Monthly Archives: July 2011

Bill Gates’ straight talk on solar subsidies was refreshing and spot on. Courtesy of the Wall Street Journal and from an interview in Wired magazine.

[Chris] Anderson: When you look at the big picture [for the future of energy], where should we be focusing besides nuclear? On massive solar plants in the desert? On middle-size stuff for office roofs? Or is there a reinvention that could be done right in the home?

Gates: If you’re going for cuteness, the stuff in the home is the place to go. It’s really kind of cool to have solar panels on your roof. But if you’re really interested in the energy problem, it’s those big things in the desert. . . .

I think people deeply underestimate what a huge problem this day-night issue is if you’re trying to design an energy system involving solar technology that’s more than just a hobby. You know, the sun shines during the day, and people turn their air conditioners on during the day, so you can catch some of that peaking load, particularly if you get enough subsidies. It’s cute, you know, it’s nice. But the economics are so, so far from making sense. And yet that’s where subsidies are going now. We’re putting 90 percent of the subsidies in deployment—this is true in Europe and the United States—not in R&D. And so unfortunately you get technologies that, no matter how much of them you buy, there’s no path to being economical. You need fundamental breakthroughs, which come more out of basic research. . . .

Anderson: So suffice to say we will find no solar cells on the roof of the Gates residence?

Gates: Oh, we like to be cute like everyone. For rich people, this is OK. Rich people can do whatever they want.

Narrowly targeted tax incentives like those for ethanol producers are really just spending items, the expenses of which could just as easily appear on the spending side of the federal budget ledger. This is why the elimination of these credits should not require an offsetting tax cut somewhere else as some Republicans appear to demand. After all, conservatives who support cutting federal spending haven’t demanded that each dollar cut be used to reduce taxes. No one has articulated why we should treat spending on ethanol, solar, or any other tax incentive differently just because that spending happens in the tax code rather than in an appropriations bill.

At the state level, the Arizona Free Enterprise Club led the charge against targeted tax incentives for movie-makers. No longer do Arizona taxpayers have to pay movie makers to make movies. The federal government should follow this lead.

Call them by any variety of names: tax incentives, tax subsidies, tax expenditures, tax credits, etc.; unless they are used to break up a government-run monopoly (i.e. public education), conservatives should be united in abolishing these behavior modifiers. That goes for ethanol, solar, oil, film, whatever. You want to debate the merits of research and development tax credits? Fine. But if the country really wants to unleash the power of a true free market economic system, it needs to abolish the current tax code and all of the market distortions that go along with them. These tax favors are really spending line items anyway. If ethanol producers can’t make it in the real world, why should the rest of the tax-paying public give them cash? Why does the fed pay people to have more kids through the per child tax credit? These policies hurt economic growth. On this topic, there should be no debate among conservatives.



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