Tech Bytes – Tid Bits in Tech News: Rural, Local, Tragic

After passing both houses in different forms earlier this year, the “Rural Local Broadcast Signal Act,” has lingered in conference for the past few months. News reports now indicate that the legislation has regained momentum in Congress. House and Senate leaders have reached a compromise bill and seek to either place it in an appropriations bill, or find time on the schedule to pass it in both Houses as a stand-alone bill.

In March, CSE wrote a letter to the House Commerce Committee to recommend defeat of this legislation. Yet, due to the bill’s concentrated benefits and broadly diffused costs, the legislation sailed through committee and the entire House.

The rural television subsidy—a more accurate description than the official title—illustrates a problem well documented by public choice economics; it is easy to earn a benefit for relatively few if the costs are distributed among many.

The rural television subsidy—a more accurate description than the official title—illustrates a problem well documented by public choice economics; it is easy to earn a benefit for relatively few if the costs are distributed among many. The legislation’s concentrated benefit comes in the form of a $1.25 billion loan guarantee, administered by the Department of Agriculture, to firms that construct satellite, cable, or wireless subscription-based systems to deliver local broadcast signals to rural areas. In effect, the bill eliminates the risk that would normally accompany such a venture, and subsequently distorts financial markets in the process.

The American lending market is the envy of the world. Positive credit reporting and a free-flow of financial information allow lenders to accurately evaluate risk. When government policy corrupts this market through guaranteed loans for preferred products, the economy suffers from inefficient asset allocation and taxpayers face potential defaulted loans that must be covered by additional government outlays.

The taxpayers, of course, are the ones who bare the broadly diffused costs. The guaranteed loans are likely to be of great significance to the companies that use them, but their estimated cost of $365 million is of little consequence to taxpayers that already shoulder over $1.6 trillion in annual taxation. Put in the context of the federal government’s enormity, the arguments for the bill’s defeat get drowned out by the “good intentions” of the arguments for its passage.

This unfortunate outcome will continue as long as legislators fail to realize that the cumulative effect of their bill-by-bill rationalizations is ruinous to the economy.