Subsidies corrode

Victor Joecks

Every week, NPRI President Andy Matthews writes a column for NPRI’s week-in-review email. If you are not getting our emails, which contain our latest commentaries and news stories, you can sign up here to receive them. Just enter your email in the box on the top right.

For today’s week-in-review email, Andy looks at the importance of rejecting subsidies.

As I’m talking to friends and supporters of NPRI, I often note that the Institute neither seeks nor accepts any funding from government.

This is a good thing for several reasons, including a rather obvious one: Since NPRI’s mission includes a commitment to holding government accountable, our efforts would inevitably be compromised if we were financially dependent on that same government.

But I think there’s an even better reason for us to refuse government funding: Subsidies corrode.

That NPRI is funded solely by those who choose to support us means that we have to work constantly to earn your support. This keeps us sharp and focused, and forces us to consistently demonstrate an efficiency and effectiveness in how we operate.

I wouldn’t have it any other way.

Would it be nice to know, going into each year, that there’s a big pot of government money coming our way? Maybe, in a sense. But the risk that we’d grow complacent, knowing that we’d still have that easy money to fall back on, would be far too high a price to pay.

Evidence of the deleterious effects of government subsidies is all around us. I wrote recently about the enormous sum of federal dollars that has been thrown at the renewable-energy industry in the name of “economic investment,” and the pathetic results we’ve seen in terms of actual job creation. But while these subsides have proven to be a bad bet for taxpayers – not to mention an injustice brought upon those green-energy companies’ competitors – they’re also ultimately harmful to their recipients. The Solyndras of the world would have a far better chance of success if they were actually forced to develop a business model that is responsive to market forces, rather than one that is reliant upon political connections and government freebies.

Geoff Lawrence, NPRI’s deputy policy director, came at this idea from another angle this week, penning an incisive commentary about the way Nevada funds its system of higher education. Among Geoff’s points is that the direct subsidization of the state’s educational institutions – in lieu of a more student-centric approach to higher-ed funding – makes those institutions less responsive to the needs of students. It’s no wonder that fewer than half of the system’s students even graduate.

And, to cite a very recent example, the Obama administration’s decision to weaken the work requirements of the 1996 welfare-reform bill provides yet another reminder of how government handouts, by undermining the concepts of personal responsibility and work ethic, hurt the very people they are intended to help.

But consider how the principle applies closer to home. Nevada’s students headed back to school this week, and if you’re a parent, your hope is not only that your child will receive good grades this year, but that he or she will learn something as well.

Imagine your 12 year-old daughter coming home on the first day of school, and reporting that her teacher has told her that at the end of the school year, she’ll automatically get 20 points added to her grade. Your child would likely be thrilled – but you’d be horrified, and rightly so. That’s because, while the higher grade might look good on paper, you’d fear that this “grade subsidy” would tempt her to goof off and put forward less effort. And in the long run, she’d be harmed by this significantly, because the goal is to learn, and have that learning be reflected by a high grade. The goal is not the grade itself.

It’s a simple concept, but one that nonetheless manages to elude so many of our politicians. If I may offer one of my favorite lines on this subject: “If we take the route of the permanent handout, the American character will itself be impoverished.”

It’s rare these days, I know, for anyone to quote Richard Nixon approvingly. But in this instance, he was right on the money.

Take care, and have a great Labor Day weekend.

Andy Matthews
NPRI President

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Update: Changed the intro text to reflect Andy’s letter.