Tag: subsidies

New Video Shows the War on Poverty Is a Failure

The Center for Freedom and Prosperity has released another “Economics 101” video, and this one has a very powerful message about the federal government’s so-called War on Poverty.

As explained by Hadley Heath of the Independent Women’s Forum, the various income redistribution schemes being imposed by Washington are bad for taxpayers – and bad for poor people.

The video has a plethora of useful information, but the data on the poverty rate is particularly compelling. Prior to the War on Poverty, the United States was getting more prosperous with each passing year and there were dramatic reductions in the level of destitution.

But once the federal government got involved in the mid-1960s, the good news evaporated. Indeed, the poverty rate has basically stagnated for the past 40-plus years, usually hovering around 13 percent depending on economic conditions.

Another remarkable finding in the video is that poor people in America rarely suffer from material deprivation. Indeed, they have wide access to consumer goods that used to be considered luxuries - and they also have more housing space than the average European (and with Europe falling apart, the comparisons presumably will become even more noteworthy).

The most important message of the video, however, is that small government and economic freedom are the best answers for poverty. As Hadley explains, poor people can be liberated to live meaningful, self-reliant lives if we can reduce the heavy burden of the federal government.

Last but not least, the video doesn’t address every issue in great detail, and there are three additional points that should be added to any discussion of poverty.

  1. The biggest beneficiaries of the current system are the army of bureaucrats that receive very comfortable salaries administering various programs.
  2. The Obama Administration is looking to re-define poverty in a way that would expand the welfare state and increase the burden of redistribution programs.
  3. The welfare reform legislation of the 1990s was a small step in the right direction because it eliminated a federal entitlement and shifted responsibility back to the state level. This success story should be replicated for programs such as Medicaid.

This last point is worth emphasizing because it is also one of the core messages of the video. The federal government has done a terrible job dealing with poverty. The time has come to get Washington out of the racket of income redistribution.

The (Beginning of the) End of the Shameful U.S. Cotton Deal?

Heartening news from the Appropriations Committee yesterday: they voted to cut aid to farmers generally, and to make significant changes to an egregious cotton program. But first, some background.  You’ll recall the embarrassing deal made by the Obama administration last year to head off Brazil’s right to impede American exports in retaliation for WTO-illegal cotton support. The United States is, in other words, now sending almost $150m worth of “technical assistance” and “capacity building” funds to Brazil, just so we can continue to subsidize American cotton growers without penalty (so much for U.S. promotion of the rule of law in international commercial relations). Rep. Ron Kind (D-WI) tried to end that deal earlier this year, but to no avail. Big Ag’s friends in Congress argued, unfortunately successfully, that any changes to the cotton bribes should be dealt with in the context of the 2012 Farm Bill, and by the agriculture committees (good luck with that).

But yesterday, the Appropriations Committee approved by voice vote an amendment from Rep. Jeff Flake (R-AZ) to take the fiscal 2013 payment to Brazil from funds that would normally go to supporting U.S. cotton growers. According to an article [$] in the Congressional Quarterly, Rep. Flake argued that “American cotton growers should pay the bill since the United States was making the payment on their behalf.” Well played, sir.  Rep. Rosa DeLauro (D-CT) filed an amendment that would send the FY2012 cotton payment to the Women’s, Infants and Children nutrition program instead.

The Committee also voted to lower the income eligibility cap to $250,000 AGI.

The CQ article did contain this worrying footnote, however:

Support for the amendments may be tenuous — especially if lawmakers cannot hide behind the anonymity of a voice vote. After winning the voice vote in committee, Flake sought a roll call, prompting appropriators of both parties to suggest that he did not need the recorded vote. Flake took their advice and demurred.

 Leglislators are usually shy about publicizing their positions only when they think it could get them in political hot water, so let’s not uncork the champagne yet.

High-Speed Rail and Federalism

Florida Governor Rick Scott deserves a big round of applause for dealing a major setback to the Obama administration’s costly plan for a national system of high-speed rail. As Randal O’Toole explains, the administration needed Florida to keep the $2.4 billion it was awarded to build a high-speed Orlando-to-Tampa line in order to build “momentum” for its plan. Instead, Scott put the interests of his taxpayers first and told the administration “no thanks.”

That’s the good news.

The bad news is that the administration is going to dole the money back out to 22 passenger-rail projects in other states. Florida taxpayers were spared their state’s share of maintaining the line, but they’re still going to be forced to help foot the bill for passenger-rail projects in other states.

Here’s Randal’s summary:

Instead, the Department of Transportation gave nearly $1 billion of the $2.4 billion to Amtrak and states in the Northeast Corridor to replace worn out infrastructure and slightly speed up trains in that corridor, as well as connecting routes such as New Haven to Hartford and New York to Albany. Most of the rest of the money went to Midwestern states—Illinois, Iowa, Minnesota, Michigan, and Missouri—to buy new trains, improve stations, and do engineering studies of a few corridors such as the vital Minneapolis-to-Duluth corridor. Trains going an average of 57 mph instead of 52 mph are not going to inspire the public to spend $53 billion more on high-speed rail.

The administration did give California $300 million for its high-speed rail program. But, with that grant, the state still has only about 10 percent of the $65 billion estimated cost of a San Francisco-to-Los Angeles line, and there is no more money in the till. If the $300 million is ever spent, it will be for a 220-mph train to nowhere in California’s Central Valley.

Why should Floridians be taxed by the federal government to pay for passenger-rail in the northeast? If the states in the Northeast Corridor want to pick up the subsidy tab from the federal government, go for it. (I argue in a Cato essay on Amtrak that if the Northeast Corridor possesses the population density to support passenger-rail then it should just be privatized.)

I don’t know if taxpayers in Northeast Corridor would want to pick up the federal government’s share of the subsidies, but I’m pretty sure California taxpayers wouldn’t be interested in footing the entire $65 billion for their state’s high-speed boondoggle-in-the-works. As I’ve discussed before, the agitators for a national system of high-speed rail know this:

If California’s beleaguered taxpayers were asked to bear the full cost of financing HSR in their state, they would likely reject it. High-speed rail proponents know this, which is why they agitate to foist a big chunk of the burden onto federal taxpayers. The proponents pretend that HSR rail is in “the national interest,” but as a Cato essay on high-speed rail explains, “high-speed rail would not likely capture more than about 1 percent of the nation’s market for passenger travel.”

According to the Wall Street Journal, congressional Republicans aren’t happy that the administration is taking Florida’s money and spreading it around the country:

Monday’s announcement drew criticism from House Republican leaders, who questioned both the decision to divide the money into nearly two-dozen grants around the country—instead of concentrating it into fewer major projects—and the fact that many of the projects will benefit Amtrak, the federally subsidized passenger-rail operator.

I heartily agree with the Amtrak complaint, but I’m not sure why as a federal taxpayer I should feel better about instead “concentrating [the money] into fewer major projects.” Subsidizing passenger-rail is no more a proper role of the federal government than education or housing. Unfortunately, for all the criticisms of the Obama administrations and the constant talk about spending cuts, Republicans don’t appear to possess much more desire to limit the scope of the federal government’s activities than the Democrats.

See this Cato essay for more on fiscal federalism.

Distortions versus Outlays

My friend Gawain Kripke at Oxfam posted a very good blog entry yesterday on the proposed cuts to agriculture subsidies. In it, Gawain elaborates on a point that I made briefly in a previous post about Rep. Paul Ryan’s 2012 budget plan: that cutting so-called direct payments—those that flow to farmers regardless of how much or even whether they produce—is only part of the picture.

Here’s Gawain’s main point:

Most farm subsidies are price-dependent, meaning they are bigger if prices are low and smaller if prices are high. Prices are hitting historic highs for many commodities, which means the bulk of these subsidies are not paying out very much money. Over time, the price-dependent subsidies have been the bulk of farm subsidies. They also distort agriculture markets by encouraging farmers to depend on payments from the government rather managing their business and hedging risks.

So—these days there’s only about $5b in farm payments being made, and these payments are not considered as damaging in international trade terms because they are not based on prices…

Still, Congress will probably make some cuts. But these cuts won’t really be reform and won’t produce much long-term savings unless they tackle the price-dependent subsidies. Taking a whack at those subsidies could save taxpayers money later and make sure our farm programs don’t hurt poor farmers in developing countries. (emphasis added)

I will be delighted if direct payments are abolished, thereby saving American taxpayers about $5 billion a year. But we should not be content with that, nor should we fool ourselves that we have tackled the main distortions in agricultural markets. If the price- and production-linked programs are not abolished, too, then taxpayers and international markets will pay the price if/when commodity prices fall.

Wash. Post, CBS, NBC Should Disclose Receipt of ObamaCare Subsidies

It’s not an easy period for major media organizations, what with all this creative destruction revamping that sector of the economy.  So the Washington Post Co. couldn’t help but be pleased when it received a $570,000 bailout from ObamaCare’s Early Retiree Reinsurance Program.  That program allows the Obama administration to run up the national debt another $5 billion by doling out cash to corporations that provide retiree health benefits.   The CBS Corporation received more than $720,000.  General Electric, a part owner of NBC Universal, Inc., cleared nearly $37 million.

Since The Washington Post, CBS News, NBC News, and MSNBC have now received subsidies (the latter two indirectly) from this very controversial law, their reporters should disclose that fact to their audiences when reporting on ObamaCare.  A disclaimer like this should suffice: “The Washington Post Corporation has received subsidies under the health care law.”  That would be consistent with how NBC discloses its relationship with General Electric:

Oh, and kudos to the marketing whiz who decided to call all these ObamaCare spending programs “slush funds.”

Friday Links

  • What are Republicans doing to stop ObamaCare? Not much.
  • Conflating the Taliban with al Qaeda isn’t helping our foreign policy dialogue.
  • “Sitting in a Volt that would not start at the 2010 Detroit Auto Show, a GM engineer swore to me that the internal combustion engine in the machine only served as a generator, kicking in when the overnight-charged lithium-ion batteries began to run down.”
  • The new issue of Regulation looks at price gouging, soda taxes, the Durbin Amendment, and more.
  • Who should decide when we tap into strategic oil reserves: The president? Or market forces

Gingrich & Woolsey on Energy

The other day, The Wall Street Journal provided a public service by lambasting Newt Gingrich for his absurd speech to the ethanol lobby in Des Moines last month (money line:  ”Obviously big urban newspapers want to kill it because it’s working, and you wonder, ‘What are their values?’”).  Today, Gingrich and fellow ethanol-maven James Woolsey struck back in those very same pages.  In doing so, Gingrich provided yet more evidence that he’s intellectually unfit for office.

“It is in this country’s long-term best interest,” he said, ”to stop the flow of $1 billion a day overseas.”  Really?  So money sent overseas is gone forever.  News to me.  The only thing you can buy with dollars earned from oil sales to the U.S. is to buy things denominated in dollars or to exchange them so that someone else can.  And we sell a lot of stuff to foreigners that are denominated in dollars (treasury bills for one) and that money comes right back to the good old U.S. of A.

But put that aside.  If Gingrich really believes this, then why not just ban all imports all together?  Is that what the GOP is about these days - rank gooberism on trade?

And one other thing; the U.S. does not spend $1 billion a day on foreign oil.  It spends about half that; $530 million a day (in 2009 anyway).

“[I] co-produced a movie with my wife, Callista, ‘We Have the Power,’ that argued for an ‘all of the above’ energy strategy which would maximize all forms of domestic energy production.”  Apparently, being a pol means that one doesn’t have to pick and choose between investments a, b, or c.  We’ll just mandate everyone invest in everything that can attract a lobbyist. 
When you hear this stuff about an ”all of the above” energy strategy, what you’re hearing is a complaint that the Democrats aren’t subsidizing enough of the energy industry.  They are too tight-fisted with the public purse.  They are not ambitious enough in their planning.  And while Republicans bang the table for more, more, and more handouts to private corporations, liberals like Amory Lovins (prominent left-of-center energy guru) and Carl Pope (former head of the Sierra Club) call for zeroing out everyone’s subsidies and leaving the energy market the heck alone (at least when it comes to this matter).  It’s a mad, mad world.
 
“Nevertheless,” says Gingrich, ”the Journal attempts to equate my career-long commitment to increased American energy production with the anti-energy agenda of President Obama. This is a laughable charge, especially considering I have been one of the most vocal opponents of the president’s energy policies since he took office.”  Perhaps, but on this matter, Gingrich is attacking the administration from the Left.  
 
Even more amusing was James Woolsey’s lecture to the editorial board over what it means to be a conservative.   “We could not help wondering,” he asked along with his co-author, Gal Luft, ”why the Journal, despite its commitment to free enterprise, chose to attack Newt Gingrich for his call to open vehicles to fuel competition, which would cost auto makers under $100 per new car.”  Well Jim, a commitment to free enterprise is a commitment to allow enterprises to be free to produce whatever they want.  Of course, if Woolsey had read Gingrich’s speech to the ethanol lobby, he would not need to wonder - it’s about their sick, twisted values.
 
Nonetheless, Woolsey claims that such a mandate ”is perfectly in line with conservative economic principles.”  That may be true given what conservatives believe about economics.  But it’s not consistent with a principled support for a free market.
 
Finally, “Challenging Mr. Gingrich’s conservative bona fides based on his support for breaking oil’s virtual monopoly over transportation fuel is not only myopic but also the best gift the Journal can give OPEC.”  But … oil dominates the transportation market because it is a heck of a lot cheaper than any other fuel.  If it weren’t so much cheaper than ethanol, then we would have no need for such massive subsidies for the same.  The same goes for electric cars.  If and when that changes, oil’s “monopoly” will crumble.  Until then, taking oil out of transportation markets simply takes cheap fuel out of transportation markets.  It would be fun to watch a Gingrich/Woolsey ticket run on that.