Not that many Americans expect politicians to be sincere, but for the sake of the naive among us these days, let’s point out that when President Joe Biden rails against giveaways to big business, it means a amount some money is on its way to favored companies. To the extent that the president takes anti-business animus seriously in his speeches, he is directed only at private businesses going their own way; entities that follow the government’s direction are the recipients of all sorts of privileges and largesse.
The rattle is a weekly newsletter from JD Tuccille. If you care about government excesses and tangible threats to everyday freedom, this is for you.
Corporate subsidies are bad, except when they’re good
“I want to talk about the future of possibilities we can build together — a future where the days of trickle-down economics are over and the rich and the biggest corporations no longer get all the tax breaks,” President Biden huffed during the speech on State of the Union this year.
The president’s speech was characterized by the usual theatricality that accompanies such monarchist spectacles, including applause from his supporters, grimaces from his opponents and the occasional protest. He also continued the age-old political tradition of being full of bullshit.
Biden “is a hypocrite,” underlines Chris Edwards, budget expert at the Cato Institute. “He signed three massive bills that dole out hundreds of billions of dollars in narrow tax breaks and spending subsidies to big corporations. He IS the biggest source of corporate welfare ever.”
Biden has just made great strides in moving from railing against tax breaks for big corporations to handing vast sums of taxpayer money to giant corporations that, we might suspect, are perfectly capable of investing in projects they expect to generate profits .
“My CHIPS and Science Act has led to partnerships with companies, investing billions and billions of dollars across the country, bringing semiconductor manufacturing back to America – America’s jobs of the future,” Biden boasted just two weeks later the State of the Union address, during a stop in Chandler, Arizona, at the site of an Intel chip manufacturing plant.
Specifically, Intel will receive $8.5 billion from the federal government to fund its expansion. Biden himself pointed out that taxpayer funds “are being matched with Intel’s more than $100 billion” that the company is investing in its project, so it’s clear that Intel is perfectly capable of making business decisions and investments on its own. But a purely private project would not provide a photo op for politicians. Unfortunately for all of us, those photos are costly.
Business subsidies are extremely expensive
“Taxpayers will pay more than $283,000 for every job created, not counting just $8.5 billion in direct payments to the company,” ReasonEric Boehm recently wrote about Intel subsidies.
Of course, if private industry is left to its own devices, it may not invest exactly the way government officials want to invest, for example in a purple state seen as crucial to the 2024 presidential contest. The Taiwan Semiconductor Manufacturing Company (TSMC) , an Intel competitor, has asked the federal government for billions of dollars in support before continuing with its planned expansion in Arizona, which carries higher costs than its existing operations in Taiwan.
And the money flow doesn’t end there.
“Rather than a trickle-down economy, this is a Niagara Falls of subsidies flooding from Washington into the president’s favorite industries and companies,” writes Cato Edwards of the Biden administration’s efforts to encourage economic development that pleases the White House , in places that provide political opportunities. benefit. “Biden signed the Infrastructure Investment and Jobs Act of 2021, which increased federal subsidies by $548 billion. Tens of billions of dollars were distributed to railroads, electric utilities, broadband companies, industrial of electric vehicles and others.”
Biden also approved tens of billions of dollars in subsidies through the CHIPs and Science Act of 2022, and $868 billion in energy subsidies in the misnamed Inflation Reduction Act of 2022.
“The U.S. government could spend more than $1.8 trillion over ten years on energy tax subsidies,” Edwards’ colleague Adam N. Michel, a tax policy expert, recently noted.
The return of industrial policy
This is all part of a return to the old days of industrial policy, in which government officials openly encouraged private businesses to develop and grow in ways that politicians preferred, whether or not they made economic sense. The Biden administration makes no secret that it favors this approach.
“A modern American industrial strategy identifies specific sectors that are critical to economic growth, strategic from a national security perspective, and where private industry alone is not prepared to make the investments needed to secure our national ambitions,” said National Security Advisor Jake Sullivan insisted last April.
Sullivan spoke a month after Harvard Kennedy School’s Ruchir Agarwal wrote for the International Monetary Fund that “industrial policy is gaining momentum in many countries, with some economists pointing to the China model as a success.”
Most observers believe that China is in dire, self-inflicted economic straits, so it is difficult to know what “success” inspires others to adopt industrial policy, unless it is control for control’s sake. But many “conservatives” from previously market-oriented backgrounds also embrace state-led economies.
“Market economies don’t automatically allocate resources appropriately across sectors,” says Oren Cass, now executive director of American compasshe insisted in 2019. “Although the policies produced by our political system will be less than ideal, efforts at sensible industrial policy can improve our status quo.”
Apparently a sensible industrial policy would be to pay billions of dollars to Intel for projects in which it is already engaged, and to pay billions more to TSMC to motivate the construction of economically uncompetitive chip plants. It also involves further windfalls to subsidize electric vehicles for which drivers show limited enthusiasm. Industrial policy seems to be based on the assumption that if you build what politicians want, consumers will come. There is little evidence to support this claim.
Although perhaps the subsidies will gain political favor. In November we will have to see how the Niagara Falls of taxpayer funding will reduce in terms of cost per vote.