Subsidies At Their Worst: Privileges
by Jeffery Smith
Money is the mother's milk of politics. Yet the milk invested by
lobbyists and those they represent is a drop in the bucket compared
to the flow they get back from the public tit, thanks to the milkmaid
state. Politicians grant well-connected big businesses:
a. direct cash outlays, such as cash to
corporations for advertising overseas,
b. lucrative contracts, such as with weaponeers et
al campaign contributors, and
c. tax breaks that burden would-be competitors,
such as tariffs that protect GM and Ford but not autoworkers. Even if
we were to abolish subsidies (a) and taxes, eliminating the advantage
of tax breaks (c), and negotiate responsible contracts (b), that'd
still leave in place
d. seven subtle privileges, mere pieces of paper
that government grants its customers at nowhere near market value,
positioning the privileged to claim all the surplus value of society.
1. The corporate charter's salient feature is to limit
the liability of those choosing to profit by putting others at risk.
As if such protection were not enough, legislatures even raise this
limit as the "need" arises. In case of a nuclear meltdown (this one's
for you, GE), oil transport spill (say "thanks", Exxon), or software
design bug (it's on the house, Microsoft), the wealth of those
responsible is kept safe. Under ancient common law, or if rights to a
healthy planet were enshrined in modern constitutions, victims of
premeditated risky decisions could collect full compensation from the
responsible parties. Charters, and their companion pieces of
legislation, are worth to those corporations putting nature, labor, and
consumer at risk however much that year insurance companies would
charge them, i.e., the losses due to unsafe products, workplaces, and
pollution and depletion - hundreds of billions annually.
2. Pollution permits, performance waivers, land use
exemptions -- whether granted by bureaucracies, legislatures, or courts
- are worth much more than however much government charges and business
pays. The polluter saves by not having to invest in clean-up
equipment or in production methods that waste less. And once government
permits any deviation from the rule, then the recipient is sheltered
from any future charges of malfeasance and can save again on insurance.
It's hard to figure how much such leniency is worth, since if a company
were to capture its pollutants, often it could sell them at a profit as
a secondary line of business.
3. Patents protect the basement inventor, right? Wrong.
Most basement inventors who manage to win a patent never see a penny of
profit. What patents do is tie up good ideas, skew techno-progress
(e.g., automotive engine design eschews all fuels but one), and enrich
those few well-enough endowed to carry innovation to market. Were
government to charge each year full market value for protecting
intellectual property, basement inventors would still pay only token
amounts while GM, DuPont, and Microsoft would have to spend billions --
the annual market value of their patents.
4. Utility franchises create monopolies in exchange for some
public service, such as providing electricity, phone communication, etc.
Yet are monopolies necessary? The power grid could be a public
monopoly, for example, while the power suppliers could be private
competitors, a model at last government is turning to. Government
regulators are supposed to keep utility profits "fair", but do they?
Some of the most lucrative investments are in Enron and AT&T whose
unearned monopoly profits in the billions represent the annual market
value of franchises.
5. Communication licenses for TV, radio, cell phones, and
the like are given away for free or for far less than market value,
turning recipients into "instant billionaires" (the business press
gleefully notes). Why does government let such assets go for
peanuts? Partly out of habit, partly because the recipients contribute
mightily to political campaigns, but also because government can get
the revenue it wants elsewhere -- it can always tax income or sales or
borrow. What are communication licenses worth to Disney, Warner, and
hopefully some day to us? Tally up how much TV charges for Superbowl
Sunday and how much all stations charge for commercials and carriers
charge to monthly subscribers. However many hundreds of billions of
dollars that is ea ch year, a goodly portion of it is rent.
6. Resource leases for public oil, minerals, forests, and
grazing land, are often let at "fire-sale" prices. If any private
landlord squandered his own assets that way, he'd go broke overnight.
How much more could our public steward collect from ca ttle ranchers,
Chevron, Weyerhauser, and others leasing the public domain? At least as
much as private landlords get per acre. It's enough billions that the
present beneficiaries spend fortunes on determining the outcome of
elections, electing their water boys to Congress and state legislatures
who keep the current largesse flowing.
7. Land titles do protect the average homeowners but because
they cost virtually nothing (a paltry filing fee often about $2.00),
they also protect enormously wealthy absentee landlords. Were
government to charge full annual value fees for deeds (r emember, the
words "own" and "owe" were once one), then it could afford to forgo
taxation. Such a shift in the revenue base would save a vast majority
thousands of dollars each year -- and cost an elite some millions.
What's the value of today's nearly free deeds? Try a couple trillion or
more dollars each year, the money we spend on the nature we use.
Land titles are the granddaddy of all privileges. Historically,
titles preceded all others and created a class of elite owners with
the power to win the six other indirect subsidies, along with the
more direct ones – grants, contracts, and tax favors. To undo
and reverse this history, it's necessary to collect and share the
natural rents from all seven inconspicuous privileges.
For these pieces of paper, government should charge full market
value. A bank or insurance company does not charge a flat fee; they
charge a rate geared to the value of the loan or insured property --
and keep it as high as the market will bear. Good for the goose, good
for the gander. Accepting the challenge of the conservatives, let's
run government like a business -- and charge business as much as the
market will bear. From these seven pieces of paper, we'll reap
trillions and afford the aboliti on of taxes. Then, like a successful
publicly-held company, we'll disburse the surplus in equitable shares
among ourselves, we stakeholders, the citizenry.
Getting a Citizens Dividend would not
only eliminate poverty, it'd also erase any rationale for subsidies -
direct or indirect - to the poor or to the privileged. Repealing the
free ride of privileges would be like repealing capitalism. Without
those subt le detours imposed upon public revenue, owners would have
to work to amass a fortune, and work is one of the worst ways known
to strike it rich.
What you can do: Dry up the milkmaid state. Dispense with the
notion that the state must meddle in enterprise. Dispense the notion
from others, too. Focus government on its lone raison d'etre - defend
rights. Demand your right to a fair share of natural revenue.
Jeffery J. Smith is president of the Geonomy Society.