Voice For Liberty

Category: Free markets

  • Wichita Chamber calls for more cronyism

    Wichita Chamber calls for more cronyism

    By advocating for revival of the Export-Import Bank of the United States, the Wichita Metro Chamber of Commerce continues its advocacy for more business welfare, more taxes, more wasteful government spending, and more cronyism.

    Your chamber of commerce radio buttonsThat may be surprising to read. 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 usually not the case. It’s certainly is not the case in Wichita, where the Chamber supports higher taxes,1 2 more government spending, more business welfare, more government planning and control, more cronyism — and less economic freedom. The predictable result is less prosperity, which has been the case in Wichita under the leadership of the Wichita Chamber, its policies, and the politicians and bureaucrats it supports.

    Email to Wichita Chamber of Commerce supporters (excerpt).
    Email to Wichita Chamber of Commerce supporters (excerpt).
    Now the Wichita Chamber is asking members to lobby Kansas representatives in support of the revival of the Export-Import Bank. In an email (read here), the Wichita Chamber speaks approvingly of a maneuver executed successfully in the United States House of Representatives that will force a vote on the reauthorization of the Export-Import Bank. The method used, a discharge petition, was signed by well over a majority of House members, including perhaps 42 Republicans. If the petition signers vote the same way, the bill to reauthorize the Ex-Im Bank will pass the House. It will then move to the Senate for consideration.

    No members of the House of Representatives from Kansas signed the discharge petition. In July a vote on an amendment in favor of the Ex-Im Bank passed with 67 votes, including votes from both Kansas Senators Pat Roberts and Jerry Moran.

    Wichita governmental agencies favor the Export-Import Bank.
    Wichita governmental agencies favor the Export-Import Bank.
    Business groups and government agencies usually favor Ex-Im. Business groups — as distinguished from capitalism. Free-market and capitalism advocacy groups are almost universally opposed.

    In testimony to Congress on this matter, The Cato Institute providwed this:

    The Export-Import Bank’s main functions of providing loan guarantees, insurance, and direct loans that benefit U.S. exporters are typically justified by Ex-Im Bank’s mission of providing that support when there are instances of “market failure” — i.e., when the private market does not provide those services on its own — or subsidized export finance that benefits foreign competitors. I hope to show that in neither instance is the Ex-Im Bank’s support called for.

    Proponents of continued funding for the Ex-Im Bank often cite figures of export-related jobs created by Ex-Im’s finance to claim that the agency benefits the U.S. economy. The opportunity costs, or costs to the rest of the economy, of funding Ex-Im Bank’s activities are, however, never cited. By this logic, we are led to believe that the government export program is virtually cost-free or even provides a net economic gain.

    The reality is much different, particularly since the market is a far more efficient allocator of resources than government. While it may be true that the export agency helps a few businesses — only about 2 percent of all U.S. goods and services exports are backed by the Ex-Im Bank — it is highly doubtful that the agency helps the U.S. economy. Indeed, as one Congressional Research Service study noted, “Most economists doubt … that a nation can improve its welfare over the long run by subsidizing exports. Internal economic policies ultimately determine the overall level of a nation’s exports… . By providing financing or insurance for exporters, Ex-Im Bank’s activities draw from the financial resources within the economy that would be available for other uses. Such opportunity costs, while impossible to estimate, potentially could be significant.”

    Put another way, the Export-Import Bank is an example of corporate welfare. It benefits a small number of private businesses at the expense of other businesses and taxpaying citizens. That is true even if the agency does not lose money. …

    Conclusion

    The Export-Import Bank is a New Deal era agency with no relevance in a liberal global economy. It has not helped cause U.S. prosperity, but has certainly imposed opportunity costs larger than any alleged benefits; it has not corrected so-called market failures, but has rewarded foreign countries for failing to adopt market-oriented policies and institutions; and it affects such a small percentage of U.S. exports that even in the face of foreign nations’ wrong-headed, export-finance programs, the “playing field” already seems to favor U.S. businesses. The most important reason, however, that the Export-Import Bank’s charter should not be reauthorized is that it is neither morally correct nor constitutional for the federal government to use general taxpayer money to promote the economic welfare of specific groups.

    A statement from Americans for Prosperity read:

    Members are right to be frustrated with this attempt to sidestep regular order, especially to revive a defunct institution that represents the worst of Beltway crony capitalism. It’s unfortunate that some are determined not to take even a modest step toward restoring free markets or getting out of the business of special interest deals. Signing this discharge petition is an attempt to bring an inherently corrupt institution back from the dead, and it means siding with corporate lobbyists over taxpayers. Abandoning free-market principles is wrong, but trying to do it with a procedural gimmick just adds insult to injury.

    FreedomWorks issued this:

    This July, an 80-year-old corporate welfare program known as the U.S. Export-Import Bank was allowed to expire for the first time since its inception. Created by FDR as part of his New Deal, the bank offers taxpayer-backed loan guarantees to companies unable to secure independent financing — in other words, loans too risky for private investors to be willing to finance.

    It’s a ridiculous and obsolete program, and while its cost is small in the grand scheme of government spending — $2 billion over years — the difficulty with which it was finally defunded shows the extreme disproportionate influence of special interests in Washington. When conservatives finally succeeded in stopping the Bank’s funding, it was regarded as a huge victory for the opponents of corporate cronyism, proof of the concept that we can stop, or at least roll back, the leviathan if we could only muster the political will. …

    It’s cynical in the extreme for politicians to try to sneak this corporate handout past the voters, and anyone who supports the reauthorization should be ashamed of themselves. FreedomWorks has preemptively issued a Key Vote NO on any bill to reauthorize the Ex-Im Bank, and will count those votes on our legislative scorecard.

    Heritage Foundation has an excellent discussion of the issues at Export–Import Bank: Propaganda versus the Facts.

    1. Weeks, B. (2015). Wichita Chamber speaks on county spending and taxes. Voice For Liberty in Wichita. Available at: wichitaliberty.org/sedgwick-county-government/wichita-chamber-speaks-on-county-spending-and-taxes ↩
    2. Weeks, B. (2014). For Wichita Chamber of Commerce chair, it’s sales tax for you, but not for me. Voice For Liberty in Wichita. Available at: wichitaliberty.org/wichita-government/wichita-chamber-commerce-chair-sales-tax ↩

  • Export-Import Bank threatens a revival

    Last week members of the United States House of Representatives successfully executed a maneuver that will force a vote on the reauthorization of the Export-Import Bank of the United States. The method used, a discharge petition, was signed by well over a majority of House members, including perhaps 42 Republicans. If the petition signers vote the same way, the bill to reauthorize the Ex-Im Bank will pass the House. It will then move to the Senate for consideration.

    No members of the House of Representatives from Kansas signed the discharge petition. In July a vote on an amendment in favor of the Ex-Im Bank passed with 67 votes, including votes from both Kansas Senators Pat Roberts and Jerry Moran.

    Wichita governmental agencies favor the Export-Import Bank.
    Wichita governmental agencies favor the Export-Import Bank.
    Business groups and government agencies usually favor Ex-Im. Business — as distinguished from capitalism. Free-market and capitalism advocacy groups are almost universally opposed. A statement from Americans for Prosperity read:

    Members are right to be frustrated with this attempt to sidestep regular order, especially to revive a defunct institution that represents the worst of Beltway crony capitalism. It’s unfortunate that some are determined not to take even a modest step toward restoring free markets or getting out of the business of special interest deals. Signing this discharge petition is an attempt to bring an inherently corrupt institution back from the dead, and it means siding with corporate lobbyists over taxpayers. Abandoning free-market principles is wrong, but trying to do it with a procedural gimmick just adds insult to injury.

    FreedomWorks issued this:

    This July, an 80-year-old corporate welfare program known as the U.S. Export-Import Bank was allowed to expire for the first time since its inception. Created by FDR as part of his New Deal, the bank offers taxpayer-backed loan guarantees to companies unable to secure independent financing — in other words, loans too risky for private investors to be willing to finance.

    It’s a ridiculous and obsolete program, and while its cost is small in the grand scheme of government spending — $2 billion over years — the difficulty with which it was finally defunded shows the extreme disproportionate influence of special interests in Washington. When conservatives finally succeeded in stopping the Bank’s funding, it was regarded as a huge victory for the opponents of corporate cronyism, proof of the concept that we can stop, or at least roll back, the leviathan if we could only muster the political will. …

    It’s cynical in the extreme for politicians to try to sneak this corporate handout past the voters, and anyone who supports the reauthorization should be ashamed of themselves. FreedomWorks has preemptively issued a Key Vote NO on any bill to reauthorize the Ex-Im Bank, and will count those votes on our legislative scorecard.

    Heritage Foundation has an excellent discussion of the issues at Export–Import Bank: Propaganda versus the Facts.

  • Does Kansas have its own Solyndra?

    Does Kansas have its own version of Solyndra, the politically-connected firm that failed and cost taxpayers some $535 million? We don’t know. But the Abengoa cellulosic ethanol plant near Hugoton received a $132.4 million loan guarantee under the same program that benefited Solyndra.

    In January I requested documents regarding the Abengoa loan guarantee and risk assessment from the United States Department of Energy. I had several conversations and emails with a records clerk. We came to agreement as to what I would receive, or at least what I am requesting to receive. But I’ve received nothing so far. I don’t know if the document will be made available to me at no charge, or will I have to pay thousands of dollars. The Department of Energy is working on my request, they say. But after nine months: nothing. Following, from October 2011, more information about this plant.

    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 free lunch: Markets and private property

    The real free lunch: Markets and private property

    As we approach another birthday of Milton Friedman, here’s his article where he clears up the authorship of a famous aphorism, and explains how to really get a free lunch. Based on remarks at the banquet celebrating the opening of the Cato Institute’s new building, Washington, May 1993.

    I am delighted to be here on the occasion of the opening of the Cato headquarters. It is a beautiful building and a real tribute to the intellectual influence of Ed Crane and his associates.

    I have sometimes been associated with the aphorism “There’s no such thing as a free lunch,” which I did not invent. I wish more attention were paid to one that I did invent, and that I think is particularly appropriate in this city, “Nobody spends somebody else’s money as carefully as he spends his own.” But all aphorisms are half-truths. One of our favorite family pursuits on long drives is to try to find the opposites of aphorisms. For example, “History never repeats itself,” but “There’s nothing new under the sun.” Or “Look before you leap,” but “He who hesitates is lost.” The opposite of “There’s no such thing as a free lunch” is clearly “The best things in life are free.”

    And in the real economic world, there is a free lunch, an extraordinary free lunch, and that free lunch is free markets and private property. Why is it that on one side of an arbitrary line there was East Germany and on the other side there was West Germany with such a different level of prosperity? It was because West Germany had a system of largely free, private markets — a free lunch. The same free lunch explains the difference between Hong Kong and mainland China, and the prosperity of the United States and Great Britain. These free lunches have been the product of a set of invisible institutions that, as F. A. Hayek emphasized, are a product of human action but not of human intention.

    (more…)

  • Kansas senators vote to advance Ex-Im Bank

    In a procedural motion, Kansas Senators Pat Roberts and Jerry Moran voted to advance the revival of the Export-Import Bank. The vote was a procedural motion on an amendment to allow a floor vote (invoking cloture). The amendment passed by a vote of 67 to 26.

    Among Republicans the vote was 24 to 26 against the measure. All Democrats voted in favor.

    The Export-Import Bank failed to be reauthorized by a June 30 deadline. It has not been making new loans since. The current legislation that passed the senate would reauthorize the bank.

    Free market groups have long opposed the Ex-Im Bank, while many business interest groups call it vital.

  • Are you in the top 1%?

    Most Americans would be surprised to learn that they are, in fact, in the top one percent of income — when the entire world is considered. It is economic freedom in America that has been responsible for this high standard of living. But America’s ranking among the countries in economic freedom has declined, and may fall further.

    View the 60-second video at Economic Freedom in 60 Seconds, or click below.

  • Thumbs up for Americans for Prosperity

    On the television news program Journal Editorial Report, Potomac Watch columnist for The Wall Street Journal editorial page Kimberley A. Strassel gave a thumbs up to Americans for Prosperity for its work in the recent election.

  • ALEC should stand up to liberal pressure groups

    ALEC should stand up to liberal pressure groups

    From April 2012.

    Today’s Wall Street Journal explains how left-wing activists are using fear of the racism label to shut down free speech and debate. The target of their current smear campaign is American Legislative Exchange Council, or ALEC.

    Liberals can’t stand ALEC because it is a strong and influential advocate for free market and limited government principals in state legislatures. Liberals accuse ALEC of supplying model legislation which may influence the writing of actual state law, or even become state law in some cases. Of course, liberal advocacy groups do this too, but they don’t let that get in the way of their criticism of ALEC.

    The reality is that all sorts of people and special interest groups seek to influence the writing of laws. But for laws to take effect — no matter who proposes them — they must be passed by legislatures and signed by the chief executive (or a veto must be overturned).

    The false charges of racism are particularly troubling, as no one wants to be labeled as such. That’s why scoundrels demonize their opponents with charges of racism, writes the Journal, and it’s become a powerful weapon for left-wing activists: “The ugly, race-baiting anti-ALEC campaign is typical of today’s liberal activism. It’s akin to the campaigns to smear libertarian donors Charles and David Koch and to exploit shareholder proxies to stop companies from giving to political campaigns or even the Chamber of Commerce. The left these days isn’t content merely to fight on the merits in legislatures or during elections. If they lose, they resort to demonizing opponents and trying to shut them down. The business community had better understand that ALEC won’t be the last target.”

    As it turns out, the motivations of some contributors to ALEC are quite narrow. Coca-Cola wanted help from ALEC only in the opposition to soft drink taxes: “So Coke executives are happy to get ALEC’s help in their self-interest but head for the tall grass when ALEC needs a friend.”

    Liberals accuse ALEC of being a front group for corporations, promoting only legislation that advances the interests of corporations or business at the expense of others. When you examine specific examples of these charges, the proposals being criticized often reduce taxes for everyone or reduce harmful and unnecessary regulations. If ALEC does promote legislation that caters to special interest groups, it should stop doing so.

    Besides services to legislators, ALEC provides a valuable service to the public: The Rich States, Poor States publication that examines why some states perform better in economic growth and opportunity than others. The fifth edition was released last week.

    Recently a city council member from a small town asked me if there were resources to help city council or county commission members understand and apply the principals of free markets and limited government to city and county governments. I looked and asked a few people. The answer is no, there appears to be no such resource. This seems like a growth opportunity for ALEC or a new organization. There are several well-known organizations that strive to advance the size and scope of city and county governments, and these need a counter-balance.

    Shutting Down ALEC

    Playing the race card to silence a free-market policy voice

    Is it suddenly disreputable to advocate free-market policies? That’s the question raised by a remarkable political assault on the American Legislative Exchange Council (ALEC), which promotes reform in the 50 states. Led by former White House aide Van Jones, various left-wing activists and media are bullying big business to cut off ALEC’s funding. So much for free and open debate.

    Founded in 1973, ALEC is a group of state lawmakers who meet to share and spread conservative policy ideas. ALEC’s main focus is fiscal and economic policy, notably at the moment pension and lawsuit reform, tax and spending limitation, and school choice. For years it labored in obscurity, its influence rising or falling with the public mood. But after conservatives made record gains in state legislatures in 2010, the left began to target ALEC for destruction.

    Continue reading at the Wall Street Journal (no subscription required)

  • 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.