Tag: subsidies

Energy Mismanagment

Try as they might, supporters of big government spending cannot make federal programs work very well. The Department of Energy, for example, has been plagued by mismanagement, cost overruns, and scandals for decades.

Today, the Washington Post reports on the poor performance of DoE’s environmental clean-up programs. As I reviewed in the linked essay, these enormously costly programs have been plagued by mismanagement for at least 25 years. Last week, Lou Dobbs lambasted DOE’s National Ignition Facility in California for its huge cost overruns (Hat Tip: Harrison Moar).

I summarize these costly projects and other DoE boondoggles here. With bipartisan support for increases to energy subsidies, we can expect a raft of bipartisan boondoggles developing over coming months and years.

It Begins: White House Unleashes the Health Care Tempest

Monday’s meeting between President Obama and representatives of the health care industry is part of an ongoing process of trying to strike a deal between government and industry over how to reform health care. Notably absent from that equation is the most important party: health care consumers.

Health care reform should be about empowering patients, not about how much increased government control the health care industry is willing to accept.

Moreover, any promised health care savings that came out of yesterday’s meeting are likely to prove illusory in the face of increased government regulation, subsidies and interference that will almost certainly drive up the cost (and decrease the quality) of health care.

Obama’s Budget Cuts

The Obama administration has issued a modest list of budget cuts for programs that are “duplicative” and “ineffective.”

That’s a good start for spending reforms, but a more substantial way to end “duplication” would be to terminate all $500 billion of federal subsidies sent to state governments each year, which duplicate properly state-level activities such as highway building.

Further, cutting some “ineffective” programs ignores the broader question of whether programs represent just and legitimate uses of government power. We can make farm subsidies more “effective,” for example, but that does not make it ethical to transfer $20 billion each year from hard-working taxpayers to often high-income farm businesses.

I’d like to see the Obama administration attack Washington’s overspending problem in a more dramatic and fundamental way.

For now, here’s a great place to start:

Obama’s Recycled Moderate-Speed Rail Plan

The Obama administration believes in recycling, as shown by the so-called high-speed rail plan it announced last week. Below is a map of the plan, and below that is a map of the Federal Railroad Administration’s 2005 high-speed rail plan. As you can see, the proposed routes are identical. (The grey lines on the first map represent conventional Amtrak routes.)

map of the plan

2005 map

Of course, this is a time-honored practice. Eisenhower’s Interstate Highway System was really the Bureau of Public Roads’ Interregional Highway System. There is no doubt that the Federal Railroad Administration is thrilled that Obama has adopted its plan.

Yet there are several problems with Obama’s plan. First, it is important to understand that most of Obama’s plan is not bullet trains or TGVs. Instead, it is conventional Amtrak Diesel-powered trains running a little faster – up to 110 mph, but averaging only 60 to 70 mph – than Amtrak runs today. Based on this, here are my most important objections to Obama’s moderate-speed rail plan.

1. Less than 1 percent will ride, more than 99 percent will pay

More than 4 percent of federal transportation spending goes to Amtrak, yet Amtrak carries only 0.1 percent of passenger travel. Moderate- and high-speed trains will significantly increase the subsidies but have little effect on the total travel. Why is it fair for 99.8 percent of people to pay for the rides enjoyed by the other 0.2 percent?

Even with subsidies, high-speed rail fares will be about 50 percent higher than ordinary Amtrak fares. For example, passengers pay $69 to ride conventional trains from New York to Washington, and $99 to ride high-speed train. (By comparison, an unsubsidized bus is $20 and unsubsidized airfares are $99.) This means only the wealthy and those whose employers pay the fare will ride high-speed rail. All taxpayers will end up paying for rides of bankers, bureaucrats, and lobbyists.

2. Moderate-speed rail is dirty

Obama’s claims that trains are better for the environment are pure speculation. Amtrak today is only a little more energy-efficient than cars and planes. While cars and planes are expected to get far more energy-efficient in the future, running trains at higher speeds will make them less energy-efficient.

True high-speed rail, which generally powered by electricity, is dirty too. Even if the electricity comes from renewable resources, the energy and environmental cost of construction will be enormous. It will take decades for the trivial annual savings to pay back that cost.

3. It doesn’t work in Europe

High-speed trains in Europe are convenient for tourists, but the average European rarely uses them. Even in France, which has more high-speed trains than any other European country, the average resident rides heavily subsidized high-speed trains just 400 miles per year. Despite punitive fuel taxes, they drive 7,600 miles per year, a number that is increasing faster than high-speed rail travel.

4. It doesn’t work in Japan

The Japanese drive less than French or Americans, but they don’t ride high-speed rail more than the French. The average resident of Japan drives 4,000 miles per year and rides high-speed trains 400 miles per year. The Japanese ride trains more than the residents of any other country – nearly 1,900 miles per year including subways and other urban rail – but due to premium fares, nearly 80 percent of train riding is on conventional trains.

5. Every car off the road means more new trucks on the road

Obama’s moderate-speed trains will run on the same tracks as existing freight trains. Since many of America’s rail lines are near capacity today, there is a real danger that moderate-speed trains will push freight onto the highways.

Europe’s rail network carries 6 percent of passenger travel, while ours carries only 0.1 percent. But European trains carry less than 17 percent of freight, while 73 percent goes by highway. By comparison, American trains carry 40 percent of our freight, while only 28 percent goes on the highway. In other words, to get 6 percent of passengers out of their cars, Europe put nearly three times as many trucks on the road.

Personally, I love trains. But Obama’s plan is bad for taxpayers and bad for the environment. We would be better off ending all subsidies to transportation than piling on subsidy after subsidy for transport that is supposedly environmentally friendly but in fact hardly anyone will use.

Is Rick Perry Really for Limited Government?

Conservative radio hosts are excited about a recent speech by Texas governor Rick Perry. Perry forcefully argued his theme of “unwavering support for efforts all across our country, but, most of all, here in Texas, to reaffirm the states’ rights affirmed through the Tenth Amendment to the U.S. Constitution.”

That sounds great, but does he really mean it?

In a study, I noted that Perry and the Texas state government are aggressive scavengers of federal grant dollars. The rise in federal granting is one of the central causes of the destruction of the Tenth Amendment in recent decades.

I noted that Perry’s official webpage is chock full of press releases touting his distribution of federal subsidies. These press releases are from a short time period in 2006:

  • “Perry: Texas Farmers and Ranchers to Share $780 Million in Drought Assistance.”
  • “Perry: FEMA Agrees to Reimburse Texas at Same Rate as Louisiana for Hurricanes.”
  • “Gov. Perry Announces $1.6 Million in Grants to Juvenile Offender Accountability Programs.”
  • “Perry: Homeland Security Grants to Focus on Technology Needs.”
  • “Gov. Perry: Presidential Disaster Declaration Approved for El Paso.”
  • “Gov. Perry Announces $38,098 in Victims of Crime Act Funds to El Paso County.”
  • “Gov. Perry Announces $3.6 Million in Grants to Local Law Enforcement.”

Notice how Perry takes credit for all the new spending? Politicians love spending, especially when they can foist the cost on taxpayers living in other states.

Look at these two press releases up on Perry’s website right now:

  • Apr. 9: “Gov. Perry Backs Resolution Affirming Texas’ Sovereignty Under 10th Amendment.”
  • Apr. 10: “Gov. Perry Calls on FEMA to Assist the State in Fighting Wildfires.”

Governor Perry: Do you want to revive the Tenth Amendment or do you want the FEMA money? You’re giving us whiplash out here!

I don’t think Perry’s tax policies have been particularly conservative either, as they have centralized fiscal power at the state level and thus reduced beneficial competition between local governments.

Demand for Subsidies

My op-ed on National Review Online today provided new information about the increasing number of federal subsidy programs. The federal welfare state is expanding rapidly.

One friendly reader emailed me:

Ever cross your mind that there’s a reason government programs increase over time? I’ll clue you in: Programs increase because of public demand.

It’s not rocket science, people want more services. Period. Somebody’s got to pay for them. Hences taxes. Or perhaps borrowing. Or a combination of both. In any event, there’s no evidence people are willing to get along with fewer services.

The situation seems simple to me; so why can’t you ideologues on the far right understand what’s going on. Instead, you simply go on bemoaning the existence of programs and taxes you don’t like.

There are numerous problems with this reader’s views, including constitutional problems. But one thing that strikes me is the underlying assumption of the “public interest theory of government,” or the idea that democracies and bureaucracies operate to efficiently provide “services.”

In reality, there are structural problems in government that bias policymakers toward fiscal irresponsibility, as our current $1.8 trillion federal deficit indicates. The issue is not ideology, it is scientific: Does the government actually work as the optimists, like this reader, believe? I think the empirical evidence is in on that question.

Feds Pay Farmers to Till the Desert

No, this headline and story is not brought to you by The Onion.

The latest proof that there’s nothing more permanent than a temporary federal program:

As drought forces families in the West to shorten their showers and let their lawns turn brown, two Depression-era government programs have been paying some of the nation’s biggest farms hundreds of millions of dollars to grow water-thirsty crops in what was once desert.

My sympathy for this farmer lies somewhere between that which I have for Bernie Madoff and Ted Stevens:

Jim Hansen, a 69-year-old cotton grower in California’s Central Valley, said his family business would crumble if the government took away low-cost water and the nearly $1.7 million in crop payments he received in 2007 and 2008.

For more on the insanity that is federal farm policy and why the USDA needs to be downsized and/or done away with, click here.