Some federal subsidies make sense, help our economy

As spring approaches, you can be sure the clarion call will be from inside Washington to stop subsidies to those undeserving (or not on a lobbyist’s call sheet) and to increase subsidies for industries needing to hire more people (or on that call sheet). From outside Washington the call will be to stop all handouts (which is what the public thinks subsidies are). And from overseas the call will be to stop subsidies as they are unfair competition.

Let’s try the truth first. Everything we produce in America has some subsidy applied, either to raw goods or energy or delivery. The planes we build were designed from specs originally developed as part of your taxpayer defense budget (from the DC3 to the present Boeing 787). The trucks that deliver your goods are fueled by diesel that has a reduced import rate, a tax credit as an essential product for the American economy, and run on roads in which private cars pay a hugely disproportionate amount of tax for the wear the trucks actually cause.

The food you eat is subsidized to the tune of billions of dollars annually. The phones you use have been subsidized by monopoly rights and monthly service fees for decades. The computer you work with has been designed with ample support of the defense and NASA department budgets and, further, the high-tech world receives some of the most generous tax incentives and government guaranteed loans of any industry.

You may ask: “Why do we have these subsidies?” It’s called managed common good. For example, computers are good for the American economy. This industry keeps many thousands of Americans employed, makes efficient use of raw materials and, importantly, makes us the world leader in this technology.

Now, of course, we have to pay for these subsidies. How? By earning more and paying more tax. Henry Ford first realized this paradigm. If he paid his workers $5 a day (an unheard of amount of money in 1920) then not only could he demand more of those workers, but they would have more money to spend. On what? A car, of course. Once the Model T started showing up everywhere, the boom took off.

Take the case of corn. America is the No.1 producer of corn worldwide (put aside the genetically engineered corn question for a moment). Our regular corn production is so heavily subsidized (from farm credits, tax incentives, and export tax kickbacks to the reduced cost of fertilizers and diesel fuel both made from oil) that we export corn at less than 50 percent of the cost of comparable corn producers in Europe and, what’s worse, cheaper than India and most African nations can produce corn.

On the one hand this well managed subsidy produces a strong economy for us, assures a national defense strategy and makes our customers dependent on at least one American product (and good will). It is worth noting that the State Department has used these visible subsidies, especially the export tax credit subsidy, as part of most treaty negotiations since before Nixon.

Seen from a developing nation’s perspective, subsidies are evil and the cause of their poverty. In truth, what they want to know is: How do we get up enough of a head of steam to do the same? Russia has seen the light; they no longer sell crude oil except under existing agreements with old USSR countries. They will sell refined diesel, gasoline and fertilizer cheaper than most European countries can produce.

But how will Tanzania or Zambia turn away from simply licensing those huge mines of copper or gems to foreign companies and actually make the copper wire at a cost effective price, or polish those emeralds in Dar es Salaam instead of Holland? To do so they need to subsidize those industries from somewhere, but their economies are too fragile, they have no tax base, no spreading of the common wealth to rely on.

So they scream “Unfair!” at world trade and environmental forums. They have a point. We have shown them the promised land, but are doing little to help them get there.

The solution is not to dismantle our system, but to help them, like the Marshall Plan, build theirs. There will always be parts of society that need more help than others. National Public Radio is necessary to maintain some semblance of media balance away from commercial interests. Good roads are necessary for industry even if they are paid for by the family car.

Our airways are a vital means of national communication, defense and transport and deserve to be paid for by that surcharge on your holiday ticket. Subsidies are part of what you ask your government to provide. What you now need to do is listen to the voices of your cousins in Asia and Africa and South America and embolden our congressmen and women to promote the true American dream into reality.

In the end, it will be beneficial to us all. If that Zambian earns more, he will surely want to buy the best American goods. Henry Ford was right, make the best product, create the most affordable new way of life and they will flock to your side.

Peter Riva, a former resident of Amenia Union, now lives in New Mexico.