Michigan awarded millions toward various business this year, including $4.5 toward a manufacturing plant, $2 million toward a new airplane hangar, and $500,000 toward an online brokerage firm – funding that raises the question: why is the state giving money to businesses? Cars are built, airplanes fly, and brokerage firms are established without the aid of government on a regular basis. Why is tax payer money expended on these ventures?
The state now focuses on offering grants, loans and other economic assistance to companies that make investments or create jobs in Michigan. Companies must meet certain investment or job creation milestones in order to receive the incentives.
Every four or five years the US reconsiders it’s farm subsidy programs. Cato reports that this year some subsides came very close (but not all the way) toward being eliminated:
Another program that could have been fixed by the farm bill was a bizarrely redundant and purely unnecessary catfish inspection regime. The new system would cost an estimated $14 million per year to administer and (by the USDA’s own admission) do nothing to improve the safety of catfish. However, the new institutional requirements imposed on catfish farmers to comply with the new regime would all but eliminate Vietnamese competitors from the market. The U.S. catfish industry and their allies in Congress are all for it.
No, it’s not deja vu, it’s simply another professional sports franchise asking for taxpayer money to help fund its private operations. In this Sun-Sentinel report, it’s revealed that the team hasn’t delivered on almost all of its original promises to the taxpayers, and now they’re asking for even more money:
The Florida Panthers professional hockey team says it’s losing more than $20 million a year and needs more public funds to survive.
Many observers have made the case that the Federal Reserve’s program known as “quantitative easing” is a giant corporate welfare scheme. In this McKinsey & Company report, they certainly make a convincing claim that there is a large distributional effect of money going from private citizens to the pockets of the world’s largest banks:
A new report from the McKinsey Global Institute examines the distributional effects of these ultra-low rates. It finds that there have been significant effects on different sectors in the economy in terms of income interest and expense.
The Department of Energy is helping fund the design and approval process of a modular nuclear reactor. They’re touting it as a new investment in a new project, but the Taxpayers for Common Sense think otherwise:
Oregon State University and the federally-funded Idaho National Laboratory developed the original design for the 45 MWe integral pressurized light water reactor – now the Power Module – in 2000. NuScale, which is 80 percent owned by Fluor Corporation, acquired the rights to the technology in 2007. In 2012, DOE allowed NuScale (along with Hyperion Power Generation Inc and Holtec International subsidiary SMR LLC) federal assistance developing, testing, and licensing a prototype of the Power Module at DOE’s Savannah River Site. Now, the DOE has decided to invest in the Power Module SMR for a third time, but the technology’s costs and licensing uncertainties make it unlikely that ‘mini-nukes’ will ever deliver affordable electricity.
It appears that our Anglosphere brethren in Australia are trying to get their act together when it comes to doling out taxpayer dollars to private corporations. Prime Minister Tony Abbott has warned companies to get their respective houses in order because subsidies aren’t coming down the chimney:
Prime Minister Tony Abbott warned struggling Australian companies Wednesday to get their house in order, refusing to indulge in “corporate welfare” subsidies despite car giant Holden’s decision to shut local plants.
Fortune magazine announced its annual list of Business people of the Year. Elon Musk came in at number one on the list. The magazine noted him for his cultural impact, his first place rank as “revenue gainer”, and his second place rank as “stock price gainer.” However, the magazine failed to note that a lot of the revenue his companies generate comes from the federal government.
Musk is perhaps most famous for starting the electric car company Tesla. The company’s 2010 stock IPO was hailed as a great success. But a lot of the company’s car sales come from a mandate for electric vehicles in California known as the zero emission vehicle program. Car companies either have to produce electric vehicles or buy electric vehicle credits from companies that do, such as Tesla. Buyers of Tesla’s luxury electric vehicles also receive a $7,500 tax credit from the federal government upon purchase. Musk’s two other companies, SolarCity and SpaceX, both heavily depending upon government contracts and financing.
SolarCity develops solar power projects and has several government clients in its portfolio. It also has benefited from hundreds of millions of dollars in a government subsidy program known as 1603. The Department of the Treasury is responsible for administrating the program and currently the Treasury Inspector General is investigating whether SolarCity overstated the fair-market value of its solar projects in order to receive more in subsidies. Musk is the chairman of SolarCity and his cousin is its founder and CEO.
Musk also founded and runs SpaceX, which officially goes by the name Space Exploration Technologies. SpaceX builds rockets and spacecraft that help launch satellites and other cargo into space. According to USASpending.gov, SpaceX has received over $1 billion in contracts from NASA and $243 million in contracts from the Air Force. SpaceX also benefited from $105 million in financing from the Export-Import Bank that supported the launch of a commercial satellite.
If you’re interested in the cronyism that occurs inside the beautiful Palmetto State, then we suggest checking out the South Carolina Policy Council’s economic research. Whether you’re interested in subsidies, economic development programs, or targeted tax breaks, SCPC has it all.
Andrew Huszar, the former “quarterback” of the Federal Reserve’s quantitative easing program, offers up an apology to the American people. Mr. Huszar states what many people have believed for a very long time: quantitative easing is a backdoor corporate welfare program to many of America’s largest banks:
I can only say: I’m sorry, America. As a former Federal Reserve official, I was responsible for executing the centerpiece program of the Fed’s first plunge into the bond-buying experiment known as quantitative easing. The central bank continues to spin QE as a tool for helping Main Street.
Christina Cassidy, a writer for AP Sports, covers the debate on the use of public funds to help finance new stadiums for privately-owned entities such as the Atlanta Braves. While it’s nice to have a professional sports team in your city, it is quite costly to the taxpayer and often doesn’t deliver on the job-creation promises:
When Atlanta Mayor Kasim Reed found out a neighboring community had made a generous offer to help finance a new Braves stadium, he balked and said the city simply couldn’t compete.