subsidies

Making Broadband Accessible: Innovation, Not Intervention

by Ryan Young on November 18, 2009

in Deregulate to Stimulate, Economy, Regulation, Tech & Telecom

FCC regulators want to provide wider and cheaper broadband access by subsidizing it, raising taxes, and forcing network owners to share their network infrastructure with competitors.

A few things the FCC should consider:

-Subsidies don’t make broadband access any less expensive. They just change who pays for it. In this case, that would be anybody with a phone. Which probably includes you. The great economist Ludwig von Mises observed that “A government can no more determine prices than a goose can lay hen’s eggs.”*

-The tax would make owning a phone more expensive. And when something becomes more expensive, people consume less of it. With tax-exempt technologies like Skype and Google Voice now available, people can switch away from a taxed phone to something cheaper more easily than ever. The more people who do that, the less revenue the phone tax would generate, defeating its very purpose.

-If a company has to share its network infrastructure with its competitors, it loses the incentive to maintain and improve that network. Why invest millions of dollars if it will help your competition just as much as yourself? Quality suffers. So does innovation. In the long run, it is innovation, not FCC intervention, that will make broadband affordable and accessible for everyone. The long-run view is just as important as the short-run view here.

-Land-based networks are expensive to build in rural areas. The cost per customer is huge compared to denser urban areas. Fortunately, that isn’t as much of a problem for wireless technologies. The FCC seems hellbent on the land-based networks since wireless networks aren’t yet advanced enough for mass-market broadband service. But they will be soon enough. And every dollar spent on old-fashioned wired networks is a dollar unavailable for improving wireless service. An unintended consequence of FCC intervention would be slower innovation.

*Ludwig von Mises, Human Action, 4th ed., (Irvington-on-Hudson New York: Foundation for Economic Education, 1996 [1949], p. 397.

Interview with Sam Kazman on the Auto Bailout

by Richard Morrison on April 7, 2009

in Video, Zeitgeist

[youtube:http://www.youtube.com/watch?v=c31kKtLECbQ 285 234]

Expensive Energy Does Not Stimulate the Economy

by William Yeatman on February 3, 2009

in Economy, Energy, Stimulus to Nowhere

Last week the House of Representatives passed HR 1, The American Recovery and Reinvestment Act, which allocates $816 billion to stimulate the economy. Environmental policy figures prominently in the House’s stimulus package, including $72 in direct spending for green energy and $20 billion in clean energy tax incentives. According to the liberal Center for American Progress, this $92 billion will create 459,000 green jobs by 2010, at a cost of $196,000 per job. What a deal!

The Senate will soon begin to debate over its own version of the stimulus package, S. 336, The American Investment and Recovery Plan, which would spend $887 billion to get the economy going. The bill includes $78 billion in clean energy spending, and $31 billion in tax incentives for renewables and energy efficiency.

Of course, the only reason that the clean energy industry needs generous taxpayer support is because it cannot otherwise compete with conventional energy sources. Which begs the question: How is it possible to stimulate the economy by forcing Americans pay more for energy?

An example will help clarify my point. President Barack Obama wants the stimulus package to spend $32 billion to provide 6 million homes with green energy by 2012. By comparison, the Navajo Nation in the Four Corners region plans to build enough coal-fired power by 2012 to supply 4 million homes in the rapidly growing southwest. Both plans would power a similar number of households by 2012. The difference between the two plans is that Obama’s renewables need $32 billion in taxpayer money to compete with conventional energy sources, whereas the Navajo Nation’s coal projects can make a profit without lavish government handouts.

For a detailed account of the green pork in both bills, click here. The numbers are appalling. Virtually every energy boondoggle is well positioned at the taxpayer trough, from synfuels to ethanol. It is farm-bill politics at its worst (N.B. “farm bill politics” is a style of legislating by which every possible stakeholder is bought off, so that there are no objections to a spending bill’s passage. As its name suggests, negotiations leading to a renewal of the God-awful farm bill every 5 years are the paragon of this governing technique).

Although both plans stink, they are not the same.  E&E Daily today reported that there are 3 major differences between the energy provisions of the House and Senate stimulus packages:

1. The Senate increases Loan Guarantee Program (authorized in Title 17 of 2005 Epact) by $50 billion in 2009. The program covers “commercial projects,” including nuclear and coal to liquid, which frightens environmentalists. The House keeps 2009 funding for “commercial projects” steady (at $38 billion), and amends Title 17 to include $8 billion in temporary funds for renewables and green transmission.

2. The House and the Senate disagree over tax incentives for renewable energy. HR 1 would fund up to 30% of construction costs for renewable projects that break ground in 2009 and 2010. I have not seen a cost estimate for this provision. S 336 does not have this provision. Senator Bingaman argued that grants are inappropriate because the taxpayer would not receive any compensation for its investment.

3. The Senate bill also provides about $5 billion less in direct energy efficiency investment than the House package. The greatest difference lies in the low-income assistance weatherization program, which would receive $2.9 billion in the Senate bill as compared to $6.2 billion in the House version.

Stimulus to Hunger

by Iain Murray on January 27, 2009 · 4 comments

in Agriculture, Economy, Energy, Environment, International, Sanctimony, Stimulus to Nowhere

Great. Now USDA head Tom Vilsack is saying the US ethanol industry needs to be protected in the borrow-and-spend bill, and beyond:

“The ethanol industry is under particular strain,” Vilsack said in a
conference call with reporters.

Loan guarantees for the industry, distributed by the USDA as part of the
2008 Farm Bill, “can help more of these companies stay in business,” Vilsack
said, though he warned that “there will be a premium on ethanol producers who
can stay efficient,” a clear warning that there is overcapacity in the US
industry.

Vilsack expected more aid to the industry would be forthcoming in a later
energy package, though he said that aid from the Farm Bill provisions for the
ethanol industry “would be the first step in stimulating the economy.” The
grant program guarantees loans up to $250 million, the USDA said.

Hang on, if there’s overcapacity, doesn’t that mean that some firms need to go under or all firms need to cut back? So there should be less spending, not more, on ethanol. It’s not as if they haven’t got a bundle of mandates subsidies already.

But the stark fact is that every bit of public money that goes into supporting the ethanol industry artificially raises the price of corn, which in turn artificially raises the price of food around the world, which in turn artificially raises the level of hunger in the world. This isn’t stimulus, it is close to murder.

UPDATE: Note also Jonathan Tolman’s post below about taking farmland out of production, and his noting that the bill also includes relief to the elderly on account of rising food prices. There is plainly no “joined-up thinking” going on in the drafting of this pathetic bill.

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