COLUMN: Government subsidization of services not thought through
After the Speak Up, Speak Out forum last week, Travis Faber and I became engaged in a debate with a graduate student on the issue of supporting government subsidization of “promising” enterprises, such as those involved in “green” energy.
Regardless of the form these subsidies take — state-owned banks, targeted tax credits, or direct monetary contributions, just to name a few examples — or the type of business receiving the subsidy, the act of government attempting to pick winners and losers is destined to fail.
Not only that, but the taxpayer bears all the risk and little to no chance of a direct return.
Consider if Lansing’s very own union stooge Virg Bernero gets his way and the state now has its own bank to provide expanded credit to “small businesses.” The first thing that needs to be considered is that a state-owned bank differs from a privately-owned bank only in regard to its source of capital — the tax money of Michigan residents and businesses.
Other than that, both state- and privately-run banks are equally subject to risk ... er, scratch that.
A state run bank would be subject to greater risk. Why? It’s simple. If the purpose of this state run bank is to open up credit because private banks are getting picky about borrowers, that inherently means riskier loans are made.
This means the taxpayer is on the hook when the loans fail.
The same theory also applies to any other method of corporate subsidization — a contribution is made for which taxpayers bear all of the risk, yet receive no direct return.
After all, do taxpayers get a check on interest attained from federal student loans? Not at all. I’m not interested in indirect benefits either — I cannot go to the store and spend them.
I am sure right now, the leftist readership wants to see empirical evidence that would dare put the deification of the government into question. How about Kmart going into bankruptcy, or Wonderstruck Studios not even opening its doors; both of which were recipients of assistance from the Michigan Economic Development Corporation and Michigan Economic Growth Authority.
The worst part of all this is people who respond apathetically when the issue of being on the hook for a failure comes up.
The graduate student described how his wife, a faculty member here at CMU, received a grant to work with some outfit out of state to work on a project.
When we questioned what happens if the project flops, not only did we get a response of “so what,” we also got castigated for, heaven forbid, demanding our tax money not be used like a blank check.
While some people attempt to deify the government, it still canno0t pick winners and losers like a true god.
