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Paper Companies' Windfall of Unintended Consequences
Jamie found a post on ScienceBlogs that serves as a stark example of the law of unintended consequences, as well as the ability of private industry to game a system of laws to their advantage. It seems that large paper companies stand to reap as much as $8 billion this year by doing the opposite of what an alternative-fuel bill intended. Here is the article from The Nation with more details and a mild reaction from a Congressional staffer. "[T]he United States government stands to pay out as much as $8 billion this year to the ten largest paper companies.... even though the money comes from a transportation bill whose manifest intent was to reduce dependence on fossil fuel, paper mills are adding diesel fuel to a process that requires none in order to qualify for the tax credit. In other words, we are paying the industry — handsomely — to use more fossil fuel. 'Which is,' as a Goldman Sachs report archly noted, the 'opposite of what lawmakers likely had in mind when the tax credit was established.'"
It wasn't mentioned in the summary, but the tax credit was passed in 2005. So no one thinks the $8 billion is related to stimulus packages passed more recently.
No, those will cost us a lot more when companies figure out how to fraud them.
Doesn't matter. Precedent from the Supreme Court states that the IRS has sovereign immunity and cannot be sued on any issue within it's own domain.
I won't argue with your distaste of the Federal Reserve, Fannie May, or Freddie Mac, but I want to make a few points about regulation and government intervention.
The great majority of sub-prime loans made were not made under The Community Reinvestment Act.
The sub-prime loans made under the Community Reinvestment Act have a lower default rate than those made outside of its' purview
Too much regulation did not cause Fannie May, Freddie Mac, and others to overvalue their portfolios.
Too much regulation did not cause the ratings companies to give the securitized mortgages high ratings greatly understating their risk.
Too much regulation did not create the credit default swaps without enough reserve to pay them off in case of a bad economy, nor did it cause the companies selling those to insure their credit default swaps with more credit default swaps from another company that also did not have enough reserve to pay them off.
Too much regulation did not cause the ratings companies to rate the companies holding credit default swaps with insufficient backing AAA even though they could not pay off their obligations in case of default.
This "loophole" has existed and been blatantly abused for many, many years. These paper mills are not even close to the worse abusers. The worst one I heard about, and this was years ago, was factories that sprayed a light mist of diesel on coal to claim this tax credit.
This tax credit should just be ended, not fixed.
Anarchists never rule