Free Markets, Free People

subsidies


Speaking of the lies we were fed …

By the likes of Krugman and the Democrats, here’s a little more proof:

The Congressional Budget Office on Tuesday quietly raised the 10-year cost of ObamaCare’s insurance subsidies offered via the health law’s exchanges by $233 billion, according to a Congressional Budget Office review of its latest spending forecast.

The CBO’s new baseline estimate shows that ObamaCare subsidies offered through the insurance exchanges — which are supposed to be up and running by next January — will total more than $1 trillion through 2022, up from $814 billion over those same years in its budget forecast made a year ago. That’s an increase of nearly 29%.

29% and they’re not even off the ground yet. Anyone have any doubt whatsoever that this is likely a lowball estimate at this point?  Are we aware of the trend we always see when “costs” are discussed by governments and political parties?

Note too that they play games with the CBO (which is limited to forecasting 10 years out and also hasn’t been very accurate about much of anything – see debt forecasts over the last decade).

The politicians mostly fabricate whatever they think is palatable to the gullible public, sell them with the CBO’s false data and then, when it is found out that it was all bollocks, they say, ‘oh well, too late now, it’s the law”.

Well here’s my feeling about that.  If the “law” doesn’t live up to their hype – if it ends up being massively more than they claimed (you know like 29%) then there’s a fairly simple rule that should be followed.

It – the law – should be automatically repealed.

~McQ


Reality smacks the left again – this time unions

Funny how this works, isn’t it?  Make up all sorts of grand claims about something and then when it is passed into law find out that making up stuff doesn’t change reality one iota:

Labor unions enthusiastically backed the Obama administration’s health-care overhaul when it was up for debate. Now that the law is rolling out, some are turning sour.

Union leaders say many of the law’s requirements will drive up the costs for their health-care plans and make unionized workers less competitive. Among other things, the law eliminates the caps on medical benefits and prescription drugs used as cost-containment measures in many health-care plans. It also allows children to stay on their parents’ plans until they turn 26.

To offset that, the nation’s largest labor groups want their lower-paid members to be able to get federal insurance subsidies while remaining on their plans. In the law, these subsidies were designed only for low-income workers without employer coverage as a way to help them buy private insurance.

You have got to love the outrageousness of the union’s desire I’ve emphasized.  In essence it says, “we voted for something, got it wrong, and it it up to the taxpayer to bail us out”.

Oh, wait, that’s not outrageous at all is it?

That pretty much sums up the entitlement/welfare culture being so carefully nurtured by the left to a tee, doesn’t it?

~McQ


But remember, government knows best …

And if you need an example of why you should always rely on government to get it right, well, just consider the latest concerning the mandated use of food ethanol for fuel:

The AAA says the Environmental Protection Agency and gasoline retailers should halt the sale of E15, a new ethanol blend that could damage millions of vehicles and void car warranties.

AAA, which issued its warning today, says just 12 million of more than 240 million cars, trucks and SUVs now in use have manufacturers’ approval for E15. Flex-fuel vehicles, 2012 and newer General Motors vehicles, 2013 Fords and 2001 and later model Porsches are the exceptions, according to AAA, the nation’s largest motorist group, with 53.5 million members.

“It is clear that millions of Americans are unfamiliar with E15, which means there is a strong possibility that many may improperly fill up using this gasoline and damage their vehicle,” AAA President and CEO Robert Darbelnet tells USA TODAY. “Bringing E15 to the market without adequate safeguards does not responsibly meet the needs of consumers.”

Ya think?

Hey look buddy,  the ideological agenda waits on no one and if you’re among those driving the 228 million “other” vehicles, tough nuts.

The government has said 15%.  Nuff said.

BMW, Chrysler, Nissan, Toyota and VW said their warranties will not cover fuel-related claims caused by E15. Ford, Honda, Kia, Mercedes-Benz and Volvo said E15 use will void warranties, says Darbelnet, citing potential corrosive damage to fuel lines, gaskets and other engine components.

Gee, I wonder if anyone will question the “fairness” of this.

Anyone doubt who will pick up the tab for this, Mr. and Mrs. Consumer?

~McQ


Crop cronyism’s destructive results

We talk about it.  Politicians condemn it.  Nothing ever happens to change it though.

This year’s agriculture bill again redistributes your money to rent seekers:

Combine a Midwestern drought with pointless ethanol mandates, and the supplies of corn inevitably dwindle, driving prices sky high. Politicians like Sen. Claire McCaskill, Missouri Democrat, are citing the crop crisis as an excuse to ram through a near-$1 trillion farm bill. While a bit of that cash might find its way to a small farmer, the bulk of the loot will be transferred to individuals who are anything but poor. Like the bank bailouts and TARP, the farm bill illustrates the capture of the legislative process by special interests.

The last farm bill in 2008 was the focus of $173.5 million in lobbying expenditure, according to a report released Tuesday by Food & Water Watch. This is all money spent on what the Mercatus Center’s Matthew Mitchell calls “unproductive entrepreneurship” where people are organizing and expending their talent to become rent seekers, and the end result is wealth redistribution, not wealth creation. Real entrepreneurship innovates in ways that are socially useful. Cronyism diverts resources — both money and talent — into a system that rewards privileges to favored groups. In the case of the 2008 farm bill, recipients of subsidies of $30,000 or more had an average household income of $210,000.

Mr. Mitchell argues that “government-granted privilege is an extraordinarily destructive force” because it not only results in a misallocation of resources and slower growth, it undermines civil society and the legitimacy of government by providing a rich soil for corruption.”

She’s absolutely right.  And, of course, when you mess with markets, like has been done with the corn market and mandated ethanol, the expected results occur when something unanticipated, like a drought, happens:

Corn and soybeans soared to record highs on Thursday as the worsening drought in the U.S. farm belt stirred fears of a food crisis, with prices coming off peaks after investors cashed out of the biggest grains rally since 2008.

Corn prices crossed into uncharted territory above $8 per bushel — about three-and-a-half times the average price 10 years ago of $2.28. Soybeans punched past $17 for the first time — also three-and-a-half times the 2002 average.

Analysts said that while forecasts for continued dry weather are expected to sustain the rally, corn prices could be vulnerable to any move by the government to lower the amount of corn-based ethanol blenders are required to mix with gasoline.

Notice what entity is mentioned in the last paragraph?  Yes, government. A key player in the increase in corn prices (yes, understood, they’d be higher with the drought alone, but government’s ethanol mandate has driven them even higher yet).

Meanwhile, as mentioned above, we’re subsidizing agriculture to the tune of $1 trillion dollars of your money (in cash or in debt to be paid back in the future).  Meanwhile, you’ll be paying more for corn based products at the grocery store as well.

Nita Ghei lays out the bottom line problem with this sort of cronyism and rent seeking:

Government privileges come in many forms, direct and indirect. It might be a monopoly, such as the one granted to utilities like Pepco. Regulations such as licensing can be used to limit entry to a particular field to the benefit of existing businesses. Lobbying and the revolving door in Washington create what economists call “regulatory capture,” which is what happens when existing firms use regulatory agencies to benefit themselves. Tax breaks, loan guarantees and subsidies are the most direct signs of a government’s favor. Bailouts of big banks under TARP, and Fannie Mae and Freddie Mac when the housing bubble burst, are the most recent examples of direct action.

Extending each of these privileges reduces America’s economic competitiveness. A monopoly protected by the government has little incentive to provide good service. The greater the availability of privileges, the greater is the incentive to indulge in rent seeking, which diverts resources from truly productive activities. In the long run, the result of anti-competitive policies is less innovation, lower growth and a smaller pie to share.

The greatest scourge to the honest Midwest farmer is not unfavorable weather, pestilence or disease. Far worse for them is the plague of politicians who create an artificial market in which only those with influence can truly compete. Defeating the budget-busting 2012 farm bill is the best chance at a good harvest.

The chances of that happening, however, are slim to none.  Regulatory capture is as common now as government debt and unemployment.  It is a systemic problem that rewards rent seekers and the well connected to the detriment of innovators and competition.  It is the antithesis of capitalism.

Unless we have the will to stop this sort of cronyism, we’re on a short road to failure.  This is another, in a long line of government programs, that are unsustainable, destructive and just flat something government shouldn’t be involved in.

But my guess is, this time next year, we’ll still be talking about it, politicians will still be condemning it and nothing will change except the higher national debt number.

~McQ

Twitter: @McQandO


More green energy “winning”

It just gets better and better:

President Obama will tout investments in “renewable” energy Wednesday at the local Copper Mountain Solar 1 plant, although the plant has only five full-time employees.

The plant, owned by San Diego-based energy company Sempra, was built in late 2010 at a cost of $141 million. Funding included $42 million in federal-government tax credits and $12 million in tax-rebate commitments from the state of Nevada.

Construction of the plant involved over 300 part-time jobs, but currently only five full-time employees operate the plant, a Sempra spokeswoman confirmed. That comes out to $10.8 million in tax-dollar subsidies per employee.

Result?

Nationally, solar energy is unlikely to help the president achieve his goal of lower energy costs. Geoffrey Lawrence, deputy policy director at the Nevada Policy Research Institute, the free-market think tank that publishes Nevada Journal, noted in his Solutions 2013 report that, even according to the U.S. Department of Energy, solar-PV energy will cost three and a half times more than energy from traditional sources such as coal.

“President Obama’s visit to the Solar 1 Facility in Boulder City is the perfect illustration of why the president’s economic policies are such a failure," said Andy Matthews, president of NPRI. “The government has spent over $50 million to ‘create’ five permanent jobs and build a plant producing a product — expensive solar energy — that no one would purchase without a government mandate.

“That’s not a path to a vibrant economy; it’s the road to serfdom. This mindset — of government attempting to pick winners and losers in the economy through subsidies and regulation — is a major reason why the national unemployment rate is at 8.3 percent, Nevada’s unemployment rate is 12.7 percent and the national debt is over $15.5 trillion.”

But hey, here we are “winning” the Charlie Sheen way.

Again, does anyone wonder anymore why, despite their rhetoric, Obama and Secretary Chu are just fine with gas prices going up?

~McQ

Twitter: @McQandO


ObamaCare–why you should care and work for its repeal

We’ve talked a lot about the dependency culture and how the left continues to try to grow it.  And perhaps one of the most outrageous examples of that is The Patient Protection and Affordable Care Act (PPACA) law commonly called ObamaCare.

The Heritage Foundation does a great job of outlining 13 reasons why ObamaCare needs to go down the circular drain (and that’s regardless of whether or not the Supreme Court invalidates the individual mandate, although that mandate is among their 13 reasons).

Each of the 13 reasons to repeal the law has its own link that takes you to another page which explains the Heritage Foundation’s argument.

Let’s take one of those reasons and look at it.  How about:

Health Care Subsidies: Obamacare spends more than $400 billion in the first 10 years to subsidize health insurance offered through government-designed exchanges. The design of these subsidies reinforces the current inequities in the tax code and creates new ones that will discourage work and encourage employers to discontinue offering health insurance.

When you go to the link you find out that:

These subsidies are the most expensive component of the overhaul, costing over $460 billion by 2019. Perhaps even more problematic, they will cause significant and harmful disruptions far outside the health care system by discouraging work and further complicating the tax treatment of health insurance. The subsidies reinforce current tax code inequities and create new ones.

Other than the cost, how that all works is hard to wrap your head around.  And to the Heritage Foundation’s credit, they attempt to explain it.  For instance, how does it discourage work?

The subsidies will discourage work by individuals eligible for the subsidy and for other taxpayers who will likely be forced to pay higher taxes in order to finance the subsidies.[14]There is an enormous “cliff effect” at 400 percent of the FPL, where earning additional income results in a total loss of the subsidy. A family of four headed by a 60-year-old would lose more than $15,000 worth of tax credits as household income passes 400 percent of the FPL.[15] The subsidy will also encourage individuals to retire early and to change the way they report income. This subsidy structure also penalizes upward income mobility and marriage.[16]

FPL is the “Federal Poverty Level”.  And 400% of the FPL for a family of four is $89,400 in 2011.  That’s right … if you make $90,000 dollars as the head of a family of 4, you’re eligible for a health care subsidy.  If you go beyond that, as the Heritage Foundation points out, it could cost you more than $15,000 dollars.

But that’s not the only impact.

How will it effect business, specifically small business?  Remember, you have to have over 50 employees before this kicks in.  But if you do have that many, you’ve got some real problems ahead of you (and, perhaps, an incentive to stay or get below 50).  The National Federation of Independent Businesses lays it out for you:

Which Businesses Face Potential Penalties?

Businesses with 50 or more full-time employees or full-time equivalents (FTEs) face potential employer mandate penalties. In this context, a full-time employee is one who works 120 hours per month or more – roughly 30 hours per week. In counting toward 50, each 120 hours per month of part-time labor comprises one FTE.

If an owner has several different businesses, they may or may not be treated as a consolidated group  under the Tax Code. If they are treated as consolidated, then the full-timers and FTEs in the multiple  businesses will be added together and treated as one business in determining whether the employee count is 50 or more.

So, first we redefine full-time employee.  From as long as I can remember, 40 hours a week has been a full time employee.  Anything under that was part-time.  Now we have 30 hour a week employees considered full-time.

Anyone, can you guess what may happen to those who are working part-time hours (30 a week, 120 a month) now when 2014 rolls around and these rules go into effect?  Yes, no more than 29 hours week and 116 hours a month.  So immediately it has an effect on productivity and hours worked and part-time employees hours and pay.

And if a business had plans to expand to 50 workers and beyond, given the complexity and cost concerning health care of doing so, why would it?  Or if it did,  why wouldn’t it drop health insurance and tell employees to join government exchanges?   In the first case there is no incentive for expanding to 50 or beyond and in the second there is every incentive to drop health care insurance if they do.

Because providing insurance could lead to this:

How Much Are The Penalties?

If a business does not provide insurance and if at least one employee receives federal insurance subsidies in the exchange, the business will pay $2,000 per employee (minus the first 30). Example: a business with 50 employees, two of whom are subsidized, would pay $40,000 = $2,000 x (50 – 30). To qualify for subsidies, an employee must meet two criteria, described below.

If a business does provide insurance, and if at least one employee receives insurance subsidies, the business will pay $3,000 per subsidized employee OR $2,000 per employee (minus the first 30) – whichever is less. So a providing business with two subsidized employees would be fined $6,000.   With 14 or more subsidized employees (above the tipping point for the formula), the penalty for a 50-employee firm would be $40,000.

So you’re a small business which has been providing health insurance for your employees and suddenly the government decides it is going to subsidize some of them (even those well paid and making 400% of FPL).  But if they subsidize them, without you or the employee asking them too, you, the employer have to pay a fine?

Why would you continue to provide health insurance?  Especially when this could happen as the law is written today:

For some firms, the employer mandate will result in large fines when circumstances change in their employees’ households. For example, an employee’s spouse losing a job or an employee’s spouse’s elderly relative moving into their house could trigger thousands of dollars in annual employer penalties. Employers will not be entitled to know the details of what triggered their penalties – unless they challenge the employee’s honesty before a government agency. The IRS is trying to fix this
sticky situation.

The absurdities abound.  But the intent is clear. 

The intent of this draconian nonsense is to drive employees to government exchanges.  And we know where it goes from there.

This is only one of 13 reasons why this travesty of a law must be repealed.  It is a disaster, it won’t drive cost down, and, given the penalties it imposes, we, the consumer will be picking up the tab for these penalties in the price of our goods.

This law alone is reason enough to get the current occupant out of the White House and planning an early retirement.  ObamaCare must not stand.

~McQ

Twitter: @McQandO


Crony Capitalism is phony Capitalism–example 6,981: solar subsidies

Via Hot Air is an article by Bjorn Lomborg in Slate.  It reviews the subsides of German toward “green energy” and how that has worked out for them.

Lomborg points out that when the global warming scare was at its height, Germany bought in, hook, line and sinker.  And, as is their way, decided they’d become the “photovoltaic world champion” as it switched to solar power.

How much did the German government commit to this pursuit of clean and green?  $130 billion dollars.

What happened when this tax payer funded gravy train left the station?

Germans installed 7.5 gigawatts of photovoltaic capacity last year, more than double what the government had deemed “acceptable.” It is estimated that this increase alone will lead to a $260 hike in the average consumer’s annual power bill.

Because, you see, solar power is more expensive than that nasty fossil fuel generated energy.  Details, details.

Anyway the government handed out $130 billion in subsides, German’s responded and the net result was a huge drop in greenhouse gasses, namely CO2, right?  Yeah, not so much:

Moreover, this sizeable investment does remarkably little to counter global warming. Even with unrealistically generous assumptions, the unimpressive net effect is that solar power reduces Germany’s CO2 emissions by roughly 8 million metric tons—or about 1 percent – for the next 20 years. To put it another way: By the end of the century, Germany’s $130 billion solar panel subsidies will have postponed temperature increases by 23 hours.

Reality … what a slap in the face that must have been.  Suddenly, the German government gets “religion”:

According to Der Spiegel, even members of Chancellor Angela Merkel’s staff are now describing the policy as a massive money pit. Philipp Rösler, Germany’s minister of economics and technology, has called the spiraling solar subsidies a “threat to the economy.”

But, as usual, the German government had to learn this the hard way. Markets, we don’t need no stinkin’ markets.  For a $130 billion dollar “investment”, Germany now gets 0.3% of its total power from solar.  Any guess why governments should steer clear of picking winners and losers?

The German government has burned $130 billion to raise the average power bill by $260 a year and delay the dreaded temperature increases by … 23 hours.

Brilliant!

~McQ

Twitter: @McQandO


$2 billion US dollars to Brazil, but the oil will go to China

Remember this?

The U.S. is going to lend billions of dollars to Brazil’s state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil’s Tupi oil field in the Santos Basin near Rio de Janeiro. Brazil’s planning minister confirmed that White House National Security Adviser James Jones met this month with Brazilian officials to talk about the loan.

The U.S. Export-Import Bank tells us it has issued a "preliminary commitment" letter to Petrobras in the amount of $2 billion and has discussed with Brazil the possibility of increasing that amount. Ex-I’m Bank says it has not decided whether the money will come in the form of a direct loan or loan guarantees. Either way, this corporate foreign aid may strike some readers as odd, given that the U.S. Treasury seems desperate for cash and Petrobras is one of the largest corporations in the Americas.

And  this?

“We want to work with you. We want to help with technology and support to develop these oil reserves safely, and, when you’re ready to start selling, we want to be one of your best customers.”

Mr. Obama was saying that while he was drastically slowing down leasing and permitting in the US and whining about “subsides” to US oil corporations.  We apparently can subsidize government controlled oil companies in foreign countries, but not here (and I’m not arguing for subsidies here – just pointing out the usual Obama contradiction – kind of like he’s against bailouts, except for Chrysler, GM, Solyndra, etc.)

Well, that little jump-start of ObamaDollars has indeed helped “develop these oil reserves”.  And the beneficiary?

Off the coast of Rio de Janeiro — below a mile of water and two miles of shifting rock, sand and salt — is an ultradeep sea of oil that could turn Brazil into the world’s fourth-largest oil producer, behind Russia, Saudi Arabia and the United States.

The country’s state-controlled oil company, Petrobras, expects to pump 4.9 million barrels a day from the country’s oil fields by 2020, with 40 percent of that coming from the seabed. One and a half million barrels will be bound for export markets.

The United States wants it, but China is getting it.

Less than a month after President Obama visited Brazil in March to make a pitch for oil, Brazilian President Dilma Rousseff was off to Beijing to sign oil contracts with two huge state-owned Chinese companies.

Well done, Mr. Obama.

[HT: Red Country]

~McQ

Twitter: @McQandO


Quotes of the Day–Green Jobs edition

Another “told you so”:

WHEN is a job not a job? Answer: when it is a green job. Jobs in an industry that raises the price of energy effectively destroy jobs elsewhere; jobs in an industry that cuts the cost of energy create extra jobs elsewhere. You will hear claims from Chris Huhne, the anti-energy secretary, and the green-greed brigade that trousers his subsidies for their wind and solar farms, about how many jobs they are creating in renewable energy. But since every one of these jobs is subsidised by higher electricity bills and extra taxes, the creation of those jobs is a cost to the rest of us. The anti-carbon and renewable agenda is not only killing jobs by closing steel mills, aluminium smelters and power stations, but preventing the creation of new jobs at hairdressers, restaurants and electricians by putting up their costs and taking money from their customers’ pockets. –Matt Ridley, City A.M., 15 December 2011

And:

The parallel-energy universe known as renewables, a place where dollars and economic theory know no bounds and make no sense, looks increasingly like a bubble set to collapse. Or, as I wrote here back in March of 2010: “That eerie hissing you hear may well be the air beginning to seep out of the green energy bubble. The sound is similar to the pfffffft and sshhhhsssssp noises we heard in the early days of the dot-com bubble collapse or the subprime mortgage meltdown.” –Terence Corcoran, Financial Post, 15 December 2011

But our rulers know better, don’t you know?  That’s why they do so well picking winners and losers (I assume I don’t need to deploy my sarcasm tag here):

Workers in Germany’s once booming solar energy industry face a shakeout of major proportions following declines in the price of solar panels over the past year. A decision by the German government earlier this year to phase out nuclear energy has done little to reignite the sector. The resulting power gap is likely to be filled by coal and gas rather than solar and wind energy. – Sarah Marsh and Christoph Steitz, Reuters, 15 December 2011

For instance:

Solon’s insolvency filing is likely to be followed by other high-profile German solar company failures, analysts said, as the blood-letting in the global industry intensifies. Shares in Solon plunged 58 percent on Wednesday after the solar module maker announced the filing late the previous day, becoming Germany’s first major casualty of a crisis in the sector.  “Solar managers and experts warned already about further bankruptcies,” a Frankfurt-based trader said. Christoph Steitz, Reuters, 14 December 2011

Like the man asked, “when is a job not a job?”  When it kills other jobs and has to be subsidized by government to continue to exist.

But, you know, that’s old fashioned thinking — just like it was when the dot.com bubble was building.  The laws of economics seem to always enforce themselves on an apparently unsuspecting or willfully ignorant elite don’t they?

~McQ

Twitter: @McQandO

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