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Down with energy subsidies

Marketplace Staff Jan 23, 2007

KAI RYSSDAL: What the president’s doing at the most fundamental level is just choosing.

He’s picking ethanol, for instance, to boost fuel efficiency. And he’s betting on new technologies to cut global warming.

When politicians choose, though, we call it something else: subsidies.

Commentator and economist Susan Lee says bureaucrats and politicians don’t usually make those choices very well.

SUSAN LEE: The time-honored mantra of conservatives is “let the market decide.”

And it’s not a foolish principle. Governments cannot pick winners and losers. Only the market can sort through competing ideas and products.

And, really, who would you trust with your investment money: a venture capitalist or a federal bureaucrat?

But what about the argument that infant industries need a little jump-start to get going? No doubt government help can be very, very effective in establishing industries. But it’s way less effective in letting those industries stand on their own after they’re established. Especially after an entire lobbying business has grown up around them.

Consider how difficult it was to dismantle tobacco price supports. It took years and years of public outrage over tobacco subsidies before the government managed to end them — at great taxpayer expense — only a few years ago.

If, as it looks likely, ethanol proves to be too expensive and not very energy efficient, can you imagine the ethanol lobby just packing up its Washington office and disappearing?

The real shame about government subsidies is that they prevent a better use of resources.

When price supports for tobacco ended, farmers discovered more profitable uses for their land. In Kentucky, for example, farmers have switched into beef and dairy cattle. In North Carolina, they’re growing vegetables.

President Bush has already given the entire energy industry a big subsidized boost. His Energy Act of 2005 was packed with incentives for nuclear and oil. Along with all sorts of tax credits and loan guarantees for alternative energy. Everything from biofuels to wind to geothermal.

Maybe it’s time to stop subsidizing all forms of energy. Why not level the entire playing field? Who knows, maybe without giant subsidies for oil, some alternative fuels will make more economic sense.

One thing we do know: Mr. Bush is not one whit better at picking energy winners than my dog.

Come on, Mr. President, start behaving like a Republican. When it comes to letting the market decide, let’s feel some real bite.

RYSSDAL: Economist Susan Lee lives in New York City.

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