The subject of the election is a Wichita city charter ordinance that rebates 75 percent of the Ambassador Hotel’s guest tax collection back to the hotel. In January I made a presentation to a Chamber committee in an effort to persuade it to support the “Vote No” campaign, or to stay neutral.
There was some hope that the Chamber would support free markets and limited government — instead of crony capitalism and corporate welfare — as sound policies for economic development. Many in Wichita thought that the Chamber had turned in this direction of economic freedom about two years ago.
This decision reminds me of a piece in the Wall Street Journal by Stephen Moore that shows how very often, local chambers of commerce support principles of crony capitalism instead of pro-growth policies that support free enterprise and genuine capitalism.
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, as we can see in Wichita. Here, in an excerpt from his article “Tax Chambers” 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 at Liberalism’s Echo Chambers.
“Richard Nixon maintained an ‘enemies list’ that singled out private citizens for investigation and abuse by agencies of government, including the Internal Revenue Service. When that was revealed, the press and public were outraged. That conduct will forever remain one of the indelible stains on Nixon’s presidency and legacy.”
This is the conclusion of Theodore B. Olson, former solicitor general of the United States. He presently represents Koch Industries. His op-ed in today’s Wall Street Journal (Obama’s Enemies List) lays out the harmful effects of the president’s campaign against the Koch brothers.
Olson calls for all Americans to respond and oppose the president’s actions, writing “Whoever may be the victim of such abuse of governmental authority, the press and public almost invariably unify with indignation against it. If a journalist, labor-union leader or community organizer on the left can be targeted today, an academic or business person on the right can be the target tomorrow. If we fail to stand up against oppression from one direction, we abdicate the moral authority to challenge it when it comes from another.”
Why is Obama so opposed to Charles and David Koch? For one thing, they run a successful business that provides over 50,000 private-sector jobs. For some reason, that goes against the president’s grain. He’d rather have 50,000 government jobs, or at least jobs in corporations that cower in response to his bullying tactics. The Koch brothers, thankfully, don’t.
Another reason must be the unwavering support for the causes of economic freedom, free markets, and limited government that Charles and David Koch have advocated for over four decades. See Charles G. Koch: Why Koch Industries is speaking out.
Obama’s Enemies List
David and Charles Koch have been the targets of a campaign of vituperation and assault, choreographed from the very top.
By Theodore B. Olson
How would you feel if aides to the president of the United States singled you out by name for attack, and if you were featured prominently in the president’s re-election campaign as an enemy of the people?
What would you do if the White House engaged in derogatory speculative innuendo about the integrity of your tax returns? Suppose also that the president’s surrogates and allies in the media regularly attacked you, sullied your reputation and questioned your integrity. On top of all of that, what if a leading member of the president’s party in Congress demanded your appearance before a congressional committee this week so that you could be interrogated about the Keystone XL oil pipeline project in which you have repeatedly — and accurately — stated that you have no involvement?
Consider that all this is happening because you have been selected as an attractive political punching bag by the president’s re-election team. This is precisely what has happened to Charles and David Koch, even though they are private citizens, and neither is a candidate for the president’s or anyone else’s office.
We have been observing coverage about us in the Times over the last year that appears in many cases driven by a political agenda and in others so gratuitous that it stretches the bounds of newsworthiness to absurd lengths. You will recall that we brought a number of these specifics to your attention last April and May. Since that time, there have been more than 50 articles in the paper critical of Koch (zero that are positive) written by some 41 different Times authors. You were gracious to offer a continued dialogue on the matter and two such pieces that appeared over the weekend prompt us to reach out again.
The first, by art critic Anthony Tommasini, complained about our support for the arts, compared us to the deposed King Ludwig of 19th-Century Bavaria and the Renaissance Medicis and therefore urged that the situation “would seem to make the performing arts a natural focus for the Occupy activists.”
The second piece, appearing in the “Ethicist” column by Ariel Kaminer, applauded a reader for keeping her granddaughter away from a performance of “The Nutcracker” because we donated to the production. “Tolerance has its limits” Ms. Kaminer explained, and “Tchaikovsky makes strange bedfellows.”
In other words, Times writers apparently must perform contortions so bent-over-backward that it involves medieval references and politicizing children’s Christmas ballets, all to squeeze a disparagement about Koch into their copy. My question to you is: if the paper is going to be indulging a hostile approach that is this far-fetched, then don’t we deserve some explanation from editors for the sheer frequency and the underlying purpose?
Readers themselves might wonder if they’ll soon read moral circumspection about the many performing arts or left-leaning institutions supported by the Sulzberger family, which owns the paper. Doubtful, it would seem. (And never mind at all the Sulzberger family’s role in building the New York Stock Exchange, stifling the Times’ unions, giving golden parachutes to underperforming executives, and other such activity the paper lately characterizes as “the one percent”).
When we last interacted, you explained that we could “expect the Times to continue to cover Kochs’ activities rather closely, as your organizations’ activities have acquired quite a high profile.” I’m troubled that this is a kind of circular logic — the Times is covering Koch because Koch is being covered — and tells readers little about the thinking and motives of the Times’ apparent fixation with us.
Let me reiterate that these are far from the only such examples. In October, a Times dining critic commenting about what protestors prefer to eat wrote, “Unlike the Tea Party, funded as it is by wealthy reactionaries like the Koch Brothers, ‘Occupy’ is sustained by energy, frustration … pizza and apples paid for by supporters or donated by farmers.” In November, one of your columnists denounced where we choose to live, saying, “even when oligarchs clearly get their income from heartland, red-state sources, where do they live? OK, one of the Koch brothers still lives in Wichita; but the other lives in New York.” And though the group Americans for Prosperity has tens of thousands of members, supporters, and co-founders, it is routinely described specifically as a project of ours.
As one of your predecessors once pointed out, the Times is a liberal newspaper. We understand that and have been documenting the often irrational and cynical ways in which left-wing groups have targeted us. But if the Times is going to take part in that bandwagon and go to lengths so far afield from legitimate news coverage, then it ought to have the integrity to acknowledge it.
We would be grateful if you could look into the examples we’ve cited and the larger point. We look forward to hearing your thoughts.
The discussion at yesterday’s Wichita City Council meeting provided an opportunity for citizens to discover the difference in the thinking of the political class and those who value limited government and capitalism.
At issue was Mid-Continent Instruments, Inc., which asked the city for a forgivable loan of $10,000. It received the same last week from Sedgwick County. According to city documents, the State of Kansas through its Department of Commerce is also contributing $503,055 in forgivable loans, sales tax exemptions, training grants, and tax credits.
At the city council meeting Clinton Coen, a young man who ran for city council earlier this year, spoke against this measure, which he called corporate welfare.
In response to Coen, Council Member James Clendenin (district 3, south and southeast Wichita) asked if we should ignore companies that want to do business here, or should we allow them to leave? Implicit in the question is that the threat dangled by Mid-Continent is real: that unless the city gives them $10,000, they will expand somewhere else. How citizens and council members feel about this issue largely depends on their perceived genuineness of this threat.
When Coen recommended that the city cut spending, Clendenin said “I can guarantee you, from what I have seen, this city government has cut a tremendous amount of spending.” When pressed by Coen for examples of cuts, he demurred. Clendenin also said that the $10,000 is needed to show the city’s commitment to the company.
Perhaps coming to the rescue of her younger and less experienced colleague, Council Member Janet Miller asked City Manager Bob Layton how much has been cut from the budget, and he replied “we’ve cut over $20 million in the general fund over three years.”
In saying that, Layton is using the language and mind-set of bureaucrats and politicians. In this world, it’s a cut if spending does not rise as fast as planned or hoped for. As you can see from the accompanying chart, Wichita general fund spending has not been cut in recent years. It has risen in each of the last three years, and plans are for it to keep rising.
This illustrates a divide between the thinking of the political class and regular people. Blurring the distinction between plans and reality lets politicians and bureaucrats present a fiscally responsible image — they cut the budget, after all — and increase spending at the same time. It’s a message that misinforms citizens about the important facts.
Miller also praised the return on investment the city receives for its spending on economic development, citing Wichita State University Center for Economic Development and Business Research and the cost-benefit calculations it performs. These calculations take the cost of providing the incentives and compare it to the returns the city and other governmental entities receive.
What is rarely mentioned, and what I think most people would be surprised to learn, is that the “returns” used in these calculations is manifested in the form of increased tax revenue. It’s not like in the private sector, where business firms attempt to increase their sales and profits by providing a product or service that people willingly buy. No, the city increases its revenue (we can’t call it profit) by collecting more taxes.
It’s another difference between the political class and everyone else: The political class craves tax revenue.
Aside from this, the cost-benefit calculations for the city don’t include the entire cost. The cost doesn’t include the county’s contribution, the majority of which comes from residents of its largest city, which is Wichita. Then, there’s the half-million in subsidy from the state, with a large portion of that paid for by the people of Wichita.
But even if you believe these calculations, there’s the problem of right-sizing the investment. If an investment of $10,000 has such glowing returns — last week Sedgwick County Commissioner Jim Skelton called the decision a “no-brainer” — why can’t we invest more? If we really believe this investment is good, we should wonder why the city council and county commission are so timid.
Since the applicant company is located in his district, Council Member Pete Meitzner (district 2, east Wichita), praised the company and the state’s incentives, and made a motion to approve the forgivable loan. All council members except Michael O’Donnell (district 4, south and southwest Wichita) voted yes.
Going forward
While the political class praises these subsidies and the companies that apply for them, not many are willing to confront the reality of the system we’re creating. Some, like O’Donnell and Sedgwick County Commissioner Richard Ranzau, have recognized that when government is seen as eager to grant these subsidies, it prompts other companies to apply. The lure of a subsidy may cause them to arrange their business affairs so as to conform — or appear to conform — to the guidelines government has for its various subsidy programs. Companies may do this without regard to underlying economic wisdom.
We also need to recognize that besides simple greed for public money, businesses have another reason to apply for these subsidies: If a publicly-traded company doesn’t seek them, its shareholders would wonder why the company didn’t exercise its fiduciary duty to do so. But this just perpetuates the system, and so increasing amounts of economic development fall under the direction of government programs.
While most people see this rise in corporate welfare as harmful — I call it a moral hazard — the political class is pleased with this arrangement. As Meitzner said in making his motion, he was proud that Wichita “won out” over the other city Mid-Continent Instruments considered moving to.
Another harmful effect of these actions is to create a reputation for having an uncompetitive business environment. Not only must businesses of all types pay for the cost of these subsidies, some face direct competition by a government-subsidized competitor. This is the situation Wichita-area hotels face as a result of the city granting millions in subsidy to a hotel developer to build a Fairfield Inn downtown.
Even those not in direct competition face increased costs as they attempt to hire labor, buy supplies, and seek access to capital in competition with government-subsidized firms. Could this uneven competitive landscape be a factor that business firms consider in deciding where to locate and invest?
We can expect to see more government intervention in economic development and more corporate welfare. Former council member Sue Schlapp in April took a job with the Kansas Department of Commerce. Her job title is “senior constituent liaison,” which I think can be better described as “customer service agent for the corporate welfare state.” Her office is in Wichita city hall.
Increasingly we see politicians and bureaucrats making decisions based on incorrect and misleading information, such as claiming that the city’s general fund budget has been cut when spending has increased. Sometimes they are fed incorrect information, as in the case of a presentation at Sedgwick County Commission that bordered on fraudulent.
Sometimes, I think, officeholders just don’t care. It’s easiest to go along with the flow and not raise ripples. They participate in groundbreakings and get their photograph in the newspaper and on television that way. Which brings up an important question: why do none of our city’s mainstream media outlets report on these matters?
A report published earlier this year by urban planning expert Randal O’Toole of the Cato Institute gives a good overview of tax increment financing (TIF) districts and the harm they cause. O’Toole discusses the research that shows that TIF has an overall negative effect on communities that use it. He also addresses the issue of crony capitalism, which is well documented in Wichita, with TIF developers handing out a continuous stream of campaign contributions to those politicians who vote their way. Following is the executive summary of O’Toole’s report, followed by a link to the full document.
Tax-increment financing (TIF) is an increasingly popular way for cities to promote economic development. TIF works by allowing cities to use the property, sales, and other taxes collected from new developments — taxes that would otherwise go to schools, libraries, fire departments, and other urban services — to subsidize those same developments.
While cities often claim that TIF is “free money” because it represents the taxes collected from developments that might not have taken place without the subsidy, there is plenty of evidence that this is not true. First, several studies have found that the developments subsidized by TIF would have happened anyway in the same urban area, though not necessarily the same location. Second, new developments impose costs on schools, fire departments, and other urban services, so other taxpayers must either pay more to cover those costs or accept a lower level of services as services are spread to developments that are not paying for them.
Moreover, rather than promoting economic development, many if not most TIF subsidies are used for entirely different purposes. First, many states give cities enormous discretion for how they use TIF funds, turning TIF into a way for cities to capture taxes that would otherwise go to rival tax entities such as school or library districts. Second, no matter how well-intentioned, city officials will always be tempted to use TIF as a vehicle for crony capitalism, providing subsidies to developers who in turn provide campaign funds to politicians.
Finally, many cities use TIF to persuade developers to build “new-urban” (high-density, mixed-use) developments that are supposedly greener than traditional designs but are less marketable than low-density suburbs. Albuquerque, Denver, Portland, and other cities have each spent hundreds of millions of dollars supporting such developments when developers would have been happy to build low-density developments without any subsidies.
TIF takes money from schools, fire departments, libraries, and other urban services funded by property taxes. By eliminating TIF, state legislatures can help close current budget gaps and prevent cities from taking even more money from these urban services in the future.
By U.S. Representatives Mike Pompeo of Kansas and Raul Labrador of Idaho, both Republicans. This is the original editorial. A version appeared in the Washington Times.
I’m afraid that the title of this op-ed is optimistic. As the authors note, “handouts are hard to give up.” But that’s no reason why we shouldn’t try to eliminate this type of harmful government spending. Pompeo has also introduced H.R. 3090: EDA Elimination Act of 2011 to shut down the Economic Development Administration, another source of wasteful government spending on economic development and business.
The Era of Energy Subsidies is Over
By Mike Pompeo and Raul Labrador
Bill Clinton famously said that “the era of big government is over.” Well, it didn’t work out that way. But something truly remarkable is happening in our national conversation about energy subsidies: outrage, mounting opposition, and, we hope, a swift end. This would be great news for taxpayers and for consumers.
Subsidy folly has been bipartisan and commonplace. For the past three decades, both parties have intervened in the energy industry. In 1978, a Democrat-controlled Congress and President Jimmy Carter created an Investment Tax Credit for solar, wind and other renewable energy sources. In 1992, a Democrat-controlled Congress and Republican President George H.W. Bush passed the Production Tax Credit for electricity produced from wind and biomass. Then in 2005, a Republican-controlled Congress and President George W. Bush passed the Energy Policy Act of 2005, which included massive tax subsidies for seemingly every energy source under the sun, including alternative vehicles, advanced nuclear power, and of course solar. The latter legislation created the infamous Department of Energy loan guarantee programs that have produced the ongoing Solyndra scandal.
After three decades, what have we learned? 1) Energy subsidies distort the free market by funneling billions in taxpayer dollars to politically favored energy sources and technologies, preventing market prices from signaling the optimal source for particular energy uses, 2) Subsidizing energy sectors drains the federal fisc and forces the consumption of higher-cost energy sources, 3) Politically allocated capital typically flows to politically connected companies or to large companies that could develop innovative technologies on their own dime. The $535 million Solyndra scandal has reinforced all of these lessons and helped shine a light on the energy subsidy debate, exposing those who maintain government is the solution to our energy needs.
The good news is, with the support of the American people, politicians are now speaking the truth. At a recent Republican presidential forum, the candidates were in near-unanimous agreement that it is time to end the federal government’s role and allow the free market to bring our nation the next great energy source. Governor Rick Perry said, “I do not think it is the federal government’s business to be picking winners and losers, frankly, in any of our energy sources.” Congresswoman Michelle Bachman had similar remarks: “I want to see a [level] federal playing field. We’ve seen what a disaster it is when the federal government picks winners and losers.” In his economic plan, Governor Mitt Romney said that government “should not be in the business of steering investment toward particular politically favored approaches.” This is progress. Just four years ago almost every candidate in Iowa was afraid to say that subsidizing politically favored energy technologies has been an enormous policy failure.
Given the shift in the debate, the time is now to end subsidies. This month we introduced the Energy Freedom and Economic Prosperity Act, H.R. 3308, which has garnered support from such conservative organizations as Americans for Prosperity, Americans for Tax Reform, The Club for Growth, The Council for Citizens Against Government Waste, Freedom Action, Heritage Action for America, National Taxpayers Union, and Taxpayers for Common Sense. H.R. 3308 eliminates all energy tax credits, each of which is nothing more than a taxpayer handout to politically favored industries or companies. From solar to wind, from geothermal to biomass and from ethanol to hydrogen, they must all go. It is equal opportunity — not one single solitary tax credit survives this bill. The proposal will then use the savings realized from the repeal of these tax credits to lower the corporate tax rate. This is a perfect model for tax reform — close out politically allocated tax favors and loopholes and lower taxes on every business that competes in America.
While we are gaining broad public support to end these energy tax credits, the takers of government largesse seldom go quietly. The pro-subsidy lobby pushes to extend its giveaway from Uncle Sam — seeking to extend the production tax credit subsidies for wind, biomass and geothermal every four years. This is the umpteenth-and-never-final request for “just four more years.” But a few more years will just lead to a few more years after that. Even before we introduced the legislation that for the first time provides zero tax credits to any energy source, the American Wind Energy Association howled that Congressman Pompeo “seems to misunderstand how a key federal tax incentive has built a thriving American wind manufacturing sector and tens of thousands of American jobs.” Well, we both understand perfectly — handouts are hard to give up.
After three decades, the tide on energy subsidies has turned. Our nation has squandered hundreds of billions of dollars with these tax credits and has little to show for it. We hold no ill will to any of these energy sources that currently receive tax credits — some or all of them may well become the next great American energy technology. But having dozens of energy handouts leads companies to spend resources lobbying Washington, D.C. rather than tinkering in their garages and labs. Indeed, we are counting on one of these alternatives to succeed. We just know that we have no idea — nor do any of our peers in Congress — which one consumers will ultimately demand. The winner must be determined the old-fashioned way: hard work, innovation, American moxie and superior skills engaged in competition.
Let’s put a different twist on the old saying “not invented here” by acknowledging that energy technology never has been invented here, on the Potomac, and do away with energy subsidies once and for all.
“The U.S.’s gains in economic freedom made over 20 years have been completely erased in just nine.” Furthermore, our economic freedom is still dropping, to the point where we now rank below Canada. The result is slow growth in the private sector economy and persistent high unemployment.
What are the components or properties of economic freedom? These are the factors:
The size of government based on expenditures and taxes.
Whether property rights are protected under an impartial rule of law.
Whether there is a sound national currency, so that peoples’ money keeps its value.
Whether people are free to trade with others, both within and outside the country.
The regulation of credit, labor, and business.
Economic freedom is associated with longer lifespans and a higher standard of living, says the video. Excessive government spending and unnecessary regulation are two primary causes for the decline in economic freedom.
A press release accompanying the video explains the harm government is causes when it destroys economic freedom: “The video illustrates how excessive government spending and regulations are eroding economic freedom in the United States, hampering the growth of the economy and leading to record-breaking unemployment. To make this relationship more tangible to viewers, the video translates current statistics into concrete effects that have a direct impact on viewers’ lives. For example, the video notes the fact that it costs U.S. businesses $1.75 trillion to comply with government regulations and that this money would be enough to hire 43 million workers — more than one-quarter of the U.S. work force.”
The video explains that faster growth in government spending causes slower growth in the private economy. This in turn has lead to the persistent high unemployment that we are experiencing today.
Investor’s Business Daily and The Atlantic have provided more context to the politically-motivated article in Bloomberg Markets criticizing Wichita-based Koch Industries. We find that the more scrutiny the Bloomberg article receives, the worse it looks.
The Investor’s op-ed makes the observation that anyone who reads the article must come to: “Indeed, throughout the entire story you find the Kochs taking steps to bring corporate behavior back in line, not only with the law but with their own stringent ethical standards.”
Later, the authors point out the politics behind the attack on Koch: “The long hit piece, as Daniel Indiviglio writes in the Atlantic, managed to find ‘eight instances of alleged misconduct by a giant multinational over the span of 63 years.’ In nearly every case, Koch itself took steps to correct the problems. Putting it in context, Indiviglio then Google-searched a comparable company, finding eight serious instances of misconduct — we’re talking fines and settlements for fraud and bribery — over 11 years. That company would be GE, whose CEO Jeffrey Immelt heads President Obama’s jobs council and seems to see regulation as opportunities for businesses to profit. We await that Bloomberg investigation.”
In his piece for The Atlantic, Indiviglio writes: “According to Bloomberg, 14 reporters around the globe worked for six months on the story. What did they turn up? Really, shockingly little. And what’s worse: from the very outset, the reporters’ bias against the Koch brothers is utterly clear.”
On the bias and lack of context, he writes: “To further attempt to sway the reader before explaining the facts, the reporters reveal the following fact that someone not familiar with politics and lobbying might find shocking: ‘Koch Industries has spent more than $50 million to lobby in Washington since 2006.’ My reaction to reading this was, ‘$50 million? That’s it?’ That might sound like a lot, but let’s compare that to, say, General Electric. Over the same period, GE has spent more than $136 million lobbying, according to the Center for Responsive Politics.”
After running through the eight issues in the Bloomberg piece, Indiviglio concludes: “Obviously, Koch Industries did make mistakes. It likely regrets those mistakes: the penalties, fines, and lawsuits that resulted cost the firm many millions of dollars. This is more a problem with big multinational corporations than a problem specific to Koch, however. When you’ve got subsidiaries around the world, strong, flawless oversight is difficult and very expensive.”
Underlying this article (and others like it) and its criticism is the advocacy of Charles Koch and David Koch for free markets and economic freedom — something the political left is opposed to.
But it’s not only the political left — liberals and progressives — that oppose the positions that Charles and David Koch advocate. Much of the business community, like General Electric, thrive on the crony capitalism the Kochs oppose, and have opposed for many years. As Charles Koch wrote earlier this year in the Wall Street Journal: “Government spending on business only aggravates the problem. Too many businesses have successfully lobbied for special favors and treatment by seeking mandates for their products, subsidies (in the form of cash payments from the government), and regulations or tariffs to keep more efficient competitors at bay. Crony capitalism is much easier than competing in an open market. But it erodes our overall standard of living and stifles entrepreneurs by rewarding the politically favored rather than those who provide what consumers want.”
At this moment, we can’t say that Kansas has its own version of Solyndra, the subsidized and politically-connected solar energy firm that recently shut down its operations and declared bankruptcy. But as far as absorbing the important lessons from Solyndra, we may have another chance to learn them in Kansas.
Solyndra is a failure in several ways. Much money was lost. It may be that corrupt or criminal activity was involved; we don’t know that yet. It appears that Solyndra will be a useful political scandal for Republicans to exploit, especially in the upcoming election campaign against the president. We can be sure that Republicans will keep us informed on this.
But the largest and most important lesson from Solyndra is one that many politicians — Democrats and Republicans both — don’t want to recognize: Government intervention in the economy is wrong for the health of the country.
The problem is that when government intervenes in the economy, it almost always gets it wrong. It’s not that Obama and other politicians aren’t smart. It’s the problems inherent in government interventionism: There will be both routine and spectacular examples of waste, as people — politicians and bureaucrats, especially — are not spending their own money. Decisions will be made to benefit the well-connected and for political, not market-based reasons. Cronyism and corruption flourish, as many will find it easier to compete in the marketplace for politicians rather than in the free market where fickle consumers rule with their fleeting tastes and preferences.
But politicians and bureaucrats love to intervene. For bureaucrats, intervention — government programs, that is — provides jobs, and well-paid jobs, too. Since much government intervention in the economy is in the form of subsidies, it allows politicians to dispense other peoples’ money and take credit for having “created” jobs or having built a bridge, probably to be named for them later on.
Other government intervention is in the form of creating unneeded regulations or tax loopholes that favor politicians’ friends or harm their competition.
All of this means that economic activity is directed according to political, not economic, considerations. It’s wasteful. It’s harmful. It diminishes market-based investment, that is, investment made according to what people really want and need. It reduces the freedom, liberty, and prosperity of everyone.
Back to Kansas: Last week the Department of Energy announced the award of a $132.4 million loan guarantee to Abengoa Bioenergy Biomass of Kansas, LLC. This is the same federal agency and the same loan guarantee program involved in the Solyndra matter. The difference is that it’s an even newer so-called green energy technology involved: cellulosic ethanol production.
The plant in Kansas is to be at Hugoton, in southwest Kansas. The press release from DOE promotes the number of jobs that will be created.
Cellulosic ethanol is produced from plant material that is usually considered waste, such as corn stalks or wheat straw. That’s different from the usual input to ethanol production in America, which is corn that would otherwise be used as animal or human food. Because of this, cellulosic ethanol is thought of by many as the “silver bullet” that will dramatically improve the path of America’s energy future. That may be the case, or it may not be. Because of the reasons listed above, government is particularly unsuited to make that decision and to participate in the scientific and entrepreneurial experimentation that will produce the answer.
At one time President George W. Bush praised the potential of this fuel. A Reuters analysis from July opens with: “The great promise of a car fuel made from cheap, clean-burning prairie grass or wood chips — and not from expensive corn that feeds the world — is more mirage than reality. Despite years of research, testing and some hype, the next-generation ethanol industry is far from the commercial success envisioned by President George W. Bush in 2006, when he pledged so-called cellulosic biofuels would be ‘practical and competitive’ by 2012.”
That hints at the problem: despite much effort, scientists haven’t been able to demonstrate cellulosic ethanol production on a commercially-successful scale. According to the Wall Street Journal, as of this summer, no commercial cellulosic ethanol has been produced.
The loan guarantee is not the only form of government subsidy and boost ethanol producers received. There is a tax credit for each gallon produced and a tariff that protects producers from cheaper imported ethanol.
Despite these very large measures of government intervention, cellulosic ethanol backers blame the government for lack of progress in the industry, citing the government’s failure to mandate production levels and provide assurances that the industry would receive subsidies. And the loan guarantees are not made fast enough, they add to the list of complaints. An analysis by ClimateWire that appeared in the New York Times in January had industry boosters blaming the federal Department of Energy for its slow pace in issuing loan guarantees.
We won’t know the success or failure of the Abengoa plant in Kansas for some time, and now we taxpayers are placed in the position of hoping that it succeeds. But it has the pedigree of a government plan to correct a perceived market failure, and that’s a danger sign.
Both Kansas Senators Pat Roberts and Jerry Moran have spoken approvingly of this plant despite the government intervention involved; Moran in a statement after the announcement, and Roberts in previous years as plans were being made. U.S. Representative Tim Huelskamp, who represents the district where the plant is located, has not commented on this plant, and offered no comment for this story.
The real lesson to be learned from Solyndra is that government is not equipped to act as entrepreneur. We need to apply that lesson to natural gas powered vehicles before it is too late.
Economist Walter Williams told a Wichita audience that when government is used in an attempt to do good, it requires either elimination or attenuation of private property and market forces. But it is private property and the desire for more that motivates people to do difficult and laborious things that benefit their fellow man. It all happens without government. In fact, government involvement in the market reduces the motivation of people to acquire, protect, and improve private property.
Recently wealthy investor Warren Buffet has been in the news for his advocacy of higher taxes. But is government — politics, in other words — the best way to allocate resources?
Appearing on the MSNBC morning program Morning Joe, energy investor T. Boone Pickens let us know that despite his no-nonsense business-like approach to supporting what he believes to be in America’s best interests, it’s really all about him and what profits him. But program hosts Joe Scarborough and Mika Brzezinski didn’t catch that.
Supporters of the Kansas Affordable Airfares Program are proud of the program’s success. But looking at the statistics uncovers a troubling trend that is obscured by the facts used to promote the program.
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 often not the case.
Are the free market critics of Social Security a shadowy “echo chamber” seeking to end the system for the benefit of the rich, or sounding a fact-based alarm that government and its supporters dispute and don’t want you to hear?
John Stossel’s most recent television program was titled “The State Against Blacks,” and it dealt with the topics of affirmative action, welfare, and the minimum wage.
Criticism by energy investor T. Boone Pickens of U.S. Representative Mike Pompeo and Koch Industries continues to illustrate the difference between those who believe in economic freedom and free markets, and those — like Pickens — who invest in politicians, bureaucrats, and the hope of a government subsidy.
Congressman Mike Pompeo of Kansas calls for application of free market principles to all industries, including the end of special tax treatment for all energy-producing industries.
Whether natural gas is good for our future is an issue that deserves discussion. But the way T. Boone Pickens wants to accomplish his goal is harmful, and the arguments he makes are mistaken.
Two conferences sponsored by liberal George Soros largely escape reporting in the news media, in contrast to the reporting on a conservative conference.
Matthew Continetti of the Weekly Standard has written a profile of Charles and David Koch and Koch Industries, focusing on politics and the attacks by the political Left. A key passage in the story explains what those who believe in economic freedom have known all along: If Charles and David Koch really wanted to make a lot of money for themselves, they would act like most corporations: seek fortune through government intervention, not through competition in free markets.
The Center for American Progress, through ThinkProgress, “has carried on a bizarre vendetta against Charles and David Koch and their company, Koch Industries.”
In today’s Wall Street Journal, Charles G. Koch, who is chairman of the board and CEO of Koch Industries, writes that economic freedom — not government spending and intervention — leads to prosperity and economic well-being for all, even for our poorest citizens.
The protests surrounding a conference of free-market advocates reveal the political left’s misunderstanding of the relationship between business and government, and between freedom and coercion.
Through application of market-based principles, Koch Industries Inc. has grown and created jobs at a rate 16 times that of an index of other large companies.
As Wichita begins its implementation of the plan for the revitalization of downtown Wichita, stakeholders like to delude themselves that the plan is “market-driven,” that the city will make prudent use of public “investment,” and that the plan’s supporters really do believe in free markets after all.
As government, both national and local, increases its intervention in markets and more decisions are made by politicians and bureaucrats rather than markets, wealth is lost.
Americans for Prosperity Kansas supports limited government and responsible tax and budget policies that force state government to live within its means. Click here to learn more.
Government is essentially the negation of liberty. — Ludwig von Mises
It is the responsibility of the patriot to protect his country from its government. — Thomas Paine
It does not take a majority to prevail, but an irate, tireless minority keen to set brushfires of freedom in the minds of men. — Samuel Adams
You do not know, and will never know, who the Remnant are, nor where they are, nor how many of them there are, nor what they are doing or will do. Two things you know, and no more: first, that they exist; second, that they will find you. — Albert Jay Nock
A major source of objection to a free economy is precisely that ... it gives people what they want instead of what a particular group thinks they ought to want. Underlying most arguments against the free market is a lack of belief in freedom itself. — Milton Friedman
As the coercive power of the state will alone decide who is to have what, the only power worth having will be a share in the exercise of this directing power. — F.A. Hayek
The kind of rules we should have are the kind that we'd make if our worst enemy were in charge. — Walter E. Williams
Your principle has placed these words above the entrance of the legislative chamber: “whosoever acquires any influence here can obtain his share of legal plunder.” And what has been the result? All classes have flung themselves upon the doors of the chamber crying: “A share of the plunder for me, for me!” — Frederic Bastiat
This was all before politicians gave us the idea that the things we could not afford individually we could somehow afford collectively through the magic of government. — Thomas Sowell
While the short-run prospects for liberty at home and abroad may seem dim, the proper attitude for the Libertarian to take is that of unquenchable long-run optimism. — Murray N. Rothbard
Barbra Streisand told Diane Sawyer that we're in a global warming crisis, and we can expect more and more intense storms, droughts and dust bowls. But before they act, weather experts say they're still waiting to hear from Celine Dion. — Jay Leno
The great virtue of free enterprise is that it forces existing businesses to meet the test of the market continuously, to produce products that meet consumer demands at lowest cost, or else be driven from the market. It is a profit-and-loss system. Naturally, existing businesses generally prefer to keep out competitors in other ways. That is why the business community, despite its rhetoric, has so often been a major enemy of truly free enterprise. — Milton Friedman
Increasingly, it seems that the biggest difference between conservatives and liberals is that the conservatives know government is force. But that doesn't stop them from using it. — John Stossel
One of the annoying things about believing in free will and individual responsibility is the difficulty of finding somebody to blame your problems on. And when you do find somebody, it's remarkable how often his picture turns up on your driver's license. — P.J. O'Rourke
Late one night in Washington, D.C. a mugger wearing a ski mask jumped into the path of a well-dressed man and stuck a gun in his ribs. "Give me your money!" he demanded. Indignant, the affluent man replied, "You can't do this. I'm a United States Congressman!" "In that case," replied the robber, "give me my money!" — Related by Walter Block
The libertarian creed, finally, offers the fulfillment of the best of the American past along with the promise of a far better future. Even more than conservatives, who are often attached to the monarchical traditions of a happily obsolete European past, libertarians are squarely in the great classical liberal tradition that built the United States and bestowed on us the American heritage of individual liberty, a peaceful foreign policy, minimal government, and a free-market economy. Libertarians are the only genuine current heirs of Jefferson, Paine, Jackson, and the abolitionists. — From "For A New Liberty: The Libertarian Manifesto" by Murray N. Rothbard
No matter how disastrously some policy has turned out, anyone who criticizes it can expect to hear: “But what would you replace it with?” When you put out a fire, what do you replace it with? — Thomas Sowell
Here’s Williams’ law: Whenever the profit incentive is missing, the probability that people’s wants can be safely ignored is the greatest. — Walter E. Williams
I would remind you that extremism in the defense of liberty is no vice. And let me remind you also that moderation in the pursuit of justice is no virtue. — Barry Goldwater
A society that puts equality — in the sense of equality of outcome — ahead of freedom will end up with neither equality nor freedom. The use of force to achieve equality will destroy freedom, and the force, introduced for good purposes, will end up in the hands of people who use it to promote their own interests. — Milton Friedman
When it becomes dominated by a collectivist creed, democracy will inevitably destroy itself. — F.A. Hayek
The most dangerous man, to any government, is the man who is able to think things out for himself, without regard to the prevailing superstitions and taboos. Almost inevitably he comes to the conclusion that the government he lives under is dishonest, insane and intolerable, and so, if he is romantic, he tries to change it. — H.L. Mencken
Of all tyrannies, a tyranny exercised for the good of its victims may be the most oppressive. It may be better to live under robber barons than under omnipotent moral busybodies. The robber baron's cruelty may sometimes sleep, his cupidity may at some point be satiated; but those who torment us for our own good will torment us without end, for they do so with the approval of their own conscience. — C.S. Lewis
When the people find they can vote themselves money, that will herald the end of the republic. — Benjamin Franklin
What is euphemistically called government-corporate "partnership" is just government coercion, political favoritism, collectivist industrial policy, and old-fashioned federal boondoggles nicely wrapped up in a bright-colored ribbon. It doesn’t work. — Ronald Reagan
Those fighting for free enterprise and free competition do not defend the interests of those rich today. They want a free hand left to unknown men who will be the entrepreneurs of tomorrow. — Ludwig von Mises
The problem is big government. If whoever controls government can impose his way upon you, you have to fight constantly to prevent the control from being harmful. With small, limited government, it doesn’t much matter who controls it, because it can’t do you much harm. — Harry Browne
Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place. — Frederic Bastiat
It is indeed probable that more harm and misery have been caused by men determined to use coercion to stamp out a moral evil than by men intent on doing evil. — F.A. Hayek
Freedom in economic arrangements is itself a component of freedom broadly understood, so economic freedom is an end in itself ... Economic freedom is also an indispensable means toward the achievement of political freedom. — Milton Friedman
Be thankful we're not getting all the government we're paying for. — Will Rogers
The American people will never knowingly adopt socialism, but under the name of liberalism, they will adopt every fragment of the socialist program until one day America will be a socialist nation without ever knowing how it happened. — Norman Thomas
[The political system] tends to give undue political power to small groups that have highly concentrated interests; to give greater weight to obvious, direct and immediate effects of government action than to possibly more important but concealed, indirect and delayed effects; to set in motion a process that sacrifices the general interest to serve special interests rather than the other way around. There is, as it were, an invisible hand in politics that operates in precisely the opposite direction to Adam Smith's invisible hand. — Milton Friedman
I'd rather be governed by the first 2,000 names in the Boston telephone directory than by the faculty of Harvard. — William F. Buckley Jr.
Liberty is not a means to a political end. It is itself the highest political end. — Lord Acton
The great virtue of a free market system is that it does not care what color people are; it does not care what their religion is; it only cares whether they can produce something you want to buy. It is the most effective system we have discovered to enable people who hate one another to deal with one another and help one another. — Milton Friedman
It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. Nobody but a beggar chooses to depend chiefly upon the benevolence of his fellow citizens. — Adam Smith
Democracy is a pathetic belief in the collective wisdom of individual ignorance. — H.L. Mencken
This is the shabby secret of the welfare statists' tirades against gold. Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard. — Alan Greenspan, “Gold and Economic Freedom” [1966]
Fundamentally, there are only two ways of coordinating the economic activities of millions. One is central direction involving the use of coercion — the technique of the army and of the modern totalitarian state. The other is voluntary cooperation of individuals — the technique of the marketplace. — Milton Friedman
The compelling issue to both conservatives and liberals is not whether it is legitimate for government to confiscate one’s property to give to another, the debate is over the disposition of the pillage. — Walter Williams
In Germany, they came first for the Communists,
And I didn’t speak up because I wasn’t a Communist;
And then they came for the trade unionists,
And I didn’t speak up because I wasn’t a trade unionist;
And then they came for the Jews,
And I didn’t speak up because I wasn’t a Jew;
And then ... they came for me ...
And by that time there was no one left to speak up.
— Pastor Martin Niemöller
There is no virtue in compulsory government charity, and there is no virtue in advocating it. A politician who portrays himself as "caring" and "sensitive" because he wants to expand the government's charitable programs is merely saying that he's willing to try to do good with other people's money. Well, who isn't? And a voter who takes pride in supporting such programs is telling us that he'll do good with his own money — if a gun is held to his head. — P.J. O'Rourke
The difference between libertarianism and socialism is that libertarians will tolerate the existence of a socialist community, but socialists can't tolerate a libertarian community. — David Boaz
When the people fear their government, there is tyranny; when the government fears the people, there is liberty. — Thomas Jefferson
After all, only the imagination limits the kind of laws and restrictions that can be written in the name of saving the planet. — Walter E. Williams
One of the methods used by statists to destroy capitalism consists in establishing controls that tie a given industry hand and foot, making it unable to solve its problems, then declaring that freedom has failed and stronger controls are necessary. — Ayn Rand
People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the publick. ... It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice. But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary. — Adam Smith
Act only on that maxim through which you can at the same time will that it should become a universal law. — Immanuel Kant
When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it. — Frederic Bastiat
