Freedom Line Blog

If corporate welfare is subsidies paid by government to businesses, then is government welfare subsidies (voluntarily) paid by businesses to government?

According to the Washington Post, a $25,000 corporate donation from the parent company of the popular Airborne cold tablets played a big role in funding the annual Easter Egg Roll, a 135-year-old tradition the White House threatened to cancel over budget sequestration.  Other funds came from the sale of commemorative eggs sold at the event.

Maybe this could be the beginning of a trend.  With the sequester lopping off between $42 to $85 billion from the federal budget this year, perhaps it’s worth exploring which government programs could generate enough private support to ease the strain on current and future taxpayers.

Who knows; maybe we’ll get to see signs at the entrance of national parks saying, “Supported by Wal-Mart,” or “Brought to You by Whole Food Markets.”

As usual, Ezra Klein’s Wonkblog has an interesting series of graphs that show the power of the federal government in granular detail.  Today’s installment, courtesy of the White House, provides a state-by-state assessment of how the coming budget sequester will impact a range of federally-funded, state-run programs.

These include popular spending on initiatives such as teachers and schools, work-study jobs, Head Start, job-search assistance, military readiness, law enforcement, child care, vaccines for children, public health, nutrition assistance for seniors, STOP Violence Against Women Program, and clean air and water.

But while the White House is putting out these details to (ostensibly) convince the public that 10 percent across-the-board cuts in discretionary spending will be devastating to popular programs, there’s also a bit of subtle public shaming thrown in as well.  Reading through the graphs it becomes painfully obvious just how much of modern American life is subsidized by federal tax dollars (and in some cases, also supported by state taxes).  Getting confronted with that reality isn’t comfortable; especially when many people have come to rely on this kind of help.

And yet, something has to change.  We simply can’t raise enough taxes to cover the cost of every liberal social experiment, or even to pay for every good idea.  Instead, we as a country need political and other leaders to think carefully about how to modify the social contract we’ve been under since the New Deal so that the generations to come will not be cheated out of their inheritance.

Much like how they react to any reasonable reform ideas to Medicare (see any number of ‘Medi-scare’ tactics), liberals can’t lead on this modification project because they refuse to acknowledge that America has a spending problem in the first place.  It thus falls to conservatives to improve on what we have, preserving what’s good and making it better.

Part of the reason I’m optimistic about the future is that I don’t believe that details about our nation’s financial problems will shame a majority of citizens into zero-sum taxation.  Rather, I think that once people become aware of how overextended is our current welfare state, they will reward politicians who can show how to scale back the public sector so that the private sector can flourish.

Fox News explains the ‘ObamaPhone’ program lauded by an enthusiastic recipient in this viral video:

The video is drawing attention to the government program — Lifeline — as a national debate unfolds on entitlements and the growing percentage of Americans who pay no income taxes and get a long menu of government benefits. But even though some beneficiaries may credit President Obama for providing the phones, Lifeline is an extension of a program that has existed since 1985. Still, critics including Rep. Tim Griffin, R-Ark., note the program has swelled from $772 million in 2008 to $1.6 billion.

Much of the increase since 2008 springs from the Obama Administration’s decision to subsidize cellular phones and service on top of the landline systems the program originally covered.  The expanded coverage and spending has grown the number of beneficiaries from 7.1 million in 2008 to 12.5 million today.

The government justifies the nearly $1 billion in new spending by claiming that 92 percent of low-income homes now have phone service.

No doubt President Barack Obama needs four more years – and at least a few hundred million dollars more – to close that pernicious 8 percent gap.

In my column last week, I outlined how ObamaCare’s Medicaid expansion is a way to sneak in socialized medicine by making it cheaper to accept government health insurance instead of paying for it (directly) oneself.

But the Medicaid expansion is only half of ObamaCare’s formula for moving most of America onto a federally-run health system.

The other half is made up of the so-called state-based health insurance exchanges that are subsidized (and regulated) by the federal government.  With the individual mandate in place, people that fail to qualify for Medicaid will most likely be forced into the exchanges.  (ObamaCare purposefully makes it cheaper for employers to pay a fine rather than cover employees.)

Writing in the New York Times on Saturday, Tyler Cowen, an economics professor at George Mason University, explains how to make the best of the very bad possibility that President Barack Obama is reelected and ObamaCare continues to be implemented, albeit with the inevitable cost overruns.

There is one way this might work: by limiting the subsidies for insurance. Note that the law itself mandates cuts if those subsidies exceed a certain percentage of gross domestic product by 2018. Most likely, the reform could not stop there, because the insurance cost burden for many Americans would feel intolerably high without the subsidies.

The next step, therefore, would lower costs by limiting the mandate to covering catastrophic conditions. Yet a further step would remove the mandate for noncatastrophic coverage, thus giving people more control over how much they want to spend on health care versus other priorities.

We would then have government-subsidized and mandated catastrophic insurance, and a freer market for other health care expenditures. We might even return to a health savings account approach on the noncatastrophic side.

That’s far from a perfect outcome, but it’s probably the most positive path that can be achieved.

Let’s hope it doesn’t come to that.

Look!  In the street!  Is it slow?  Is it expensive?  Then it must be a federally subsidized streetcar project!

Randal O’Toole (pdf), a transportation scholar at the Cato Institute, explains how the Obama Administration is literally rewriting the rules to make an inefficient mode of transportation easier to fund:

The Obama administration is currently rewriting the rules for Small Starts [a federal program to subsidize local mass transit projects], and the draft rules, issued January 25, 2012, effectively eliminate the cost-effectiveness requirement.  Instead, the administration proposes to judge projects by how well they promote “livability,” which Secretary of Transportation Ray LaHoood defines as, “If you don’t want an automobile, you don’t have to have one.”  In this case, it evidently also means, “If you don’t want to take a bus, taxpayers will provide an expensive rail alternative.”

Why the need to change the funding criteria?  O’Toole explains:

When the [Federal Transit Administration] applied the [cost-effectiveness] rules to the Small Starts program, however, streetcar advocates complained that the rules discriminated against streetcars because streetcars did not save time.  Instead, advocates argued, the FTA should evaluate streetcars based on their perceived contributions to livability and economic development.

Among other uses “livability” is code for “high density,” a term that translates into smaller living spaces crowded together in apartment buildings instead of single family homes with a yard.

California Governor Jerry Brown is notorious for preaching an “era of limits” that lets the state’s freeway system decay in order to force people into high density housing in the urban core.  With everybody living on top of each other, cars become unfeasible and mass transit suddenly becomes relevant.

But even in this Orwellian vision, streetcars like the ones favored by the Obama administration don’t make economic sense because buses can go faster, seat more people and cost less to operate because they don’t depend on railway lines to move.

No matter.  With the new rules in place 45 cities are lining up to qualify for streetcar subsidies.

If the Feds are paying, who cares about the costs?

During a visit to Solyndra’s Fremont, CA, headquarters President Barack Obama infamously proclaimed “we can see the positive impacts [of Recovery Act stimulus money] right here at Solyndra.”  A year later, Solyndra filed for bankruptcy.  Less noticed was Vice President Joe Biden’s equally presumptuous statement last year that Indiana-based EnerDel – a maker of government subsidized batteries for electric cars – was the “start” to reorienting “the way Americans power their lives.”   As of yesterday, exactly one year after Biden uttered those words, the latest green energy fiasco declared bankruptcy.

For those keeping score, that’s Solyndra costing $535 million, EnerDel $118 million, with more failures to follow.  Had enough, America?

Environmentalists’ dreams of highways filled with electric cars continue to crash and burn.  Literally.

Fresh off news that the Chevy Volt will undergo an internal redesign to make the car less susceptible to catching fire up to three weeks after it is impacted in an accident, William La Jeunesse of Fox News reports how taxpayers are getting burned even if they never purchase the car.

“Politicans love to get in front of something they think is the future, the problem is they do it poorly, they waste money and they just don’t have an impact on the overall economy,” says economist James Hohman of the Mackinac Center for Public Policy.

When all the federal and state subsidies to General Motors and its Volt suppliers are totaled, Hohman estimates each Volt sold costs taxpayers as much as $250,000.

Here’s the most outrageous numbers:

According to the CEO of General Motors, the average annual income of buyers of the Chevy Volt is $170,000. Those who buy the luxury electric Fisker Karma or Tesla roadster earn more than $250,000 a year. Yet every wealthy buyer receives a hefty handout from Uncle Sam, adding more than $8,500 to the federal debt for every car sold.

Once upon a time limousine liberals could be counted on to at least foot the charge for their gas bill.  Now, the rest of us are stuck paying for their environmental guilt trips.

If you or a family member are weighing a decision about whether or how much college loan money to request from the government next fall, consider this nugget from Michael Barone’s column on the coming burst in the higher education bubble:

Peter Thiel, co-founder of PayPal, is adept at spotting bubbles. He cashed out for $500 million in March 2000, at the peak of the tech bubble, when his partners wanted to hold out for more. He refused to buy a house until the housing bubble burst.

“A true bubble is when something is overvalued and intensely believed,” he has said. “Education may still be the only thing people still believe in in the United States.”

Owning a college degree may certify completion of a program, but it does not guarantee that the holder has marketable skills to land a job, as this report on the ongoing talent shortage details.  Higher education – like all levels and kinds of education – is an investment only if the students, faculty and administrators involved focus on learning and teaching things that matter.  And with a 9.2 percent unemployment rate, that increasingly means basic comprehension of grammar, logic and rhetoric, with some grounding in finance thrown in for good measure.

So, if you know someone thinking about going back to school for a master’s in Religious or Women’s Studies – for the good of your fellow citizens and taxpayers, urge them to reconsider.  We can’t afford the experience.

Or, to use Romney’s phrasing, “I support the subsidy of ethanol.”  Forget the passive voice; Mitt Romney is actively standing on his principles!

Two weeks ago, the former Massachusetts governor has defended his version of an individual mandate in health care.  Now, he’s declaring fealty to a $5 billion program to create a source of energy the free market will not support.

In 2008, Romney was tagged as being inauthentic because he tried to remake himself into a social conservative when he’s really more a country club Republican.  With his background in big business, Romney’s 2012 dalliances with corporate welfare may be more authentic, but they risk being out-of-step with free market tea partiers.

Mitt Romney seems like a genuinely nice, earnest guy.  Too bad he’s just not a conservative.

During the 1980 presidential campaign, Republican candidate George H. W. Bush decried Ronald Reagan’s supply-side tax cuts as “voodoo economics” because the policy promised to lower tax rates and generate more production, and thus more tax revenues.  Bush’s denunciation of Reagan’s economic vision was a proxy for Keynesian thinkers in both parties, who thought (and think) that tax reductions spur consumption (demand), not production (supply).

Of course, Bush lost to Reagan in the Republican primary that year, in part because Reagan had a more compelling message: let’s cut taxes to get the economy growing instead of cutting them simply to reduce spending.  Moreover, Bush was wrong because Reagan’s policies worked.

This weekend, 2012 presidential candidate Newt Gingrich slammed Rep. Paul Ryan (R-WI) and the latter’s “Path to Prosperity” budget proposal as “right-wing social engineering.”  Why?  Because Gingrich thinks changing the way Medicare operates – from straight government subsidy to vouchers – is too “radical.”

But that isn’t stopping Gingrich from continuing to support an individual mandate to buy health insurance.  (Like fellow contender Mitt Romney (R-MA), but unlike President Barack Obama, Gingrich wants the individual mandate at the state, not federal, level.)  So, in Gingrich’s mind, transforming Medicare from a defined benefit into a defined voucher is “radical,” but mandating individuals to buy health insurance is not?

When Reagan adopted the mantra of economic growth through across-the-board tax cuts in 1980, he gave voters a clear alternative to the shared scarcity narrative being peddled by politicians in both parties.  Ryan’s budget proposal is based on Reagan’s insight that less taxes and more growth sells; less choice and more government mandates do not.

Like Reagan, whoever wins the Republican presidential nomination next year will have to make some accommodation with Ryan’s economic vision.  Downsizing – whether it’s freedom, opportunity, taxes, or spending – isn’t enough of a message to create the kind of majority needed to enact the kind of policy changes that spur real private sector growth.  With positions supporting ethanol subsidies and state level individual mandates, it sounds like Newt Gingrich is more comfortable playing the elder Bush’s role in this campaign.

A sobering bit of news for college administrators about to go on spring break:

“The current prolonged recession means that we can no longer expect new revenue to pay for increasing attainment in higher education,” said Jane V. Wellman, Executive Director of the Delta Cost Project, which does a study every year on the cost of higher education. “In the next decade, we are going to be lucky to hold onto the resources we have. That means that all institutions – from the Ivies to the community colleges –are going to have to develop investment strategies that support goals for attainment. That will require new habits: looking at spending, and promoting the values of efficiency and cost effectiveness as co-partners to the never-ending search for new revenues.”

At first, one might be tempted to think that higher education needs to take a financial haircut just like the rest of the economy.  While that is undoubtedly true, the consequences will be enormous.

Federal higher education loans like Stafford and Grad Plus (and their state counterparts) are used like entitlements, though you’d never hear a recipient saying so.  Though only 1 in 4 Americans eventually graduate with a college degree, nearly everyone qualifies for the loans to finance one.

Because the cost of attendance continues to grow at several times the rate of inflation, grads and non-grads are piling up huge debt loads; prompting some to call the looming student loan crisis our next financial disaster.

The coming cuts in state and federal budgets for higher education financing will significantly decrease the subsidies available to students.  That means fewer students going to college, leaving enrollments peopled with those able to count on private financing.

Since passage of the 1944 GI Bill an essential part of the American dream has been having the opportunity to go to college by removing cost as a consideration.  The same bill did the same thing to spur home ownership via the VA-backed mortgage.  We all know how slippery that slope turned out to be.

Austerity is coming to America.  Hopefully, we can adjust to reduced expectations.

Along with his status as America’s most famous military historian and classicist, Victor Davis Hanson is also the operator of a family farm in California’s San Joaquin Valley.  In a recent article for RealClearPolitics, VDH speaks from experience about the disastrous state of U.S. agricultural policy:

We need a drastic reset of agricultural policy. The use of prime ag land to grow corn varieties for ethanol biofuel makes no sense. Why divert farmland for fuels when the world’s poor are short of food, and there are millions of un-farmable areas in Alaska and the arid West, as well as off the American coast, that are either not being tapped for more efficient gas and oil or are only partially exploited?

When North Americans do not fully use their own fossil-fuel resources, two very bad things usually follow: 1) someone else in Africa, Asia or Russia is far more likely to harm the environment to provide us oil; 2) precious farmland will be diverted to growing less-efficient biofuels instead of food – and billions worldwide pay the price.

No supporter has ever been able to explain why the advent of massive subsidies over the last half-century coincided with the decline, not the renaissance, of “family farmers.” Nor has anyone offered reasons why cotton, wheat, soy, sugar and corn are directly subsidized, but not, for example, nuts, peaches or carrots.

The uniqueness of Senators Rand Paul (R-KY), Mike Lee (R-UT), and Jim DeMint (R-SC) in joining their chamber’s Tea Party caucus shone forth again when yet another freshman conservative declined to join their ranks.  Tea Party darling Senator Marco Rubio (R-FL) refuses to join.  Now, it’s John Boozman’s (R-AR) turn.

Officially, Boozman says he doesn’t want the public to confuse the tri-partisan nature of the Tea Party (Republican, Reagan Democrat, and Independent) with being an arm of the GOP.  But closer scrutiny of Boozman’s rationale to ABC News indicates he’s not ready to balance the budget by cutting agricultural subsidies.

“But it doesn’t sound like ag subsidies will be at the top of your list for things to cut,” Karl said.

“We’re going to have to look at everything but ag subsidies are like everything else. That affects jobs,” the senator said. “Now listen, the one thing about agriculture is we’ve lost our manufacturing, we’ve lost a great deal of jobs overseas, lots of our industry. The last thing in the world we need to do is lose the ability to produce our food.”

Chances are Boozman doesn’t want to tie himself to unqualified budget cutters like Paul, Lee, or DeMint.  Boozman’s calculation may be that it’s far better to fight for certain cuts while arguing to keep tax-supported jobs in his home state.

Senators like Rubio and Boozman argue that caucus membership in the Senate isn’t as important in the upper chamber as it is in the House.  Any member of the Senate can unilaterally slow or kill legislation he doesn’t like.  While that’s true, it’s also a way to sidestep a measure of accountability.  After all, if your major theme is cutting the budget, why not join a group that won’t make exceptions for pet pork projects?

Eventually, Paul, Lee, or DeMint might prove the truth of the single senator theory by killing bills favored by Rubio or Boozman.  If that happens, don’t be surprised to find Rubio and Boozman caught between their rhetoric and their record.

Believe it.  In an op-ed for BusinessWeek, the scourge of concentrated wealth and power sees a lot to love in the new, Tea Party-infused legislators walking around Capitol Hill.  Specifically, Nader isolates five issues that could bring the movement’s limited government mantra into conflict with establishment Republicans.

(1)   Ron Paul’s fight to curb the power of the Federal Reserve

(2)   Heightened criticism for corporate welfare programs (e.g. everything from ethanol subsidies for biofuel to “green” initiatives designed to get federal tax dollars)

(3)   Trimming the military budget (Apparently, Defense Secretary Robert Gates already got the memo; sort of)

(4)   Renewal and expansion of the World Trade Organization, NAFTA, etc.

(5)   Whistleblower protection for bureaucrats and corporate workers

The limited government foundations of the Tea Party movement will make predicting voting outcomes this session iffier than when Republicans could be assumed to oppose any Democrat plan.  If necessary, we’ll see how many of the new Constitutionalists in Congress are ready to buck convention and vote their principles instead of their party.