Paul Kedrosky's Infectious Greed

A few paragraphs from my weekend National Post column on the escalating tussle over the Byrd Amendment:

The ongoing trade spat over the so-called Byrd Amendment is an exercise in deep cynicism on all sides. No matter what resolution is reached, it exposes some of the central hypocrisies in international trade.

More properly known as the Continued Dumping and Subsidy Offset Act of 2000, CDSOA was one of the last legislative acts of the 106th U.S. Congress. It was inserted by Senator Robert Byrd into a larger agricultural bill that outgoing U.S. President Clinton wanted badly to sign before he left office.

The Byrd Amendment redirects monies collected in the U.S. from import tariffs. It tells U.S. Customs to put all such antidumping tariffs into special bank accounts, one for each case. In the past that money went to the U.S. Treasury, but post-CDSOA the money was collected by Customs and then paid out to the companies successfully participating in each case.

….

That that hasn’t always been the case. Instead of being a revenue stream for companies, tariffs have historically been a revenue stream and incentive for government, whether in the U.S., Canada, or elsewhere. It is difficult to argue that the latter is truly preferable to the former. Both are distortions; both create wrong-headed incentives.

Perhaps, therefore, one consequence, entirely unintended, of the tussle over the Byrd Amendment will be to draw this “tariffs as profit center” hypocrisy to the fore. And that wouldn’t be such a bad thing.

What happens to an organization’s fund-raising when it raises “too much” money? National Public Radio has that problem after Joan Kroc, wife of McDonald’s founder Ray Kroc, gave the radio organization a little more than $200-million last year as part of her estate. As strange as it may seem, receiving the money could very well make the organization’s economics more tenuous.

Here is the problem: Money publicly received in such large amounts can have a dissuading effect on fund-raising. After all, people may understandably feel as if they no longer need to contribute to NPR’s quarterly on-air fund-raising drives given the huge influx of cash from Ms. Kroc. Call it a sort of squeezing-out phenomenon, wherein a large amount of money publicly-received from a single source to some degree offsets money that would have been received from many other smaller sources.

At the same time, some misunderstand how this sort of money is used. A naive view is that NPR has an $800-million annual budget, so a $200-million gift is a large offset. It is a silly view, but it is one expressed directly by the Los Angeles Times in a November 7th front-page story after the Kroc gift:

“…. the days when National Public Radio is forced to ask member stations to hold fundraising drives just so it can stay on the air are over.”

In December, for example, one Los Angeles public radio station missed its fund-raising goal by 25%. It blamed, in part, the Los Angeles Times story, and widespread perceptions about the effect of Joan Kroc’s $200-million gift to NPR.

There is, of course, another possibility. Sometimes large charitable gifts can inspire others to do the same thing. In the limit, however, as gifts get larger and larger, it is hard to imagine how a sufficiently large gift does not begin to discourage other contributors. It appears that the one of the main effects of Ms. Kroc’s gift will be, strangely enough, to make NPR’s future fund-raising even more difficult.