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Wed July 25, 2012
Your Subsidy Is My Incentive
Originally published on Thu July 26, 2012 10:30 am
We've taken a look at government spending in a few different ways lately, including the posts 50 Years Of Government Spending, In 1 Graph in May, and, more recently, Dissecting Federal Spending With An Eye On Cuts.
Now the folks over at Pew Charitable Trusts — a warren of data, analysis and insight — are giving a glimpse of the spending through another prism: subsidies.
Pew's Subsidyscope project says it "aims to raise public awareness about the role of federal subsidies in the economy." On Tuesday, it released data looking at the subsidies received by nine sectors of the economy: agriculture, education, energy, health, housing, national defense, natural resources and environment, science and technology (including space), and transportation.
The total? Some $823 billion in grants, $460 billion in tax breaks, and $113 billion in no-competition contracts — for one year, according to Tuesday's report.
The latest numbers show, for example, that in fiscal 2009 the federal government spent $504 per household on "direct expenditures" for housing — housing assistance grants, government housing contracts, etc.
But the government spent $1,581 per household, or $185 billion in 2009, on 13 distinct "tax expenditures" — aka tax breaks — including the mortgage-interest deduction ($79.4 billion) and a capital-gains break for those selling their homes ($23.5 billion).
"Subsidy" is a powerful word, of course. Technically, it just means the government is picking up part of the cost for something (and by extension, not for other things).
But aside from economists and journalists, it's often used with a bit of a sneer. After all, one person's incentive is another person's subsidy.
The mortgage interest deduction — one of the biggest and most popular on the federal books — is an incentive for homeownership and encourages people to put down roots in their communities.
Or maybe it's a subsidy for people who buy their homes, as well as the banking and housing industry — a subsidy that renters don't get.
Same with health care, at $4,728 per household in direct expenditures (think Medicare and Medicaid) and $1,598 in tax expenditures — most of which came from not taxing the premiums employers pay for workplace health insurance.
If you listen to our show regularly and this is all beginning to sound familiar, it should: One of the big reasons our No-Brainer Economic Platform panel came out swinging against tax breaks (including the mortgage-interest deduction and tax breaks for health insurance) is that they quickly become entrenched, and gum up the tax code with all kinds of conflicting and costly incentives and subsidies.