Posted on 05/02/2014 7:17:46 AM PDT by SeekAndFind
A recent book by Burton W. Folsom Jr. and his wife Anita, Uncle Sam Can’t Count, draws on examples from the past and present to show why government subsidies overwhelmingly do not work.
There have been a few that can be considered successful, such as the Erie Canal system, the atomic bomb development, and putting a man on the moon. However, for the most part, the federal government always seems to pick the losers, not the winners, when attempting to interfere with the free market system. The authors show in the book that from the days of George Washington to the present day, government subsidies have failed dismally while draining the Treasury of cash, increasing the national debt, and impeding economic growth. American Thinker had the privilege of discussing this topic with the Folsoms.
According to the authors there are two types of entrepreneurs: political- and market-based. The authors first developed this dichotomy in 1987. Market entrepreneurs work within the free market system by relying on producing a competitive product at a reasonable price. The political entrepreneur works the political system while relying on the federal government to become successful.
(Excerpt) Read more at americanthinker.com ...
Obviously, because Sam wasn’t taught maths the Common Core way. /s
“However, for the most part, the federal government always seems to pick the losers, not the winners, . . .”
The author seems to have forgotten or omitted these federally funded projects which subsidized industry and contributed to economic development:
Federal government land grants to individuals. To the extent an individual farm, developed from a federal land grant, sold products grown on the farm, it is a subsidized business enterprise.
Free land grants for the railroads in the 1800’s. This was an outright subsidy for politically favored companies.
Interstate highway system. A huge federal subsidy for the trucking industry, the automobile industry, and the petroleum industry. If trucking companies had to build their own highways there would be no long haul trucking industry bringing goods from west coast ports and farms to the east coast in days.
Panama Canal. This project was made possible due to federal government funding. It directly benefited the shipping industry.
Army Corps of Engineers navigation projects. Huge subsidy for the shipping industry with the taxpayers paying the cost of maintaining waterways.
Rural electrification and rural telephone system. Private industry would not serve rural areas.
Post office. Until modern times no private company was prepared, or had the capability to provide universal mail service.
Federal funding of airport construction and the air traffic control system is a direct subsidy of companies involved in the air transportation business.
Federal construction and funding of the GPS navigation system.
Federal development and funding of the internet.
Which of the above subsidized enterprises would be considered a “loser” with the possible exception of the post office today? However, had the post office not been created at the founding, the private sector would not have provided universal mail service which was critical to the economic development of the new nation.
Let’s see...
* Federal government land grants to individuals. To the extent an individual farm, developed from a federal land grant, sold products grown on the farm, it is a subsidized business enterprise.
But who eventually owns the land? What is the incentive for making the land profitable if the ultimate end is for the fruits of your labor to return to Uncle Sam?
If the individual ultimately owns the land, then it is a case of PRIVATIZING it.
* Interstate highway system. <— That is within the scope of the Federal government’s job of facilitating interstate and national commerce.
* Army Corps of Engineers navigation projects. <-— Original rationale was to facilitate military navigation.... the follow-on benefits were of course a bonus.
* Rural Electrification and Telephony.
Hmmm... this is a questionable call.
Congress passed legislation in 1936 to fund the Rural Electrification Administration, designed to bring electricity to rural farming communities. In the early 1930s, few rural families had access to electrical power. But by the mid-1950s, the number of rural households with electricity matched that of suburban households, and by 1975 more than 99 percent of all farms had electricity.
With rural America wired up to the electrical grid, one would expect that Congress would disband the REA. Instead, Congress has continually expanded the agency and broadened its mandate. One new goal of the agency was to help bring telephone service to the countryside. Telephone service penetration in rural areas topped 90 percent by the mid-1970s and 95 percent by the 1980s.
The REA was renamed the Rural Utilities Service in 1994. The RUS continues to subsidize the electricity industry through low-rate loans to the nation’s more than 800 rural electric cooperatives.
The RUS also subsidizes urban areas through a number of its programs. Close to 200 of the counties in which RUS subsidizes loans to electric co-ops have populations of more than 1 million.15 For example, three borrowers that received more than $400 million in loans between 1999 and 2003 distribute electricity near Atlanta, Georgia. Only 24 percent of the counties served by RUS borrowers are completely rural.
Some of the electricity co-ops that are subsidized by the RUS have gone beyond their original role of rural electrification. Some compete with for-profit private companies in commercial ventures outside their core businesses. The Washington Post reported, for example, that one co-op operates a gas station and another operates a Dairy Queen.
Some of the new missions of the RUS include providing distance learning, telemedicine, and broadband Internet access to rural America through grant and loan programs. Broadband initiatives have proven to be very expensive. The USDA boasted that it had spent $3 billion in taxpayer money to assist 1.3 million subscribers in accessing broadband.18 That works out to a cost of more than $2,300 each—enough to have bought each beneficiary a long-term subscription to a satellite broadband service.
Electricity, telephone, and Internet services are the last things we need the government to be involved with in today’s advanced economy. The RUS should be eliminated as one of many unneeded relics of the New Deal era.
* Federal funding of airport construction and the air traffic control system
Air traffic is ARGUABLy part of common defense AND interstate commerce. It is also part of homeland security, so no questions on the role of the Federal government.
* Post Office. An example of why it was necessary in the past, and why it is no longer necessary for government to be involved today.
* Federal Funding of the Internet and GPS Systems. It was originally a DEFENSE initiative, so yes, that was part of providing for common defense. So yes, Government Did Invent the Internet, But the Market Made It Glorious.
Now, can the same be said (i.e., part of the Federal government’s role ) of all the other stuff government is taking over and subsidizing now? (e.g., Solar and Wind energy, electric cars, ethanol, Beer brewing, pig poop for energy, Owning 84% of a state’s land, etc)?
Do our phone bills still include a tax to fund the Spanish American War?
Perhaps. I do know I am paying $1.48 per month tax funding for Obamaphones.
I checked Snopes...That tax ended in 2006 but it began in 1898.
RE: Do our phone bills still include a tax to fund the Spanish American War?
It has actually been repealed and reinstated several times, usually in times of war or economic crisis. But because of this connection to Spanish-American war, the tax has been a frequent target of war tax resisters.
On January 25, 2011, Rep. Dean Heller (R-Nev.) introduced H.R. 428, a bill “To amend the Internal Revenue Code to repeal the excise tax on telephone and other communications services”; it was referred to the House Ways and Means Committee.
I don’t know of any actions taken since.
WOW!
“But who eventually owns the land? What is the incentive for making the land profitable if the ultimate end is for the fruits of your labor to return to Uncle Sam?
If the individual ultimately owns the land, then it is a case of PRIVATIZING it.”
Significant amounts of federal land (Louisiana Purchase, Gadsden Purchase, and Mexican War annexed lands for example were paid for out of the US treasury. To the extent those lands were awarded to individuals as free land grants, those grants were direct subsidies and essentially gifts of public property for private purposes. No different than corporate or individual welfare today.
If the case is made that navigation projects, the interstate highway system, and free land grants to the railroads fall under national defense or facilitating interstate and national commerce, the same logic can be used for green energy. I’m not a proponent of green energy subsidies but the case could be made they facilitate energy independence which is a legitimate national defense goal. Once could also argue the subsidies are an investment in national commerce in the same way the investment in technology to realize the moon landing was a direct subsidy of technological development a number of industries. Once those technologies were developed with government funding. private concerns commercialized those technologies, and realized billions of dollars in profits on what was a government investment. Another analogy is the investment in the internet which was funded by the government and commercialized by industry.
RE: . I’m not a proponent of green energy subsidies but the case could be made they facilitate energy independence
Well, if we apply this logic further, then a case can be made for ANY government subsidy to facilitate health ( which can be argued as a legitimate national security goal), finance ( which can argued as a national security goal ), technology ( again a national security goal), the elimination of poverty by redistributing wealth( hey, prevention of social unrest is a national security goal), etc.
Those logic were use by most socialist nations in Europe and look where it got them...
In which case, following the logic of your argument, ANYTHING the government decides is for the good of the country, the government can and must subsidize.
Is that really what the framers intended?
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