Washington logic will be on full display in the United States Senate this week. Senators – ranging from the most liberal to the most conservative (by some measures anyway) – will hem and haw about how outrageous federal subsidies are for a certain industry, and then they will turn around and vote for subsidies for a different industry.
This is the phenomenon known as selective subsidization. Sure, it reveals blatant hypocrisy on the part of our elected officials, but it also serves to underscore the very problem with subsidies: the government decides which industries win and which industries lose.
Thanks to President Obama’s failed stimulus and the Solyndra debacle, American voters are now intimately familiar with government energy subsidies. In the venture capital world, it was well known that Solyndra was unable to persuade would-be investors that their business model was solid…at least until the federal government came in to guarantee the investment.
Courtesy of the taxpayer, the federal government subsidizes companies and industries that cannot secure private financing. Just take the federal Export-Import Bank. Its mission is to “assume credit and country risks that the private sector is unable or unwilling to accept.”
That’s some straight talk if I’ve ever seen it! But sadly we have seen this same logic applied time and again, and the results are usually dismal. Can anyone say Fannie Mae?
It is not just the inherent risk assumed (on our behalf) by the federal government that is the problem, but also the selective nature in which it is assumed. Some lawmakers consider wind subsidies a grotesque waste of taxpayer money, but are more than happy to subsidize all-electric cars and nuclear. Theirs is not a principled opposition to picking winners and losers, just parochial and dogmatic opposition to which winners and losers are being picked.
On this front, there are three critical amendments to watch next week in the Senate.
An amendment to be offered by Senator Debbie Stabenow (D-MI) would extend multiple stimulus-era green energy subsidies. It would expand and extend federal handouts for alternative fueling stations, cellulosic biofuel including algae, bio- and renewable diesel, refined coal, energy-efficient homes, energy-efficient appliances, onshore and offshore wind, and more. It is market-distortion at its gluttonous worst.
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