Wind Subsidy is Market-Distorting Corporate Welfare


By:  Tim Huelskamp
Date: Nov. 28, 2012
Location: Washington, DC

Democrats call Republicans defenders of big business. Republicans accuse Democrats of meddling in the market at the expense of taxpayers.

Democrats (sometimes accurately) accuse Republican leadership of prioritizing the interests of Corporate America ahead of the average person. Republicans (often rightfully) criticize the Obama Administration for expensive "investments" in the private sector that yield negative returns for taxpayers.

But, when it comes to energy subsidies, politicians on both sides of the aisle embrace their characterization of the other: Republicans are willing to distort free markets and Democrats are willing to defend corporations. This is reflected in the bipartisan supporters of extending - once again - the massive taxpayer subsidy for the wind energy industry.

A one-year extension of this 20-year-old "tax credit" carries a total price tag of $12 billion. According to the industry's own estimates, not extending it for one year will result in 37,000 jobs lost. That amounts to roughly $324,000 in taxpayer subsidy per job. And this wind subsidy is 86 times greater per unit than subsidies for oil, gas, and coal (I'd like to see those gone too, by the way).

Budgeting is always about priorities, particularly so when America is already $16 trillion in debt. Are we going hand out $12 billion -- 40 percent of which would be borrowed -- on propping up a private industry that should stand on its own after 20 years of massive taxpayer support? Or, alternatively should we instead use that $12 billion for another year of the school lunch program? Or, how about let small businesses and families cough up the $12 billion with the scheduled massive death tax increase next year? (Or, perhaps Washington will instead do what it has done for decades: put it all on the credit card!)

Contrary to the claims made by well-paid lobbyists, this is no infant industry still in incubation. While the subsidy goes to the wind farms that produce the energy, the loudest supporters are the large manufacturers who produce turbines and other related equipment. Siemens, which has threatened to lay off workers in Kansas if the tax subsidy is not extended, is a $100 billion global corporation. General Electric (GE), another big player in the wind product business, is even larger. These companies have enormous legal and accounting departments that should be smart enough to know that Washington cannot keep spending and borrowing forever.

Businesses like Siemens and GE get to reap the rewards of success when they make smart decisions. But, they should also suffer the consequences of bad decisions. If this is a profitable industry, then they will find a way to survive without massive taxpayer subsidies. If they cannot, then they and taxpayers should not be in the business. Why should American taxpayers be on the hook for subsidizing these billion-dollar industries and related corporations, including one (GE) that paid no taxes on its billions of dollars of profit in 2010?

It certainly is possible to run a profitable energy venture without subsidies. Just this past week I participated in an oil and gas conference in Hutchinson. The 600 people in attendance were all looking to create jobs -- and none on the backs of taxpayers.

The time to take off the proverbial training wheels is now. After all, when Congress originally created this tax benefit in the 1990s, it was intended to be temporary. Every extension since then was intended to be temporary. Unsurprisingly, this time around they tell us the same thing: the need is temporary. What evidence is there that the same industry lobbyists will not be back next year asking for just "one more year?"

Republicans and Democrats alike should not be tricked into ignoring the principles for which they typically stand just so big businesses do not have to evaluate and improve their own practices. We need more of all types of market competitive energy, and we cannot afford a massive, market-distorting $12 billion subsidy for an industry that should be profitable by now.

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