Subsidizing the Future?

A great deal of discussion is had about the rationale behind government subsidies, both direct and indirect. The recent gas prices have brought the oil companies under an immense amount of scrutiny. Meanwhile, the recent obsession with cutting discretionary spending in government makes the idea of a farm bill laden with subsidies seems less likely than in the past. The question that should be asked is whether its the role of the government to provide subsidies to particular sectors in society. Furthermore, how do we determine what to subsidize. Two areas probably most prevalent in this debate are the aforementioned agricultural and energy sectors.

Should we subsidize particular farming industries? A question worth asking. According to the Environmental Working Group, the United States Government spent over 75 billion dollars from 1995 to 2009 on corn subsidies alone. As a result, there is corn in basically everything you eat. While in small doses there is no problem with it, when its found in everything from chewing gum to corned beef it can cause some serious health problems, especially for those who are enticed into buying these foods because of their artificially low price point.  Furthermore, subsidizing certain crops (e.g. cotton) makes it pretty much impossible for the world to compete with one another, leading to a further divide between the haves and have-nots of the world.

Inversely, for many farmers, without these incentives they would be unable to earn a living providing food for the rest of society. According to the U.S. Environmental Protection Agency, less than 1% of the United States population are farmers. These individuals provide the material used to feed and clothe the other 99 %.  It is vital they have the ability to make a living at such important work. For this reason, simply eliminating all farm subsidies may not be a viable option either. Rather, it may be more prudent to examine the types of subsidies awarded and more oversight may be needed to ensure the money is being used to ensure the health and welfare of not only the farmers, but the population at large. Speaking of which…

Why do we subsidize oil companies? Recently the oil companies have come under attack for the billions of dollars in tax breaks they receive, while recording astronomical profits. The top 5 oil companies: Exxon Mobil Corp, Royal Dutch Shell, BP, Chevron Corp, and Conoco Phillips posted profits of 36 billion in the first quarter of 2011, yet gas prices are around $4 a gallon. If the point of subsidies are to keep prices affordable for the general population, they seem to be failing in this case. In addition, years of cheap fuel have prevented the innovations needed in other energy areas to ensure a secure, healthy population. Does this mean all energy subsidies should be eliminated?

From a purely capitalist perspective this may seem like a good idea. However, due to the advantages we have given less permanent and dirtier forms of energy (e.g. oil) it may not be the wisest. In order to ensure private sector companies (who have benefited from years of energy subsidies for oil and other impermanent, environmentally unsound fuel sources) invest in the future technologies needed it would make more sense to shift these incentives to technologies better suited for the future. Once again, creating a more efficient system of subsidies may be more beneficial than simply eliminating them.

The complexities of the economic subsidy system may be too difficult to boil down to simple benefits and drawbacks. However, whatever one’s perspective on the value of this aid, it is important the best interest of the larger population is served. Merely eliminating the assistance simply to eliminate debt is foolish if it leads to increased poverty and hardship. Similarly, maintaining the status quo is equally bad if it merely serves to line the pockets of a select few with no clear benefits to the greater good. After all, as JFK once said, “If a free society cannot help the many who are poor, it cannot save the few who are rich”.

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