Voice For Liberty

Tag: Free markets

  • Voice for Liberty Radio: David Boaz of Cato Institute

    Voice for Liberty logo with microphone 150In this episode of WichitaLiberty Radio: David Boaz spoke at the annual Kansas Policy Institute Dinner. David Boaz is the executive vice president of the Cato Institute and has played a key role in the development of the Cato Institute and the libertarian movement. He is a provocative commentator and a leading authority on domestic issues such as education choice, drug legalization, the growth of government, and the rise of libertarianism. Boaz is the former editor of New Guard magazine and was executive director of the Council for a Competitive Economy prior to joining Cato in 1981. He is the author of Libertarianism: A Primer, described by the Los Angeles Times as “a well-researched manifesto of libertarian ideas,” the editor of The Libertarian Reader, and coeditor of the Cato Handbook For Policymakers. His articles have been published in the Wall Street Journal, the New York Times, the Washington Post, the Los Angeles Times, National Review, and Slate. He is a frequent guest on national television and radio shows, and has appeared on ABC’s Politically Incorrect with Bill Maher, CNN’s Crossfire, NPR’s Talk of the Nation and All Things Considered, John McLaughlin’s One on One, Fox News Channel, BBC, Voice of America, Radio Free Europe, and other media. His latest book is The Politics of Freedom.

    This is an excerpt of David Boaz speaking in Wichita, October 15, 2013.

    Shownotes

    Cato Institute
    David Boaz at Cato Institute
    David Boaz: Independent Thinking in a Red-Blue Town
    Books by David Boaz
    Kansas Policy Institute

  • Voice for Liberty Radio: Private enterprise and markets

    Voice for Liberty logo with microphone 150

    In this episode of WichitaLiberty Radio: Mary Beth Jarvis delivered the keynote address of the Kansas Republican Party Convention for 2014. She spoke on the topics of private enterprise and the profit and loss system.

    Mary Beth Jarvis is Chief Executive Officer and President at Wichita Festivals. Prior to that, she worked in communications at Koch Industries, and before that in the United States Air Force.

    In her speech, she said “Entrepreneurial capitalism — you know what that is — it’s not cronyism. It’s real courage, real risk, real passion, and real effort.”

    Expanding on the importance of entrepreneurial capitalism, she told the audience:

    “What else is necessary for that kind of entrepreneurial capitalism, that kind of engine for improvement, is that you always respect that what you need is a clear tie to market signals of what’s really adding value, what’s really making people’s lives better. That dedication to maintaining strong markets and to maintaining liberty is absolutely essential.

    “It is also essential to find out quickly and clearly if this is the necessary message, that our efforts — however industrious — are not creating value. Because only then can you divert resources to that which will help us all. So the reward for successfully bringing value to someone ought to be clear, and the signal that you are not, ought to be clear, and the only way to do that is an absolute adherence to the principles of free markets and the improvement that they provide.”

    In conclusion, she said: “In those public policy endeavors that you work so hard, and devote your energy and passion to, doing what’s right really means: Measuring ideas and actions by the yardstick of freedom and markets. The mantra that markets matter then becomes the platform for which the greatest progress and the greatest good in the improvement of our quality of life can happen.”

    This was recorded on Friday January 24, 2014. This is a portion of her speech.

    Shownotes

    Wichita River Festival
    Mary Beth Jarvis at LinkedIn

  • Wichita economic development: Worth higher taxes?

    In this excerpt from WichitaLiberty.TV: Wichita city and business leaders are likely to ask Wichitans to support a higher sales tax in order to support additional economic development efforts. Should Wichitans vote in favor of this? View below, or click here to view at YouTube.

    Another thing that a tax increase in Wichita might be used for is for economic development. That is, paying subsidies to companies so that they will provide jobs in Wichita.

    wichita-chamber-job-growth-2013-12
    It’s felt that Wichita needs to step up its economic development efforts because things haven’t been going well lately. Not that everyone agrees. You’ve seen the charts I showed you, showing the growth of jobs in Wichita and also other economic indicators. When we compare Wichita with the nation as a whole and with our Visioneering peer cities, Wichita is almost always in last place. When I presented this data to the Wichita city Council, the Council members did not believe these numbers. So here’s a chart that was presented recently at a Wichita Metro Chamber of Commerce meeting. It uses the same data source that I use, the Bureau of Economic Analysis, and it shows the same data using the same methodology. It comes to the same conclusion: Wichita performs poorly.

    Our chamber of commerce and its leadership will use this poor performance to argue that Wichita needs to spend more money on economic development. And that’s a problem.

    Your chamber of commerce radio buttons
    Very often, local chambers of commerce support principles of crony capitalism instead of pro-growth policies that allow free enterprise and genuine capitalism to flourish.

    Now you may be confused. Most people probably think that local chambers of commerce, since their membership is mostly business firms, support pro-growth policies that embrace limited government and free markets. But that’s not always the case. Here, in an excerpt from his Wall Street Journal article “Tax Chambers” Stephen Moore explains:

    “The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.

    “In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes, state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes.”

    This is the argument that the Wichita Chamber of Commerce and the city council will be making: We don’t spend enough on business welfare. Capitalism and the free market: These things don’t work, they will tell us. Only government can save Wichita from decline. Business leaders will tell us we need more taxes for more spending on economic development. But be careful here:

    There’s a difference between “business leaders” and “capitalists.”

    Last year Charles Koch explained the difference in an article in the Wall Street Journal. He wrote:

    “Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.”

    He continued:

    “The effects on government are equally distorting — and corrupting. Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”

    In his article, Koch makes an important observation when he defines cronyism: “We have a term for this kind of collusion between business and government. It used to be known as rent-seeking. Now we call it cronyism. Rampant cronyism threatens the economic foundations that have made this the most prosperous country in the world.”

    You regular viewers know that we have a problem with cronyism in Wichita. This is exemplified by incidents like where a mayor votes to send millions of taxpayer dollars to a man who owns movie theaters, and then the mayor sells his barbeque sauce in those theaters. It’s when a real estate developer lists the mayor and city manager as business references when bidding for a city project and thinks that no one will care or notice. It’s when a city council member receives thousands in campaign contributions from an out-of-state construction company right at the time he votes to award a contract to that company. It’s when the city council votes to give over-priced no-bid construction contracts to their significant campaign contributors.

    In other words, instead of allowing people to direct resources to where they believe they will be most useful, our local government direct resources to their cronies. Where it’s useful for their political careers.

    I’m of the opinion that it has harmed Wichita’s economic growth. It’s one of the reasons why Wichita is the bottom line in the charts we’ve seen. But many of our business leaders, and almost all of our political leaders, propose more of the same.

    That’s right. Instead of focusing on things like water and sewer pipes, government wants to raise taxes so that it can direct more of our economy. Having neglected our water and sewer infrastructure to the point where the mayor says we need to spend at the rate of $70 million dollars per year for the next 30 years, our city leaders are going to ask us for more tax money so that they can try to fix the Wichita economy.

    Returning to Stephen Moore’s article. Here he quotes Jon Caldera of the Independence Institute. “I used to think that public employee unions like the National Education Association were the main enemy in the struggle for limited government, competition and private sector solutions. I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”

    Let’s ask our business and political leaders some questions. First, will we acknowledge Wichita’s poor economic performance, or will we continue to ignore the facts and statistics? Second: Will we realize that the cozy relationship between city hall and a small group of insiders — Wichita’s cronies, if you will — is harmful and corrosive? Third: Will we realize that free enterprise and capitalism work better than cronyism?

  • In Wichita, ‘free markets’ used to justify business welfare

    Wichita City HallIncredibly, a prominent Wichita business uses the free market to justify its request for economic development incentives. A gullible city council buys the argument.

    At the December 10, 2013 meeting of the Wichita City Council, Bombardier LearJet received an economic development incentive that will let it avoid paying some property taxes on newly-purchased property. The amount involved in this particular incident is relatively small. According to city documents, “the value of the abated taxes on that investment could be as much as $1,980.”

    (Bombardier receives millions each year in other government subsidies; see Kansas PEAK program: corporate welfare wrapped in obfuscation and Bombardier Learjet should pay just a little for examples.)

    While the amount of the incentive granted in the December 10 action is small, the meeting was useful in letting us understand how some prominent members of Wichita’s business community have distorted the principles of free markets and capitalism. As illustrated by the fawning of Wichita City Council Member and Vice Mayor Pete Meitzner (district 2, east Wichita) and others, elected officials have long forsaken these ideas.

    Bombardier’s argument

    Don Pufahl, who is Director of Finance at Bombardier Learjet, addressed the council regarding this matter. He started his remarks on a positive note, telling the council “There are various aspects to a free-market economy. There’s the rule of law, there’s property rights, and another major aspect is incentives.”

    We must be careful when using the term incentive. In a free-market economy or capitalism, incentive refers to the motivation of the possibility of earning profits. Another incentive — the flip side of the same coin — is avoiding losses. That’s why capitalism is called a profit-and-loss system. The losses are just as important as profits, as losses are a signal that the economic activity is not valued, and the resources should be shifted to somewhere else where they are valued more highly.

    But in the field of economic development as practiced by government, incentive means something given to or granted to a company. That’s what the representative from Bombardier meant by incentive. He explained: “One party, in this case, the local government, uses incentives for another party, in this case our company, to invest in the community.”

    A few thoughts: First, Bombardier is not investing in the community. The company is investing in itself.

    Second, the free market system that the speaker seemed to praise is a system based on voluntary exchange. That flows from property rights, which is the fundamental idea that people own themselves and the product of their labor, and are free to exchange with others, or to not exchange. But when government uses incentives, many people do not consent to the exchange. That’s not a free market system.

    Third, an important part of a free market system is market competition. That is, business firms compete with others for customers. They also compete with other business firms for resources needed for production, such as capital. When government makes these decisions instead of markets, we don’t have a free market system. Instead, we have cronyism. Charles G. Koch has described the harm of cronyism, recently writing: “The effects on government are equally distorting — and corrupting. Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”

    In the same article Koch wrote: “We have a term for this kind of collusion between business and government. It used to be known as rent-seeking. Now we call it cronyism. Rampant cronyism threatens the economic foundations that have made this the most prosperous country in the world.” (Charles G. Koch: Corporate cronyism harms America)

    The representative from Bombardier also said that the city’s incentives would reduce Bombardier’s investment risk. There is little doubt this is true. What has happened, however, is that the risk has not been eliminated or reduced. It has merely been shifted to the people of Wichita, Sedgwick County, the Wichita public school district, and the State of Kansas. When government does this on a piecemeal basis, this is called cronyism. When done universally, we call this socialism.

    We can easily argue that actions like this — and especially the large subsidies granted to Bombardier the by state — increase the risk of these investments. Since the subsidies reduce the cost of its investment, Bombardier may be motivated to make risky investments that it might otherwise not make, were it investing its own funds (and that of its shareholders).

    The cost of Bombardier’s investments, and the accompanying risk, is spread to a class of business firms that can’t afford additional cost and risk. These are young startup firms, the entrepreneurial firms that we need to nurture in order to have real and sustainable economic growth and jobs. But we can’t identify these. We don’t know who they are. But we need an economic development strategy that creates an environment where these young entrepreneurial firms have the greatest chance to survive. (See Kansas economic growth policy should embrace dynamism and How to grow the Kansas economy.)

    Now the city and Bombardier will say that these investments have a payoff for the taxpayer. That is, if Bombardier grows, it will pay more in taxes, and that constitutes “profit” for taxpayers. Even if we accept that premise — that the city “profits” from collecting taxes — why do we need to invest in Bombardier in order to harvest its “profits” when there are so many companies that pay taxes without requiring subsidy?

    Finally, the representative from Bombardier said that these incentives are not a handout. I don’t see how anyone can say that and maintain a straight face.

    wichita-chamber-job-growth-2013-12
    It would be one thing if the Wichita area was thriving economically. But it isn’t. We’re in last place among our self-identified peers, as illustrated in Wichita and Visioneering peers job growth. Minutes from a recent meeting of Greater Wichita Economic Development Coalition, the primary organization in charge of economic development, holds this paragraph: “As shown in the Chart below Wichita economy suffered the largest loss of employment among peer cities and has not seen any signs of rebounding as the other communities have. Wichita lost 31,000 jobs during the recession principally due to the down turn in general aviation.”

    Following is a fuller representation of the Bombardier representative’s remarks to the council.

    There are various aspects to a free-market economy. There’s the rule of law, there’s property rights, and another major aspect is incentives.

    One party, in this case, the local government, uses incentives for another party, in this case our company, to invest in the community.

    As the company moves forward to invest in the community, those investments are not without risk. … Your incentives allow us to offset some of that risk so that we can move forward with those investments, which hopefully create new jobs and also then also improves the quality of life in our community. … These incentives are not a handout. They are a way that the local government uses such things to offset some of the risk that is involved in local companies as they invest in the community, bring jobs to the community, and improve the community overall.


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  • Your local chamber of commerce: Working for you?

    Your chamber of commerce radio buttonsVery often, local chambers of commerce support principles of crony capitalism instead of pro-growth policies that allow free enterprise and genuine capitalism to flourish.

    We may soon have an example of this in Wichita, where business leaders are tossing about ideas for tax increases. I distinguish between “business leaders” and “capitalists.”

    Most people probably think that local chambers of commerce, since their membership is mostly business firms, support pro-growth policies that embrace limited government and free markets. But that’s not always the case. Here, in an excerpt from his article “Tax Chambers” Stephen Moore explains:

    The Chamber of Commerce, long a supporter of limited government and low taxes, was part of the coalition backing the Reagan revolution in the 1980s. On the national level, the organization still follows a pro-growth agenda — but thanks to an astonishing political transformation, many chambers of commerce on the state and local level have been abandoning these goals. They’re becoming, in effect, lobbyists for big government.

    …

    In as many as half the states, state taxpayer organizations, free market think tanks and small business leaders now complain bitterly that, on a wide range of issues, chambers of commerce deploy their financial resources and lobbying clout to expand the taxing, spending and regulatory authorities of government. This behavior, they note, erodes the very pro-growth climate necessary for businesses — at least those not connected at the hip with government — to prosper. Journalist Tim Carney agrees: All too often, he notes in his recent book, “Rip-Off,” “state and local chambers have become corrupted by the lure of big dollar corporate welfare schemes.”

    …

    “I used to think that public employee unions like the NEA were the main enemy in the struggle for limited government, competition and private sector solutions,” says Mr. Caldera of the Independence Institute. “I was wrong. Our biggest adversary is the special interest business cartel that labels itself ‘the business community’ and its political machine run by chambers and other industry associations.”

    From Stephen Moore in the article “Tax Chambers” published in The Wall Street Journal February 10, 2007. The full article can be found here.

  • Charles G. Koch: Corporate cronyism harms America

    From September 2012, and even more relevant today.

    “The effects on government are equally distorting — and corrupting. Instead of protecting our liberty and property, government officials are determining where to send resources based on the political influence of their cronies. In the process, government gains even more power and the ranks of bureaucrats continue to swell.”

    The editorial in today’s Wall Street Journal by Charles G. Koch, chairman of the board and CEO of Wichita-based Koch Industries contains many powerful arguments against the rise of cronyism. The argument above is just one of many.

    In his article, Koch makes an important observation when he defines cronyism: “We have a term for this kind of collusion between business and government. It used to be known as rent-seeking. Now we call it cronyism. Rampant cronyism threatens the economic foundations that have made this the most prosperous country in the world.”

    “Rent-seeking” was always a difficult term to use and understand. It had meaning mostly to economists. But “cronyism” — everyone knows what that means. It is a harsh word, offensive to many elected officials. But we need a harsh term to accurately describe the harm caused, as Koch writes: “This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.”

    The entire article is available at the Wall Street Journal. Koch has also contributed other articles on this topic, see Charles G. Koch: Why Koch Industries is speaking out and Charles Koch: The importance of economic freedom.

    Charles G. Koch: Corporate Cronyism Harms America

    When businesses feed at the federal trough, they threaten public support for business and free markets.

    By Charles G. Koch

    “We didn’t build this business — somebody else did.”

    So reads a sign outside a small roadside craft store in Utah. The message is clearly tongue-in-cheek. But if it hung next to the corporate offices of some of our nation’s big financial institutions or auto makers, there would be no irony in the message at all.

    It shouldn’t surprise us that the role of American business is increasingly vilified or viewed with skepticism. In a Rasmussen poll conducted this year, 68% of voters said they “believe government and big business work together against the rest of us.”

    Businesses have failed to make the case that government policy — not business greed — has caused many of our current problems. To understand the dreadful condition of our economy, look no further than mandates such as the Fannie Mae and Freddie Mac “affordable housing” quotas, directives such as the Community Reinvestment Act, and the Federal Reserve’s artificial, below-market interest-rate policy.

    Far too many businesses have been all too eager to lobby for maintaining and increasing subsidies and mandates paid by taxpayers and consumers. This growing partnership between business and government is a destructive force, undermining not just our economy and our political system, but the very foundations of our culture.

    With partisan rhetoric on the rise this election season, it’s important to remind ourselves of what the role of business in a free society really is — and even more important, what it is not.

    Continue reading at The Wall Street Journal

  • WichitaLiberty.TV October 27, 2013

    In this episode of WichitaLiberty.TV: David Boaz, Executive Vice President of the Cato Institute, visits the WichitaLiberty.TV studios and explains the ideas behind libertarianism and its approach to government and society. Episode 18, broadcast October 27, 2013. View below, or click here to view at YouTube.

    David Boaz is the executive vice president of the Cato Institute and has played a key role in the development of the Cato Institute and the libertarian movement. He is a provocative commentator and a leading authority on domestic issues such as education choice, drug legalization, the growth of government, and the rise of libertarianism. Boaz is the former editor of New Guard magazine and was executive director of the Council for a Competitive Economy prior to joining Cato in 1981. He is the author of Libertarianism: A Primer, described by the Los Angeles Times as “a well-researched manifesto of libertarian ideas,” the editor of The Libertarian Reader, and coeditor of the Cato Handbook For Policymakers. His articles have been published in the Wall Street Journal, the New York Times, the Washington Post, the Los Angeles Times, National Review, and Slate. He is a frequent guest on national television and radio shows, and has appeared on ABC’s Politically Incorrect with Bill Maher, CNN’s Crossfire, NPR’s Talk of the Nation and All Things Considered, John McLaughlin’s One on One, Fox News Channel, BBC, Voice of America, Radio Free Europe, and other media. His latest book is The Politics of Freedom: Taking on The Left, The Right and Threats to Our Liberties.

  • Exchange Place still not good for Wichita, others

    Wichita city hall logoTomorrow the Wichita City Council will consider a redevelopment plan for the Exchange Place project in downtown Wichita. Despite having shed the problems with the former owners, the project has become an even worse deal for the taxpayers of Wichita, Kansas, and the nation. Those looking for jobs and for investment capital to meet consumer demands are worse off, too.

    Here’s what the city council agenda packet gives as the sources of financing for this project.

    HUD Loan Amount         $29,087,700
Private Equity            5,652,254
Tax Credit Equity        19,370,395
TIF Proceeds             12,500,000
Total Sources of Funds  $66,610,349

    Consider each of these sources of funding. TIF, or tax increment financing, diverts future increased tax revenues away from their normal uses and diverts them back to the project. In this case, the city will borrow $12,500,000 by selling bonds. It will give this money to the developer. Then, TIF proceeds will be used to repay these bonds.

    It sounds innocent, even beneficient and desirable. But if this project was not built within a TIF district, it would add $12,500,000 in tax revenues to the city, county, and school district. This is called “building up the tax base,” something politicians and bureaucrats say is an important goal. Downtown Wichita, however, has not done well in this regard, despite the claim of hundreds of millions in investment.

    City leaders will tell us that tax increment financing is needed for economic development. Regarding the effect of tax increment financing districts on economic development, economists Richard F. Dye and David F. Merriman have studied tax increment financing extensively. Their paper The Effects of Tax Increment Financing on Economic Development bluntly states the overall impact of TIF: “We find clear and consistent evidence that municipalities that adopt TIF grow more slowly after adoption than those that do not.”

    Later in the same paper the authors conclude: “These findings suggest that TIF trades off higher growth in the TIF district for lower growth elsewhere. This hypothesis is bolstered by other empirical findings.”

    What about the effect of tax increment financing on job creation, that being another goal mentioned by politicians and bureaucrats? One person who has looked at the effect of TIF on jobs is Paul F. Byrne of Washburn University. He authored a recent report titled Does Tax Increment Financing Deliver on Its Promise of Jobs? The Impact of Tax Increment Financing on Municipal Employment Growth. In its abstract we find this conclusion regarding the impact of TIF on jobs: “Results find no general impact of TIF use on employment. However, findings suggest that TIF districts supporting industrial development may have a positive effect on municipal employment, whereas TIF districts supporting retail development have a negative effect on municipal employment.” This project is a retail project, and can be expected to have a negative effect on employment.

    Another bad aspect of this project for citizens is what city documents describe as “tax credit equity.” The amount is $19,370,395. This is understatement at its finest. Tax credits are a direct transfer from taxpayers to the project developers, with very few strings attached.

    A tax credit is an appropriation of money made through the tax system and economically equivalent to a direct grant of money. Recently some have started to use the word “tax appropriations” or “tax expenditures” to describe tax credits in recognition of this. These expenditures don’t go through the normal legislative process as do most appropriations. If the Kansas Legislature and United States Congress are not comfortable with writing this developer a check for over $19,000,000, they should not make a roundabout contribution through the tax system that has the same economic impact on the state’s and nation’s finances.

    Citizens will be told that the tax credits are needed because rehabbing historic buildings is expensive. We should let politicians and bureaucrats know that living or working in a historic building is a premium amenity that one chooses, just like one might choose granite counter tops in their kitchen. We shouldn’t expect others to pay for these voluntary choices.

    Then, there’s a “HUD Loan Amount,” which is actually a loan guarantee of $29,087,700. U.S. taxpayers are liable for this amount of money should the project not meet its projections.

    The subsides to this project have real costs. This development will require services from the city, county, and school district, yet it won’t be contributing its full share of property taxes. So someone else has to pay.

    The tax credits represent money that has to be made up by taxpayers across Kansas and the nation. Again, someone else has to pay. Since Kansas applies sales tax to food, even poor people buying groceries will be contributing to the cost of the grants given to this project through state tax credits.

    We’ll be told that there’s a “funding gap” that taxpayers must step forward to fill. Why does that gap exist? It’s simple: Markets have decided that this project is not worth what it costs. If it was worth what it’s going to cost, and if the developer is reputable (as we’ve been promised), markets would be willing to fund the project. This happens every day all across the country, even during recessions.

    What the city is proposing to do is to take risks with the taxpayers’ money that no one is willing to take with their own. Further, the spending and credit that is diverted from markets to this project wastes capital. There is less capital available for projects that people value, because it is diverted to projects that politicians and bureaucrats value.

    The difficulty is that it’s easy to see the new project. The groundbreaking and ribbon cutting ceremonies that commemorate government intervention will be covered by television and newspapers. Politicians and bureaucrats are drawn to these events and will spend taxpayer funds to make sure you’re aware of them.

    It’s more difficult to see that the harm that government intervention causes. That harm is dispersed and more difficult to spot. But the harm is real. If it is not, then we need to ask why our governments don’t do more of this type of development.

    Driving by a development in a TIF district and noticing a building or people working at jobs does not tell the entire story. Recognizing the existence of a building, or the payment of taxes, or jobs created, is “stage one” thinking, and no more than that.

    It’s hard to think beyond stage one. It requires considering not only the seen, but also the unseen, as Frederic Bastiat taught us in his famous parable of the broken window. It also requires thinking of the long term effects of a policy, not just the immediate. But over and over again we see how politicians at all levels of government stop thinking at stage one. This is one of the many reasons why we need to return as much decision-making as possible to the private sector, and drastically limit the powers of politicians and governments.

  • Coalition to Congress: End the wind production tax credit

    Following is a letter from a coalition of organizations led by Americans for Prosperity advocating for the end of special treatment and subsidies for one industry.

    September 24, 2013
    Dear Senators and Representatives:

    On behalf of the millions of members that our organizations represent, we encourage you to oppose extending the main source of federal support for wind energy, the production tax credit (PTC). The problems with bestowing government favors on wind energy are myriad — it doesn’t produce cheaper energy, it threatens electrical grid reliability, it’s inefficient, it’s unprincipled tax policy, to name a few — and it’s time to end this misguided handout.

    Proposals to phase out the credit over time are a red herring. A phaseout is still an extension, and it does not address any of the problems that arise from government backing for wind energy. Besides, the PTC in its current form already has a phaseout built in: Wind farm projects may claim the tax credit for 10 years following receiving an investment letter.

    In addition, we discourage you from including a PTC extension in a large tax extenders package at the end of the year. This is precisely what happened this past December; a 1-year PTC extension and expansion found its way into the Fiscal Cliff deal at the last minute. This provision expanded wind farm eligibility from those that were already in operation to those that were simply in the planning stages. If Congress is serious about comprehensive tax reform that lowers rates for everyone, then special provisions like the PTC that clutter the tax code should be first on the chopping block.

    The PTC is scheduled expire on December 31, 2013. Congress should ensure that it does so as to clear the way for a simpler, less burdensome tax system across the board.

    Also, Christine Harbin Hanson, a policy analyst for Americans for Prosperity, contributes the following article:

    Kansas wind turbines

    Expiring wind subsidies bring a sense of déjà vu to Capitol Hill. The main federal tax break for wind energy, the wind production tax credit (PTC), is on track to expire at the end of the year, and history is poised to repeat itself. This year, Congress should break from the past and end this wasteful handout for the wind industry, once and for all.

    Over the next four months, Washington will engage in the same debate as always. The wind industry will claim that it needs even more time and more subsidies to get on its feet. Meanwhile, Americans for Prosperity and our coalition partners will point out the numerous economic and philosophical problems with the tax credit — it doesn’t produce cheaper energy, it’s an unreliable energy source, it’s inefficient, it’s not principled, it distorts markets, etc. Over the last twenty years, Congress has repeatedly agreed to the PTC, usually in one or two-year intervals.

    This is exactly what happened with this past extension. Big Wind produced a flurry of lobbying activity while Senate Minority Leader McConnell (R-Ky.) and Vice President Biden (D) negotiated a deal to avert the Fiscal Cliff. As Tim Carney noted in the Washington Examiner at the time, this lobbying included “Obama’s closest corporate confidants as well as former congressmen from both parties.” In the end, a 1-year PTC extension and expansion found its way into the Fiscal Cliff deal at the 11th hour, alongside several additional targeted tax credits for renewable energy. Not only was the subsidy extended but it was expanded from wind farms that were already in operation to those that were simply in the planning stages.

    This upcoming expiration has a plot twist: The American Wind Energy Association senses that its D.C. gravy train may be coming to an end and it will likely propose phasing down the tax credit over a period of years. Congress should avoid this trap. A phaseout is still an extension, and it does not address the problems that arise from subsidizing wind energy. Besides, the PTC in its current form already has a phaseout built in: wind farm projects may claim the tax credit for 10 years following receiving an investment letter.

    Washington may be wising up to the pitfalls of using federal incentives to encourage politically-favored energy sources. Grants and loan guarantees are drying up, tarnished by repeated failures like Solyndra, Beacon Power, Ener1, A123 Systems and the list goes on-and-on. The main tax breaks for ethanol have also gone away, and momentum is building in Congress to repeal green energy mandates like the renewable fuel standard. This phase out proposal is Big Wind’s attempt to get more drink at the taxpayer trough.

    Laughably, the only group calling for making the tax credit permanent is the White House. Apparently the Obama administration has still not learned from its repeated green energy failures, showing just how out of touch it is with economic realities.

    Congress should end—not phase down, not extend—the wind production tax credit this year. Americans deserve energy solutions that can make it on their own in the marketplace—not ones that need to be propped up by government indefinitely. Washington’s long-time policy of giving preferential tax treatment to special interests simply isn’t working.