“House Agriculture Chair G.T. Thompson (R-Pa.) said Saturday that he will oppose any spending measure that leaves out the billions in extra aid farm state Republicans were seeking for farmers still reeling from Donald Trump’s 2018 trade war, inflation, a delayed five-year farm bill reauthorization and a raft of other economic pressures. Republicans in agriculture-heavy states and some Democrats have warned about a crippling economic crisis hitting rural America, which overwhelmingly supported Trump in the last election.”
“For millions of families, a spike in health care costs might be around the corner because crucial subsidies are set to expire at the end of next year. Some families will see their premiums rise by thousands of dollars; others might lose their insurance altogether.
In 2021, President Joe Biden signed into law the American Rescue Plan Act, which included a provision that enhanced the premium tax credit — a piece of the Affordable Care Act (ACA) that subsidized the cost of premiums for some lower- and middle-income families. The Biden-era enhancements, which essentially expanded the number of people who qualify for the tax credit, were originally set to expire at the end of 2022, but Congress extended them through 2025 when it passed the Inflation Reduction Act. (For families at or slightly above the poverty line, the enhanced tax credit subsidizes the full premium. For people making more than 400 percent of the poverty line — people who were previously ineligible for this subsidy — it caps their premiums to 8.5 percent of their income.)
The enhanced premium tax credits contributed to a record number of insured people in the United States. In February 2021, before Congress expanded the premium tax credits, 11.2 million people were enrolled in health coverage through ACA marketplaces. By 2024, that number shot up to 20.8 million people.
There are many reasons for the dramatic increase in marketplace coverage — including the fact that millions of people were disenrolled from Medicaid coverage after Covid emergency measures lapsed and had to turn to other forms of insurance, including the marketplace — but the enhanced premium tax credit played a critical role. Its expansion was the main reason so many more people were able to enroll in health care coverage from the ACA marketplace, according to the Kaiser Family Foundation.
If Congress allows the enhanced premium tax credits to expire, millions of people will see a noticeable rise in out-of-pocket expenses. Many will likely lose their coverage, and that’s without considering how much more will be at stake if Medicaid gets slashed as well. For low-income families, particularly those who live just above the poverty line, that could be a nightmare.”
“”China spent roughly $173 billion in subsidies to support the new energy-vehicle sector, which encompasses electric and plug-in hybrid vehicles, between 2009 and 2022,” write Kubota and Leong. By 2019, there were 500 E.V. manufacturers in China. But that same year, the government started paring back those incentives, and by 2023, the number of automakers had shrunk by 80 percent.
Now, though, the country is ready to throw good money after bad: “Chinese leader Xi Jinping has called on local leaders to promote ‘new productive forces’—a buzzword in Chinese policy circles for the need to promote high-value manufacturing industries.” Local leaders responded by pumping money into struggling companies—in one case, giving the equivalent of $27.5 million to a company that had sold fewer than 2,000 cars in the first quarter of 2024.
“China currently has the capacity to produce some 40 million vehicles a year, though it sells only around 22 million cars domestically,” the Journal authors warn. As a result, the country’s largesse “is adding cars to a global market that risks becoming more oversupplied.”
Of course, E.V.s are not inherently a bad idea—especially in China, whose cities have a history of such severe pollution that it lowers the nation’s life expectancy.”
…
“But as with anything, the advent of clean-energy technology should be driven by market forces. The Chinese government spent more than a decade subsidizing the production of electric vehicles, no matter whether consumers wanted to buy them. When the spigot of free money finally shut off, and manufacturers had to stand on their own, the country saw the rise of “E.V. graveyards,” in which entire fields were covered in unsold or abandoned vehicles.
America would do well to heed China’s example as a cautionary tale about industrial policy. China averaged 9.8 percent annual economic growth for 35 years starting in 1978; in 2013, officials pledged to keep growth at 7.5 percent—a two-decade low for the country, even if it would have been an enviable figure for any other nation.
But much of that expansion was driven by government spending, not market forces: For much of the 21st century, China embarked upon a construction binge, building residential and commercial developments as fast as possible with no regard for whether there were any tenants to fill them.
The result was China’s “ghost cities,” full of high-rise apartments and shopping centers in which nobody lived. Worried about rising debt, the Chinese government finally started drawing back its building spree in 2020. Since then, the country’s real estate market has cratered, and its debt load has only deepened.”
“Higher rents and home prices are a natural consequence of local and state zoning laws, labyrinthine approval processes, federal restrictions on mortgage financing, and environmental reporting laws, to name a few.
All these laws limit the supply of new housing, which drives up the price for any given level of demand. That’s a diagnosis the Biden administration itself has endorsed in various housing briefs and “action plans.”
Despite that insight, the president’s proposals to subsidize home buying will, all else equal, increase demand while leaving supply constraints in place. That will only raise prices further.”
“Governments often make deals with private companies, offering generous subsidies to encourage development in their respective states. The year 2023 was unfortunately no exception.
According to a new report from Good Jobs First, a watchdog group that tracks economic development deals, 16 states promised more than $10 billion to private companies last year. The group counted 23 “megadeals,” which it defines as any agreement involving at least $50 million in subsidies to a private company.”
“By insuring risky property, Paul points out, “You’re actually doing the opposite of what you would think government would want to do; you’re promoting bad behavior.””
…
“Years ago, federal flood insurance encouraged my bad behavior.
I wanted to build a house on a beach. When I asked my father to help with the mortgage, he said, “No! Are you crazy? It’s on the edge of an ocean!”
Dad was right. It was a dumb place to build. But I built anyway, because federal flood insurance, idiotically, guaranteed that I wouldn’t lose money.
I enjoyed my house for ten years, but then, as predicted, it washed away.
It was an upsetting loss, but thanks to Uncle Sam, I didn’t lose a penny.
I’m grateful. But it’s wrong that you were forced to pay for my beach house.”
“A new audit of Georgia’s Film Tax Credit program found that the state “loses money” on the program. A lot of money, actually: about $160,000 for every job the program creates. Georgia is now spending about $1.3 billion annually on the program, but it generates a return on investment of just 19 cents per dollar, the auditors conclude.”
…
“There’s no doubt that Georgia’s program has influenced where movie and TV production takes place. The new audit concludes that the program has induced “substantial economic activity in Georgia,” but that’s simply evidence of the fact that lighting a lot of money on fire will eventually produce some heat. The underlying numbers suggest that Georgia’s subsidies are doing a poor job of generating economic growth or creating jobs.”
“Each year since 2018, the Center for Economic Accountability (CEA)—a nonpartisan think tank opposed to corporate welfare—has named its Worst Economic Development Deal of the Year, a dishonor awarded to the most egregious misuse of taxpayer funds nominally intended to spur economic growth.
This year, the ignoble honor goes to Michigan, which has awarded over $1.75 billion to Ford Motor Co. and Contemporary Amperex Technology Ltd. (CATL), a Chinese battery manufacturer. The two companies are jointly developing a factory in Marshall, Michigan, that would build lithium iron phosphate batteries for the automaker’s electric vehicle (E.V.) lineup.”
…
“facing strong economic headwinds, Ford announced it was “re-timing and resizing some investments.” While the Michigan plant was originally intended to create 2,500 jobs, Ford changed its pledge to 1,700 jobs and lowered its potential output by 40 percent, estimated to shrink the company’s financial investment by $1 billion or more.
Since Ford originally pledged $3.5 billion, Michigan’s contribution to the project could be nearly as much as what Ford plans to spend on its own factory. Gov. Gretchen Whitmer, a Democrat, told reporters that Michigan’s investment may be “resized” as well, and “as Ford has had to make some changes…the state’s role will change as well.”
Of course, the deal’s merits were questionable from the start. When the project was first announced, Whitmer’s office claimed it would have “an employment multiplier of 4.38, which means that an additional 4.38 jobs in Michigan’s economy are anticipated to be created for every new direct job.”
This is a fanciful notion. Tim Bartik of the W.E. Upjohn Institute for Employment Research has estimated that a more typical multiplier on a local or state level is between 1.5 and 2. Last month, Bartik calculated the estimated benefits of Michigan’s proposed investment; while he was broadly positive, he noted that a 4.38 multiplier was “very high,” and “if the Ford project had a more typical multiplier—2.5 rather than 4.38—the project’s gross benefits would be less than the incentive costs.””