Naked Economics by Wheelan, Charles (spanish books to read .txt) 📕

lot about it—probably more than they care about any other government policy. Meanwhile, the rest of us, who pay mere pennies extra in taxes to preserve an unnecessary supply of mohair, don’t care much about it at all. Any politician with a preference for job security can calculate that a vote for the mohair subsidy will earn the strong support of the mohair farmers while costing nothing among other voters. It’s a political no-brainer.

The problem is that mohair farmers aren’t the only group lining up to get a subsidy, or a tax break, or trade protection, or some other government policy that puts money in their pockets. Indeed, the most savvy politicians can trade favors with one another—if you support the mohair farmers in my district, then I’ll support the Bingo Hall of Fame in your district. During my days as a speechwriter for the governor of Maine, we used to refer to the state budget as a Christmas tree. Every legislator could hang an ornament or two. I currently live in the Illinois Fifth Congressional District, the seat held for decades by Dan Rostenkowski (and later by Rahm Emanuel). We Chicagoans can drive around the city and literally point to the things that Rosty built. When the Museum of Science and Industry needed tens of millions of dollars to build an underground parking garage, Dan Rostenkowski found federal funds.1 Should taxpayers in Seattle or rural Vermont have paid for a parking garage at a Chicago museum? Of course not. But when I took my children to the museum last weekend in a downpour, I was delighted to be able to park indoors. That helps to explain why Dan Rostenkowski, not long out of federal prison, can still command a standing ovation at political gatherings in Chicago.

The stimulus bill passed by the Obama administration during the depths of the financial crisis was a giant legislative Christmas tree. I will argue in the next chapter that the stimulus was a reasonable thing to do under the circumstances. No sane person, however, would have designed that particular bill, which included funding for things ranging from “green” golf carts to a polar ice breaker. Yes, the process that has generated decades of cash payments for mohair farmers is alive and well. Let’s talk about ethanol, a corn-based gasoline additive with putative environmental benefits. Gasoline blended with ethanol is taxed 5.4 cents less per gallon than pure gasoline, ostensibly because it burns more cleanly than pure gasoline and because it lowers our dependence on foreign oil. Of course, neither scientists nor environmentalists are convinced that ethanol is such a great thing. A 1997 study by the General Accounting Office (which later changed its name to the Government Accountability Office), the nonpartisan research arm of Congress, found that ethanol had little effect on either the environment or our dependence on foreign oil. The ethanol subsidy had, however, cost the Treasury $7.1 billion in forgone tax revenues. Worse, ethanol may actually make some kinds of air pollution worse. It evaporates faster than pure gasoline, contributing to ozone problems in hot temperatures. A 2006 study published in the Proceedings of the National Academy of Sciences concluded that ethanol does reduce greenhouse gas emissions by 12 percent relative to gasoline, but it calculated that devoting the entire U.S. corn crop to make ethanol would replace only a small fraction of American gasoline consumption. Corn farming also contributes to environmental degradation due to runoff from fertilizer and pesticides.2

But to dwell on the science is to miss the point. As the New York Times noted in the throes of the 2000 presidential race, “Regardless of whether ethanol is a great fuel for cars, it certainly works wonders in Iowa campaigns.”3 The ethanol tax subsidy increases the demand for corn, which puts money in farmers’ pockets. Just before the Iowa caucuses, corn farmer Marvin Flier told the Times, “Sometimes I think [the candidates] just come out and pander to us,” he said. Then he added, “Of course, that may not be the worst thing.” The National Corn Growers Association figures that the ethanol program increases the demand for corn, which adds 30 cents to the price of every bushel sold.

Bill Bradley opposed the ethanol subsidy during his three terms as a senator from New Jersey (not a big corn-growing state). Indeed, some of his most important accomplishments as a senator involved purging the tax code of subsidies and loopholes that collectively do more harm than good. But when Bill Bradley arrived in Iowa as a Democratic presidential candidate back in 1992, he “spoke to some farmers” and suddenly found it in his heart to support tax breaks for ethanol. In short, he realized that ethanol is crucial to Iowa voters, and Iowa is crucial to the presidential race. Since then, every mainstream presidential candidate has supported the ethanol subsidy, except one: John McCain. To his credit, Senator McCain generally opposed ethanol subsidies during his presidential runs in both 2000 and 2008. While Senator McCain’s “straight talk” is admirable, let us remind ourselves of one important detail: John McCain is not currently president of the United States. That would be Barack Obama—an ethanol subsidy supporter.

Ethanol is not a case of a powerful special interest pounding the rest of us into submission. Farmers are a scant 2 or 3 percent of the population; even fewer of them actually grow corn. If squeezing favors out of the political process were simply a matter of brute strength, then those of us who can’t tell a heifer from a steer should be kicking the farmers around. Indeed, America’s right-handed voters could band together and demand tax breaks at the expense of the lefties. And we could really have our way with those mohair farmers. But that’s not what happens.

Economists have come up with a theory of political behavior that fits better with what we actually observe. When it comes to interest group politics, it pays to be small. Gary Becker, the same University of Chicago Nobel