Need Unnecessary

This just in from the GAO on US wind energy subsidies (emphasis mine):

GAO identified 82 federal wind-related initiatives, with a variety of key characteristics, implemented by nine agencies in fiscal year 2011. Five agencies--the Departments of Energy (DOE), the Interior, Agriculture (USDA), Commerce, and the Treasury--collectively implemented 73 of the initiatives. The 82 initiatives incurred about $2.9 billion in wind-related obligations and provided estimated wind-related tax subsidies totaling at least $1.1 billion in fiscal year 2011, although complete data on wind-related tax subsidies were not available. Initiatives supporting deployment of wind facilities, such as those financing their construction or use, constituted the majority of initiatives and accounted for nearly all obligations and estimated tax subsidies related to wind in fiscal year 2011. In particular, a tax expenditure and a grant initiative, both administered by Treasury, accounted for nearly all federal financial support for wind energy.

The 82 wind-related initiatives GAO identified were fragmented across agencies, most had overlapping characteristics, and several that financed deployment of wind facilities provided some duplicative financial support. The 82 initiatives were fragmented because they were implemented across nine agencies, and 68 overlapped with at least one other initiative because of shared characteristics. About half of all initiatives reported formal coordination. Such coordination can, in principle, reduce the risk of unnecessary duplication and improve the effectiveness of federal efforts. However, GAO identified 7 initiatives that have provided duplicative support--financial support from multiple initiatives to the same recipient for deployment of a single project. Specifically, wind project developers have in many cases combined the support of more than 1 Treasury initiative and, in some cases, have received additional support from smaller grant or loan guarantee programs at DOE or USDA. GAO also identified 3 other initiatives that did not fund any wind projects in fiscal year 2011 but that could, based on their eligibility criteria, be combined with 1 or more initiatives to provide duplicative support. Of the 10 initiatives, those at Treasury accounted for over 95 percent of the federal financial support for wind in fiscal year 2011.

Agencies implementing the 10 initiatives allocate support to projects on the basis of the initiatives' goals or eligibility criteria, but the extent to which applicant financial need is considered is unclear. DOE and USDA--which have some discretion over the projects they support through their initiatives--allocate support based on projects' ability to meet initiative goals such as reducing emissions or benefitting rural communities, as well as other criteria. Both agencies also consider applicant need for the support of some initiatives, according to officials. However, GAO found that neither agency documents assessments of applicant need; therefore the extent to which they use such assessments to determine how much support to provide is unclear. Unlike DOE and USDA, Treasury generally supports projects based on the tax code's eligibility criteria and does not have discretion to allocate support to projects based on need. While the support of these initiatives may be necessary in many cases for wind projects to be built, because agencies do not document assessments of need, it is unclear, in some cases, if the entire amount of federal support provided was necessary. Federal support in excess of what is needed to induce projects to be built could instead be used to induce other projects to be built or simply withheld, thereby reducing federal expenditures.

Full GAO Report is available here.

To recap: 82 wind subsidy programs; 9 different federal agencies; 2.9 billion taxpayer dollars in 2011 alone; "fragmented," "overlapping," and "duplicative" subsidies; and no formal indication that any of that taxpayer money was actually needed to get these projects off the ground or keep them afloat.

One last note: the US National Debt as of today is $16,753,612,387,626.67.

Transparency: So There's Apparently a "Secret Farm Bill"

This news is not - I repeat, not - from The Onion:

Lawmakers on the House and Senate Agriculture committees are trying to write a new five-year farm bill through the supercommittee process.

The legislators are using the supercommittee to avoid what would be a more public, election-year debate in 2012, when the current farm bill expires and new legislation would be scheduled for writing, according to critics of the effort.

“We call it the secret farm bill,” said one environmental activist, who worries that if the lawmakers succeed, it will prop up U.S. farm payments through 2017....

While some of the changes lawmakers are expected to propose would save billions on paper, critics say the new farm payments could balloon in cost if commodity prices fall.

Opponents also worry the lawmakers are trying to get around longtime critics of the farm bill who for years have said the legislation is a symbol of waste that costs taxpayers money while hurting farmers in poor countries who do not receive similar levels of support....

“That is the last thing we want, to authorize multiyear programs through this process. I am worried,” Rep. Jeff Flake (R-Ariz.) said. "Their mission is to cut."

An advantage of locking in the changes through the supercommittee is that the panel’s recommendations must get an up-or-down vote in Congress. That would give less leverage to opponents of farm subsidies.

Ben Becker, a spokesman for the Senate Agriculture Committee, defended the effort to propose farm bill changes to the supercommittee.

“Either the supercommittee would in essence write the Farm Bill, with no hearings or public input, or the Agriculture Committees and the communities we represent would have a voice. Democrats and Republicans are working hard within the process that’s been imposed on us to develop a sound bipartisan and bicameral recommendation that members of both parties can support,” he said.

Becker's irrational non-statement aside, it's completely true that America's bloated, irrational and WTO-inconsistent farm subsidies have broad, bi-partisan support, particularly among perpetually-campaigning farm state politicians (gee, I wonder why?).  Yet, just like Congress, farm subsidies are also increasingly unpopular.  (Coincidence?  I think not.)  So what this new "secret" plan really boils down to is a bunch of desperate, farm-subsidy-loving Members of Congress seeking to avoid election-year scrutiny by circumventing the very public legislative process that they've been elected to follow in order to quietly enrich their domestic constituents.  They funnel all that sweet, sweet taxpayer money out of Washington, yet avoid the increasingly-bright spotlight that (fortunately) accompanies such fiscal profligacy.

The United States Congress, ladies and gentlemen.

With Credit Tight, White House and Congress Say "Thanks But No Thanks" to Chinese Investment

It's no secret that the American government has run up huge debts over the last few years, and that China (and other foreign countries) has been one of the largest buyers of this new (and troubling!) American debt.  Indeed, after a brief respite, China has once again ramped up its US debt purchases in the wake of the European debt crisis.  The result of these purchases has been lower interest rates for American consumers, and a check on US inflation that has allowed liberal economists like Paul Krugman to argue for even more government spending.  Nevertheless, China's debt purchases have also elicited loud screams from the very Congress that has created that debt in the first place.  Indeed, just last month the US Senate overwhelmingly approved an amendment that would "require regular White House reports on the financial and national security risks posed by debt held by China and other foreign governments."

Assuming that Chinese purchases of US government debt really are a big problem for the US economy and US national security (a rather dubious claim to be sure), one simple solution would be to encourage China to invest its greenbacks in private American companies (who could certainly use it right now), as Cato's Dan Ikenson explains in a recent paper:

If it is desirable that China recycle some of its estimated $2.4 trillion in accumulated foreign reserves, U.S. policy (and the policy of other governments) should be more welcoming of Chinese investment in the private sector. As of the close of 2008, Chinese direct investment in the United States stood at just $1.2 billion— a mere rounding error at about 0.05 percent of the $2.3 trillion in total foreign direct investment in the United States. That figure comes nowhere close to the amount of U.S. direct investment held by foreigners in other big economies. U.S. direct investment in 2008 held in the United Kingdom was $454 billion; it was $260 billion in Japan, $259 billion in the Netherlands, $221 billion in Canada, $211 billion in Germany, $64 billion in Australia, $16 billion in South Korea, and even $1.7 billion in Russia.

Sounds pretty reasonable, huh?  Well, only one problem: the White House and many folks in Congress don't seem too keen on Chinese private investment in the United States, either - at least, that's what two stories from over the weekend surely indicate.  First, the FT reports that the Treasury Department has thwarted an attempt by a Chinese firm to invest in a US fiber optic company because of national security concerns:

The Obama administration has forced a US maker of fibre optics to abandon a planned joint venture with China’s Tangshan Caofeidian Investment Corporation because it believes the tie-up would threaten national security.

The decision by the White House to scupper the move represents the second time in less than a year that the administration has sought to block a transaction involving a Chinese company because of security concerns.

It also offers a rare glimpse into the administration’s handling of sensitive acquisitions following a drought in cross-border deals during the financial crisis.

Emcore, which is based in New Mexico and makes components for fibre optics and solar panels, said in a statement it had withdrawn a voluntary filing with the Committee on Foreign Investment (Cfius) after the executive branch panel said it had “regulatory concerns” over the venture.

Cfius, which is chaired by the Treasury department, conducts classified investigations of deals on national security grounds.

Although it rarely blocks transactions formally – it has done so only once – the panel alerts companies about a problem to allow them to drop merger plans voluntarily.

Under the terms of the deal, Emcore was set to sell 60 per cent of its fibre optics business to TCIC for $27.8m in cash. “While addressing any regulatory requirements, Emcore remains committed to seeking other means of co-operation,” the company said.

The Treasury department declined to comment....

Late last year, Washington forced another Chinese company to abandon a bid to buy a 51 per cent stake in FirstGold, a Nevada mining group.

Second, Reuters piles on with news of a congressional attempt to thwart Chinese investment in an American steelmaker:

A bipartisan group of 50 U.S. lawmakers called on Friday for an investigation into whether a Chinese investment in the U.S. steel sector should be blocked on national security grounds.

The Congressional Steel Caucus, in a letter to Treasury Secretary Timothy Geithner, said it was "deeply concerned" the recently announced joint venture between Anshan Iron and Steel Group's ASISG.UL and the Steel Development Co also threatened American jobs.

The Chinese state-owned firm, also known as Angang, plans to invest in a $175 million rebar facility that Steel Development is building in Amory, Mississippi.

Rebar is a reinforcing steel bar commonly used in concrete and masonry structures.

The move comes at a time when U.S. steel companies have complained loudly about unfair competition from China and have won a number of U.S. anti-dumping and countervailing duties on Chinese steel goods.

It also follows a high-level pledge by Geithner and senior Chinese officials in late May that the United States and China would remain open to each other's investments.

"Anshan is China's fourth-largest steel producer and the product of massive Chinese government subsidies," the lawmakers said in their letter. "We are deeply concerned that their direct investment in an American steel company threatens American jobs and our national security."

"For example, Anshan could have access to new steel production technologies and information regarding American national security infrastructure projects," they said.

Chinese government subsidies could allow Anshan "to distort the American market and force American steelworkers to compete against a blank check," the lawmakers said.

So to recap: the US economy is teetering on the brink of a double-dip recession, and one of the biggest problems is access to investment capital.  The Chinese are trying to provide some of that absent capital by investing in American manufacturing (and American jobs, by the way).  Such investment also would quell many lawmakers' concerns (baseless as they may be) that China owns too much US government debt.  And yet, it appears that our White House and many in Congress are openly hostile to this Chinese investment.

In the best of economic times, telling China to take its dollars and buzz-off would be bad policy.  Right now, it's flat-out insane.