I’m a capitalist. A real one, not the Congressional variety. I believe in (properly regulated) markets, with the important caveat that I believe in markets in those areas of the economy where markets work. (Markets only work, I constantly remind anyone who listens, in transactions with a willing buyer and a willing seller, both of whom are in possession of all information relevant to the transaction.)
Being predisposed to competition and markets doesn’t mean I think government’s role is unimportant, or that public assistance is never warranted.Government can help markets in a number of ways: outlawing monopolies and anti-competitive practices or, in compelling cases, granting subsidies or tax incentives to industries deemed critical to the national interest.
It won’t surprise anyone reading this to discover that, in today’s America, subsidies are more often used to suffocate progress and protect profitable, established industries than to move the nation forward.
American business spokespersons can be counted on to profess devotion to markets. They can also be counted on to avoid competition whenever possible, because their belief in the market’s level playing field is wholly fictional.
The coal industry and its allies in the Trump administration have recently devoted considerable energy to arguing that subsidies to renewable energy have distorted energy markets and helped drive coal out of business. “Certain regulations and subsidies,” says Rick Perry, “are having a large impact on the functioning of markets, and thereby challenging our power generation mix.” You can guess which regulations and subsidies he’s talking about.
This is nothing new, of course. It is in keeping with a long conservative tradition of challenging the economic wisdom and effectiveness of energy subsidies.
At least, uh, some energy subsidies.
Energy analysts have made the point again and again that fossil fuels, not renewable energy, most benefit from supportive public policy. Yet this fact, so inconvenient to the conservative worldview, never seems to sink in to the energy debate in a serious way. The supports offered to fossil fuels are so old and familiar, they fade into the background. It is support offered to challengers — typically temporary, fragmentary, and politically uncertain support — that is forever in the spotlight.
The article goes on to shine that spotlight on those older subsidies, beginning with the twenty billion dollar annual production subsidy we taxpayers provide to the fossil fuel industries that contribute massively to climate change. We provide that financial assistance despite the fact that these companies are very, very profitable.
The twenty billion dollar figure is only a beginning. It subsidizes only direct production costs. Another $14.5 billion in consumption subsidies also benefit fossil fuel companies–things like the Low Income Home Energy Assistance Program(LIHEAP), which helps lower-income residents pay their (fuel oil) heating bills.
It also leaves out subsidies for overseas fossil fuel projects ($2.1 billion a year).
Most significantly, OCI’s analysis leaves out indirect subsidies — things like the money the US military spends to protect oil shipping routes, or the unpaid costs of health and climate impacts from burning fossil fuels. These indirect subsidies reach to the hundreds of billions, dwarfing direct subsidies — the IMF says that, globally speaking, they amount to $5.3 trillion a year. But they are controversial and very difficult to measure precisely.
Finally, OCI acknowledges that its estimates of state-level subsidies are probably low, since many states don’t report the costs of tax expenditures (i.e., tax breaks and credits to industry), so data is difficult to come by.
The best available estimate is that energy companies get $20.5 billion annually in corporate welfare, of which 80 percent goes to oil and gas, and 20 percent to coal. And we don’t know how much remediation will eventually add to that figure.
Vox’s summary says it all better than I could:
If you ask people in fossil fuel industries, their support staff in conservative think tanks, or fossil-state politicians, they will tell you why these fossil fuel production subsidies are necessary. It’s always been this way. They’re more than paid back by tax revenue. Other industries get them too. (For the record: More than half the $20 billion is available to fossil fuels alone). They create jobs. They’re important for national security. Tax expenditures aren’t subsidies at all, if you think about it. Etc.
If the endless debate over energy subsidies has taught me anything, it’s that nobody thinks their own subsidy is a subsidy — and no one outside think tanks and universities really gives a damn about the economic distortions of subsidies as such. Everyone thinks their favored energy sources deserve support and the other guys’ don’t. Period. They use whatever economic argument is handy — “picking winners” if you’re against the subsidy, “supporting jobs” if you’re for it — but such arguments are always instrumental. As I said recently about coal’s rent-seeking, there are no true free marketeers in struggling industries.
Speaking of rent-seeking, here’s a final fun factoid from OCI: In the 2015-2016 election cycle, oil, gas, and coal companies spent $354 million in campaign contributions and lobbying and received $29.4 billion in federal subsidies in total over those same years — an 8,200% return on investment.
The next time some corporate poo-bah piously invokes the genius of the market, tell him to give it a rest. It’s abundantly clear that no one really wants to “let the market decide.”
There are so many examples of this kind of outlandish tax money giveaways, so much “privatization” of government in order to pay back campaign supporters, and so much corruption that even the least educated get it.
If liberals really want to take back Congress and the majority of state governments, they need only to simplify this analysis and others like it under the slogan “Make America Fair Again”. AND THEN MEAN IT!
The constant preaching from conservatives about the benefits of and need for the ‘free’ market is nauseating. They have been getting away with this BS for decades because most people have no knowledge of the subsidies that oil, gas and coal get.
I am so glad that Indiana will be rid of one of their staunch supporters in Hershman. However, I worry about the power he will be given in DC to further support these industries who have been his donors. He isn’t packing up and moving there just for giggles. There is an evil plan in the works and you can bet that pence is involved.
I don’t believe “rational agents” exist for the very reason Albert Einstein pointed out in his infamous 1949 dictum called, “Why Socialism”:
“Private capital tends to become concentrated in few hands, partly because of competition among the capitalists, and partly because technological development and the increasing division of labor encourage the formation of larger units of production at the expense of smaller ones. The result of these developments is an oligarchy of private capital the enormous power of which cannot be effectively checked even by a democratically organized political society. This is true since the members of legislative bodies are selected by political parties, largely financed or otherwise influenced by private capitalists who, for all practical purposes, separate the electorate from the legislature. The consequence is that the representatives of the people do not in fact sufficiently protect the interests of the underprivileged sections of the population. Moreover, under existing conditions, private capitalists inevitably control, directly or indirectly, the main sources of information (press, radio, education). It is thus extremely difficult, and indeed in most cases quite impossible, for the individual citizen to come to objective conclusions and to make intelligent use of his political rights.”
Informed, rational agents don’t exist. The laws have been written to favor the capitalists over workers. This is intentional. Therefore, the premise of the free market is disqualified.
We need to move on past capitalism. This will take a few years if we don’t kill each other and the planet first.
Theresa Bowers – that is a great thought. I am going to suggest this to my friend that is challenging Stat Sen Wolkins. Wolkins is a state chair for ALEC and supports all of their ideas.
Todd, have you heard of David Houle? He wrote several months ago that our two party system is on the way out and that there will be at least one more party organized well enough in the near future to strongly challenge the Ds and Rs. The current presidency and cabinet may be quite the catalyst for a major change.
Nancy, thanks for the support for my idea of a slogan. I believe it speaks for the majority of the governed. All most people want is “fairness”.
So the “invisible hand” isn’t really invisible, it just goes unnoticed because it’s been propping up certain industries for so long. I remember the oil depreciation allowance being enacted because we recognized that fossil fuels weren’t an unlimited commodity, so we made it more profitable for oil companies to continue to operate, when we should’ve been making it more profitable for them to switch to renewable sources.
Bad choices by our government are not new, but they also seem to go unnoticed. Perhaps bad choices have been going on for too long, as well.
The current supposedly free market makes it extremely difficult for anyone who doesn’t have the support of a reasonably well off family to start a business or move up the economic food chain. I know people who are talented, work hard and have good ideas who are frozen out of the market because of lack of capital. Intelligent people who are thwarted by a corrupt system will tear that system down. Peacefully if possible, violently if not.
Capitalism, to succeed must provide some benefit for all, not only the 1%; to assure this, there must be regulations in place which are upheld. Regulations are necessary in all levels of government and business for the same reason we must have laws against criminal activities…human nature cannot be trusted to regulate itself. The current administration is ending regulations put in place to protect not only money, but lives, and regulations if followed would actually benefit capitalists. There IS a “trickle down” element; it just is NOT what the Republicans are doing to this country; when we run out of money to spend on their goods and services, how will they continue to thrive? “The Market” is our daily, minute-by-minute, reporting of how well big business is doing by shifting money between and among themselves; “themselves” being the 1% with all of the money which has become a monopoly.
Citizens United became the “rule of law” to ensure the money stays with the 1% and the elected officials who protect the 1%. Greed, avarice and mendacity rule; and thanks to the “conservative” Republicans in Congress and SCOTUS, it is currently here to stay. Not even the Constitution protects us regarding the economy; no Sections or Amendments require common sense, logic and humanity when it comes to money. Bill Clinton repealed in finality what little remained of the Glass-Steagall Act which was enacted to protect citizens from destruction by government and big business, and George W. took charge from there. Currently; the vast majority of Americans are at the mercy of Republican Capitalists who have used capitalism in its most self-serving translation, thus removing regulations put in place to prevent the current oligarchy.
We cannot escape Trumpism; it is here, embedded into the very fabric of our government, urged on and upheld by Congress and misguided supporters. The current administration is not stabilized at any level; our hopes of salvation are all placed on 2018 and 2020 elections…a futuristic society we can only hope we survive today’s economy long enough to vote it in place.
Someone on Facebook referred to this current administration as “a circular firing squad”; I’m waiting for someone to give the order to “Fire”.
Theresa; I think you and I are saying the same thing. You condensed my rant into a few words and struck at the heart of the problem.
This really feels like the third economic revolution in the US, the first two being industrial. When one thinks back to the beginnings of the internet the one song sung by everyone was… this time it is different.
Not so much.
The invisible hand has always been in the pocket and directed by government for profit. That being said if we look at the wealth created by this revolution I find the difference in the greater and earlier philanthropy exhibited by the titans who created this revolution.
Actually I believe we have progressed from the Gilded Age.
Interesting that the timing of the Gilded Age was after the Civil War and this time is after the Presidency of a Black Man.
To use Dickens from the first revolution, ‘It was the best of times it was the worst of times’, most of all of course it is what we make it.
Serious question…is there anything for sale in the market place that doesn’t benefit from some support?
OK, here is my lengthy diatribe condensed into one brief statement; Republicans have bastardized the true meaning of capitalism!
“MAKE AMERICA FAIR AGAIN”
Joseph E. Stiglitz, one of my favorite economists (and a Hoosier) won a Nobel for his work on information inequality between buyer and seller. Like the “free market” idea, there has never been information equality other than in isolated cases. Buyers and sellers do not obey the gentlemanly ideas of Adam Smith in that they are always trying to con one another.
There are the obvious giveaways such as the depletion allowance of a wasting asset to the fossil fuel industry, accelerated depreciation schedules (but not for you and me) etc., and most of us are only vaguely aware of the enormous subsidies given over to fossil fuel businesses and, for that matter, to the Wall Street financiers, where hedge and equity fund managers pay a “carried interest” tax rate on their commissions far below what they would have to pay if such commissions were treated as what they are – ordinary income. In this latter connection, it is interesting to recall that both Trump and Hillary pledged to end this “carried interest” fraud but it somehow survived in the tax bill just passed, and when the Ways and Means Chair was asked how that happened, dismissively replied: “People don’t care about that.” Wrong. I care.
I could but for time and energy write a book on Sheila’s topic for today. Suffice it to say that if all these hidden (and some of the unhidden) subsidies not in the public or national interest were ended and the “defense budget” were halved (at no risk for readiness) and the tax rates were the same as today and wage inequality were ended, we would see economic growth even greater than that after WW II, be enabled to substantially reduce or in time pay off our debt, see multinationals come home with their capital for investment in our booming market with aggregate demand in the stratosphere. etc. etc. etc.
Fleshing out such a Pollyanna view with the superrich in control of our politics is, admittedly, highly unlikely, as the greedy insist on even more public subsidy for their operations (but sans a share of the profits in return for our investment), so we are left with a situation where we cannot broadly attack the current corporate swindle of our till with Republicans and Wall Street propaganda organs in full swing, and must nip at the edges for the time being. As my fellow commentators know, my nip is wage inequality, but unfortunately, there remain many other public-private swindles available for nipping, so let’s keep nipping.
JoAnn, Yes! Yes! Yes!
Marx: “Unregulated capitalism will destroy itself from within.”
Coolidge/Hoover: Free market enterprise will solve all the world’s economic and social problems.
Me: “Racing to the Brink: The End Game for Race and Capitalism”
Another part of Einstein’s, Why Socialism?
“For example, most of the major states of history owed their existence to conquest. The conquering peoples established themselves, legally and economically, as the privileged class of the conquered country. They seized for themselves a monopoly of the land ownership and appointed a priesthood from among their own ranks. The priests, in control of education, made the class division of society into a permanent institution and created a system of values by which the people were thenceforth, to a large extent unconsciously, guided in their social behavior.”
The above paragraph explains a lot. The conquering state here in America is the 1%. We proles are conquered. “The priests”, Einstein refers to could be religious, secular or both. These “priests” on a daily basis via the McMega-Media and pulpits tell us what they want us hear. When NAFTA was being debated the corporate media was behind it 100%. There were no or very few stories about the fate of workers here in the US once their jobs were gone – think Carrier here in Indiana.
if we look today at the military spending,and it seems to be hidden in some sort of secret need (drones,domestic spying)to be quiet about how,our military supports the corprate intrests in America. sure we have a need,in words of monroe doctrine,strategic need. when today we rely on the WTO, to maintain a balance in trade, we see more and more need for American military,,Obligation. wheres the other nations role? (nato,un)we rely on alot of outside matrials to manufacture,and day to day needs. where the military stands today,mercenaries. ya i know ya cant read that.. the doom and gloom of media has the hype we can not live without it. most of the tech today,civilians with command in the field. black water/tiger-swan in security against our own people. (dapl,north dakota,via corps and north dakota state gov) when we profess needs,we see money flow,but,whos paying for this? in fact,sen hoven,and sen,hietkamp of NoDak demanded the u.s.goverment pay for the security for that protest,while,its a fact, tiger swan was delibertly stiring trouble in the DAPL camp. after 40 million dollars,fema said no,,tough,make the corp pay,they initiated the problem.. like so many other so called needs to,protect the corp interests,at any costs. ( seriously,haliburton just loves men and women in the military dieing for our so called protections. ) reality sucks i know. since nam, we have made a presidence in military action on behalf of the corprate needs to fulfill American dreams. we forgot who,really pays. capitalism is a fine way to run a economy,but markets need spending. and we can not spend if wages are frozen. wall,streets greed is based on alot of foriegn trade through multi nationals. (profits that should be taxed if,these corps expect us represent them and to die for them too)the SEC is a whore for wall street,plain and simple. it should be run like the fbi,and no one walks when they game the system,period. we have a mass amount of thus trend over the last 30 years,where people like the goldman sachs alumni should have been taken down,and sent to prison. today we allow lies and deciet as a new Anerican norm. if we profess a great and vibrant world here,one can say,we are all,lieing to ourselves….happy holidays..
p.s. we all know as educated adults,the present corp media,needs no cudos, we have avenues to gain acurate information. celibrate the free press,deny profit to advertisers who pay for ads on those news medians. take a stand, sends a big thank you to those independant journalists that still see the American experiment,survive this new mass atrocities , and keeping us informed. thanks to Bill Moyers, a real man,and American. best wishes..
I would ask anyone who believes that the market “works” in some way to benefit large numbers of people to ponder the following point: There are roughly 1200 lobbyists in Washington. Each of them (disregarding a handful of “issue” lobbyists) is paid a handsome wage – in some cases more than a million dollars annually – to make sure that the market works in favor of their employer and to the detriment of all others. Some of them are very effective, and most can point to successes sufficient to keep them on the payroll. When, as a CEO or a company or an industry, your economic power and political connections are great enough to allow you a role in deciding the rules of the market, you will never acquiesce to a rule that fails to give your enterprise an advantage.
Theoretically, the market is a brilliant idea. Today’s tilted version, however, bears little resemblance to what Adam Smith had in mind. We need a new, less corruptible mechanism, one that can function even when politicians offer their services for bargain-basement prices. No, I haven’t figured out what that is.
For those who enjoy independent research, check out this subsidy tracker from Good Jobs First, a nonprofit organization promoting accountability.
https://www.goodjobsfirst.org/subsidy-tracker
Terry,
Actually, there are over 30,000 lobbyists in Washington.
Wealth can afford to be very patient. That’s why its theft of America is so insidious. We must be as relentless and strategic. Focus on 2018. There must be a landslide election. While there might be a few right minded Republicans left they have not been at all evident in Congress. Every Democrat is closer to a friend than any Republican.
They created extremism but we must now and temporarily do the same.
If this has been going on for decades,where were the Democrats during the previous decades? It’s obvious from empirical evidence that voting for Democrats to rectify this inequality is pointless.
The tectonic plates of our current government need to clash and to clash hard. The current political parties need to be relegated to the dustbin of history for any chance of real and genuine change.
William,
“The tectonic plates of our current government need to clash and to clash hard.”
I agree with you the tectonic plates are out of equilibrium. However, my opinion which differs from yours, is that I feel we must FIRST avoid a clashing of the plates which appears to be inevitable. If we fail to do that, equilibrium will be impossible.
I also agree with you that there is no chance of “real and genuine change” through the Democratic or Republican Parties as they now exist.
People, when speaking of economics, need to give Adam Smith a rest. Smith was a moral philosopher, not an economist. Wealth of Nations was his attempt to spin the practical world on the point of his moral compass. Quoting him with reverence now is the equal of quoting Ronald Reagan 250 years down the road.