Voice For Liberty

Category: Free markets

  • Despite subsidy program, Wichita flights are declining

    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.

    The program provides taxpayer-funded grants to airlines so that they will provide low-cost service to cities in Kansas. The thought is that by propping up a discount carrier, other airlines will be forced to reduce their fares. By far the largest consumer of these subsidies is Airtran Airways in Wichita. For this goal, the program has worked, probably. We have to say “probably” because we can never know what would have happened in the absence of this program. But it is quite likely that fares are at least somewhat lower than would they would be otherwise.

    But lower fares is not the only measure of success. The number of available flights is a measure, too, and a very important one for many people.

    The problem is that subsidy boosters state that the number of flights has increased. For example, on a page that is part of the Sedgwick County official website, the claim is made that the affordable airfares program “offers more flights to both east and west coasts.”

    In the agenda packet for the July meeting of the Regional Economic Area Partnership of South Central Kansas — that’s the body that administers the affordable airfares program — board members were presented this information: “In presenting its proposal Sedgwick County provided evidence documenting that low-fare air service to eastern and western U.S. destinations through Wichita Mid-Continent Airport had been successful in providing more air flight options, more competition for air travel, and affordable air fares for Kansas.”

    Later that document describes selection criteria for deciding which airlines will receive grants. The first goal listed is “more air flight options,” which is further described as the number of scheduled, daily nonstop and one-stop flights.

    Certainly enticing a new airline carrier to town by paying them a subsidy increases the number of flights that carrier will offer, as before the subsidy, they offered none. But the experience of Wichita shows that the affordable airfares program is causing an overall loss of flight options in Wichita.

    It’s true that when the airline subsidy started, funded at first only by the City of Wichita, the number of flights departing from Wichita increased. That’s not remarkable. That was the stated goal of the program, and if we paid AirTran a subsidy and they didn’t provide flights, that would have been a problem.

    But the history of flights before the subsidy program is not the only important measure, although supporters of the program like the Wichita Eagle’s Rhonda Holman make use of it when she recently wrote this about the program and an audit of it conducted by Kansas Legislative Division of Post Audit: “Even so, the audit put the return on the state’s investment at $2.32-to-$1, cited 38 percent growth in passenger counts between 2000 and 2009, and said ‘fares have decreased, while the number of passengers and the number of available flights have increased.’”

    Yes, the number of available flights increased upon the arrival of AirTran and the start of the subsidy payments. But the trend since 2005 — about the time the state got involved in the funding and the program matured — is not encouraging. As shown in the accompanying charts, that trend is continually on a downward trajectory. (The charts show two different sets of data for the number of departures from Wichita.)

    The decline in the number of available flights is important, because for some travelers, particularly business travelers, the availability of a seat on an airplane at any price is more important than being able to book a cheap flight a month in advance.

    People may disagree about the wisdom of the airline subsidy program. But we need to recognize that the availability of flights to and from Wichita is declining, and has been declining for a number of years.

    We often hear of the unintended consequences of government intervention. This is such an example. Compounding the problem is the refusal of the program’s supporters — both within and outside of government — to recognize it, at least publicly.

    Monthly departures from WichitaMonthly departures from the Wichita airport
    Number of daily departures from the Wichita airport by air carriers (excluding weekends)Number of daily departures from the Wichita airport by air carriers (excluding weekends)

  • Local chambers of commerce: tax machines in disguise

    The fact that the Overland Park Chamber of Commerce supports a tax increase reminded 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.

    We may soon have a test of this in Wichita, where business leaders are tossing about ideas for various forms of tax increases. Again, I distinguish between “business leaders” and “capitalists.”

    Fortunately, the Kansas Chamber of Commerce is generally unwavering in its support of pro-growth, limited government principles. But that’s not the case for most local chambers. Bernie Koch, a booster of local chambers and their big-government policies, recently wrote an op-ed in which he defended the high-tax corporate welfare state model for Kansas.

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

  • Greenwald and Sanders try to defend Social Security, slam Charles and David Koch

    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?

    According to a short video by Robert Greenwald, it’s the first choice. But examination of the claims made will lead us to the opposite conclusion, and you’ll wonder why Greenwald has any credibility.

    The video features U.S. Senator from Vermont Bernie Sanders, who describes himself as a democratic socialist. He describes Social Security as a federal program that has been “enormously successful,” so right away we need to take issue with Sanders. Social Security a success? If creating a system where millions of people are dependent on government for their retirement income is a successful program, the government has done just that. What has been the result? As George Reisman recently wrote: “Not surprisingly, in the conviction that the government was now providing for people’s old age, the rate of saving in the United States has declined precipitously over the years, falling all the way to zero in some years.”

    We’ve transitioned from savers to government dependents. For a socialist like Sanders, that may very well have been his goal. He certainly can’t be unhappy with the results.

    Right after this, the video shows images and names of think tank organizations that are funded in part by Charles Koch and/or David Koch, with Sanders claiming these organizations spread “disinformation” about Social Security. The information generated by these think tanks is truthful, however, and an important antidote to a huge whopper of a lie Sanders will spread later on.

    (At this point one might be tempted to ask: What is the interest of the Charles and David Koch in reforming Social Security? John Hinderaker in his Powerline article A Less Than Magnificent Obsession answers this question when he writes: “… does it make any difference to the Kochs’ company, Koch Industries, whether the retirement age is 65 or 68? I can’t imagine why it would. Likewise, the brothers themselves are both billionaires. Whether Social Security is or is not reformed makes zero difference to them personally.” I would say, however, that Charles and David Koch have long advocated for liberty and economic freedom for everyone, and since Social Security is contrary to that, this could explain their interest.)

    A huge focus of the video is raising the retirement age. It’s repeated over and over — so as to scare viewers. As John Hinderaker notes at Powerline, it’s been done before: “proposals to raise the age of Social Security eligibility have been a bipartisan staple of reform proposals for decades. … The bipartisan Bowles-Simpson Commission, which was appointed by President Obama, recommended increasing the age of eligibility.”

    It’s important to note that the Social Security retirement age is simply the age at which one can begin receiving benefits. Contrary to the claims of Sanders in this video, it doesn’t mean that everyone has to keep working until that age. Over the course of a working career, isn’t it possible for someone to save enough to cover the several years between when they decide to quit working and when they’re eligible for Social Security? Or will we let the government — people like Sanders — tell us how long we must work?

    Sanders also says that older people need to retire and get out of the workforce to make way for younger workers to take their jobs. This is an example of the fallacy — followed by nearly all on the political Left, it seems — of believing that the economy is a fixed size, and that one person can have income only if someone else gives up theirs.

    Perhaps the most dangerous lie of Sanders is his claim that Social Security has a $2.6 trillion surplus available to pay future benefits. He’s referring to the Social Security trust fund. Here, Sanders is correct one on level: The system has collected that much more than it has needed to pay benefits, forming the balance referred to in the trust fund. That money has been lent to other federal government agencies, and they spent it all. So while Federal Agency X may owe the trust fund $50 billion, the only way that agency can repay the trust fund is by borrowing or increasing taxes. (Less spending might be another way, but that’s a difficult goal, and we’d be taxed the same for a lower level of services — a tax increase by another name.) See Social Security trust fund: a problem in disguise.

    Sanders dismisses private retirement accounts as risky and dangerous: “You may lose all your retirement savings when you get old.” While true, any reasonable investment strategy designed for the long term has little chance of that happening. Unless, of course, one gets greedy and invests everything in a company like Enron — greed of that type being something Sanders rails against.

    Saving on one’s own, however, isn’t what leftists like Bernie Sanders have in mind. Far better for him, Democrats, and big-government Republicans that people remain dependent on government for their retirement security. Once people save and gain some wealth of their own, they find that they can thrive very nicely without a nanny state government. They find themselves wishing they could have saved more throughout their working lives, rather than making forced contributions to a government retirement plan that’s now broke. Even if not broke, most people would be in a much better position if they could have kept their own and their employers’ payroll tax contributions for their own investment.

    Finally, Sanders makes a major point of “huge campaign contributions” made to advance the interests of Charles and David Koch. Hinderaker chases down some of the actual numbers, and finds that contributions from Koch Industries PAC are sometimes less than what a single labor union has contributed.

    In the end, I’m sure that Sanders said something that’s true in this video. But I can’t bear to watch it again to try and spot it.

    Here’s my video response:

  • Stossel: The state against blacks

    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.

    A featured guest on the show was Dr. Walter E. Williams, an economist at George Mason University. His most recent book is on this topic, and it’s titled Race and Economics: How Much Can Be Blamed on Discrimination? A preview of the book is available at that link.

    On welfare, Williams told Stossel: “The welfare state has done to black Americans what slavery could not have done, the harshest Jim Crow laws and racism could not have done — namely, break up the black family. Today, just slightly over 30 percent of black kids live in two-parent families.” He contrasted this with much higher numbers of intact families in the past. A video clip is below.

    In another clip from the show, Williams discusses the war on poverty and how the minimum wage is harmful to those it is meant to help.

    Summarizing at the end of the show, Stossel told the audience that limited government — not an expansive welfare state — is best for everyone, including the poor, immigrants, and minorities:

    There’s no question that in America that blacks, on average, are economically behind whites. Average black household income is about 40 percent less than for whites. Why? Other minorities were once that far behind, but they prospered. In 1910 Chinese immigrants were 10 percent poorer than other Americans. Their grandkids, in 1985, were 35 percent richer than other Americans.

    Other minorities rose out of poverty: Italians, Hungarians, the Irish, and so on. So why not most blacks? Because just at the time that blacks like Walter Williams were lifting themselves out of poverty, President Johnson created a government war on poverty. Trillions of your dollars were spent on welfare programs that unintentionally reward dependency.

    And then came more regulation like licensing rules and minimum wage rules that stifle entrepreneurship. Politicians like Jessie Jackson say racism is why blacks still struggle today. But Walter Williams taught me that’s just nonsense. There is still racism today. But if that’s such an obstacle, explain the success of black immigrants in America. Their skin is just as dark, but they knew well they’d proposer. Immigrants from Jamaica are poorer than the average American, but a few years later their kids are one percent richer than the average American.

    Why? For one reason, it’s harder for immigrants to get government assistance. They don’t grow up in a culture of handouts, so they’re forced to make it on their own. And that makes all the difference. What helps poor people most is limited government, simple rules that everyone understands, that leave newcomers free to braid hair, for example, or drive taxis, or start companies.

    If the state keeps the peace but then gets out of our way, people prosper. I didn’t understand that until Walter Williams taught me. And many Americans still don’t get it.

    Stossel’s column on this topic is Is Government Aid Helping or Hurting Blacks? Video from Williams’ 1985 PBS documentary “State Against Blacks” is available here. Video from the “Good Intentions” series is here.

  • Pickens criticism illustrates divide between free markets and intervention

    Last week’s criticism by energy investor T. Boone Pickens of U.S. Representative Mike Pompeo, a Wichita Republican serving his first term, 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.

    Pickens is pushing H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, or NAT GAS act. The bill provides a variety of subsidies, implemented through tax credits, to producers and users of natural gas. The goal is to promote the use of natural gas as the fuel the nation uses for transportation.

    In his op-ed in the Wichita Eagle, Pickens was critical of Pompeo for his stance in favor of free markets and in opposition to subsidies. His criticism, however, was inconsistent and contradictory. Further, Pompeo’s position on this issue is clear, as part of a resolution he introduced reads: eliminate existing energy subsidies.

    There was another target of Pickens’ criticism. He didn’t mention the company by name, but there were several thinly-veiled references to Wichita-based Koch Industries. Charles Koch and his brother David Koch have emerged as prominent defenders of economic freedom and the freedom and prosperity it generates. Charles Koch, in particular, has been outspoken in his criticism of the type of subsidies that Pickens seeks. Koch’s op-ed, also in the Wichita Eagle and on Koch Industries website at Advancing economic freedom, was pointed in its criticism of corporate welfare: “Our government made a point of reforming its welfare policies for individuals but not for corporations. … Unfair programs that favor certain companies — such as the current well-intentioned but misguided suggestion that the natural-gas industry should receive enormous new subsidies — don’t just happen. They are promoted, in large part, by those seeking to profit politically, rather than by competing in a market where consumers vote with their wallets.”

    In a statement on the company’s Viewpoint website, Dr. Richard Fink, Executive Vice President of Koch Industries, continued to explain the harm of government intervention, saying “Koch has consistently opposed subsidies that distort markets. We maintain that the marketplace, while not perfect, is the best mechanism for allocating resources to consumers. People deciding what fuels to purchase, instead of the government, is best for consumers and our country. Likewise, if natural gas vehicles are truly advantageous and economically efficient, then consumers will demand that they be developed without political mandates that exhaust more taxpayer dollars.”

    Fink continues, “We do not question T. Boone Pickens’ intentions or integrity in this debate. We recognize his experience in the energy markets and take him at his word that he thinks this is a good idea. However, we believe history has demonstrated over and over that these subsidies end up undermining the long term prosperity of the country. For these principled reasons, we oppose this bill to give tax incentives to buyers and makers of natural gas-powered vehicles and related infrastructure. We also consistently oppose subsidies for all other fuels whether or not we benefit from them.”

    Pickens would probably object to the use of the term “subsidy,” as the legislation he pushes grants “credits,” a term that sounds fairly benign. Timothy P. Carney, writing in the Washington Examiner, provides an explanation of the difference: “Pickens draws two dividing lines in the piece: tax credit vs. grant, and permanent versus temporary. A temporary subsidy is certainly better than an indefinite or permanent one. The tax credit question is trickier. Many free-market champions support every tax break ever proposed (Ron Paul, for instance). Other free market types (like me, probably) think that tax credits act as subsidies which distort the market, and ultimately lead to tax hikes on others. One of the bad things about tax credits is that they reward businesses for following political signals rather than market signals, but they do it in a way that allow the beneficiaries, like Pickens, to act as if they’re not on the public dole. Sure, a tax credit (most of the time) isn’t a handout, but the favored product (like ethanol or natural gas) only succeeds because its competition is taxed at high rates. So tax credits are the socially acceptable form of corporate welfare.” (emphasis added)

    While Carney usually gets things just right, I’ll disagree with him that the question of tax credits is tricky: They have the same economic effect as a grant or subsidy. They engineer the behavior the government wants. But Carney is right about the confusing appearance of tax credits, allowing them to be “the socially acceptable form of corporate welfare.” Unless we really think about it, that is.

    In any discussion of Pickens and natural gas, we must recognize that he is an investor in gas and another energy technology related to gas: wind power. In 2008 Pickens ordered 667 wind turbines worth $2 billion from General Electric with plans to build a large wind power plant in Texas. Wind power is highly dependent on government subsidy, with supporters claiming the industry will be devastated unless Congress continues to renew the subsidies.

    At one time Pickens wanted to use wind power to generate electricity, and the natural gas saved would be used to power transportation. But there’s another relationship between wind power and gas, and it stems from the unreliability and variability of wind power. It’s difficult to quickly adjust the output of most power plants. But natural gas turbine plants are an exception. Kansas recently saw one of its major electric utilities complete a new natural gas power plant. The need for the plant was at least partly created by its investment in wind: A document produced by Westar titled The Greenhouse Gas Challenge noted the “Construction of the 665 MW natural gas-fired Emporia Energy Center, providing the ability to efficiently follow the variability of wind generation.” In another document announcing a request for a rate increase it stated “Our Emporia Energy Center is excellent for following the variability of wind production.”

    At the time of these investments by Pickens and Westar, the price of natural gas was high. Now it is low — so low, and the prospects for future low prices certain enough that Pickens has abandoned his wind farm projects. Even with all the subsidy granted to wind power, it’s cheaper to generate electricity with gas.

    (Pickens has been left with many wind turbines he can’t use. According to the Wall Street Journal: “He’s hoping to foist them on ratepayers in Canada, because that country has mandates that require consumers to buy more expensive renewable electricity.” In other words, relying on some other country’s government intervention to relieve him of his mistake.)

    So we see Pickens moving from one government-subsidized industry — wind power — to another: the subsidized market for natural gas-powered vehicles he hopes to create. The distinction between political entrepreneurs and market entrepreneurs couldn’t be clearer.

  • Pompeo on energy tax simplification

    In an email alert sent to members, Americans for Prosperity–Kansas calls for support for a Kansas Congressman who is fighting for free markets in energy. AFP–Kansas State Director Derrick Sontag wrote: “U.S. Representative Mike Pompeo (R-Kan.) is getting attacked for standing up for the free market principles that Kansas voters sent him to Washington to defend. You may have seen that T. Boone Pickens is trying to use out-of-state pressure from Oklahoma to lean on Pompeo. Pickens wants Pompeo to end his opposition to Pickens’ effort to get special tax treatment for natural gas vehicles. But Pompeo has it exactly right; Washington shouldn’t be picking winners and losers in the energy industry.”

    The bill in question is H.R. 1380: New Alternative Transportation to Give Americans Solutions Act of 2011, or NAT GAS act. The bill provides a variety of subsidies, implemented through tax credits, to producers and users of natural gas. Last week the Wichita Eagle printed an op-ed from T. Boone Pickens which unsuccessfully attempted to make the case that these credits are not the same as subsidies.

    Pickens also criticized Pompeo for failure to come out against all subsides, a criticism which is false and uninformed. On May 12th Pompeo introduced H. Res. 267, which is subtitled “Expressing the sense of the House of Representatives that the United States should end all subsidies aimed at specific energy technologies or fuels.”

    The summary of the bill as provided by the Congressional Research Service is: “Declares that the House of Representatives should: (1) provide by refusing any legislative proposal that includes new energy subsidy programs of any kind; (2) prohibit the expansion or extension of existing energy subsidies; (3) eliminate existing energy subsidies; and (4) begin tax simplification and reform by eliminating energy tax credits and deductions and reducing income tax rates.”

    That sounds clear and unequivocal to me: refusing … new energy subsidy programs — prohibit the expansion or extension — eliminating existing energy subsidies — eliminating energy tax credits and deductions.

    (The full text of the Pompeo resolution is below.)

    In yesterday’s Wichita Eagle, oilman Wink Hartman, who ran against Pompeo in last year’s primary election, argued against removal of tax credits currently in place for oil companies: “First, removal of tax credits for energy companies will not only hurt the intended political scapegoats — large oil companies — but will also hit small energy companies, too, including the dozens of Kansas oil producers fighting hard to find much-needed additional oil reserves and compete with the larger oil companies for their survival.”

    But as argued recently in Forbes Magazine, these oil industry subsidies, like all subsidies, “make the economy less — not more — efficient.”

    Authors Jerry Taylor and Peter Van Doren also argue that “Many conservatives argue that the elimination of these energy tax provisions and others like them for other sectors are tax increases. They are correct in a narrow sense. But in a larger sense they are incorrect because the elimination of such tax provisions makes the tax code more neutral and a more neutral tax code is a more conservative tax code.”

    They also write that these tax favors “direct private investment to the favored businesses and away from the unfavored” and that “such favors are as much a part of big government as explicit appropriated spending. Tax breaks like this constitute big government on the sly.”

    To the extent that the oil business — and any other industry — has incorporated special tax treatment into their business plan, we can support a phase-out of all tax favors instead of overnight elimination. This will give the companies time to plan for the transition. But aside from this consideration, we must end all such preferential treatment if we are to have a truly sound and robust economy.

    Those wishing to express support for Pompeo can do so at AFP’s Action Center.

    The resolution by Mike Pompeo and co-sponsors Raúl Labrador and Tom McClintock:

    Expressing the sense of the House of Representatives that the United States should end all subsidies aimed at specific energy technologies or fuels.

    Whereas companies continue to innovate and adapt to a growing and volatile energy market;

    Whereas the primary role of the Government in the energy markets is to create an economic climate where companies can continue to innovate and compete, and thereby provide value and affordability to families and businesses;

    Whereas it is not the role of the Government to favor one fuel source or energy sector over another;

    Whereas taxpayers have subsidized the energy industry with grants, direct loans and loan guarantees, and tax credits aimed at specific industries for decades;

    Whereas deductions and cost-recovery mechanisms available to all energy sectors are different than credits, loans and grants, and are therefore not taxpayer subsidies;

    Whereas a deduction of costs and cost recovery with respect to timing is not a subsidy;

    Whereas the current system of energy subsidies is opaque and unduly complex;

    Whereas energy subsidies have consistently failed to bring down the price of gasoline for consumers, and electricity and natural gas for industrial users; and

    Whereas eliminating energy subsidies from the Internal Revenue Code of 1986 will allow us to lower the overall rate of corporate income tax without increasing deficits: Now, therefore, be it

    Resolved, That the House of Representatives should —

    (1) provide no new energy subsidies by refusing any legislative proposal that includes new energy subsidy programs of any kind;

    (2) prohibit the expansion or extension of existing energy subsidies;

    (3) eliminate existing energy subsidies; and

    (4) begin tax simplification and reform by eliminating energy tax credits and deductions and reducing income tax rates.

  • Pickens and his energy plan

    It’s surprising how those who are successful in business can torture logic and reason when attempting to convince someone of their beliefs. Today’s Wichita Eagle carries such an example from T. Boone Pickens in his quest to move America towards a future powered by natural gas.

    Whether natural gas is good for our future is an issue that deserves discussion. But the way Pickens wants to accomplish his goal is harmful, and the arguments he makes are mistaken.

    In the Eagle piece today, Pickens wrote this in criticism of U.S. Representative Mike Pompeo, who represents the Kansas fourth congressional district: “What Pompeo might not understand is that there is a difference between a targeted incentive and a never-ending subsidy paid by the federal government on a per-gallon, per-kilowatt or per-anything basis. The latter is a check from the Treasury to a producer. The New Alternative Transportation to Give Americans Solutions Act (H.R. 1380) extends highly targeted tax incentives (not federal grants) to organizations that have heavy vehicles currently burning diesel.”

    He goes on to write that these “incentives for fleet owners to change” would be limited in amount and time.

    Where Pickens is confused is in the difference between “tax incentives” and “subsidy.”

    A subsidy is a check from the government, as Pickens says. Tax credits, on the other hand, are mysterious. The very term credit has a positive connotation, like when someone deserves credit for doing something well. Using such a term allows people like Pickens to make arguments that sound noble and lets them obscure the true economic transaction. A transaction, of course, which benefits them, and one they don’t want you to know about.

    Instead of tax credits or business credits it would be more accurate to use the term tax expenditures, as that accurately describes what is happening: government spends money through the tax system.

    It’s easy to see how this works. When government issues a tax credit, it takes the form of a coupon (conceptually) with a dollar amount, say $1,000,000, written on it. When it comes time for a company to pay taxes, it computes its tax liability using the normal methods, and might come up with a liability of, say, $2,500,000. But instead of sending that amount to the tax collector, the company would send a check for $1,500,000 and its coupon (the tax credit) worth $1,000,000.

    To the company that received the tax credit, it’s just like receiving a cash payment, except it’s restricted to use in paying its taxes. But since taxes must be paid, this is a restriction without meaning.

    (Sometimes companies have no tax liability, in which case the credits might not be able to be used, or might have to be used in future years. But often tax credits are refundable, meaning that the government will issue a tax refund, so that the full value of the credit is realized. Or, sometimes tax credits may be sold to someone else who may use them.)

    In addition to this misunderstanding or blatant disingenuousness — take your pick — Pickens’ article is contradictory. Near the end he criticizes Pompeo for inconsistency: “If Pompeo is opposed to using federal dollars to ‘pick winners and losers,’ then he should come out in opposition to all such subsidies.”

    But at the start of the article Pickens wrote of Pompeo’s “highly public opposition to subsidies for fuels of any kind.” Indeed, in the article Pickens refers to, Pompeo called for an end to all energy subsidies.

    Pickens contradicts himself here.

    In the end, the largest problem is that one person is proposing a solution to what he perceives as a problem. Then he wants to use the power and force of government to implement his solution. If Pickens is correct about natural gas — and he may be — we’ll never know if he gets his way. Government social and industrial engineering — implemented by grants of money made through tax expenditures — strips away all the benefits of dispersed knowledge possessed by millions of smart people throughout the world. It takes away the ability of free markets to truly evaluate the worth of products.

    It’s only by allowing ideas to compete in the marketplace that we’ll know which solution, or combination of solutions, is best. Government subsidies to industry, including all its present subsidies, lead to suboptimal solutions made for political rather than economic reasons. As Pompeo has recommended, we need to end these as soon as we can.

  • Charles Koch: Advancing economic freedom

    In recent years Charles Koch and his brother David Koch have emerged as prominent defenders of economic freedom and the freedom and prosperity it promises. In today’s Wichita Eagle, Charles Koch explains the importance of economic freedom and warns of the threats to freedom and prosperity that our country faces.

    A key component of economic freedom is property rights. In his 2007 book The Science of Success: How Market-Based Management Built the World’s Largest Private Company, Mr. Koch explained the importance of property rights: “Countries that clearly define and protect individual private property rights stimulate investment and grow. Those that threaten and confiscate private property lose capital and decline. They also lose the capability and efforts of the individuals who would be the greatest contributors to economic growth.”

    In the Economic Freedom of the World report, there are five broad areas that are measured to determine the relative economic freedom of countries:

    • Size of Government: Expenditures, Taxes, and Enterprises;
    • Legal Structure and Security of Property Rights;
    • Access to Sound Money;
    • Freedom to Trade Internationally; and
    • Regulation of Credit, Labor, and Business.

    We can see the importance of property rights to economic freedom. When government taxes, it takes our property and gives it to someone else — often to business firms in the form of corporate welfare. Without a developed legal system, property rights are not secure. Without sound money, government takes our property by devaluing our savings through inflationary monetary policies.

    It is the advancement of policies that promote economic freedom that, as Koch writes, “help societies prosper.” We see this in the rankings of countries on the economic freedom index. Countries with high levels of economic freedom, like Hong Kong, are prosperous even through they often have little in the way of natural resources. And countries that are rich in resources but not in economic freedom: Their people suffer, although corrupt leaders usually live richly.

    Economic freedom is not just for rich people. Everyone — especially those on the lowest rungs of the economic ladder — benefits.

    Charles Koch: Economic freedom key to improving society

    By Charles G. Koch

    My brother David and I have long supported the principles that help societies prosper. I have actively done so for nearly 50 years, as has my brother for more than 40.

    In recent years, we have stepped up our efforts to deal with the enormous threats to the future well-being of the people of this country. This has prompted some extreme criticism. From the White House to fringe bloggers, we are now being vilified, mischaracterized and threatened.

    In a perverse way, these attacks indicate that we are having a positive effect on public awareness and policymaking. That is why we are working even harder to advance economic freedom and prosperity.

    We do so because we believe economic freedom is essential for improving the well-being of society as a whole, especially those who work hard to provide for their families, as well as our most vulnerable. History and sound theory are clear on this point. If we allow our government to waste scarce resources and become the ultimate decision maker, almost everyone will suffer a lower standard of living.

    Continue reading at The Wichita Eagle. A slightly different version of Mr. Koch’s editorial is available on the Koch Industries website at Advancing economic freedom.

  • Stossel: Follow-up to ‘Freeloaders’

    Earlier this year John Stossel had an hour-long special show that focused on freeloaders. The show is now available on the free hulu service by clicking on Stossel: Freeloaders. This week Stossel’s show had some of the people he criticized on the show making appearances to defend themselves.

    One of the most notable segments was about Al Pires, an attorney who helped black farmers (and other minorities) receive payments for alleged discrimination at the hands of government loan programs. Stossel and others uncovered evidence that thousands of people who simply said they were farmers got payments, too. Having flowers in pots or fertilizing one’s lawn was enough to count as a farmer. When Stossel brought on Andrew Breitbart to talk about the abuse of the program by Pires, the attorney became agitated, telling Stossel and Bretibart they didn’t know what they were talking about. He attacked Breitbart savagely, calling him a “sad, sad person” and repeatedly advising him to get a job. Video of this segment is available here.

    Through his books, columns, lectures (see John Stossel urges reliance on freedom, not government, in Wichita), and television shows, Stossel is the popular voice of limited government and economic freedom in America. Here’s how he closed this week’s show:

    “And most unfair is that now government is so big and generous with your money, it’s killing the innovation that makes America great. If you run a company, you can say to yourself ‘How am I going to make money?’ I could invest in researching a new product, or I could hire lobbyists to manipulate Congress and get money from government. Investing in research: That’s tricky and we might not discover anything. And if we do, we’ll be regulated and taxed so much. Lobbyists — they have a high rate of return. And sure enough, this week the Wall Street Journal ran two interesting stories. Look at this one: ‘GM revs up its lobbying.’ Since we bailed GM out, GM doubled spending on lobbying. And then here, on the same page: a story on the company that makes Lipitor. Sadly, it’s going to cut its research spending — cut it from $8.1 billion to $6.5 billion. This is a terrible thing. Lipitor may be what’s keeping me alive. I want drug companies to do more drug research, not less. But I can’t blame Pfizer. If they did discover something, today big government might prevent them from selling. I can’t even blame GM for its freeloading. When government’s very big and investing lots of your money on politically-favored industries, then it’s prudent for companies to invest in lobbying. I blame big government. $3.8 trillion in spending rewards freeloading. Let’s cut government in half. And then, let’s cut it again. Then, there would be much less freeloading, and much more prosperity.”