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> Just because the subsidies are gone doesn't mean they haven't had their effect. Once you've already paid to develop the technology and build the factory, the

> Just because the subsidies are gone doesn't mean they haven't had their effect. Once you've already paid to develop the technology and build the factory, the incremental cost of making more units is much lower and you can outcompete companies that never received subsidies to do that. Oh 100%. I totally agree with you there but the implementation of these policies make it very hard for someone like Yellen to point her finger at and say "Get rid of it to play fair." because by the time she does, it's already gone. The subsidies are now in the capital of these companies as you've rightly pointed out. How do you even fight that? I don't know how the US can continue to defend global free market in the face of market distorting measures like these without putting up trade barriers. Otherwise we risk becoming de-industrialized over time.

AnthonyMouse 3y ago
The entire premise suffers from a problem I like to call "money is fungible". Suppose the government collects taxes and uses the money to fund, say, transportation infrastructure, or Social Security, or the Department of Defense. Normal things governments do. But also inherently a subsidy. Whoever is using the transportation infrastructure is receiving a benefit, whoever is paying the taxes is footing the bill, and whenever these are not exactly the same party in exactly their proportionate share -- and they never are -- then the party receiving more in benefits than they paid in taxes is receiving a subsidy. We could never actually get them to balance, but we don't even try. Every tax credit and deduction is a subsidy and the US tax code is a zillion pages long because it's full of them. But every deduction is also a tax on everybody else, because if you get to deduct your solar panels then somebody else has to supply the money you didn't when the government pays Lockheed for fighter jets. Which brings us back to the problem of subsidies. A subsidy is when you tax one industry and use the money to benefit a different one. But then you're hurting the first one. You can't just generically subsidize the entire economy, somebody has to be the source of the money. We often try to do this, but it's preposterous, it's the thing that makes the tax code a zillion pages long and then everybody gets their requested deduction but they all just require a lot of paperwork only to cancel out. Or create a net transfer to the constituencies with the most powerful lobbyists, which is even worse. On the other hand, you can do the opposite of that, and create a net tax on the entire economy. All you have to do is waste the tax money on something inefficient, so people are paying but not benefiting. Now you want to know how to make your country's industries more competitive? Stop wasting tax money. Which brings us back to my other point: Compliance overhead is a tax.

AnthonyMouse 3y ago

The entire premise suffers from a problem I like to call "money is fungible". Suppose the government collects taxes and uses the money to fund, say, transportation infrastructure, or Social Security, or the Department of Defense. Normal things governments do. But also inherently a subsidy. Whoever is using the transportation infrastructure is receiving a benefit, whoever is paying the taxes is footing the bill, and whenever these are not exactly the same party in exactly their proportionate share -- and they never are -- then the party receiving more in benefits than they paid in taxes is receiving a subsidy. We could never actually get them to balance, but we don't even try. Every tax credit and deduction is a subsidy and the US tax code is a zillion pages long because it's full of them. But every deduction is also a tax on everybody else, because if you get to deduct your solar panels then somebody else has to supply the money you didn't when the government pays Lockheed for fighter jets. Which brings us back to the problem of subsidies. A subsidy is when you tax one industry and use the money to benefit a different one. But then you're hurting the first one. You can't just generically subsidize the entire economy, somebody has to be the source of the money. We often try to do this, but it's preposterous, it's the thing that makes the tax code a zillion pages long and then everybody gets their requested deduction but they all just require a lot of paperwork only to cancel out. Or create a net transfer to the constituencies with the most powerful lobbyists, which is even worse. On the other hand, you can do the opposite of that, and create a net tax on the entire economy. All you have to do is waste the tax money on something inefficient, so people are paying but not benefiting. Now you want to know how to make your country's industries more competitive? Stop wasting tax money. Which brings us back to my other point: Compliance overhead is a tax.