by Paige Terryberry
Senior Analyst for Fiscal Policy, John Locke Foundation
The beauty of the free market is found in the voluntary exchange between consumers and producers. But consumers in today’s market are hard-pressed to find a pure, mutually voluntary exchange anymore.
Subsidies amount to the government inserting itself between consumers and producers. The government “invests” your money in politically chosen ventures — whether they’re a business expansion, solar or wind facilities, ethanol, electric cars, a healthcare program, a film project, a housing program, or something else — to prop them up. Actual consumer demand is not enough, politicians say. But since the government has no ability to produce wealth, the money used is your money — taxpayer dollars gained through coercion.
Policymakers justify subsidies as a way to bridge the gap for entrepreneurs in a given sector. Subsidies will reduce risk, they say. But if private investors and entrepreneurs aren’t willing to take the risk voluntarily, why should taxpayers be compelled instead?
True accountability is removed because these funds do not belong to the government. “Nobody spends someone else’s money as carefully as he spends his own,” as Milton Friedman observed.
The promise of concentrated benefits at dispersed costs ensures taxpayers feel they are harmed “just a little bit” to provide a benefit to a recipient who supposedly needs it. But government intervention isn’t so simple. More than one group is always affected. Moreover, the groups that benefit become dependent on the government giveaways sustaining them. This is how a bureaucratic program forms.
Under the guise of stability, environmentalism, safety, equality, protecting the marginalized, or stimulating economic activity, governments claim subsidies are necessary and helpful to society. Mainstream media parrot this message into popularity.
People sometimes need a push to “do the right thing,” they say. The government has supreme knowledge of where the world is heading. This is the essence of a top-down approach.
Gov. Roy Cooper has perfected such convincing, elitist language. His sweeping executive order (EO) last January would fundamentally alter North Carolinians’ way of life by mandating drastic changes in transportation through changing (and eliminating some) consumer choices.
Gov. Cooper forces his own preferences on the market. Since members of the private market freely choose to meet a demand that is insufficient according to Gov. Cooper, he tries to force his will, claiming to know better than private actors. As such, he directs cabinet agencies to invest state and federal funding (your money) to achieve his objectives.
The preferences of the political class forcibly replace freely chosen consumer preferences.
Subsidies distort investment in the economy and empower special interests. With subsidies, private fundraisers are now competing with those wooing the government for support. This incentivizes businesses to invest in government lobbying. Why should a business fight for more profit the old-fashioned way when the government will pay them? Not lobbying might mean the government pays someone else.
Of course, subsidized businesses do benefit from the subsidies. But the benefits are not without strings attached. They exchange some of their sovereignty when they allow the government a seat in their boardrooms. Pleasing politicians becomes as important, if not more so, than pleasing customers.
Policymakers make big promises through subsidies. They promise to electrify the transportation sector, create jobs, or save the film industry. They call these projects “public investments” and rarely remind anyone they are taxpayer-funded. The government will never spend your money more efficiently than you will. Moreover, government leaders have no special foresight. What they do have is an incentive to create dependency and keep themselves in business.
Policymakers have power. And by convincing enough people that these programs are necessary, the programs will continue to be funded (by you), and the policymakers will get to keep their power.