If seems as if all businesses now require some type of welfare program. The definition of economic development is grants or loans or special tax breaks given by our government to businesses. Banks get their welfare indirectly – from loan guarantees from many government programs. Of course our farmers must be protected from losses by government – through crop insurance subsidies that not only cover natural disasters, but actually protect against price declines. All types of energy companies receive special tax credits or tax breaks. The biggest manufacturers in Iowa receive large tax credits for research. Now, Mediacom and John Deere want a grant of $800,000 from the federal government to help bring high speed internet to farmers who buy high-tech, internet connected tractors that cost hundreds of thousands of dollars. We should say no! We need to reverse the trend of expecting taxpayers to fund all types of economic development. Just as with with individuals and families, welfare for businesses create dependency. Our economy will continue to grow sluggishly as long as we look to government to manage our economic development.
“Iowa has enjoyed tremendous economic benefits by being a leader in both wind power development and wind manufacturing.” So wrote Mike Prior, Milford, interim executive director, Iowa Wind Energy Association, in a letter to the editor on 2/4/2012, (“Wind energy is important jobs provider”) He went on to extol the many benefits that Iowans have enjoyed as a result of the funding that taxpayers have provided to those in the industry. He urged that we, “… continue to invest in Iowa’s future.”
Good economic analysis must consider both what is seen and what is not seen. We see the jobs. We see the payments to farmers. What we don’t see are the other jobs that would have been created if people had been left to spend or invest their own money. Other jobs would have been created that would not be dependent on government handouts. Instead, we hear a never-ending story about how we must continue to provide taxpayer support or the investment and jobs will be lost. This is very typical when government creates new “incentives” and makes “investments” in what should be left to the private sector.
Welfare for wind energy producers is like all other special interest giveaways: the benefits are large and concentrated among the few who who are politically connected, and and costs are relatively small and disbursed among many taxpayers. This is a classic case in public choice theory. Those who directly benefit have a great incentive to lobby government to continue the subsidies, and those who pay the taxes don’t have a strong incentive to oppose any specific program.
We need legislators who will stand against political favors for special interest factions who press their political power for their own self interest.
Link to Register article: http://www.desmoinesregister.com/apps/pbcs.dll/article?AID=2014302040081
Speculators are being blamed for increases in ethanol RIN credits! Renewable Identification Number (RIN) credits are issued to manufacturers for every gallon of ethanol that they blend into gasoline. All manufacturers are required to meet targets for blending ethanol into their gasoline – in order to meet national Renewable Fuels Standards. If they fail to meet their targets, they have to pay substantial penalties. Some manufacturers exceed their targets so they have excess credits that they are allowed to sell. Others fail to meet their targets and either have to purchase credits from other manufacturers or pay the penalties. If, for the entire market, it appears there will be a shortage then the price of the credits will go up. If it were possible for a few speculators to “corner the market”, then they might be able to hold out for higher prices. But, the there were truly a shortage, then manufacturers who have excess credits could just as easily do the same. In either case, this puts pressure on manufacturers to blend more ethanol. If there is a shortage of ethanol, then the price of ethanol should rise. If the price of ethanol rises than ethanol producers will try to increase their production to capture more profit. In any case, the credits are doing what they are supposed to do: reward manufacturers who blend excess gallons and penalize those who blend less than their target. If the entire market is below the target, then there will be incentives to produce more ethanol. Speculators help the market to work as it was intended. The real problem here is the entire Renewable Fuel Standards that uses force, in the form of money penalties, to make everyone use more ethanol than they would in a voluntary market. This is a classic case of unintended consequences that occurs when people discover, as Friedrich Hayek wrote, “…how little they know about what they imagine they can design.”
Maybe it would be best to let the Sequestration spending cuts to take effect. It appears that elected politicians are unable to make significant cuts to any specific federal spending items.If cuts could be prioritized, here would be my short list in order of priority:
- The Medicare eligibility age should be coupled with Social Security and they both should be gradually moved to age 70. The federal government should not be responsible to pay for 15 – 30 years of retirement for healthy adults. (see below)
- Freeze the dollar amount of federal spending on Medicaid – block grant the money to the states and let States decide on the priorities. There will always be more demand than there is supply for free medical care.
- Cut military spending, in actual dollars, by at least 5%. Let the defense department decide on priorities to give us the best defense that the budget can buy. We would still have greatest defense on Earth.
- Eliminate the Dept. of Education – leave education to the states entirely.
- Limit farm subsidies to $50,000 per farmer maximum, $100,000 per family maximum. Phase out all subsidies for farmers who have a Adjusted Gross Income between $100,000 and $200,000. Require 100% of the cost of crop insurance to be charged to the farmers. Why do we keep paying subsidies to farmers when they have record profits? Something is wrong.
- Cut the FEMA budget by 50%, and make States pay a 50% co-insurance payment for all federal money that flows into any State. States would be much more efficient, and there would be much less abuse and fraud.
- Eliminate subsidies and special tax breaks for all forms of energy. All energy producers fight to protect their subsidies by claiming that the other forms of energy get subsidies and all they want is a fair playing field. Well, lets make the playing field very fair – no subsidies for anyone.
- Eliminate spending on arts, and humanities, public broadcasting, etc. Contributions to these kinds of organizations should be left to charitable organizations.
I’m sure the list would be different and much larger if I took enough additional time.
According to data compiled by the Social Security Administration:
- A man reaching age 65 today can expect to live, on average, until age 83.
- A woman turning age 65 today can expect to live, on average, until age 85.
And those are just averages. About one out of every four 65-year-olds today will live past age 90, and one out of 10 will live past age 95.