The government shouldn’t be in the business of picking winners and losers, but when governments give money to some companies to give them a leg up on the competition, that’s exactly what happens.
Podcast: Play in new window | Download
Here’s a transcript of our conversation:
Emma: Hi, Brittany.
Brittany: Hi, Emma.
Emma: Today we’re going to talk about subsidies. And if you’ve never heard of the word subsidy before, or if you don’t know what it is, we’re going to explain what they are, but also how they impact your life. So basically, a subsidy is something like an industry or a product, or, a company that gets special treatment from the government. And typically this comes in the form of money that the government actually pays. And this can be through certain tax breaks or tax cuts, or it can come through rolling back regulations specifically for one company or one group rather than doing it for everyone. So we’ve talked a little bit about taxes and sort of how that stuff works before. And just to be clear, right before we start, I just wanna make something super clear. rolling back taxes and changing regulations to be more free for everybody is a really good thing. it allows more businesses to thrive. There’s more opportunity, more job creation. But what we’re gonna talk about today is when the government chooses only a specific company to benefit from those things. And essentially why that’s wrong is it’s because the government is picking winners and losers. Yeah. So, Brittany, do you wanna name maybe a few different things that are subsidized that people may or may not know about?
Brittany: Yeah. One of the big ones that I don’t think people realize is corn. corn and sugar, both of them, which is, they’ve both caused a lot of problems. You know, corn syrup, high fructose corn syrup has caused a lot of health issues. And part of the reason that high fructose corn syrup in everything is because it’s so heavily subsidized by the government. So that’s the one thing, colleges, right? The reason everyone thinks they have to go to college is there’s so much propaganda pushed like into it, but colleges get so much money just for being colleges. Like they’re not really proving their worth or anything. and then another big thing, and this is, I work with a lot of farmers. I won’t get into that, but part of the problem, with a lot of farmers is there’s a lot of farm subsidies. And a lot of these began during, the Great Depression and the New Deal era. In fact, sometimes farmers are subsidized given money to not farm. which is a whole other problem we could get into. But once you give these farmers subsidies, it’s really hard to get them off of the subsidies. It’s almost like a drug or something. Yeah. Cause they get so used to having them and a lot of their operating expenses depend on these subsidies. So that was a big deal, especially when I was in Utah and I used to do, local politics because you’d have a candidate who was against subsidies, and you’d have these farmers that were aligned with these candidates on everything except for the subsidies. Because they were so used to them. That’s how they ran their farms. Yeah. So, yeah, that’s, those are just a few examples. I’m trying to think of other, I know that there’s so many others. I mean, goodness.
Emma: There’s too much Facebook.
Brittany: I mean, Facebook has been given subsidy, and everything almost is subsidized.
Emma: Pretty much everything. Yeah. I think if you were to go look into pretty much any major company, especially a publicly traded company Yep. Just about all of them would be getting a subsidy in some kind of way. And I think there’s, that’s not just a coincidence. It’s that once a company has basically been selected by the government as the winner, it makes it a lot easier for them to succeed. So all of the brands that we all would recognize, like Amazon, you know, we’ve talked a lot about how Amazon has innovated a lot and created a lot of value for people.
Brittany: They’ve done some bad things.
Emma: But they also have done some bad things. And a lot of times you’re, you might be wondering like, how does this even happen? How do these companies get subsidies and why do they get them? Why would politicians just give them away? And the answer, like with many things, you have to follow the money. Yeah. And a lot of the times these giant companies will hire really powerful lobbyists, which are people who basically get paid to, try to convince politicians to do certain things. So like Amazon has a lot of lobbyists that work for them. Yes. farming industry sort of associations. So it’s like these clubs that different huge farm companies will join, they’ll all hire lobbyists to represent them as a group and push for their interests. And as citizens, we all have the right to lobby our government and to make our voices heard. But when the government starts to give special favor to these groups that don’t represent all of America, they just represent a few companies or a few people that’s super corrupt. And a lot of the time that’s how you end up with these crazy subsidies. In Britney, you talked about corn and sugar and soybeans have also been subsidized. Yeah. Soybean. Yes. And these products, because the government comes in and says, Hey, if you grow these products, we will give you this crazy tax benefit, or we will give you this money. Basically, then the farmers start saying, well, now we’re growing all of this corn and soybeans. What are we gonna do with them? Yeah. So then they bring in scientists who are very creative and very clever when it comes to how can we use these products. And they come up with things like corn syrup, which if it weren’t for corn being subsidized, we may not even have corn syrup on the market. But now it’s in just about everything.
Brittany: It’s in everything.
Emma: Because corn has become so artificially cheapened by the government. So there have been a lot of, you know, health problems that have come from that, and even from soy products that are put in everything. and a lot of these are very heavily changed by these chemistry people. They come in and they mess with the DNA of the plants. And it becomes this super weird situation where in a normal free market, you would never have people growing so much corn and soybeans because there’s not demand for it. People aren’t asking for it, they don’t need it. But when the government comes in and says, Hey, we’re gonna give an extra boost this industry, it basically decides who’s gonna be the winner, who’s gonna be the loser. And we talked about college a little bit too. I just wanna get into that a little. Basically what happened is, in the seventies, the government decided, the federal government said, we are going to create a program where any student who wants to go to college and who can get into college should be able to go, we’re going to give them government-backed loans. And before that, if people took out a loan to go to college, it was through a private company that had to be careful about who it was lending money to because they wanted to make sure that the person could pay the money back. But the government got into the loan business and basically said, Hey, colleges, no matter how much you charge students, we’re going to guarantee that they can pay for it. So it took away the competition element, and it took away the element of colleges wanting to keep their prices low. Because when you go to the grocery store, they all wanna keep those prices low so that people buy the products. Yeah. In both colleges, there’s no competition anymore. They can make it as expensive as they want. So the cost of going to college since then has gone up about 300%, which is crazy. People used to be able to go and just get a summer job or just work a little here or there to pay their way through. Now people will leave sometimes with up to a hundred thousand dollars in debt, even more than that.
Brittany: Yeah. Like you’re in law school or something. It’s, yeah. It’s insane.
Emma: It’s super insane. And that’s because the government subsidized it by saying, here, we’re going to put a bunch of extra money into this marketplace and mess it all up. So when you hear people talk about subsidies, that’s sort of what they mean. They can come through in all sorts of different forms. But does, anything else come to mind on stuff that might be subsidized that the audience may know about?
Brittany: I’m trying to think of subsidies. Not so much subsidies, but I mean, how this plays a role in the free market, I think is interesting. Yeah. Because it messes everything up. Right? The whole point of the free market is Adam Smith and his concept of the invisible hand is that you don’t need a government directing the market. People are going to shop and choose what they want to choose. But that doesn’t happen when things are subsidized because a lot of times, especially with like high fructose corn syrup, it’s so much cheaper to use than other sweeteners. So of course people are gonna go to that because the government is paying for it. Right? So, it’s cheaper for you. Same with school. People are gonna go to college because now it’s cheaper because they can get a student loan and they can go, now it’s not really cheaper as you and I know, because then we’re paying for it in taxes, but it looks cheaper. And so it’s interfering. But that’s not the free market because like you said, we’re picking winners and losers. And the free market, the consumers are the only people who should be picking winners and losers, not the government. So, it’s, oh, you know what, one of the big things come to mind, I don’t know if it’s subsidized. This might be more of a monopoly. I don’t know if we can bring this example up, but utility companies, I don’t actually wanna answer to this, I just know they have a monopoly, but I do wonder if they’re subsidized as well.
Emma: I think you could make the argument that they are, because basically, so I live in Nashville, Tennessee, and there is one company that is allowed to give power to people. Yeah. It’s just one company. And it started out as a private company, and then the government basically gives it a bunch of money to keep it in business. So it’s technically a private company, but because the public and our tax dollars here in the city go just to that company, you could argue that it’s gone from a private company to a public one. And then when that happens, it’s just the government that’s in control. And there’s no more choice in the matter. There’s no choice for me if I wanna say, Hey, you guys jacked up my cost of my bill on a month when it was, there was a snowstorm in town and you made my bill three times more expensive than normal. That’s something that really happened to me this year. And I can’t go say, Hey, other competitor business, I’m gonna go with you guys. What kind of a deal can you give me? And it takes away that element of choice. And I think that’s a really good example of what can happen when these subsidies get out of control and companies get too extremely, kind of monopolized in taking over the whole industry. And there are other industries where you see that as well. And another element to this that I think we should talk about is for small businesses the effects that these can have. Basically what it does is the government picks the company that’s the biggest and the most successful. Sorry, I’ve got some firetrucks going on outside of my house right now. The government picks, you know, the big most successful company that’s sending all the lobbyists up, and they’re trying to work out these backdoor deals. But at the same time, there are other small businesses out there that are doing things the right way and they’re not getting any extra help. So basically what happens is these big companies get bigger and bigger, and they can afford to, you know, take all these risks and grow really quickly. While the little guys who are actually operating in a free market, and who are actually like out there competing and, and trying to do their thing, they’re actually getting a huge disadvantage against them. So when people talk about protecting small businesses, one of the best ways to do that is actually to get the government out of business, period.
Brittany: I think you’re absolutely right. And that’s the problem is, again, it’s picking winners and losers and it’s picking it. So smaller businesses can’t, you know, they don’t even really stand a chance. So that’s a big problem. You have me thinking, I was trying to think of all the other things that are subsidized, and there’s probably so many that’s why I can’t think of any, but I had one that just came to mind and I forgot it.
Emma: It’s a great one, it’s basically everything.
Brittany: Basically everything. One thing that we really, I know what I was gonna say and I was debating whether or not to bring it up, because we all love Elon Musk so much.
Emma: Oh yeah. do it.
Brittany: But one thing to remember is that Elon Musk’s businesses are very heavily subsidized. I mean, SpaceX was heavily subsidized. Now we still credit it’s great. Cause it was a lot, it was more private than any other, you know, rocket launch we’ve ever done. But I think it is important to remember that, like you said about Amazon, Elon Musk has also taken subsidies. So it’s such a hard one because we love ’em so much, but we have to remember, you know, first principles and anytime the government is paying for something, that’s a bad problem now. there’s another thing I wanna talk about with Amazon and Elon, and that is some of these subsidies are tax breaks.
Brittany: And that gets a little bit more murky because at the same time you wanna say, all right, I’m in favor of anybody getting a tax break, right? because we don’t love taxes, as we’ve said before, taxation is theft. So if that’s a hard one because is it a subsidy, is it a tax break? And if it’s a tax break, does that make it a little bit better than a subsidy? So there are areas where this isn’t just black and ri and white. Like it gets a little bit tricky. Yeah. So I did wanna bring that up and I know, heaven forbid I insult our wonderful Elon Musk but I thought we should at least mention it.
Emma: Yes. I completely agree with you. When I first started following Elon Musk, that was the first thing that my dad said. He was like, well, I don’t like that guy, cuz he gets subsidies and now he likes ’em a little more cuz he’s been standing up to some of the more woke, you know, yes,
Brittany: He has.
Emma: Cancel culture stuff, but still it’s, if you’re gonna be a businessman and you’re going to create these amazing products, people should be doing that without the government propping up winners and losers. And I loved seeing our first private space exploration, and I love seeing the Rockets launch, but in the back of my mind, there is a little voice saying, Hey taxpayers, we’re helping pay for that. Yep. It’s not totally private, so
Brittany: Not totally private.
Emma: That’s also just the world that we live in. Things are very rarely black and white and very rarely fit perfectly into, you know, the way that we like to see things happen and the way that we see the world. But it is important to talk about these things and figure out what your biases may be. Yep. So for me, my bias is that I like Elon Musk, I like his products. I think he’s a cool person, but at the same time, if he’s getting subsidies, which are something I don’t believe in, maybe want to think that through. And you can still like someone, and you can still think that they’re, you know, an overall good person who’s doing good things for the world, but have problems with certain things that they do, or maybe certain things that their business does, because that’s the world we live in. It’s not all black and white. Yeah. Everyone is complicated.
Brittany: That’s a good way to put it. Everything is complex, everything’s complicated.
Emma: Yes. And that’s why we have this podcast to talk about the way the world works,
Brittany: Exactly. Well, I don’t have anything else to add, Emma, if you do.
Emma: I don’t think I do either. We’re gonna wrap it up there. Guys. Thank you so much for listening. Check out the show notes for more info on subsidies. We’ll drop some stats and good stuff like that. But we will talk to you guys next time. Bye, Brittany.
Brittany: Talk to you next time.
Podcast: Play in new window | Download