Economic Symbolism

+

Every time an industry gets significant tax benefits or even direct subsidies, jobs are created and an industry grows in that fertile soil. Those additional jobs and the resulting tax collected from the workers have to be balanced against the loss to the taxpayers resulting from the tax benefit or incentive subsidy offered. Sometimes, the taxpayers do well – and even avoid paying additional unemployment benefits in the interim; sometimes it really turns out to be a taxpayer burden without offsetting benefits. And sometimes, it just plain doesn’t matter, because “it looks bad.”

Corporate jets are now in Congressional reformers’ crosshairs, and the adjustments to the tax benefits accorded owners of such private aircraft (“used for business”) suggested by those in the know will generate an extra $3 billion in revenue for the fed… but owning a corporate jet will be a lot more expensive… and folks are likely to cut down on buying such aircraft as a result. Jobs will probably be lost. “‘The president is vilifying an entire industry,’ said Dan Hubbard, a senior vice president for the National Business Aviation Association, which represents 8,000 companies that use private planes. ‘This is an attempt to score some cheap political points on the back of an industry that employs 1.2 million people.’” New York Times, July 7^th. Like, Americans are going to feel bad about those folks with private jets.

As the debt ceiling talks roll on, there is evidence that while Tea Party Republicans won’t tolerate any rate increases, they are not opposed to closing a few loopholes. Arizona Republican Senator John McCain has also suggested that we do away completely with agricultural subsidies, a large expenditure with little in the way of taxpayer benefits. Indeed, as commodity prices soar, one really has to question continuing such subsidies on any basis. The focus in Washington is also on subsidizing corn farmers (mostly in the mid-west) who process water-sucking (wasting!) corn to be burned as ethanol to burn as a gasoline additive, with tariffs on Brazilian ethanol that would be much cheaper than the domestic product.

“No one is seeking to end the most important government support for ethanol [argh!!!!] — a federal mandate that gasoline blenders mix increasing amounts of ethanol into gasoline. But at a time when many tax breaks are under scrutiny, there seems to be little political will to continue giving $6 billion a year in federal tax credits to fuel blenders that must buy the ethanol anyway…Further undermining support for ethanol are food makers and livestock farmers, who say the industry’s huge demand for corn is driving up their own costs, and the oil industry, which has never been fond of a fuel that displaces some of the gasoline in cars and trucks.

“Recognizing reality, ethanol makers say they are willing to give up most of the money, although they and their allies in Congress want to spend some of the savings on new subsidies instead… ‘They always say, ‘It’s just a few more years,’ and now the few more years has added up to decades,’ said Jay Hakes, a former director of the federal Energy Information Agency and now director of the Jimmy Carter Library. Noting that the early subsidies provided by the Carter administration were originally intended to be temporary, he added, ‘The time for heavy subsidies for corn-based ethanol has passed.’” NY Times. Psssstttt! The oil industry recently escaped major cu ts in their tax benefits, and we know they are making money hand over fist. I guess if you are big enough and contribute enough, you get whatever you want. Does anybody really think that the financial regulation package the twisted through Congress really has enough teeth in it to impact Wall Street?

In the end, Congress does have the power to incentivize and regulate various forms of economic activities, either through subsidies or tax benefits… but there is less than a fine line between pure contribution-generating-constituent-pleasing pork and what the country really needs to prosper. And no one is better at crossing that line than Congress.

I’m Peter Dekom, and if I grow up, I want to be a special interest.