Tag Archives: subsidies

The Fire Sale, by Eric Peters

If electric cars [vaccines] are so good, why does the government have to pay [force] people to buy [take] them? From Eric Peters at ericpetersautos.com:

Apparently, it’s not sufficient to pay people $7,500 to “buy” an electric car – using your money (as a taxpayer) to facilitate the transaction. Democrats want to increase the amount that taxpayers are forced to subsidize each purchase of an American-made electric car to $12,500.

This will “benefit” America, you see. Or rather, some Americans – at the expense of other Americans. Including Americans who pay full freight for their non-electric Toyota or Honda Japanese (or German) car and then pay more taxes to make up for the tax kickback used to “help” their neighbor buy his American-brand electric car.

That’s how you “build back better,” apparently.

To put what’s on offer in some perspective:   

$12,500 amounts to a near 40 percent “discount” off the MSRP – the sticker price – of an electric car such as the Chevy Bolt,  some 60,000 of which were recently recalled due to their tendency to auto-immolate, which is a function of their being electric cars. Which are all fire-prone because of the nature of the things – because of the inherent susceptibility of the thousands of individual cells in a single EV battery pack to damage in accident or deterioration over time or on account of a manufacturing defect.

All it takes being one damaged/defective/deteriorated cell to trigger thermal runaway – a short circuit – and a searing chemical fire that is faster spreading than a gas fire, hotter than a gas fire and – unlike a gas fire – is capable of spontaneous re-ignition after it has been put out.

Sometimes, several times.

It is why some wrecking yards have giant sarcophagi to douse and house crisped EVs in, so as to assure they do not catch fire again – and crisp the entire lot.

Electric cars are also inherently fire-prone due to the stress on the battery pack of deep discharging followed by “fast” recharging. If the charging circuitry doesn’t keep things balanced just so, if a cell within the pack is dendritically challenged, if the cooling system doesn’t work – it’s hot zig, you’re all fired up.

Or maybe just your house.

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Intel & TSMC on Chip Shortage: After Blowing $84 Billion on Share Buybacks since 2011 and Now Woefully Behind, Intel Clamors for $50 Billion in Subsidies for US Chip Industry, by Wolf Street

Who cares if your company falls behind in its main line of business if you can borrow a lot of money and buy back your stock to keep its price going up, especially when you have lots of stock options? From Wolf Richter at wolfstreet.com:

“We will not be anywhere near as focused on buybacks going forward as we have in the past”: Intel’s new CEO.

US semiconductor manufacturing has declined to where it is now only 12% of the world’s total, said Intel’s new CEO Pat Gelsinger in an interview with CBS on 60 Minutes. “And anybody who looks at supply chain says, ‘That’s a problem.’” It’s a problem, he said, “because relying on one region, especially one as unpredictable as Asia,” where 75% of the chips are made, “is highly risky.”

And Intel, which made $63 billion in net income over the past three years combined, “has been lobbying the US government to help revive chip manufacturing at home – with incentives, subsidies, and-or tax breaks, the way the governments of Taiwan, Singapore, and Israel have done,” Gelsinger said. This lobbying came after Intel had incinerated $84.5 billion in share buybacks since 2011 (data via YCharts):

The success of Intel’s lobbying became clear in late March when the White House unveiled $50 billion in subsidies for semiconductor makers in the US to address the shortages and US exposure to foreign chip makers, as part of its $2 trillion infrastructure plan. The subsidies for the semiconductor industry have bipartisan support in Congress, the White House said. Corporate subsidies have nearly always bipartisan support.

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Elon’s “Earnings”, by Eric Peters

Elon Musk’s subsidy-slurping, tax-credit-trading companies will be the poster children for the Biden administration, like Solyndra was the poster child for the Obama administration. From Eric Peters at ericpetersautos.com:

It is being “reported” that Tesla’s net “earnings” have “surged” to $438 million. What they do not report is that this includes $518 million “earned” via regulatory credits – which aren’t cars. Rather, they are monies mulcted from other car companies, paid to Tesla to get “credit” for not having made a sufficient number of electric cars themselves.

Enough to achieve compliance with government requirements, as in California, that they build a certain number/percentage of them – else pay Elon to get the “credit.” In other words, it is a racket.

A shakedown.

Only legal – like the income tax. But it does not change the nature of the thing. Only the marketing of the thing.

It is very interesting that no major automotive media reports the context about Tesla’s “earnings.” Instead, it is “reported” that Tesla is making money hand-over-fist.

Which is true.

It is also true of the IRS. And of Al Capone. But the media in those days did not cover for Capone. Everyone knew he was a gangster – and to be fair to Capone, he was only that because the government made his otherwise legitimate business – the selling of alcohol to people who very much wished to buy it –  illegal.

The situation with Tesla – and Elon Musk – is morally and legally the inverse. The government has made it illegal for other car companies to not sell electric cars, which most people do not wish to freely buy.

It makes no more sense for Toyota, say, to build lots of electric cars when there is no real market for electric cars than it does for Starbucks to build coffee kiosks in Death Valley. Luckily for Starbucks, there is no government regulation requiring hot coffee to be sold in Death Valley as the price of being allowed to sell hot coffee in San Francisco – so Starbucks doesn’t have to build coffee kiosks in the desert – nor pay some other coffee company that does build them in the desert, so as to get “credit” for it.

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How Government Subsidizes Obesity, by Barry Brownstein

The government pays out a lot of money to make us fat (I’m munching on a tortilla chip right now). One of the most quietly disguised facts of the coronavirus outbreak is that obesity is a major comorbidity. If the government could somehow make obese people exercise an hour a day, it would be far more effective than masks and lockdowns. From Barry Brownstein at aier.org:

Austrian mathematician Abraham Wald was a World War II hero. He worked out of a nondescript apartment building in Harlem for the Applied Mathematics Panel. Wald’s ability to see the unseen was a significant factor in the Allied victory in World War II.

Allied bomber planes were being shot down at such an alarming rate that bomber airmen were called “ghosts already.” The Air Force concluded that more armor was needed on the planes but adding armor would add weight. David McRaney, the author of several books on cognitive biases, tells the story of how Wald saved the military from a major blunder:

“The military looked at the bombers that had returned from enemy territory. They recorded where those planes had taken the most damage. Over and over again, they saw that the bullet holes tended to accumulate along the wings, around the tail gunner, and down the center of the body. Wings. Body. Tail gunner. Considering this information, where would you put the extra armor? Naturally, the commanders wanted to put the thicker protection where they could clearly see the most damage, where the holes clustered. But Wald said no, that would be precisely the wrong decision. Putting the armor there wouldn’t improve their chances at all.”

Wald looked at the same bullet holes and saw a pattern revealing “where a bomber could be shot and still survive the flight home.”

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Electric Vehicle Subsidies and Other Fantasies, by Craig Rucker

Will there ever be an market for electric vehicles that isn’t subsidized by governments? From Craig Rucker at lewrockwell.com:

Electric vehicles (EVs) are the future. Everyone will want one because they’re emission-free, ecologically responsible, and more affordable every year. That’s why GM, Volvo, and other manufacturers will soon be making only EVs.

Or so we’re told.

Some people have high disposable incomes and do most of their driving locally. For them buying an EV may be a viable choice.

Why do the rest of us need mandates and subsidies to “persuade” us to buy EVs, instead of internal combustion engine (ICE) vehicles? Who’s actually getting the subsidies – and who’s paying for them? What other costs and unintended consequences are hidden from view?

President Biden wants to require all new light/medium-duty vehicles sold by 2035 (or sooner) be EVs. Vice President Harris wants only ZEVs (zero-emission vehicles) on America’s roads by 2045. Various states have already passed or are considering similar laws. Some would ban the sale of new gasoline and diesel vehicles by 2030.

A 2021 Tesla Model S Long Range can go 412 miles on a multi-hour charge; its MSRP is $80,000. A Model 3 costs around $42,000; the Model Y all-wheel-drive $58,000. Similar sticker-shock prices apply to other EV makes and models, putting them out of reach for most families. “Long range” models achieve that status by loading them down with expensive, heavy batteries and long charging times. Most electric vehicle ranges are far shorter.

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Tariffs, Barriers and Subsidies, by Raúl Ilargi Meijer

If your tariffs, trade barriers, and subsidies are low and the other nation’s are high, if you want them lowered, what leverage do you have other than to raise yours? From Raúl Ilargi Meijer at theautomaticearth.com:

There’s not a shade of a doubt that I’m not an expert on tariffs, trade barriers and subsidies, and I’d be the last to suggest any such thing. But I can read. Still, do correct me if I’m wrong anywhere. The whole field is so complicated -no doubt often on purpose- that there’s always the possibility that there are side issues involved for which one would need to actually be an expert.

But still. Now that EU chief Jean-Claude -‘When it becomes serious, you have to lie’- Juncker is due to arrive at the White House soon, I looked at some of the items involved. Last night Trump said that all tariffs, barriers and subsidies should be dropped between the EU and US. Why the TTiP doesn’t come anywhere close to that is anyone’s guess. Too complicated for the boys and girls?

In at least some major fields, Trump does seem to have a point or two. The US has a 2.5% tariff on European cars, while the EU slaps a 10% tariff on American cars. That’s 4x as much, or a 300% difference. Whoever said yes to that? Sure, the US has a 25% tariff on EU pickups, but nobody in Europe drives pickups, hence they don’t produce them, so that’s not consequential.

So what had Trump done? He’s threatened a 20% tariff on Beemers and Mercs, and added -for entertainment value only- that he doesn’t want to see any of them in on Fifth Avenue anymore. Cue EU carmakers warning about the cost to American customers.

That’s all fine and well, but those tariffs on personal cars are still 300% higher. So push your European government to make them equal. Easy as -American- pie. How about zero? I can see where Trump’s coming from. Issuing warnings to the American public about BMW’s getting more expensive doesn’t look entirely on the up and up.

To continue reading: Tariffs, Barriers and Subsidies

 

Trump’s Farm Bailout Is Win-Lose, by Bill Bonner

What Trump taketh away from farmers in trade he’s trying to give back to them in subsidies. From Bill Bonner at bonnerandpartners.com:

What a spectacular summer!

People may be frying eggs on the sidewalks of Algiers and fighting forest fires in Sweden, but here in Ireland, the heatwave is a delight.

Farmers are grousing, of course, but we are enjoying daytime temperatures in the mid-70s and beautiful, clear skies.

Farmers are grumbling in the U.S., too. The weather is always a favorite subject. And this year, they have something more to kvetch about – the trade war.

Casualties are beginning to pile up. This from Bloomberg:

Harley-Davidson Inc. on Tuesday cut its profit margin forecast, citing tariffs. The iconic motorcycle maker was caught in the crossfire of the trade war last month when it announced plans to shift some U.S. production overseas, prompting attacks from Trump.

Dutch electronics firm Royal Philips NV Chief Executive Frans van Houten says an escalation of tariffs may mean it has to pass on costs to customers, and Whirlpool Corp. said rising raw material costs hurt results in some of its markets in the second quarter.

Farm Bailout

Out on the Great Plains, the bodies lie especially thick. The damage estimate so far: $11 billion.

But U.S. farmers are not locking arms like Londoners during the Blitz, or going on short rations like Soviets during the Siege of Leningrad. If anyone is going to make wartime sacrifices… it’s not going to be them.

They’ve got two senators per state… and a Republican Party that needs their money and their votes.

As expected, America’s president proposed yesterday to bail out the farm sector with $12 billion in welfare payments.

Naturally, the president feels some responsibility in the matter, since it was he who put the hayseeds under water.

He also looks ahead to the midterm election season, when the fellows with the big tractors make a big impression on the politicians.

The Donald has replaced win-win with win-lose. But the $12 billion won’t come out of Donald Trump’s pocket.

Nor will it come from the U.S. Treasury. The feds don’t have any money; they’re already projected to run a trillion dollars in the hole for fiscal year 2019.

So where will the money come from?

Will taxes be raised on consumers, also hurt by the trade war? Will the steel producers… or steel workers… or steel buyers – similarly damaged – pony up the money? Which group will get the rewards? Which will be punished?

To continue reading: Trump’s Farm Bailout Is Win-Lose

Without Help From Uncle, by Eric Peters

Would you consider a car that averages 80 MPG and retails for less than $8,000? Too bad the government won’t let you buy it. From Eric Peters at theburningplatform.com:

Why don’t cars that make sense make it?

Five years ago, Paul Elio bought up a shuttered GM assembly plant In Shreveport, Louisiana with the intention of using it as home base for the manufacture of a low-cost/high-economy car – the kind of car no other car company makes anymore. Instead of $12k and maybe 40 MPG on the highway – the best you can get in a new car sold by any other manufacturer – the Elio would average at least 80 MPG and sell for less than $8,000.

Such a car makes all kinds of sense.

At a stroke, it would cut the cost of getting around by car in half – minimally. Keep in mind that the least-expensive new car being manufactured right now, the one referenced above, is the Nissan Versa. Most new cars cost significantly more. The average price paid for a new car is currently well over $30,000 – and the average new car averages a great deal less than 40 MPG, on the highway or otherwise.

It would also render many “alternative” fuel cars irrelevant; make them look even sillier as economic and functional and evenenvironmental propositions than they already do. The Elio’s “carbon footprint,” for instance, is so small it’s hardly there.

Which is why the Elio faces every kind of obstacle imaginable to preventits manufacture.

Unlike the manufacturers of those other cars, which make no sense at all – including environmentally-speaking – and so are given every artificial advantage (via government) imaginable.

Electric cars.

It is doubtful anyone would by them at a price which reflected their true cost to manufacture, absent all the manufacturing subsidies, including sweetheart deals/financing on their manufacturing facilities – such as the $1.3 billion the taxpayers of Nevada were compelled to provide the billionaire crony capitalist Elon Musk to finance the battery plant for his electric luxury-sports cars. As well as the retail ones, including not only the tax breaks dangled in front of buyers of the cars but also on the “fuel” they use – the electricity – which isn’t subject to any motor fuels taxation (for the moment) and often literally given away for free (well, at taxpayer expense) at so-called public charging stations, to further nudge the electric car into general use.

Elio enjoys no such help.

To continue reading: Without Help From Uncle

The Udder Runs Dry? by Eric Peters

The electric car industry has been sucking at the government teat, but at least for Elon Musk and company, the milk of human subsidies may be running out. From Eric Peters at ericpetersauto.com:

There must be a rube in the House.

A recent Republican who does not understand how the game is played – much less why it is being played the way it is played. He and perhaps some of his fellows not-yet-initiated publicly wondered why the federal government is underwriting the sale of luxury-performance cars that happen to be electric.

It is a curious thing.

They suggested rescinding the $7,500 tax inducement which the government has been using to “help” electric car manufacturers like Tesla, which sell electric cars that start around $40,000 and which emphasize not economy but performance and style and technology.

Some might look upon the robbing of Peter – who probably drives an eight-year-old Camry in need of front end work – so that Paul can drive a brand-new, $40,000 electric luxury-performance car – as somewhat obnoxious.

But not everyone.

There is, for example, Genevieve Cullen – who is the head shill for the electric luxury-performance car lobby, styled the Electric Drive Transportation Association. She practically squealed the collective indignation of her clients, who are alarmed very much by the prospect of having to make an honest dollar:

She and they “ . . .continue to believe that a reformed tax code should include a robust set of incentives to support the electrification of transportation,” Cullen wrote to House Republican Rep. Kevin Brady of Texas, who is the chair of the Ways and Means Committee – which is the government gaggle which weighs how to dispose of our means.

But Cullen is not being straight with Brady – or with the means providers (who haven’t got much choice about that).

The issue on the table is not whether Uncle should “support the electrification of transportation,” as she shysterishly misdirects. It is whether wealth transfers from working people to affluent people ought to be continued.

Elon Musk, for instance, is a billionaire. The idea that anyone who files a W2 ought to be made to fund his operations is haltingly offensive.

To continue reading: The Udder Runs Dry

Government Incentives to Business Distort Free Market Forces, by A. Barton Hinkle

The market can’t be allowed to separate winners and losers among beers; it’s certainly a job for government. From A. Barton Hinkle, at the Richmond Times-Dispatch, via reason.com:

Are people drinking enough beer? Most people, quite sensibly, are likely to answer with some variation of “How the heck should I know?” But Virginia Gov. Terry McAuliffe (D) and state lawmakers think they know. In fact, they’re sure of it.

The other day McAuliffe joined the founders of Hardywood Park Craft Brewery for a big announcement: Hardywood, which opened its Richmond brewery just four years ago, will commence a $28 million expansion in Goochland County. The project will include a brewery and distribution center, a beer garden, an amphitheater and more.

This is good news for Hardywood, for Goochland and for beer aficionados. But it’s not so good news for other craft-beer companies — because Hardywood is getting a big financial boost courtesy of Virginia taxpayers. The $1.15 million package includes a $500,000 grant from the Commonwealth’s Opportunity Fund (essentially, a slush fund the governor can use to grease the skids for new development); $250,000 from another state fund; $56,000 for job training; and more. Goochland has pledged an additional $1 million in tax incentives.

This is patently unfair to those craft brewers who don’t get special treatment. The governor and members of the General Assembly — who recently dumped millions more into the Opportunity Fund — say this is good business. Hardywood, for example, was considering expansion in North Carolina, among other places. Besides, other states also offer incentives, and you can’t expect Virginia to compete with one hand tied behind its back.

To put that another way, a level playing field for state governments requires an unlevel playing field for private enterprise. Since everyone else cheats, letting Virginia cheat too is only fair.

That was the argument when Virginia lured Stone Brewing to Richmond with a $5 million grant for its own brewery-and-beer-garden combo. And when the commonwealth arranged an $11 million incentive package to bring the Redskins training camp to Richmond. The city is paying one of the world’s richest sports teams $500,000 a year — taken from the pockets of barbers, waitresses and other working stiffs. And when — OK, you get the drift.

To continue reading: Government Incentives to Business Distort Free Markets

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