Category Archives: Crony Baloney

Farm Bill 2012: Over-regulation Strikes Again!

Americans for Tax Reform bemoans  subsidies to agribusiness.

The proposed bill fails to reform certain programs like sugar, makes other wasteful programs like dairy even worse, and creates a whole new entitlement program for farmers, while spending 60 percent more than the last farm bill and only cutting a paltry $23 billion from the deficit over the next ten years. This farm bill will leave a wide path of destruction behind it: consumer prices will increase, costly entitlement programs will bloat, and market distortions will continue to run wild.

Crony Baloney: Online Wine a Tough Sell

Online retail sales this year are thought to be 12% of total sales, and it’s not surprising why online sales keep growing. Buying online is convenient, selection is ever growing, and you don’t ever have to visit a crowded mall.

But one industry isn’t having much luck expanding their online sales. The wine industry isn’t anywhere near that 12% number, in fact, they are closer to 1%. It isn’t for lack of trying; as this Wall Street Journal article (subscription required) explains, there have been many attempts by both wineries and distributors, even including retail powerhouse Amazon, to sell wine online. Most have ended in failure.

Why has this been such a hard sell? Because of all the laws and regulations governing the sale of alcohol in the states. While these rules are ostensibly for public health and safety, many are blatantly in place to protect the local distributors and keep out any competition. For examples, the article states:

Violating wine-shipping rules and limits can lead to fines, suspension or, ultimately, termination of a winery’s license. Because of laws favoring local distributors, the wineries themselves can’t ship directly to consumers in 11 states, including Massachusetts, Pennsylvania and Oklahoma, according to advocacy group Free the Grapes…

Rich Bergsund, chief executive of Inc., has experienced those vagaries firsthand. The San Francisco-based online wine merchant has been fined by New York state for shipping wine in gift baskets stuffed with food; state law mandates food and alcohol be shipped separately. It has had to build seven separate warehouses to satisfy differing sets of state regulations.

Wineries should be able to sell their wine online, and state laws shouldn’t protect local distributors at the expense of consumers. I give this two baloneys:


Crony Baloney: Federal spending on popcorn promotion

Popcorn is a great snack. Most Americans agree, since the average consumption of popcorn was 52 quarts per person last year. You would think that the popcorn industry wouldn’t need any help marketing their product, and you’re right. But the federal government subsidizes them anyways.

Rob Hotakainen writes for the Kansas City Star about the popcorn subsidies:

In an attempt to boost popcorn sales, the U.S. Department of Agriculture this year gave the Popcorn Board more than $250,000 for promotion. Taxpayers have been paying to push popcorn sales since 1999, three years after Congress passed the Popcorn Promotion, Research and Consumer Information Act.

The article also gets input from economist Richard McKenzie:

“It’s a classic public choice, where you have the benefits concentrated on a very small part of the population and the impact of the padding of the pockets getting spread out over the general population,” said McKenzie, who wrote a book called “Why Popcorn Costs So Much at the Movies, and Other Pricing Puzzles.” “If Congress can’t thwart these types of minor, inconsequential government programs that are really benefiting the non-poor, it’s just very hard to see how they’re going to do anything about Medicare, Medicaid and some other things.”

Why are Americans paying to advertise popcorn overseas? These types of programs benefit a narrow interest group at the expense of all taxpayers, and they need to be ended. I give the subsidization of popcorn promotion two baloneys:


Crony Baloney: Are Sporting Goods Stores “Natural History Museums?”

Spending time in a sporting goods store can be lots of fun, but as Scott Reeder at The Atlantic reports, many of these stores are supported by millions and millions of taxpayer dollars:

After analyzing the development agreements, state audits, bond issues, development studies and local news accounts the Franklin Center found:

  • Cabela’s has received $551 million in local and state assistance during the past 15 years.
  • Bass Pro Shops received $1.3 billion in local and state assistance during the same period.
  • The federal government helped ensure liquidity for Cabela’s’ credit card division by providing $400 million in financing for the purchase of the company’s securitized debt.

That’s an incredible amount of money, and in some cases they have received tens of millions for just one store. How do they justify getting so much government assistance?

Numbers don’t always tell the whole story, counters Larry Whitely, a spokesman for Bass Pro Shops, a privately held company based in Springfield, Missouri. Whitley argues the stores should be viewed as an amenity being added to a community — much like one might view a park or a library.

“These aren’t just stores – they are natural history museums,” he says. “Every store is designed to reflect the unique natural environment of the area in which it is located.” He adds that often a Bass Pro store is an anchor development that attracts additional retailers.

Natural history museums? While these stores are impressive in size and their furnishing, they are stores – privately owned and run for profit. Calling them a museum to justify getting huge government favors is more than a stretch, it is cronyism. I give this three baloneys:


Crony Maple-Flavored Baloney: Sen. Schumer Introduces Amendment for Maple Syrup Industry

Sen. Charles Schumer of New York is not afraid to use the government to favor certain industries in his state. He recently urged federal officials to bring Greek yogurt to schools, because it would provide an “economic boost for yogurt makers and dairy farmers, two of the state’s most important industries,” after pushing for legislation to give the industry tax incentives.

This time Schumer is trying to get benefits for the maple syrup industry by inserting an amendment into the federal farm bill. The National Journal blog explains what is in the amendment:

More specifically, the amendment would allow the Secretary of Agriculture to provide grants to states and tribal governments for research and marketing of maple syrup. Grants could also be provided to encourage landowners to make their trees and property available for the cultivation of the sap.

As delicious as maple syrup is, why should the federal government be giving grants in order to “promote maple syrup production”? If people want maple syrup, they will purchase it, giving the producers all the incentive they need to make it. By giving grants, the government is giving an unfair advantage to one industry, an industry in Sen. Schumer’s state that just so happens to be the second largest producer of maple syrup in the country behind Vermont.

I give this three maple-flavored baloneys:


Crony Baloney, Doggy Glitter Edition: USDA’s Market Access Program is Corporate Welfare

Susan Ferrechio at the Washington Examiner writes about the the massive farm bill making its way through congress, and how there are lots of little programs thrown into the bill:

But billions of dollars in the legislation are also dedicated to entities like the Market Access Program, which provides $200 million a year in taxpayer dollars to trade associations to promote U.S. products overseas.

Espree, the company that produces the styling spray for dogs (“Leaves the coat with specks of shiny glitter and aroma of Candy Cane”) was aided by a taxpayer subsidy under MAP.

Paying to advertise for doggy glitter overseas hardly seems to be a legitimate function of government. But it isn’t just small products getting benefits, large and profitable companies are also receiving millions every year to help them pay for advertising. Why are taxpayers paying for this service? Why does the Market Access Program (MAP) even exist? Steve Ellis, vice president of Taxpayers for Common Sense, says “The truth is, MAP is classic corporate welfare that takes taxpayer dollars to benefit big businesses’ bottom line.”

A few examples of how the MAP spends its money (amount spent in 2010):

Organization Amount of Funding
Cotton Council International $20,645,807
California Prune Board $3,660,254
National Potato Promotion Board $5,231,810
Sunkist Growers, Inc. $4,072,982
Welch Foods, Inc. $907,177
Wine Institute $7,152,261

We don’t need to pay for companies or industries to market their products overseas. I give this two baloneys:


Crony Baloney: No Free Cab Rides in North Dakota Town?

Our story begins with two entrepreneurial women in Williston, North Dakota, who noticed that there was a shortage of cabs in their town because of the recent oil boom in the area. They decided to start two small shuttle services, with some service for locals. As the Williston Herald reported on April 2nd:

“We initially intended to do the shuttle service, but until that really gets built up and people are aware, if people need rides home, we’re giving them rides home. We’re not charging anything, but we do accept gratuities. We tell everybody that gets in exactly that,” Malladi said. Continue reading

Crony Baloney: Saw Maker Petitions Government to Mandate Their Technology

The Consumer Product Safety Commission (CPSC) is proposing to require more stringent regulations on table saws, which many say could increase the cost of affordable versions of these tools by 100-300%. Presumably, consumers already know that table saws are sharp. Still, thousands of table saw injuries are reported every year, typically because of the removal of safety equipment.

There’s more to this story than meets the eye: this CPSC regulation was initiated by a petition from three entrepreneurs who patented the SawStop system, a technology that decreases the risk of injury from table saws. While this technology is already on the market, consumers tend to pick affordable tools over the more expensive SawStop versions, despite the safety features. By regulating standards for table saws, the SawStop innovators will have an automatic leg-up on their competitors (and the consumers who buy from them). Continue reading

Crony Baloney: Law Requiring Embalming Room in Minnesota

In Minnesota, an entrepreneur named Verlin Stoll owns a funeral home and wants to build another, but in order to do so he must build an expensive “embalming room” which he would not use. Minnesota law requires that all funeral homes have such a room, even though the requirement makes no sense as the Institute for Justice (who is challenging the law in state court) makes clear:

The embalming room requirement exists even though: (1) embalming is not required by law; (2) funeral directors do not have to personally perform the embalming services that they sell; and (3) a funeral home can contract out its embalming to third-party trade embalmers.

So why does the law exist? Because it represents a serious barrier to entry into the funeral home business. Continue reading