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Selective Subsidization

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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.

It is unclear how many Senators will support the amendment, which needs 60 votes to be adopted. What is clear is that some of the Senators opposing the amendment are very likely to turn around and support another amendment raft with subsidies for the natural gas vehicle (NGV) industry – the awkwardly-named New Alternatives to Give Americans Solutions (NAT GAS) Act.

Senators Richard Burr (R-NC), Robert Menendez (D-NJ) and Harry Reid (D-NV) want to provide generous subsidies for the NGV-industry – from the production of natural gas-powered vehicles and the purchase of these vehicles to the installation of fueling stations. Federal handouts to the NGV-industry, which has been lobbying non-stop for well over a year, is exactly what President Obama touted in his trip to Mount Holly, North Carolina last week.

After the President’s speech last week, Republican National Committee Chairman Reince Priebus said, “There is no reason to believe that today’s promises will be any different and is just another reason why North Carolinians can’t afford a second term of Barack Obama.” He is right that Americans cannot afford doubling down on failure. Yet, that is exactly what President Obama and many in the Senate appear ready to do, including some Republican Senators.


If we ever hope to turn back the big-government agenda enacted by President Obama, conservatism must carry the day in November. It must be about a choice between two fundamentally different visions for America. Conservatism does not carry the day by taking one for the team or enacting an Obama-lite agenda.

Fortunately, Senators will have an opportunity to provide a sharp contrast to the big-government, market-distorting policies offered by Senators Stabenow, Burr, Menendez and Reid.

Senator Jim DeMint (R-SC) will offer an amendment to repeal all the targeted tax credit subsidies for the energy industry, and lower the corporate tax rate by a corresponding amount. Instead of empowering the Washington Establishment to pick winners and losers, the DeMint Amendment would empower individuals and make America more competitive in the global economy.

The message is simple: lawmakers need to shed their selective subsidy outrage and get out of the business of picking winners and losers.

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