Tax Day Is Coming – Remember, Uncle Sam Can’t Count!

by Anita on April 11, 2014

Uncle Sam Can’t Count is the story of failed government subsidies in U.S. history from George Washington to Barack Obama.   No one else has told this story, so we have decided to tell it at last in our newest book!

What’s especially remarkable about the stream of government aid—subsidies to the fur trade, steamships, railroads, airplanes, and even ethanol today—is that private citizens, with no federal funds, almost always outperformed the men whom the government endowed with large chunks of cash.

In the first years of the American Republic, John Jacob Astor owned a fur company that defeated a government-funded rival—supported by George Washington himself.  Astor actively traded with Indians instead of trying to tell them what they wanted and how to live.

With steamships and transcontinental railroads, the government subsidized companies that either went broke or were so politically corrupt that the public demanded reform.  On the other hand, the most successful companies in steamships and transcontinental railroads were both privately owned and made regular profits in spite of the vast amounts of federal aid given to their competitors.

Another example is the Wright Brothers.   Wilbur and Orville Wright used two thousand dollars of their own money to design and build their airplane and successfully flew the first manned flight.  At the same time the government threw money at a government bureaucrat, Samuel Langley, whose two failed attempts at flight both crashed in the Potomac River.

After the Wright brothers succeeded, Wilbur Wright said, “We have not thought of asking financial assistance from the government.  We propose to sell the results of experiments finished at our own expense.”  Reporting on the Langley fiasco, the San Francisco Chronicle, once a source of wisdom, said, “The destruction of Langley’s machine should put an end to Congressional appropriations of any kind in every field of experiments which properly belongs to private enterprise.”

But it didn’t.  In fact, government subsidies for corporations have increased dramatically in the last hundred years.

Currently, one corporate giant in the race for government money is General Electric.  GE’s chairman and CEO, Jeffrey Immelt, has led the charge to secure more federal funds for any project connected to green energy.  “GE is the leading American producer of wind turbines, and Immelt has actively supported President Obama, serving in his administration as the jobs czar.  GE has the biggest lobbying budget of any corporation in America, and the company gave more to Obama in 2008 than any presidential candidate in its history.”   (Uncle Sam Can’t Count, pages 187-188)

From 2000-2012 the U.S. spent $3,000 a second every second of that twelve-year period on government subsidies—most of which, like Solyndra, were a huge waste.

Why does federal aid seem to have a reverse Midas touch?  Simply put, federal officials don’t have the same abilities or incentives as entrepreneurs.  In addition, federal control always produces political control of some kind.  What is best for politicians is not often what works in the marketplace.  Politicians want to win votes, and they can do so by giving targeted CEOs benefits while dispersing costs to others.

The fact that government subsidies have failed right from the start, and that they continue to fail, should alarm us when we consider the astonishing increases in federal aid given to most of the largest corporations in America today.  The Constitution, in Article one section eight, limits the power of government in economic development.   If we want to preserve our nation’s financial integrity for the 21st century, we need to end government subsidies and encourage the private sector to provide the goods and services that will keep our country prosperous.

Uncle Sam Can’t Count: A History of Failed Government Investments, from Beaver Pelts to Green Energy by Burton W. Folsom, Jr. and Anita Folsom (HarperCollins, 2014). To order a copy on Amazon click HERE.

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