Tags: Corporate Welfare

Bring on the Draconian Cuts


Hark, unless mine eyes are cheated, it appears that the House has passed a bill — on energy and water development — that would spend less money than we spent last year. Indeed, that is the case: The $30.4 billion bill is $2.9 billion less than was appropriated for 2013. If my always-suspect English-major math is correct, that $2.9 billion represents a full 0.08 percent of 2012 federal outlays.

The White House has threated to veto these “draconian cuts.” Seriously — OMB put out a statement calling these “draconian cuts.” Does anybody over there know what “draconian” means?

Among the prize pigs being slaughtered by our beady-eyed Republican friends is a multimillion-dollar national propaganda campaign on behalf of alternative-energy interests, which went down thanks to Representative Tim Walberg of Michigan. It is bad enough that the federal government subsidizes these politically connected energy firms — spending millions of dollars of taxpayers’ money to push their wares as well is a bit much to stomach.

Representative Mike Burgess (R., Texas) offered an amendment that would block federal regulation of refrigerators and incandescent light bulbs, while Representative Marsha Blackburn (R., Tenn.) took aim at ceiling-fan regulations. ARPA-E, the Department of Energy’s answer to DARPA, would see its funding cut by $215 million — that’s millions with an “m,” there, out of a budget in the trillions — and various other programs would be trimmed and consolidated.

Draconian cuts. Indeed.

This is all very good, and it deserves to become law. But it also offers a dramatic illustration of how difficult it is to cut spending without cutting the areas where the spending actually happens. This may be a minuscule cut in terms of overall federal spending, but it’s an 81 percent cut for ARPA-E, and a 50 percent cut for the newly consolidated delivery/reliability/efficiency/renewables program. The people who receive grants and other financial benefits under those programs will howl, and — more important — those who earn their living staffing those programs will fight to the death to avoid the hunt for productive employment in the real economy. That is why spending reductions on those kinds of programs are never really enough: You have to eliminate the program entirely. Conservative populists sometimes get mocked for promising to cut entire cabinet agencies, but, in the long term, that is the most promising model for achieving a healthy fiscal balance.

Obligatory reminder: None of this matters very much without entitlement reform and controls on defense spending. Non-defense discretionary spending, i.e. the stuff everybody promises to cut or cap, is a small part of federal spending.

The Department of Energy, which like the Department of Education is a creature of the Carter administration, does some useful things: For historical reasons, it is entrusted with maintenance of the country’s nuclear arsenal, and it sponsors some worthwhile research. None of which justifies having a cabinet agency to tell us what kind of light bulbs to use. The best course of action would be to turn the department’s defense functions over to Defense and its research functions over to the National Science Foundation and to zero out most of the rest. That’s what real fiscal reform would look like.

Instead, we’ll probably be treated to a veto and drawn-out fight over a minuscule reduction in federal outlays simply because every dollar of federal spending eventually lands in the pocket of somebody with a powerful interest in receiving it. None of that is helped by the Obama administration’s apparent ideological commitment to maximizing the federal government’s control over the U.S. economy and its resources, a project that it pursues relentlessly while wondering why its more excitable critics describe its agenda as socialism.

Yesterday, I wrote about “Obamaphones for millionaires,” the federal program under which telephone companies serving Maui beach developments and Scottsdale golf communities receive subsidies amounting to thousands of dollars per year for every line they install. The comments were predictable: Self-identified conservatives wrote in to assure me that, while they agree that federal spending is out of control, these programs — just these — are really, truly necessary, and that the telecoms receiving those billions of dollars a year in subsidies are totally deserving. Every dollar in spending creates its own constituency, whether it produces cash in hand or a government-funded national ad campaign for your business. Representatives Walberg, Burgess, et al. will have worked a minor miracle if they can make the trivial reductions they have proposed a reality.

— Kevin D. Williamson is a roving correspondent for National Review and author of the newly published The End Is Near and It’s Going to Be Awesome.

Tags: Fiscal Armageddon , Corporate Welfare

Immelt Is the Perfect Pick


In case there existed any doubt that Barack Obama (D., Goldman Sachs) is Big Business’s man in Washington, he has named General Electric CEO Jeffrey Immelt to a key economic position: head of the President’s Council on Jobs and Competitiveness, successor to Paul Volcker’s Economic Recovery Advisory Board.

GE, you will not be surprised to know, spent $32 million on lobbying in the last year and is a big political donor.  Like its colleagues in most Big Business sectors, it heavily favors Democrats: It was a large contributor to Barack Obama’s senatorial and presidential campaigns, and the single largest recipient of GE money in 2009–10 was, you will not be surprised to learn, one Barack Obama.

Many in President Obama’s union-goon constituency are disappointed with the decision: Mr. Immelt, they complain, is an “outsourcer,” sending their jobs (“their” jobs) to China. Case in point: GE is shutting down two U.S. factories that made incandescent lightbulbs; the replacements will be made in China.

But hold on: Those incandescent lightbulbs are going the way of the dodo and the pro-life Democrat not because of nefarious plotting by the infernal Chicomms, but because the United States is banning them. Who banned them? The Democrats did, as part of their first-100-hours push upon assuming the majority in Congress. (And who lobbied the Democrats to ban them? GE, of course, for its own Machiavellian reasons.)

Having been the target of a Teamsters picket, I can attest that organized labor is not full of the brightest bulbs in the great American light show. But: How do you give your money and your votes to the party that plans to ban your product and then turn around and whine when they ban your product? Keep up with the news, geniuses.

Speaking of Chicomms, GE was in the process of signing a bunch of deals with them even as Mr. Immelt’s appointment was percolating. Which must have put him in a sweet negotiating position.

GE is the poster child for corporate welfare, having encouraged the supersizing of Obama’s stimulus lard-loaf as a prelude to chasing after its green-tech and energy giveaways. Immelt tagged along with Obama to India, where the president acted as vice president of marketing for the gaggle of CEOs he had in tow.

GE’s cozy relationship with government is paying off: The company has been given a multibillion-dollar contract to build an engine for the Joint Strike Fighter — which already has an engine, built by another company. Having two companies building redundant engines for the same plane was enough to get defense secretary Robert Gates’s attention; he called it a “wasteful boondoggle.” The Pentagon doesn’t want it. But GE got the deal, all the same.

In truth, I can’t think of a more appropriate adviser for an overreaching, arrogant, big-government administration than the head of GE, an overreaching, arrogant, big-government corporation. If we can have a tax cheat overseeing the IRS, why can’t we have a corporate-welfare case telling us how to get productive?

—  Kevin D. Williamson is a deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, just published by Regnery. You can buy an autographed copy through National Review Online here.

Tags: Barack Obama , Corporate Welfare , Wall Street Democrats

Obama’s Tax Cut for Rich Oil Companies


Tom Vilsack, secretary of agriculture, came out Thursday with an announcement sure to warm the cockles of progressive hearts all across the fruited plains: The Obama administration backs the indefinite extension of massive tax cuts for multinational oil corporations and protectionist trade measures to enrich U.S. corporate giants such as Archer Daniels Midland, Monsanto, and ConAgra.

Ethanol: Is there anything it can’t do? It won’t save the environment, slow global warming, or achieve the phantom of U.S. “energy independence,” but it has made the Obama administration come out in favor of tax cuts for the rich and politically connected oil companies. It’s sort of magical that way.

Critics of the massive corporate-welfare program known as U.S. ethanol policy have jokingly referred to Archer Daniels Midland as the “Exxon of ethanol.” But you know who the real Exxon of ethanol is? Exxon. Just as BP gets subsidized to the tune of some $600 million a year through the ethanol tax credit, Exxon and the other oil giants collect millions of dollars in taxpayer subsidies: 45 cents for every gallon of ethanol they blend into their gasoline. “It’s not just a reduction in somebody’s tax rate — it’s an actual check that’s made out to these oil companies,” says Marlo Lewis, who keeps an eye on ethanol shenanigans for the Competitive Enterprise Institute. “They get a check from the general fund of the Treasury — from us, the taxpayers.”

It’s a big stack of money, to be sure, but even Exxon does not think the program is a great idea. Exxon would just as soon forgo the subsidy, provided that its competitors didn’t collect it, either.

So, if even the suits at Big Oil are a little bit ashamed of a program that dumps hundreds of millions of dollars a year into their lap, who is in favor? “It’s the makers and the corn growers who are screaming that we have to keep doing this,” Mr. Lewis says. Only the blenders actually receive the refund checks, but corn growers and ethanol processors benefit because the demand for their products increases.

Vilsack said Thursday that the administration is in favor of a temporary and “fiscally responsible” continuation of the ethanol tax credit and the associated tariffs that keep cheaper, sugarcane-based ethanol off the market in the United States. When pressed by a reporter to define “temporary,” Vilsack demurred. When pressed by the same reporter to define “fiscally responsible,” he again declined to answer. Meaning: status quo ad infinitum. Vilsack, as Mr. Lewis points out, has been talking that same temporary-and-fiscally-responsible jive since he was a governor. (Either that, or he literally does not know what “fiscally responsible” means, which is possible.)

Two bills were floated in the last Congress to extend the tax credit and the tariff: one introduced by Sen. Chuck Grassley and one introduced by Rep. Earl Pomeroy. Neither made much progress. The danger is that while those bills have foundered, their essential provisions — extending the tariff and the tax credit — could be sneaked into a tax or energy bill during the lame-duck session. Look for some green-jobs camouflage to be attached to it, but keep in mind: If it quacks like corporate welfare, it’s corporate welfare.

But this is federal spending we’re talking about, so it could always be worse. “The good news,” Mr. Lewis says, “is that Vilsack did not call for a Marshall Plan for biofuels or a Manhattan Project for biofuels. And that’s what the ethanol lobby has been pushing for.” There’s a split in the ethanol lobby at the moment, with one camp focused on protecting the current basket of goodies and another arguing for a massive new federally subsidized infrastructure project, with 200,000 new ethanol pumps serving up E85, a sprawling new pipeline system to keep those pumps pumping, and a mandate that automakers deliver 120 million flex-fuel vehicles a year to the U.S. market. That’s not on the agenda — for now.

Keep ethanol in mind when Obama, Al Gore, and the Wall Street guys who are positioned to benefit from “green energy” programs talk about “temporary” measures to protect a fledgling start-up industry. The day never comes when these industries can stand on their own — because they never were economically viable in the first place. They’re selling a product nobody wants at a price nobody wants to pay. “We’re still waiting for Godot here,” Mr. Lewis says. “Ethanol will always be an ‘infant industry,’ no matter how big it gets. The U.S. industry is the biggest in the world by far — twice as big as Brazil’s. If it had to compete, it might actually become innovative. But it’s easier to have entitlements.”

The Obama administration is dead-set on raising the taxes of thousands of small-business owners, the so-called rich who benefited from the Bush tax cuts. And, at the same time, his administration is arguing for a massive tax cut for some of the most profitable multinational corporations in the world, some of which don’t even want it. Which is what you get when a president brought to you by Goldman Sachs promises to take on the fat cats.

– Kevin D. Williamson is deputy managing editor of National Review and author of The Politically Incorrect Guide to Socialism, to be published in January.

Tags: Corporate Welfare , Debt , Deficits , Democrats , Despair , Ethanol , Fiscal Armageddon , General Shenanigans

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