Just In: Subsidies Running Over Budget
Just In: Subsidies Running Over Budget
Plus: Jefferson on religious liberty; T-Pain, vocalist extraordinaire; and Bismarck, Demodocus, Dwight Schrute, Milesians, Americans, and idiots.
The Congressional Budget Office (CBO) has done some re-thinking. Due largely to unanticipated investment and aggressive regulation, the agency now says the Inflation Reduction Act’s (IRA) clean-energy subsidies will cost $428 billion more than it previously estimated.
Who possibly — besides anybody who understands basic economics — could have foreseen this? Remember, the fact that policy errors are (putatively) unintended by those who enacted them does not mean those errors were unforeseen — by sober economists, at least.
This author discussed all this in Florida Daily:
The economic dynamics causing these overruns are simple. Government subsidies that lower a good or service’s price invariably increase consumers’ demand for it. Consider a simple hypothetical. If a grocery store were to sell quality beef at $40 per pound, only certain subset of well-to-do shoppers would buy it regularly. Were the government to subsidize these steaks and cut their consumer price in half, many more shoppers would consider it a financially viable dinner option. In economic terms, demand would rise sharply — perhaps doubling. The store’s pre-subsidy stock (20 lbs. per week, say) would suddenly become insufficient; the grocer would order and sell more beef to meet its customers’ subsidy-heightened demand.
If government planners appropriated only enough funds to subsidize the status-quo-ante 20 lbs. per week (a projected weekly cost of $400, in this scenario), they would soon discover that the beef boondoggle had run overbudget. Doubled demand for state-sponsored sirloin will have doubled the taxpayers’ burden.
Sure enough, the CBO “now expect[s] greater investment in the manufacturing of batteries and in wind and solar power generation than was anticipated in August 2022.” Subsidies — of green-energy infrastructure, in this case —produce more of the subsidized thing. The economic incentive structure is ineluctable.
When drafting legislation, political incentives drive politicians to underestimate proposals’ costs and overestimate their revenue potential. This minimizes the nasty challenges responsible budgeting poses. Further, economic models that neglect to incorporate human behavioral patterns make conveniently deceptive tools for spendthrift politicians to pitch new spending to their constituents.
The CBO notes that, of the projected IRA cost overruns, $224 billion come from EV tax credits. This stems largely from the Biden administration’s pro-EV regulation. For example, the CBO reports that the Biden administration, to widen access to EV tax credits, has loosened eligibility criteria, which increases the number of credits doled out and the public cost.
Some Wisdom
So thoroughly has modern America separated church from state that few remember that many in the revolutionary generation favored established churches. The eminent George Mason, for instance, favored a state-funded Church of Virginia — which the 25-year-old James Madison fought unsuccessfully against during the state’s constitutional convention in 1776.
Writing in 1784, Thomas Jefferson laid out “a summary view of that religious slavery” (restrictions on practice and conscience) Virginia then imposed.
He continues:
The error seems not sufficiently eradicated, that the operations of the mind, as well as the acts of the body, are subject to the coercion of the laws. But our rulers can have authority over such natural rights only as we have submitted to them. The rights of conscience we never submitted, we could not submit. We are answerable for them to our God. The legitimate powers of government extend to such acts only as are injurious to others. But it does me no injury for my neighbour to say there are twenty gods, or no god. It neither picks my pocket nor breaks my leg.
…
It is error alone which needs the support of government. Truth can stand by itself. Subject opinion to coercion; whom will you make your inquisitors? Fallible men; men government by bad passions, by private as well as public reasons. And why subject it to coercion? To produce uniformity. But is uniformity of opinion desirable? No more than of face and stature.
…
Our sister states of Pennsylvania and New York, however, have long subsisted without any establishment at all. The experiment was new and doubtful when they made it. It has answered beyond conception. They flourish infinitely. Religion is well supported; of various kinds, indeed, but all good enough; all sufficient to preserve peace and order.
Particularly in a time in which the Right’s would-be-edgy Twitter pundits once again have begun prodding the canker sore of state-enforced religion, Jefferson’s words are useful.
Some Beauty
In a stunning turn of events, T-Pain, the auto-tuned remnant of a human voice behind such classics as “I’m On a Boat” and “In Love With A Stripper,” has revealed himself to have a generationally talented set of vocal cords.
His covers of “Summertime,” “A Change Is Gonna Come,” “Tennessee Whiskey," and “Stay With Me” come particularly recommended.
Some Humor
As The Thoughtful Spot has noted previously, German Chancellor Otto von Bismarck reputedly said, “God has a special providence for fools, drunkards, and the United States of America.”
The American people are extraordinary and fundamentally decent. But particularly on certain days, what Demodocus said of Milesians seems applicable to them: “It’s not that Milesians are stupid, just that they will do the sort of things that stupid people do.”
Maybe during some of the more-stupid, Twitter-fueled news cycles, the nation could heed the advice of a certain Pennsylvanian beet farmer/paper salesman: "Whenever I'm about to do something, I think, 'Would an idiot do that?' And if they would, I do not do that thing."
If a Milesian would have tweeted that, don’t.
(Editor’s note: To paraphrase Billy Joel, it may be called “X” now, but it’s always “Twitter” to me.)