How Enron, Papa John’s and the Ritz Got Taxpayer Subsidies


(Photo: Newscom)

(Photo: Newscom)

What do Enron, the Soros Economic Development Fund, Papa John’s Pizza, Ritz-Carlton Hotel Company, MTV, the Bank of Palestine, and Deutsche Bank have in common? They’ve all benefited from millions of dollars in taxpayer subsidies through the Overseas Private Investment Corporation (OPIC).

OPIC provides loans and loan guarantees for investments in developing and emerging markets, offers “political risk insurance” (covering losses resulting from things like coups, terrorism, and expropriation), and supports funds that invest in companies doing business in emerging markets.

When proposed by President Nixon in 1969, OPIC was sold as a way to “contribute to the economic and social progress of developing nations” by encouraging venture capital to pursue investments that might normally be deemed too risky. It would do so by placing “the credit of the United States Government behind the insurance and guaranties which the Corporation would sell to U.S. private investors.”

There might have been a need for OPIC four decades ago. But in today’s global economy, investment in developing countries does not depend on U.S. government backing. According to the United Nations, developing and transitioning countries attracted $790 billion in foreign direct investment (FDI) in 2012 — more than the total FDI in developed countries. Even the least-developed countries have seen enormous growth in FDI over the past two decades.

Moreover, there are reasons to think that OPIC may be counterproductive. When OPIC guarantees investments in foreign environments, those countries have less reason to adopt policies that are friendly to investors. The Heritage Foundation’s annual Index of Economic Freedom ranks countries on their investment climate. OPIC-backed projects include the production of olive oil in Argentina (which has a 2014 Investment Freedom score of 30 out of 100), Papa John’s franchises in Russia (Investment Freedom score: 25), and hotel renovations in Uzbekistan (Investment Freedom score: 0). Investors should not base their activities on whether a government agency will cover their risks, but on whether investment in a country makes economic sense.

Even worse, OPIC could be susceptible to cronyism and corruption. Consider some recent OPIC beneficiaries:

* Obama bundler James Torrey, a board member of MicroVest Capital Management, was nominated to serve on OPIC’s board of directors in 2010. In 2013, MicroVest Short Duration Fund LP and MicroVest + Plus LP received about $8 million in insurance for projects in Azerbaijan, Georgia, and Nicaragua. Another $6 million in insurance was provided in 2013 for projects in Russia, but the project descriptions were not available online.

* The Soros Economic Development Fund was approved for $3.9 million for renewable-energy projects in Moldova in 2013. The Soros fund’s general counsel is a former OPIC senior commercial associate.

* A Porsche/Jaguar/Land Rover dealership in Ukraine owned by Winner Imports received $20 million in 2013. Joe Biden’s “very good friend” John Hynansky is chairman/CEO of Winner Auto Group.

OPIC supporters would like to dismiss these issues and argue that OPIC should be retained because it poses little risk to the U.S. taxpayer and supports U.S. jobs. These arguments are dubious.

OPIC may not have suffered grave losses, but the risk to the U.S. taxpayer is real. Nixon likened OPIC to the Federal Housing Administration in that both would use government guarantees to attract private capital to underwrite beneficial investments. Invoking the FHA was intended to be a positive comparison at the time, designed to mollify concerns about exposing U.S. taxpayers to unnecessary risk. However, the resemblance looks less reassuring in the wake of a $1.7 billion bailout of the FHA last year.

Indeed, OPIC’s record is hardly flawless. It supported several Enron-related projects under the Clinton administration, including providing $160 million to Enron and two other corporations to help build the $2.9 billion Dabhol Energy Project in India. Not only did Enron go bankrupt, but the government of India expropriated the failed project.

OPIC’s claims to have “supported more than 278,000 American jobs” should be regarded with skepticism. First of all, with over $200 billion in OPIC-supported investments, that works out to about $720,000 per job. Surely we can find a better way to spur U.S. employment. But more fundamentally, those claims rest on the dubious assumptions that the investments would not have occurred without OPIC assistance, and that alternative investments that could have had similar or even better impact on U.S. job creation would not have been made.

An OPIC executive once described the agency’s role:

It’s not unlike when you were younger and you wanted to buy a car and your dad signed the bank note. He guaranteed that you would pay it back. Well, we operate an awful lot like that.

OPIC has not been specifically reauthorized since 2007, but has continued operating under annual appropriations. The House passed a three-year authorization of OPIC earlier this month in the otherwise unobjectionable Electrify Africa Act. The Senate is expected to address the issue soon. Congress should end its support for this outdated government corporation. The American taxpayer can’t afford to continue being treated as a sugar daddy for U.S. and foreign corporations.

Originally appeared in National Review Online.

The post How Enron, Papa John's and the Ritz Got Taxpayer Subsidies appeared first on The Foundry: Conservative Policy News from The Heritage Foundation.

*UPDATED* RALLY FOR REPEAL – June 4th

RALLY FOR REPEAL

Wednesday June 4th
11:00am – 1:00pm
in Statehouse Atrium

‘Call to Action’ Speakers include:

Jenni White-Grassroots leader of Oklahoma’s passage of FULL repeal legislation will share how and why our bellwether state must pass HB237

Brad McQueen-AZ Teacher & PARCC Development Team member turned activist and author will speak to the agenda behind the national assessment

Rose Stechschulte-Veteran Ohio teacher calls out Common Core and its 3rd Grade Reading Guarantee’s damaging effects on children

Sarah Lewis-Celina mom will share the real world of “local control”

Representatives Andy Thompson and John AdamsHB237 update

Q&A will follow speakers

Learn more about our speakers at links below:
Oklahoma Legislature Passes Strongest Common Core Repeal Bill in the Country
A Scathing Interview – Teacher and Common Core Insider Exposes Agenda
Celina Superintendent Retaliates After Parents Opt Out

hb237 5Ohio’s battle to repeal Common Core is advancing! 


Join us for an important update on HB237

Speakers and program details being finalized and will follow shortly

– Mark your calendar and make plans to attend the Rally

- Share rally info and coordinate your plans with friends

- Make an appointment for you and your children to meet with
your state representative and senator during your visit

- Bring examples of your child’s inane Common Core
homework to share with your legislators

- Plan a Statehouse tour ~ Info at (614) 728-2695

- Pack a lunch and plan a Civics field trip with
AND FOR your children and grandchildren

  Don’t miss this opportunity to engage with fellow Ohio parents
and children. It is up to US to STOP Common Core in Ohio. 


PLEASE REMIND ALL REPUBLICAN LEGISLATORS THAT THE
REPUBLICAN NATIONAL COMMITTEE
PASSED A RESOLUTION CONDEMNING COMMON CORE

SHARE VIA FACEBOOK AND EMAIL

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Surprise! Political Pundits Dismiss Conservative Policy Agenda


Rep. Jeb Hensarling, flanked by House Speaker John Boehner and Majority Leader Eric Cantor. (Photo: Jim Lo Scalzo/EPA/Newscom)

Rep. Jeb Hensarling, flanked by House Speaker John Boehner and Majority Leader Eric Cantor. (Photo: Jim Lo Scalzo/EPA/Newscom)

There never has been a shortage of vapid policy analysis in Washington, and the current generation of pundits and reporters is no exception.

Take the lead paragraph in Thursday’s Wall Street Journal story, “Tea Party Agonistes”:

The media’s latest political line is that the Republican establishment finally has crushed the Tea Party. The truth, as usual, is more interesting. The Tea Party already has changed the GOP on policy—mostly for the better. But it is suffering this year because some candidates and operatives acting in its name have been motivated more by personal than policy agendas. That’s a shame because the GOP needs the Tea Party to prevent it from lapsing back into the do-little caucus of the George W. Bush-Tom DeLay years. (emphasis added)

The Republican Party is undergoing a serious—and healthy—internal debate about whether it is a pro-business party or a pro-free market party. Reasonable folks can disagree over primary candidates, but conservatives are ill-served when these differences are attributed to personalities because the outcome of the internal debate will have substantial policy implications.

In a speech at The Heritage Foundation on Tuesday, House Financial Services Committee Chairman Jeb Hensarling, R-Texas, sketched out where he stands on that divide when he said, “Let’s tell K Street ‘No’ so we can tell the American people ‘Yes.’”

>>> Related: Hensarling’s ‘Choice’: Success Should Depend on Hard Work, Not Friends in Washington

On a whole host of issues—tax reform, farm subsidies, Export-Import Bank, Fannie and Freddie, and capital markets—there is a fundamental divide within the GOP over how government should interact with business.

“Business’ interests are not necessarily freedom’s interests,” Hensarling said. “To support business does not necessarily support free enterprise.”

Fannie Mae and Freddie Mac are good examples of this. Hensarling has moved to abolish the taxpayer-backed home-mortgage giants. But, as Bloomberg News observed, “His own party’s leaders, backed by industry groups that disagree with Hensarling’s purist free-market philosophy, have stymied his plans to abolish Fannie Mae and limit federal flood insurance.”

>>> Read More: Time to Eliminate Fannie and Freddie, Not Replace Them

There is no doubt the Tea Party and conservative activists have pulled the Republican Party further to the right, and the Wall Street Journal and pundits such as George Will regularly acknowledge this has been good for the party and the country. But as Hensarling inferred, the remaining differences are substantive and, despite what the aforementioned observers may suggest, significant.

The post Surprise! Political Pundits Dismiss Conservative Policy Agenda appeared first on The Foundry: Conservative Policy News from The Heritage Foundation.

School Car Wash Fundraisers Banned in Virginia County


Photo: Ringo Chiu/ZUMA Press/Newscom

Photo: Ringo Chiu/ZUMA Press/Newscom

For years, car washes have been a fundraising staple for high school sports teams, marching bands and youth groups.

Just get some kids together with buckets and soap, rent out a parking lot, put up a sign and hope it doesn’t rain.

But in Arlington, Va., you also have to hope the government doesn’t catch you.

Charity car washes and car wash fundraisers are now banned on school property there, after the Department of Environmental Services issued new rules for stormwater and water runoff.

The county pins the blame on the Virginia General Assembly, which approved more stringent water regulations last year.

“There is an underlying reason why most types of car washing are not allowed under state and federal stormwater regulations,” DES spokeswoman Shannon Whalen told the Arlington News.

Those important reasons: washing cars can cause chlorinated water and soap to wash into local streams, which flow into the Potomac River and Chesapeake Bay.

But Whalen found a silver lining in the new regulations.

“There are educational and environmental benefits that come with finding new and environmentally friendly ways to raise money for extracurricular activities,” she said.

One of those educational benefits: high school kids get a first-hand civics lesson in how government shuts down just about any activity it doesn’t like. Try finding that lesson in any textbook.

Coaches told the Arlington News they’re concerned about how the ban will affect sports and other activities. After all, the market can only handle so many bake sales.

The new stormwater regulations in Virginia have consequences beyond Arlington.

By the letter of the law approved in July 2013, all car washes that aren’t for personal use require a permit from the state government, even charity car washes held on private property.

Eric Boehm is a reporter for Watchdog.org, a national network of investigative reporters covering waste, fraud and abuse in government. Watchdog.org is a project of the nonprofit Franklin Center for Government & Public Integrity.

The post School Car Wash Fundraisers Banned in Virginia County appeared first on The Foundry: Conservative Policy News from The Heritage Foundation.

One Man’s Tireless Fight to Make Congress Live Under Obamacare


Sen. David Vitter, R-La. (Photo: Bill Clark/CQ Roll Call/Newscom)

Sen. David Vitter, R-La. (Photo: Bill Clark/CQ Roll Call/Newscom)

Sen. David Vitter, an ardent opponent of Obamacare, readily concedes that his proposal to end health care subsidies to members of Congress and their staffs isn’t popular on Capitol Hill. But the Louisiana Republican won’t give up anytime soon, he vows.

“I won’t let my amendment fall to the wayside,” Vitter writes in a commentary in Roll Call. “I plan to fight for this vote until we get one.”

In September 2013, Vitter proposed ending White House exemptions and repealing an Office of Personnel Management regulation that allows the federal government to help pay for lawmakers’ and aides’ health coverage bought under insurance exchanges created by the Affordable Care Act.

That OPM rule, issued last August, came after an uproar in the House and Senate that health plans would be too expensive without federal contributions. Such contributions had been made to members and staffers when they were part of the Federal Employees Health Benefits Program.

Senate Majority Leader Harry Reid, D-Nev., recently said the Vitter amendment was designed to stop congressional staff from getting health care. Vitter, who added the Obamacare amendment to the Energy Efficiency Act that is headed for a Senate floor vote, hit back at Reid’s characterization:

Really, Harry? That’s a pretty wild and desperate spin, even for a politician. My legislation would simply ensure that we do what the Obamacare statute actually says—make all members of Congress and staff go to the Obamacare exchanges for their health care with no mention of a special, ultra-generous taxpayer-funded subsidy. It would also expand that same rule to President Barack Obama, his Cabinet, and top White House officials.

In a related move, Sen. Ron Johnson, R-Wis., filed a lawsuit against the head of OPM, saying the agency’s decision to give premium assistance to members of Congress and their staffs violates the law. Johnson acknowledged at a Heritage Foundation event that the court action faces long odds but said he would continue to push the issue.

The Vitter commentary comes a few days after Louisiana Gov. Bobby Jindal, a Republican, wrote for FoxNews.com that the Affordable Care Act still could be repealed.

However, Dean Clancy, former vice president for public policy at the conservative advocacy group FreedomWorks, questioned whether the focus on Obamacare would be a boon to Republicans leading up to the mid-term elections.

“No matter how many policy devils inhabit the Unaffordable Care Act—and they are legion—this troubled law has always had one great strength: the public’s belief that it is, at bottom, inspired by noble intentions,” Clancy wrote in U.S. News and World Report. “And politically, that counts for a lot.”

The post One Man's Tireless Fight to Make Congress Live Under Obamacare appeared first on The Foundry: Conservative Policy News from The Heritage Foundation.

New Grads Are Most Indebted Ever — But It’s Not Just Student Loans


congratsclassof14_v2

Congratulations to the Class of 2014—after all of your hard work in college, you will leave your campuses the most indebted class of graduates ever. The average grad will carry $33,000 worth of student loans off the stage with her diploma, nearly double the amount students took on 20 years ago (even when factoring inflation).

But what’s even worse: your share of the national debt. That comes to $39,500.

Each American will see his share of the national debt increase from $39,500 today to $142,000 in 2038, or more than triple the average starting salary for 2013 graduates.

As The Wall Street Journal notes, the class of 2013 graduated with the then-record amount of debt last year, and as the student loan burden continues to rise faster than inflation, the class of 2015will likely claim the title next year. In addition, a greater share of college students took loans out in 2014, leaving 70 percent of all graduates in debt. Compare that to the Class of 1994, when only half of graduates left school with loan payments to make.

The explosion of debt that graduates face today mirrors that of the nation. Despite the temporary dip in budget deficits, each year’s cash shortfall adds to the mountainous national debt, which now stands at a record high of $17.5 trillion.

And the debt will only continue to grow more quickly. Similar to how a greater proportion of college students is taking out loans, a greater share of the U.S. population will begin to consume more government services as the baby boomer generation retires and becomes eligible for Social Security and Medicare. This will cause the government to take on more and more debt to pay for these services as the growth of retirees outpaces the growth of the workforce.

Indeed, the Social Security Trust Fund ran a $74.6 billion deficit in 2013, a number that will jump to $322 billion in less than 20 years. Furthermore, a report from the Institute of Economic affairs indicates that the national debt held by the public is really $95 trillion—more than seven times the published figure—once government pension and health care commitments missing from official budget calculations are accounted for.

The burden of student and national debt should be a major concern for recent graduates. In addition to having to pay off more student loan debt than ever, graduates face a weak job market still struggling in the Obama recovery. And as the national debt increases more quickly, younger generations could face a larger future tax burden and lower investment in the private economy, possibly hampering economic growth.

So what can recent grads do? Take steps to start saving today, as young Americans should not count on Social Security to provide them with the same benefits today’s retirees receive. Also, grads should make their voices heard and urge Washington to make necessary budget and entitlement reforms that would reduce the debt and ensure economic prosperity for all. Young Americans have faced challenges before and have overcome them—there is no reason that this generation should be different.

The post New Grads Are Most Indebted Ever -- But It's Not Just Student Loans appeared first on The Foundry: Conservative Policy News from The Heritage Foundation.

Where is National Talk Radio?

My wife is a big Glenn Beck fan and I happened to be driving with her and heard a podcast of Glenn Becks’ radio show the day after the Bevin loss in Kentucky. It was a rather unhappy episode of the show.  Glenn asked in various ways, “Is there a solution?”, “Can the country be saved?” […]

Where is National Talk Radio?

My wife is a big Glenn Beck fan and I happened to be driving with her and heard a podcast of Glenn Becks’ radio show the day after the Bevin loss in Kentucky. It was a rather unhappy episode of the show.  Glenn asked in various ways, “Is there a solution?”, “Can the country be saved?” […]

The Best Housing Program in America in 15 Seconds


Get government out of the housing market – that’s the message Rep. Jeb Hensarling, R-Texas, has for the housing industry. According to Hensarling, government intervention in the housing market is not a solution to the problems Americans have identified with the system, and the real way to reform is through privatization of the market.

In the 15-second Foundry Fast Facts below, Hensarling describes the “best housing program in America” – a growing economy.

>>Click here to watch more Foundry Fast Facts.

The post The Best Housing Program in America in 15 Seconds appeared first on The Foundry: Conservative Policy News from The Heritage Foundation.

A Dynamic Leap Forward on Tax Policy


On May 21, Senator Rob Portman (R–OH) introduced an important piece of legislation, the Accurate Budgeting Act (S. 2371). It would require the Joint Committee on Taxation (JCT) to dynamically score all major pieces of tax legislation.

Dynamic analysis, which takes into account economic and behavioral changes as a result of policy changes, gives legislators an accurate and realistic appraisal of tax bills. It is certain that the static score of a given bill will be wrong, and with dynamic scoring analysis, policy makers get a better assessment of the full impact of a bill.

While Senator Portman’s legislation would still keep static scoring as the official score of a bill, policymakers would be given important additional information through dynamic analysis. The JCT would be able to show how tax legislation affects the economy through providing more or less incentives for work or investment. As tax analyst Martin Sullivan has said:

Gradually, lawmakers, the press and the public would be far better acquainted with the following important and powerful economic ideas.… Marginal rate reductions are more economically beneficial than infra-marginal tax giveaways. Inefficient taxation of residential investment reduces economic growth. Overtaxation of corporate capital hinders economic growth.

Senator Portman has been a leader on driving dynamic analysis in the Senate. In 2013, he successfully pushed a budget amendment to call for more dynamic scoring, although the amendment was excluded in final passage of the legislation. This new legislation is yet another step in the right direction for enacting better tax policy.

The JCT used dynamic analysis to estimate the economic impact of House Ways and Means Committee chairman Dave Camp’s (R–MI) tax reform bill. That was a victory for better tax policy, and Senator Portman is building on that momentum. Legislation such as the Accurate Budgeting Act shows legislators that tax changes have real-world impacts and that people respond to incentives and disincentives in the tax code.

The post A Dynamic Leap Forward on Tax Policy appeared first on The Foundry: Conservative Policy News from The Heritage Foundation.