Government Subsidies

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Government Subsidies
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• I. Definition Governmental financial support.
  The main types of subsidies are
• A. Cash (TANF)
• B. Tax incentives (Home mortgages)
• C. Credit subsidies (Loans for veterans)
• D. Benefit-in-kind subsidies/ non-cash benefits
  (medical)
• II. Purpose of subsidies to encourage a
  particular type of private sector action.
• A. Examples (loans, production or development of
  something, etc.)
• B. Most people associate subsidies with welfare
  programs for the poor actually, most subsidies
  go to people in the top half of the nations
  income distribution. Many subsidies, in fact, go
  to corporations, leading liberals to criticize
  this as corporate welfare.

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• III. The politics of subsidies.
•  A. Most Americans complain about subsidies
  however most also receive them in one form or
  another.
•  B. Once subsidies are established, they are
  extremely difficult to eliminate. Iron triangles
  or issue networks develop and work quite hard to
  keep the subsidies. Some subsidies even become
  sacred cows.
•  C. Another reason subsidies are hard to
  eliminate is that they are often difficult to
  see.

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• IV. Subsidies that promote commerce
• A. Examples of subsidies to business and
  industry.
• 1. The Reagan Administration raised tariffs
  on imported motorcycles to assist Harley
  Davidson.
• 2. Chrysler Corp. received a bailout from
  the government to prevent bankruptcy in the 80s.
  
• 3. Oil companies receive tax breaks to
  encourage oil production and make us less
  dependent on foreign oil.
• 4. Airlines received billions in federal aid
  after the 9/11 terrorist attacks.
• 5. Auto, banking, and financial industry
  companies received substantial support through
  the American Recovery and Reinvestment Act of
  2009 (Stimulus Bill).

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• B. Examples of subsidies to agriculture.
• 1. In the 19th century, the federal government
  made huge land grants to states to support the
  building of agricultural universities.
• 2. FDRs New Deal during the 1930s started
  programs to reduce crop surpluses and raise crop
  prices.
• 3. The federal government  today provides loans
  and cash payments to farmers (crop support
  payments), and in some cases pays farmers to not
  grow crops to prevent surpluses. 
• 4. Criticisms of these subsidies
• a. Though these are supposed to help farmers, 30
  of these subsidies go to huge agribusiness
  firms, leading once again to charges of
  corporate welfare.
• b. Consumers end up paying higher prices for
  food, yet so much of the subsidies go not to the
  small farmers, but instead agribusiness.
• 5. The federal government pays for agricultural
  research, often at land grant colleges.