted Daniel Adams, a film impresario with several films under his belt, on ten counts larceny and false claims to the state in the financing of two movies set in the Cape Cod area, The Golden Boys (2008) and The Lightkeepers (2009).

According to Boston​.com, Adams is charged with taking “advantage of a state incentive that allows film makers to apply for a tax credit equal to 25 percent of eligible production expenses. But prosecutors said he deceived the state about his expenses, claiming, for instance, that he paid [actor Richard] Dreyfuss $2.5 million, when in fact he paid him only $400,000.”

Adams has pleaded not guilty, and his legal standing is for a jury to decide.

More important is the general policy — funding movies is just not a legitimate use of tax money.

The only possibly legitimate argument for taxation is that the forcibly extracted money serves all the people it’s extracted from, by fulfilling very general, truly public interests. Making movies is not that.

One wag notes that “[t]he real crime is that a movie starring Richard Dreyfuss ever qualified for taxpayer funds in the first place.” That sounds almost like a criticism of Dreyfuss. Hey, I like the actor.

The point is that no film, either starring the greatest of greats or the least of unknowns, should be financed with conscripted money.

This is Common Sense. I’m Paul Jacob.

Categories
free trade & free markets too much government

Locovore Law

America’s agricultural policies are notoriously crazy. The federal government subsidizes one crop while discouraging its use at the consumer end. The old New Deal program of paying farmers not to grow crops is still in place. The high tariff on sugar artificially increases prices far above the world price.

To compensate, the federal government helped develop a refined sugar substitute, high fructose corn syrup — an even more “sugary” sugar — and then infected nearly the whole food supply with it.

So, some sympathy for the “locavore” movement, the folks who believe we should eat foods grown in the areas we live. It seems more natural. Less goofy.

But it’s also a lot more costly, considering that buying locally tends to forsake gains from trade.

So a law to prop up locavore production and consumption, like the legislation introduced early in November by Sen. Sherrod Brown (D‑OH) and Rep. Chellie Pingree (D‑ME), cannot help but shuffle two steps back for every misstep forward. Basically, it’s about more subsidy, including $30 million for “Value-​Added Producer Grants,” $15 million for “farmer food safety training,” $90 million for something called a “Specialty Crop Block Program.” The least obviously bad part would direct the “USDA Research, Education, and Extension Office to coordinate classical plant and animal breeding research activities,” though I don’t see why farmers can’t manage this on their own. This is the Age of the Internet, after all, of Information.

Congress: Forget it; repeal current agribusiness subsidy and protectionism, instead.

This is Common Sense. I’m Paul Jacob.