T Boone Pickens explains what types of subsidies are okay for capitalists to like 

Freshman conservative Rep. Mike Pompeo, R-Kan., has been leading the charge against the latest incarnation of the natural-gas-car subsidy bill (read my 2009 piece about this legislation, headline: "Congress Gives Your Money to T. Boone Pickens.")

Recently, Pompeo and other Republicans wrote a letter that, "asked for a House resolution backing the elimination of all "grants, direct loans, loan guarantees and tax credits aimed at specific sectors of the energy industry," according to the Wichita Eagle.

In that same paper last week, Pickens wrote that Pompeo's move was "a rookie mistake." Pickens, reviled/respected for decades as a ruthless capitalist, tries to draw some lines between the natural gas subsidies he's seeking, and other sorts of subsidies.

there is a difference between a targeted incentive and a never-ending subsidy paid by the federal government on a per-gallon, per-kilowatt or per-anything basis. The latter is a check from the Treasury to a producer.

Pickens draws two dividing lines in the piece: tax credit vs. grant, and permanent versus temporary. A temporary subsidy is certainly better than an indefinite or permanent one. The tax credit question is trickier. Many free-market champions support every tax break ever proposed (Ron Paul, for instance). Other free market types (like me, probably) think that tax credits act as subsidies which distort the market, and ultimately lead to tax hikes on others.
One of the bad things about tax credits is that they reward businesses for following political signals rather than market signals, but they do it in a way that allow the beneficiaries, like Pickens, to act as if they're not on the public dole. Sure, a tax credit (most of the time) isn't a handout, but the favored product (like ethanol or natural gas) only succeeds because its competition is taxed at high rates.
So tax credits are the socially acceptable form of corporate welfare.
But there's another bias in the world of subsidies, and Pickens' arguments highlight it: the utter loathing of tariffs by those who sign up for every other sort of subsidy. Free Markets, pshaw! But Free Trade uber alles!
Look at Pickens' professed aim with his raft of natural gas subsidies: "The specific reason for this bill is not to pick one fuel over another. It is to pick the United States over OPEC."
But if the goal really were to reduce our dependence on foreign oil, there's a simple, straightforward way to do this that really doesn't "pick one fuel over another": a tariff on imported oil.
I wouldn't support such a tariff, but it would be much better -- on the score of reducing our foreign oil consumption -- than the hodgepodge of handouts we have now, and which Pickens wants to make ever hodgier-podgier. For one thing, it would address our oil use in both gasoline and heating. Also, it would encourage economy as much as new technology.
But I guess this idea will get me called a protectionist, while those who support bailouts, subsidies, and handouts get to be called free-traders.

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Timothy P. Carney

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