This is the third installment of a multi-part series on suggested economic policies for the next government to consider.  These are meant to be long-term solutions.

Government welfare is addicting.  It creates dependency by the recipients and control for the government.  Federal welfare takes many forms.  We tend to focus on the part that is meant for the poor but that may be the least offensive version.  The program is ineffective and immoral but at least we can see the need.

From an economic point of view, many of the other versions are far more dangerous; welfare programs distort market signals.  They reward and encourage inefficiencies, wastefulness and even corruption.  These programs are not charity, they are vote buying.  Charity is when you give YOUR OWN money, not someone else’s.

But, the federal dependency has many more facets.  There are countless businesses lined up at the trough to get their taxpayer feeding.  Solyndra is but one example and even it is not the most egregious for the simple fact that it received a grant, a one-time thing.  These are bad enough and there are plenty of other examples but the real culprit in all of this is the entire dependency system that the federal government encourages and perpetuates.

The government’s perpetual intervention into the economy, mostly in the capital markets contributes to undermining the free operation of the economy.  Prices are a communication system.  We know what job to take based on the compensation offered; we know where to invest based on the profits and losses of the firms we are considering.  When the government intervenes, it distorts prices and then the communication system is full of static and false signals.  These interventions take several forms, all of which should be eliminated entirely.

(more…)

Message to my fellow conservatives: Please don’t blame the mainstream media for the improvement in jobs, unemployment, and economic growth. Reporters are not making this up. The economy is better. It’s going to give President Obama a leg up on the election. GOP beware, and come to your senses.

Take Friday’s jobs report from the Bureau of Labor Statistics. Nonfarm payrolls gained 200,000 and the unemployment rate slipped to 8.5 percent from 8.7 percent. It may well be that a seasonal quirk added 42,000 messengers and couriers to the totals, but that will be lost in the headline reporting. It will be given back next month. It’s inconsequential to the overall story. Likewise, a normal labor participation rate would yield much higher unemployment. But that’s academic.

Like any president, Mr. Obama will take credit for these economic gains. He’s doing that right now. And he has a case to make: A year ago the unemployment rate was 9.4 percent, and in 2011 it fell almost a percentage point. In the twelve months through December 2011, the economy produced 1.64 million new jobs, while in 2010, only 940,000 were created. On a monthly average basis, 137,000 new jobs per month were created in 2011, compared to only 78,000 a month in 2010. Things are getting better.

(more…)

As lawyers say, lets stipulate that the political system is broken. We have, in the past, railed against special tax incentives for business that are often outmoded, ill conceived, and are generally ineffective. These, more often than not, merely distort the marketplace at great expense to the taxpayer and the American consumer. Elected officials in Washington have become so locked into doctrinaire philosophical positions that compromise has eluded their reach, and common sense has become as rare as the two-dollar bill. Democrats and the left point to growing gaps between the middle class and those they refer to as millionaires and billionaires (people who earn over $250,000 per annum) and who they say must pay their “fair share” in taxes.

And while it is widely acknowledged that the top 5% of earners pay over 50 percent of federal taxes, there has been a growing concentration of wealth within that top 5% of income earners during the last 20 years. Politicians love to define issues in a debate to gain popular advantage. The country is in desperate need of economic growth, which the Obama Administration has failed effectively to address. So, the White House has made increased taxes on “millionaires and billionaires” the cornerstone of their 2012 election strategy. Excessive spending, the growth of the federal deficit and the accumulated debt of the country threaten to snuff out economic growth in America just as it surely is doing in Europe. When Barack Obama became President, the federal debt was slightly over $10 trillion dollars. It has grown to more than $14 trillion dollars under his watch. If spending is not reined in, and/or revenues do not increase, servicing the nation’s debt will crowd out vital resources for private investment (where new jobs are created).

Elected officials are not leading; they talk past one another. The way out of this mess might be in changing the vocabulary of the debate so both sides can claim a victory. The Democrats could hoist the GOP on their own petard by shifting the debate away from tax increases, to cutting corporate entitlements and benefits. Note that the right complains about spending only when the beneficiaries are those who rely on government to help with retirement payments, medical benefits, or to finance their children’s education. Cutting specified corporate entitlements that really provide no economic benefit to the country would be easier for conservatives to swallow than increasing tax rates, which would retard economic growth.

(more…)

The chairwoman of the Democratic National Committee, Debbie Wasserman Schultz, made a surprise appearance at the Iowa Straw Poll earlier August 13th. During a short interview, she claimed “common ground” with several Republican presidential candidates, including Mitt Romney, on renewable energy subsidies. Much to the chagrin of economic conservatives, her claim appears substantiated.

Parked horizontally on the grounds of the Iowa Straw Poll throughout the weekend was a blade from a wind turbine. Prominently displayed on the turbine blade were the corporate logos of GE and TPI Composites. These two companies partner together to develop subsidized wind farms throughout Iowa. Representatives of this partnership provided magic markers to straw poll attendees and to politicians. People could then indicate support of the projects by signing the turbine blade. In addition, politicians were provided a speaking area to verbally express their support of renewable energy subsidies in front of the blade.

Both Mitt Romney and Debbie Wasserman Schultz (D-FL), amongst other politicians, attached their signatures to the declaration of support for wind energy subsidies. Considering Mitt Romney’s portrayal of himself as a businessperson with an economic vision starkly opposed to President Obama’s, his apparent support for renewable energy subsidies for TPI Composites may give conservatives pause. Unbeknownst to most Republican primary voters, several other prominent Democrats strongly support corporate welfare for TPI Composites. In fact, President Obama mentioned stimulus funds provided to TPI Composites in a speech last year. Another Massachusetts politician, stalwart Leftist Barney Frank, recently proudly announced the placement of a TPI plant in Fall River, MA—a plant supported with a $250,000 grant from the government.

The apparent endorsement by several Republican presidential candidates of this particular corporate welfare recipient will likely raise questions with conservative primary voters.

(more…)

The Battle For Brooklyn, a documentary about one man’s fight to stop a private developer from using eminent domain to take his home, recently opened in select theaters in New York City after a successful film-festival run.

In 2003, billionaire real estate developer and New Jersey Nets owner Bruce Ratner decided to move the team to Brooklyn, with the intention of building an arena, an affordable housing project, and bringing desperately needed jobs to the borough of Brooklyn. Ratner’s friend and fellow billionaire, Michael Bloomberg, enthusiastically put the weight of top-down government planning behind the project. That included using the city government’s extensive powers of eminent domain, despite the fact eminent domain is supposed to be used only in cases where development is for public uses such as schools and roads. And despite the fact that the construction of what became known as the “Atlantic Yards” project would displace many thriving businesses and homes.

Graphic designer Daniel Goldstein fought for nearly seven years to keep his home out of the hands of Ratner’s company, Forest City Ratner. Goldstein’s quixotic struggle is the centerpiece of The Battle For Brooklyn.

Reason.tv sat down with co-directors Michael Galinsky and Suki Hawley to discuss eminent domain abuse and political perceptions of their film. Galinsky and Hawley insist their film is not a polemic, but rather an all-too-common story of a single person fighting an injustice against figures whose power and influence drawf his own.

Produced by Anthony L. Fisher. About 4.40 minutes.

Go to http://reason.tv for downloadable versions, and subscribe to our YouTube Channel to receive notifications when new material goes live.

Related video: Billionaires vs. Brooklyn’s Best Bar: Eminent Domain Abuse and the Atlantic Yards Project.

I recently had the opportunity to ask Michigan’s 1st District Freshman Rep. Dan Benishek a few questions about the state of affairs in Congress in the wake of the battle between Speaker Boehner, Senate Majority Leader Reid, and President Obama over what to do with the budget for the remainder of the fiscal year. What follows are his responses, and a brief wrap at the close.

[Lead in to Rep. Benishek]
The debate over the budget for the remainder of this year was very contentious. There’s been a tremendous amount of pressure; from the media, to the President and the Democrats (including a great deal of rancor within the Republican caucus itself), the Continuing Resolution (H.R. 1473) to fund the Government through September 30 had the attention of the entire country.

Many people have been very critical of Speaker Boehner and the process that got this deal done as well as what it actually contains. A great deal of attention has been paid to this fight by Tea Party folks and many others. A lot of Americans, both left AND right, believe they were “played” by Leadership on both sides of the aisle – sold a bill of goods filled with what we once called “fuzzy math” – and they are not happy. But the vote is done now, the bill has passed, and we’re moving ahead.

Q: In 2010 Americans sent a lot of new faces to Washington to change the direction of the country. Right now, people are feeling they’ve been sold out. Were they?

Congressman Benishek: People should not feel sold out. They can be frustrated. I am frustrated that the cuts were not bigger, but we have to remember Democrats still control the Senate and White House. I believe the Speaker did the best he could with the resources he had. I was not directly involved in negotiating with President Obama and Senator Reid, but I can tell you that as long as I am given the opportunity to vote for significant reductions in spending, I will be a “Yea” vote every time.

Q: What happened, how are you going to handle negotiations differently going forward, and what do we all need to be paying closer attention to?

(more…)

While GE spent millions to elect President Obama and pushing fiscally destructive policies like cap & trade on the American taxpayer, the company’s bloated tax department of 975 employees has been busy making sure it’s own tax bill on $14 billion of revenues less than ZERO. That’s right, GE actually claimed a tax benefit of $3.2 billion.

It’s interesting to note that while Ronald Reagan cracked down on GE in the mid-1980s—he overhauled the tax system after learning that G.E. was among dozens of corporations that had used accounting gamesmanship to avoid paying any taxes—President Obama has taken the opposite approach. CEO Immelt and Obama have appeared joined at the hip of late, with the President even appointing him chairman of the President’s Council on Jobs and Competitiveness.

Among the actions Immelt has taken over the years to preserve GE’s preferential tax treatment, was to bribe Charles B. Rangel in 2008 (then Chairman of the Ways and Means Committee) with a $30 million “donation” to New York City schools, including $11 million to benefit various schools in Mr. Rangel’s district.

(more…)

The current recession and, especially, the related financial panic in the fall of 2008 have given rise to an extraordinary surge in the U.S. government’s size, scope, and power. As I write, the financial panic has subsided, but the recession, already the longest since the 1930s, seems likely to continue for a long time. Even when it has passed, however, the government will certainly retain much of the augmentation it has gained recently. Hence, this crisis will prove to be the occasion for another episode of the ratchet effect in the growth of government.

According to the National Bureau of Economic Research, the recession began early in 2008, but the decline became severe only in the latter part of the year. The financial panic that came to a head in late September 2008 proved to be the catalyst for an accelerated decline in real GDP and rise in the rate of unemployment. The so-called credit crunch in the fall of 2008 prompted the Fed, the Treasury, and the Congress to take a series of extraordinary actions in quick succession.

In September 2008, the Federal Reserve System (“the Fed”) took control of the insurance giant American International Group (AIG), and the Federal Housing Finance Authority took over the huge government-sponsored enterprises Fannie Mae and Freddie Mac, secondary lending institutions that held or insured more than half of the total value of U.S. residential mortgages. On October 3, the president signed the Emergency Economic Stabilization Act, which, among other things, created the Troubled Assets Relief Program (TARP), authorizing as much as $700 billion for the purchase of so-called troubled assets, primarily mortgage-related securities, held by banks and other financial institutions. Instead of making the authorized purchases, however, the Treasury used the TARP to inject funds into the banks by purchasing their preferred shares. In this way, the government acquired an ownership interest in nearly 600 commercial banks.

Meanwhile, the Fed made a series of unprecedented types of asset purchases and loans, loan guarantees, and asset swaps, and provided other forms of assistance to securities dealers, money-market mutual funds, Fannie Mae, Freddie Mac, the Federal Home Loan Banks, Citigroup, fourteen foreign central banks, and buyers of certain asset-backed securities based on consumer and small-business loans. As a result, the monetary base of the United States increased by more than 100 percent between August 2008 and January 2009.

(more…)

M. Night Shyamalan’s latest film production, The Last Airbender, was recently awarded over $35 million in film tax credits from Pennsylvania over two years.  The award is the largest in the history of Pennsylvania’s Film Tax Credit (FTC), breaking the record held by his previous project, The Happening, which received $12 million in tax credits.  His film Lady in the Water also received a film production grant. The only good news is that taxpayers are only forced to subsidize these movies, not to watch them.

Pennsylvania first created a film tax credit in 2004, replaced it with a film grant program in 2006, then enacted its current $75 tax credit program in 2007, in which films can receive up to 25 percent of production costs in the form of tax credit. The state’s FTC was temporarily reduced, as the 2009 state budget agreement reduced all tax credits by 33% for three years.

Forty-four states offer tax incentivizes or grants to filmmakers for in-state production, according to a recent report on film tax credits by the Tax Foundation.  Pennsylvania is among the 26 states that offer transferable (or in some states refundable) tax credits to film producers.  This means that tax credit awarded is more than the actual state taxes the recipient owes, they can sell the remaining credit to another business.

But movie incentives by-and-large have failed as economic policy.  As the Tax Foundation notes:

Movie production incentives are costly and fail to live up to their promises. … Among these failures, the two most important are their failure to encourage economic growth overall and their failure to raise tax revenue.

(more…)

The recent ruling of the House Ethics committee against Charlie Rangel has attracted a tremendous amount of attention and has put substantial pressure on House Democrats, especially Nancy Pelosi. The Atlantic’s Marc Ambinder even reported one Democratic strategist claiming that it “loses us the House.” The basics of the story are that Rangel and his staff failed to disclose a series of facts about corporate sponsored trips about Caribbean policy.

However, there’s another Caribbean scandal that could burn Democrats. In February, Pro Publica’s Marcus Stern reported that Congress and the Virgin Islands will give British alcohol conglomerate Diageo a $3b subsidy if they shift production from Puerto Rico to the US Virgin Islands. Previously, I had written about this issue, including Rangel’s threats against the Puerto Rican health system.

But now an ad, pictured here, is running in Montana asking Senate Finance Committee Chair Max Baucus why he is putting up with this. That’s turning up the heat a little.

Another rum producer told the Billings Gazette that the subsidy “is so large it’s twice the cost of production.”  That is, if Diageo spends $100 making rum in the Virgin Islands, they get $200 from the federal government. Then Diageo gets to sell the rum too! Diageo’s 2008 operating profit was £2.2 billion and 2009 sales were $20 billion.

Now, I understand — disagree but understand — US taxpayers giving struggling American farmers a subsidy to make ethanol. (rum is also ethanol) I don’t understand why US taxpayers are giving billions to an already highly profitable, publicly traded British booze company.

(more…)

Michael Moore discussed his new film on MSNBC’s Countdown with Keith Olbermann last week, which excoriates the 2008 financial bailouts, corporate welfare and various other flaws in a system in which the government gives favor to corporations that can afford lobbyists in Washington DC. Moore also calls capitalism “evil,” even when you strip away all the sweetheart deals with the government.

While his initial frustration with crony capitalism may be justified, while on Olbermann’s show, Moore completely failed to mention that General Electric, the company that keeps Olbermann on the air, received billions in bailout money last year. He also neglected to point out that Olbermann received a  $3.5 million pay raise around the same time that taxpayers paid to keep General Electric afloat. (Olbermann regularly scolds corporate employees who receive bonuses from bailed out companies.)

Despite calls to put his money where his mouth is and return his own bonus, Olbermann has remained silent. And while Moore is usually so quick to attack anyone benefiting from government-backed corporate profits,  he didn’t even mention his host’s own hypocrisy.

You see, to guys like Moore and Olbermann, it’s perfectly okay to make millions from taxpayers and capitalism, so long as it’s their bank account getting filled with the cash.