One doesn’t have to turn over very many rocks to find the number 700 billion in other contexts. Few of them are relevant, but this one is apposite, I believe. It’s from Suburban Nation: The Rise of Sprawl and the Decline of the American Dream by Andres Duany, Elizabeth Plater-Zyberk, and Jeff Speck:
Subsidized automobile use is the single largest violation of the free-market principle in U.S. fiscal policy. Economic inefficiencies in this country due to automotive subsidization are estimated at $700 billion annually, which powerfully undermines America’s ability to compete in the global economy. (see this brief excerpt for a fuller description)
Free-market supporters usually defend de-regulation by claiming that government intervention prevents the market from pricing goods and services. The market, they believe, is the most efficient mechanism for arriving at fair prices and for rewarding risk, incentivizing hard work, and nurturing good ideas. This may well be the case.
What I find myself trying to convince free-marketeers of lately is that government intervention is already much more significant than they suppose it to be. It’s difficult to persuade them because government intervention with markets is so big one can hardly even see it.
Our society has evolved by subsidizing certain industries—automobile, insurance, and especially big oil—at a huge cost to the American taxpayer. Concerned taxpayers and campaigning politicians are justified in getting hot and bothered by, for example, the ethanol subsidy.
But what about a much larger subsidy that encourages the continued dependence on greenhouse gasses when most Americans favor R & D for new energy technologies that will limit toxic emissions? Further, all sorts of other problems, that many Americans, again, would like to avoid, inhere in the auto subsidy, namely: foreign entanglements, landscape destruction, and the emerging idea that our car and suburb culture isn’t sustainable or even aesthetically agreeable.
(Expanded explanations of the auto and other subsidies is available in this Newsweek article.)
The question isn’t whether the government should “interfere,” it’s how and where they should. The government interferes for car-driving and alters the “free market” by around 6% of GDP. I applaud those in Congress opposed to the financial bailout, but their reasoning, if based on defending free markets from government interference, is suspect. If the effect of their opposition will be to put all government subsidies on the negotiating table, their misguided posturing might be productive.