Well done, fellow taxpayer. I want to commend you for your progressive-minded support of today’s environmentally friendly green technology. Thanks to you, the United States is well on its way to a cleaner, brighter future.
Now, you may claim that you aren’t really concerned about the development of wind energy or electric cars, but I know you’re just being modest. After all, quite a bit of your money has been used to fund these initiatives.
Take the Chevy Volt, General Motors’ celebrated plug-in car for instance. According to the Mackinac Center, a Michigan-based policy think tank, each of the 6,000 Volts GM sold by December 2011 received between $50,000 and $250,000 in government subsidies. Given that the Volt retails for only $40,000, it seems the electric vehicle is getting quite a bit of help from you, the taxpayer. Kudos!
Fortunately for the planet, your support doesn’t stop there. In fact, the Institute for Energy Research found that from fiscal year 2007 through fiscal year 2010, federal subsidies for renewable energy jumped from $5.1 billion to $14.7 billion – a 186 percent increase.
Curiously, it seems you’re also a fan of fossil fuels. Over the same three year period, federal subsidies for coal increased 44 percent; oil and natural gas subsidies increased 40 percent. You obviously understand the importance of increasing domestic energy production and ending the United States’ dependence on foreign oil. Bravo!
In all seriousness, if these policies seem contradictory and nonsensical, it’s because they are. They also offer an important lesson about how governments spend tax dollars.
As a 2011 report by the Congressional Research Service points out, “energy tax policy in the United States is made in a political setting, determined by fiscal dictates and the views and interests of the key players in this setting, including policy-makers, special interest groups, and academic scholars.” Noticeably absent from this list of key players are taxpayers – the people whose money is being spent.
You may not have the slightest interest in the rise of green energy. You may even have a vested interest in its decline. Too bad – if you pay federal income taxes, your money supports green energy. Likewise, you may oppose the continued extraction of oil, natural gas and coal. Again, too bad.
If such subsidies applied only to energy production, their effects on the economy would be destructive enough. Unfortunately, these programs are only a drop in Washington’s subsidy bucket. In January 2010, the total number of federal subsidy programs in the U.S. surpassed 2,000, with 350 new programs created since 2005.
This growth of federal intervention into the American economy is dangerous for a variety of reasons. At their core, subsidy programs seek to artificially shape the economy to suit their advocates’ particular interests.
By their very nature, subsidy programs attempt to take an unprofitable activity and make it seem profitable. Therefore, whenever congressmen or special interest leaders seek a subsidy for a certain activity, they’re effectively acknowledging that the activity makes no economic sense.
The Chevy Volt and other electric cars demonstrate this point brilliantly. Without massive help from the federal government and various state governments, these vehicles would carry an enormous price tag, and few people would buy them.
Even now, Volt sales have failed to meet expectations, and GM has admitted it won’t know how much market demand exists for the car until summer.
Green energy fans no doubt support even more subsidization of the Volt and similar initiatives, but these actions miss the point. The fact that these initiatives could not survive in a free market clearly shows that the funds devoted to them would be better spent elsewhere. The same goes for subsidies to oil, coal, agriculture, education and any other pet project a legislator may have.
The most dangerous aspect of these programs is that they distort prices and incentives throughout an economy that, for reasons I can’t figure out, is still referred to as “capitalist.” I assure you the modern American economy is not a capitalist system, at least not in the proper sense of the term.
Any problems it experiences cannot logically be blamed on the free market any more than they can be blamed on the federal Politburo.
Today’s American system is one of corporatism, in which special interests lobby for and receive undue protection and support from the government.
This system does an immense disservice to everyday Americans, who are forced to fund services they don’t like and to choose among products that exist not because of their economic value, but because of their manufacturers’ political clout.
The most just and sensible way to determine what kinds of cars should be produced, energy resources exploited, or crops grown is to reign in these unwieldy subsidy programs and allow markets to work.
Doing so will take power away from government kingmakers and return it to consumers, who ultimately reign supreme in a free market economy.