Opinion: Government Subsidies and Corruption

While reading the latest Michael Connelly novel, The Law of Innocence, I came across a quote that struck me as so obvious and true, I wondered why I hadn’t thought of it myself. The quote was, “And where there is government subsidy, there is always corruption.” Think of the government subsidy programs and think of all of the corruption over the years. Whether it is Social Security, Medicare, Medicaid, or Green Energy, the question that begs asking is, why do these subsidies attract corruption like metal shavings to a magnet?

The reasons appear to be the three reasons property crimes are almost always committed: temptation, opportunity, and rationalization. There is, of course, an antidote reason that, without which, those other three incentives would not come into play: character. If a person has character built on a foundation of honesty, integrity and moral tenets, then it wouldn’t matter what the temptation was. Such a moral person wouldn’t view an opportunity for corruption as a chance for monetary gain and there would, therefore, be no reason to rationalize.

Unfortunately, for every taxpayer in America, the opportunities for corruption are presented almost every time Congress is in session. In many instances, Congress will provide subsidies for both sides of an industry. For example, while the federal government gives billions of dollars to “green energy” companies that produce solar, wind and other so-called renewable energy companies, they also give lots of money to the oil and gas industries.

While Congress may investigate the innumerable boondoggles these subsidies create, they never seem to correct the problems that they produce. In 2015, Veronique de Rugy, a senior research fellow at the Mercatus Center at George Mason University, whose primary research interests include the US economy, the federal budget, federal programs, and tax policy, testified before the the House Committee on Science, Space, and Technology, Subcommittee on Energy.

The main thrust of her testimony was that all subsidies concerning energy should cease. The reasons she gave were very compelling:

1) government lacks the incentives to manage funds that private investors have;

2) giving subsidies to some businesses puts other businesses that do not receive such subsidies at a disadvantage, distorting investment and other economic activity; and

3) the existence of government subsidies increases the incentive to lobby and the power of special interests.

There has been no legislative action to correct these problems since then, has there? While her suggestions were directed at the energy industry, they would apply equally to most, if not all government subsidies. They are the central inducement for the most publicized “crony capitalism” cases. If a politician has received a large political donation from a corporation, he or she has the incentive to push and/or vote for a government subsidy of that business or the industry in which the donating company operates.

Let’s not forget that the fraud and corruption we know about, is just the tip of the iceberg. How much don’t we know about, 25%, 50%, 90%? Government subsidies provide the TEMPTATION for those who are less ethical, the OPPORTUNITY, for financial gain and the RATIONALIZATION, that they are not stealing from individuals, only from the government.

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