Liddick: Good money after bad
December 11, 2012
We should take a step back from the looming “fiscal cliff” to give ourselves a bit of perspective on the spring tide of political hokum swamping Washington. The hope of mending America’s parlous financial condition isn’t in tax increases. “Tax the rich” may be effective political theatre when haranguing the ignorant, but as a palliative for debt like ours, to borrow a phrase, “the math just doesn’t work.” The theoretical extra income from returning tax rates on high earners to the Clinton-era 39.5 percent is a rounding error, not a solution. To get out of this mess, we must. Stop. Spending. Money.
We don’t live in a free market economy, and haven’t for some time. In a free market, workers don’t get paid not to work for 99 weeks – or forever, if the president gets his way. That’s cost us $535 billion since 2008.
In a free market, the size of one’s house depends on what one can afford, not on the upper limit of a taxpayer-backed mortgage. That’s made us liable for trillions of dollars, should real estate go south again.
In a free market, production decisions are made on the basis of profitability, not on the availability of government subsidies. In a free market, one is entitled to the gains from one’s labors, but has no claim to others’ gains. But we don’t live there anymore. We are obsessed with “fairness” – meaning one can’t be very wealthy, no matter how hard one works. And we live in a country whose government is a major player in the economy.
Government intrusion creates ever-growing distortions; calculations of marketability and return are replaced by rent-seeking, subsidy farming and maneuvering for political favor. America’s nineteenth century saw these in battles over tariffs; today, direct government payments are where the action is. Following are a few among thousands of examples.
General Electric cleared $2.94 billion in the fourth quarter of 2010, but paid zero federal income tax. As one of the Obama administration’s pet companies, GE also received $5.38 billion in federal subsidies that year. Perhaps it regarded its $65 million in lobbying expenses a good investment, but as a taxpayer forced to “invest” in the company without receiving dividends, I’m not so sure.
Anyone following current events can identify another problem with government picking corporate winners: failure. When investors decide to put their own money on the line, they have an interest in success; they will work to achieve it. When taxpayers “invested” in Solyndra, Abound Solar, and Fiskar Automotive, was there due diligence? Financial scrutiny? Analysis of the business plan? Not according to those who wrote the checks, several of whom noted an unhealthy interest from the White House in funding these projects as quickly as possible. You know the results.
As a taxpayer, you “invested” $220,000 in improvements to a Michigan boutique brewery. The money came from the Department of Housing and Urban Development through a block grant. How do you plan to follow the results of your investment, to see if it was profitable?
You will soon “invest” $4.9 billion in a high-speed rail project proposed by a Nevada company with ties to Senate Majority Leader Harry Reid: a line from Las Vegas to Victorville – 81 miles short of Los Angeles. The Washington Post called this a “gravy train,” but pork or not, profitable or not, you’re funding it. You have no choice.
Of the $7.2 billion you “invested” to provide high-speed internet access to rural America in 2009, $100 million came to Colorado’s “Eagle Net,” which spent it competing against private providers. If these small companies were profitable, they paid taxes to subsidize their competition, so they may not be around long.
Then there’s corruption. Perhaps not Teapot-Dome style nonsequential small-denomination unmarked bills in a suitcase, but that doesn’t mean there’s no funny business. One may dismiss as coincidence generous “speaking fees” for legislators, or their post-political-office high-paying positions in private industry or academe, but consider this: the Washington Post reports that in 2011, $3.9 billion in subsidies and loan guarantees from the Department of Energy alone went to companies with ties to five Obama administration staffers and advisors. In this America, it’s who you know, not what.
Is this what we want? A sluggish, distorted economy, shot through with inefficiencies and subject to the whiplash of political fashion? If not, there’s a solution: stop paying for it. Welfare, featherbedding, rule-jiggering, cronyism – corporate or individual, it’s all got to go. Contact your senators and congressman. Tell them you’re tired of paying other people’s bills, be they Jeffrey Immelt or Sandra Fluke or Hamid Karzai. Tell them to stop spending, and the fiscal cliff will evaporate. Who knows? They may be so desperate that they’ll listen.
Summit County resident Morgan Liddick pens a Tuesday column. Email him at email@example.com.