Tag: subsidies

GOP: Cut Whaling History Subsidies, Save Nation

House Republican Whip Eric Cantor’s “YouCut” project has released a new video that attempts to visually underscore the impropriety of sticking future taxpayers with a mountain of federal debt.

The video begins with a voice saying “You wouldn’t do this to your child’s piggy bank” followed by visuals of a child’s piggy bank being smashed with a hammer. The voice then says:

But Democrat controlled Washington is leaving a $13 trillion debt for your children and future generations. It’s time Washington got its fiscal house in order. Start changing the culture of spending in Washington by voting on YouCut today.

That’s a wee bit disingenuous considering that Republicans and Democrats alike are responsible for the massive federal debt.

More frustrating is the fact that the GOP leadership rhetoric of grave concern is completely at odds with the party’s tiny proposed reforms. In Cantor’s YouCut commentary he says “America is at a critical crossroads, and the choices we make today will determine the kind of country we leave to our children and grandchildren.”

Now let’s look at this week’s proposed GOP spending cuts. A website banner says “CLICK HERE TO VOTE FOR THIS WEEK’S FIVE CUTS,” but takes the viewer to the YouCut page where they’re offered three spending cut options:

1. Terminate Taxpayer Funding of National Public Radio. The site says this would achieve “Savings of Tens of Millions of Dollars (potentially in excess of a hundred million dollars).” NPR shouldn’t receive taxpayer funding – and not just because it canned Juan Williams. But couldn’t the House GOP leadership have at least offered up the $500 million Corporation for Public Broadcasting that subsidizes NPR for cutting?

2. Terminate Exchanges with Historic Whaling and Trading Partners Program. The site says this would save $87.5 million over ten years.

3. Terminate the Presidential Election Fund. This would achieve a whopping projected savings of $520 million over ten years.

America is at a “critical crossroads” and the GOP leadership is offering to cut whaling history subsidies? Congress is bankrupting the nation and the possible next Speaker of the House – “never a details man” – can’t even specify what he would cut in the budget.

It’s pathetic.

Enough Community College PDA

Yesterday, President Obama hosted the White House Summit on Community Colleges, and in-your-face love was in the air. President Obama and Second Lady Jill Biden, a community college professor, couldn’t keep their hands off their signficant other, lavishing all sorts of praise on their favorite little schools.

Swooned Dr. Biden about the dreamy things community colleges do for their students:

They are students like the mother who shared her experience with us on the White House website of working towards a degree while raising three children and straddling financial challenges.  Now employed and the holder of a Bachelor’s and a Master’s degree, she wrote, “Community colleges didn’t just change my life, they gave me my life.”

Community colleges do that every day. 

Ick!

The President, too, couldn’t hide his affection:

So I think it’s clear why I asked Jill to travel the country visiting community colleges -– because, as she knows personally, these colleges are the unsung heroes of America’s education system.  They may not get the credit they deserve.  They may not get the same resources as other schools.  But they provide a gateway to millions of Americans to good jobs and a better life.

Like the guy with the locker next to Mr. and Mrs. Lovebird, all I can say is “oh, come on!”

Community colleges might be a good option for some people, but they are hardly paragons of educational success. Quite the opposite: According to the U.S. Department of Education, they have the worst graduation rates of any two-year sector of higher education. Only around 22 percent of public, two-year college students graduate within three years, versus roughly 49 percent of private, not-for-profit attendees and about 59 percent of private, for-profit students.

Wait! What’s that? Private, for-profit institutions outperform super-cute community colleges…by a lot? But they’re the ugliest, meanest, least popular kids in school!  Nobody likes them!

Oh, I know what’s going on here! For-profit schools cost a lot more than community colleges, right? That’s why they’re so disliked.

That’s true if you look at tuition prices. But community colleges get big subsidies from government, especially state and local taxpayers. So they might actually cost a lot, it’s just that they sneak the money out of your back pocket and then congratulate themselves for charging students so little.  

When you look at government expenditures per-pupil, including aid to schools and students, it becomes clear that community colleges are, in fact, just as mean and greedy as for-profits. Indeed, former Clinton administration economist Robert Shapiro has calculated that they are actually more costly to taxpayers than for-profit schools (see table 24). According to his calculations, two-year public schools cost taxpayers $6,919 per student, while private, for-profits cost just $3,628. 

No wonder the summit turned my stomach! At the same time the administration and its allies in Congress are bashing for-profit schools, the President has a love fest with community colleges that are generally much worse. Unfortunately, it leaves you concluding that for-profits could walk on water and it wouldn’t matter: As long as they’re honest about trying to make a buck, they’ll be beaten up in the parking lot and never invited to any of the cool summits.

Trade Can Help the Poor Escape Poverty

Professor William Easterly, the economic development expert from New York University, has written an excellent comment for the Financial Times online. He writes, “The Millennium Development Goals [summit that wraps up in NY today] tragically misused the world’s goodwill to support failed official aid approaches to global poverty and gave virtually no support to proven approaches. … But current experience and history both speak loudly that the only real engine of growth out of poverty is private business, and there is no evidence that aid fuels such growth.”

At the Center for Global Liberty and Prosperity, we have continuously emphasized the power of trade to help the poor escape poverty. Unfortunately, politicians in rich countries find it easier to waste billions of taxpayers’ dollars in the form of foreign aid than to take on special interests that thrive on trade protectionism; hence European and American agricultural tariffs and subsidies.

However, the impact of rich countries’ protectionism should not be exaggerated. African countries are typically more protectionist than rich countries. In fact, they are more protectionist against one another than against rich countries. The sad truth is that poor countries are perfectly able to shoot themselves in the foot by following growth-killing economic policies – irrespective of what the rich countries do.

Foreign aid, incidentally, has been ineffective at promoting liberalization.

Biden’s Fatal Conceit

The White House’s misbegotten “Summer of Recovery” continued today with the release of another administration “analysis” that purportedly demonstrates the stimulus’s success in “transforming” the economy.

Vice President Joe Biden unveiled the report alongside Energy secretary Steven Chu and numerous businesses officials willing to serve as political props in return for Uncle Sam’s free candy. Biden bemoaned the nefarious “special interests” that were coddled by the previous administration. What does the vice president think those subsidized business officials attending his speech are called?

The money the White House has lavished on these privileged businesses isn’t free. The money comes from taxpayers—including businesses that do not enjoy the favor of the White House—who consequently have $100 billion (plus interest) less to spend or invest. Therefore, the fundamental question is: Are Joe Biden — an individual who has spent his entire career in government— and the Washington political class better at directing economic activity than the private sector?

Biden repeatedly stated that the “government plants the seed and the private sector makes it grow.” Because the government possesses no “seeds” that it didn’t first confiscate from the private sector, what the vice president is advocating is the redistribution of capital according to the dictates of the Beltway. This mindset exemplifies the arrogance of the political class, which at its core believes that free individuals are incapable of making the “right” decision without the guiding hand of the state.

Unfortunately for Joe Biden, the state’s hand guided the private sector into the economic downturn that the administration and its apologists would have us believe was a consequence of imaginary laissez faire policies. From the housing market planners at HUD to the money planners at the Federal Reserve, government interventions led to the economic turmoil that the perpetrating political class now claims it can fix.

Enough already.

The following are Cato resources that challenge the vice president’s breezy rhetoric on the ability of the federal government to direct economic growth:

  • Energy Subsidies: The government has spent billions of dollars over the decades on dead-end schemes and dubious projects that have often had large cost overruns.
  • Energy Regulations: Most federal intrusions into energy markets have been serious mistakes. They have destabilized markets, reduced domestic output, and decreased consumer welfare.
  • Energy Interventions: The current arguments for energy intervention and energy subsidies fall short.
  • High-Speed Rail: Policymakers are dumping billions of dollars into high-speed rail, even though foreign systems are money losers and carry only a small share of intercity passengers.
  • Special-Interest Spending: Many federal programs deliver subsidies to particular groups of individuals and businesses while harming taxpayers and damaging the overall economy.

Beware of Americans Proselytizing the Chinese Economic Model

In a Cato paper released earlier this month, I argued that the glacial pace of America’s economic recovery and its growing public debt juxtaposed against China’s almost uninterrupted double-digit annual economic growth and its role as Congress’s sugar daddy have bred insecurity among U.S. opinion leaders, many of whom now advocate a more strident approach to China, or emulation of its top-down approach.

I cite, among others, Thomas Friedman of the New York Times, who is enamored of autocracy’s capacity to facilitate China’s singularity of purpose to dominate the industries of the future:

One-party autocracy certainly has its drawbacks. But when it is led by a reasonably enlightened group of people, as China is today, it can also have great advantages. That one party can just impose the politically difficult but critically important policies needed to move a society forward in the 21st century. It is not an accident that China is committed to overtaking us in electric cars, solar power, energy efficiency, batteries, nuclear power, and wind power. China’s leaders understand that in a world of exploding populations and rising emerging-market middle classes, demand for clean power and energy efficiency is going to soar. Beijing wants to make sure that it owns that industry and is ordering the policies to do that, including boosting gasoline prices, from the top down.

Friedman’s theme—but less googoo eyed and more all-hands-on-deck!—is echoed in an op-ed by China-expert James McGregor, which ran in yesterday’s Washington Post.  McGregor conveys what he describes as an emerging sentiment within the U.S. business community in China.  That is: the Chinese government is hell bent on creating national economic champions; is using its increasing leverage (as global financier and fastest-growing market) to impose its own interpretations of the global rules of economic engagement in support of its comprehensive industrial policy, and, ultimately; the United States must wake up and rise to the challenge by crafting some top-down industrial policy of its own.

I don’t dispute some of McGregor’s premises.  China’s long process of market liberalization has slowed down, halted, and even reversed in some areas.  Policies are proliferating that favor local companies (particularly state-owned enterprises), hamper the operations of foreign-owned firms, and impede market access for imports.  Indeed, many of these policies are likely the product of industrial planning. 

But McGregor’s conclusion is extreme:

The time has come for a White House-led, public-private, comprehensive examination of American competitiveness against a clear-eyed view of China’s very smart and comprehensive industrial development policies and plans…What technology do we protect? What do we share? What are our commercial strategic imperatives as a nation? How do we retool the U.S. government’s inadequate and outdated trade bureaucracy to provide thoughtful strategic focus and interagency coordination? How do we overcome the fundamental disconnect between our system of scattered bureaucratic responsibilities and almost no national economic planning vs. China’s top-down, disciplined and aggressive national economic development planning machine?

Central planning may be more en vogue in Washington than usual nowadays, but to even come close to reaching his conclusion requires disregarding many facts, which is how McGregor gets there sans tongue in cheek.

First, in an effort to preempt any suggestion that China’s protectionism is nothing exceptional and can be remedied through the World Trade Organization and other channels, McGregor offers this blanket statement: “Chinese policymakers are masters of creative initiatives that slide through the loopholes of WTO and other international trade rules.”  I realize that op-ed writing forces one to economize on words, but that statement, which serves as McGregor’s springboard to socialism, cannot suffice for an analysis of the facts.  One of those facts is that the United States has been successful in compelling changes in China’s protectionist practices in all of the formal WTO disputes it has lodged that have been resolved thus far (6 of 8 formal cases have been resolved).  If China violates the agreed rules of trade, and its actions impair benefits or impose costs on U.S. interests that are too large to ignore, pursuing a WTO case is a legitimate and proven channel of resolution. Chinese protectionism can be addressed without the radical changes McGregor counsels. 

But I think McGregor—sharing the tactics of other in the media and politics—exploits public angst over a rising China to promote his idea as the obvious and only solution to what he sells as a rapidly-metastasizing problem.  McGregor argues that China is aiming to create national champions through subsidies and other preferential policies, while charging foreign companies admission to its market in the form of technology transfer, joint-venturing requirements, and local content rules.  McGregor claims, that this appropriation of foreign technology will be used to “create Chinese ‘indigenous innovations’ that will come back at us globally.”  Ultimately, McGregor fears that “American technology companies could be coerced to plant the seeds of their destruction in the fertile China market.”

It is telling that McGregor doesn’t consider U.S. government expropriation of those companies’ technology assets as planting the seeds of their own destruction.  Indeed, it is nothing short of expropriation when technology that is owned by individual companies in the private sector, making unique decisions to improve their own bottom-lines on behalf of their own shareholders is suddenly subject to the questions McGregor wants answered: What technology do we protect? What do we share? What are our commercial strategic imperatives as a nation?  Those questions, let alone the answers, imply that the U.S. government should have at least de facto ownership and control over these privately-held technology assets.

What is wrong with allowing each of these companies to decide for themselves whether they want to license or transfer some of their technology to Chinese companies, as the price of doing business in China?  Some will, some won’t, but the presupposition that those who do are selling the golden goose is not based on fact.  Let companies decide for themselves how to use their resources, and don’t treat industry as a monolith, as in “What are our commercial strategic imperatives as a nation?” 

Had we tried to answer and implement the answer to that question in the face the Japanese “threat” two decade ago, we’d be bereft of some of the most ingenious technological breakthroughs and the hundreds of industries and thousands of products that “our system of almost no national economic planning” has yielded.

When we peel away the chicken-little rhetoric, when we dispense with neo-Rahm Emanualism (“Never manufacture a good crisis and then let it go to waste”), when cooler heads and analytical minds prevail, the economic question boils down to this: What has been more successful at creating growth, central planning or decentralized dynamism?  For both China and the United States, it has been the latter. 

My bet is that China’s re-embrace of greater central planning will be brief, as it wastes resources, yields few -if any- national champions, and limits innovation.  For similar reasons, U.S. opinion leaders will eschew central planning, as well.

Internet Regulation: How About This Ad Hominem?

The New York Times starts its commentary on proposed Internet regulations with a clever ad hominem argument: “The Republican attack on the Federal Communications Commission’s proposal to classify broadband Internet access as a telecommunications service sounded a lot like the G.O.P. talking points on health care reform.”

The GOP are being like themselves. Accordingly, Times readers should think their viewpoint is yucky. It’s not the most substantive argument you’ll come across today.

There are good reasons not to encumber the Internet with regulations designed for the telephone system. Here are four: The Internet is not like the telephone system, and the FCC  doesn’t have the institutional ability to manage a changing, competitive system of networks. Extending “universal service” telephone taxes to the Internet will drive down adoption and frustrate universal service goals. The FCC is subject to capture by the very interests from which the Times thinks regulation would “protect.” The Internet’s large cadre of technologists and active consumers will do a better job than the FCC of protecting consumers’ interests. 

But ad hominem is more fun. So let’s ask why the New York Times didn’t disclose that, as a content provider, it has a dog in the fight? Net neutrality regulation would act as a subsidy to content providers like the Times, ultimately paid by consumers as higher prices for Internet access.

What Do The Economist’s Bloggers Think a Free Market Is, Anyway?

A correspondent for The Economist, whose initials are M.S., posts this on the Democracy in America blog:

[T]he new health-care-reform law passed in March is an entirely private-insurer, free-market-based reform. If someone were to refer to it as a “government takeover of the health-care sector”, that person would hold a factually incorrect ideological belief.

I wonder what convinced M.S. that the new health care law is an entirely free-market-based reform.  Was it the expansion of the government’s Medicaid program to another 16 million Americans?  Was it the 19-million-plus other Americans who will receive government subsidies to purchase private health insurance? Was it the new price controls that the law imposes on health insurance?  Or the price and exchange controls that it will extend to even more of the market?  Was it the dynamics those regulations set in motion, which will reduce variety and innovation in health insurance?  Was it the mandates that require private actors to spend their resources according to the wishes of the state?  Or the new federal regulations that will shape every health insurance plan in the United States, whether purchased through the employer-based market, the individual market, or the new health insurance “exchanges”?  Was it the half-trillion dollars of (explicit) tax increases over the next 10 years?  

I wonder what it is about this law that M.S. thinks is consonant with the principles of a free market.  Perhaps we have a different idea of what “free” means.

M.S. lists other “factually incorrect beliefs,” including:

that the Clinton plan would deny patients their choice of doctor, and that the health-care-reform bills in Congress at the time involved government “death panels” that could decide to withhold care from elderly patients on a cost-benefit basis.

I won’t dredge up the Clinton health plan.  But I have previously demonstrated that, when Sarah Palin claimed that President Obama wanted to give a government panel the power to deny medical care to the elderly and disabled based on cost-effectiveness criteria, the president had in fact proposed a panel with the power to do exactly that.

I agree with M.S. about this much: “once people are exposed to false information, it’s extremely difficult to convince them it’s false.”