China syndrome

[Blazeman]

Our government allows us to "write off" mortgage interest for primary residence. That certainly is a subsidy to the home construction industry. Energy credits for replacing older heaters and windows are as well. The current administration was very upfront about the desired effect that would have.....keeping a segment of the ecomomy going to some degree.

So government subsidies are all around us. But I can't think of anyone who lost a job because of the above programs or policies.

I was working in the ferro alloy business in the 70's and 80's. At that time, the domestic producers were  being faced with dumping from overseas. In fairness, the US producers had higher costs since so many of them had labor contracts with the USW that paid the hourly people a lot of money. These benefits were then extended to the non hourly people, so wage costs were even higher. So, even a shipment of foreign alloy at cost  would force the US producers to slash margin to compete.

The straw that broke this camel's back was when a boatload of alloys from the USSR landed in New Orleans. It became politically unpopular then for any metals producer to even consider using that product.  Instead, the overseas producers sent the steel here so both the US alloy producers and the US steel industry shrunk.

And don't forget, those overseas mills in many instances were built by US taxpayers as part of programs to rebuild ecomomies of our WW2 adversaries. The mills were of the latest efficient design, further spreading the differential. Just like the railroads, if US mills wanted to upgrade or modernize, it was out of their pockets, but with the ability to utilize tax reinvestment credits under programs created to make that happen.

Upshot is subsidies are all over the place. It's the subtleties that make the difference in who's ox is being gored more.

The real "crime" in what is going on is the practice of some Far Eastern countries to reverse engineer products developed here. No payments for intellectual property theft. Or that pharmaceutical companies are not permitted to build into their export prices any portion of the millions invested in development of the products (done with US government grants in many instances to be accurate).

Then there are the trade barriers put up to keep out our products. I don't see how that can be defended and yet rarely does our country feel the crime overcomes the politics to bring action at WTO.

[sirenwerks]

Our government allows us to "write off" mortgage interest for primary residence. That certainly is a subsidy to the home construction industry. Energy credits for replacing older heaters and windows are as well. The current administration was very upfront about the desired effect that would have.....keeping a segment of the ecomomy going to some degree.

Our tax code's not a really a compelling example, considering its willy-nilly-ness. For instance, the mortgage write-off makes sense as a direct-result economic stimulus. Buy a product from a weakened industrial sector, get a write-off.

The energy credits make sense in a secondary manner. By promoting improvement of consumer units, through conservation and off-grid production for individual consumption, the slack national grid is relieved of traffic and we become slightly less dependent on it.

But then there's politically or socially-motivated tertiary incidents. Take the tax credit for children. With each person in America, the need for civic services increases in the form of education, engineered infrastructure, public safety, potential for social services, etc. So each child adds to the tax burden, yet individuals who have children receive the benefit of a tax write-off while those without end up shouldering the shared cost. It seems to me it should be the other way around, credit the person who does not add to the network of need.

The straw that broke this camel's back was when a boatload of alloys from the USSR landed in New Orleans. It became politically unpopular then for any metals producer to even consider using that product.  Instead, the overseas producers sent the steel here so both the US alloy producers and the US steel industry shrunk. 

If the domestic production of such product is vital to national security, the federal government has its own system of providing contracts for goods and services to promote the health of that asset. Metals for military equipment would be one such area where we certainly wouldn't want to rely on the Soviets and I can see where US metal producers with or seeking federal contracts might consider not taking advantage of the low-cost materials to politically leverage themselves towards receipt of DOD contracts. Yet the correlation is lost on me as you state it - if no US metal producer decides to utilize (buy) the less expensive product, it goes unpurchased and sits in warehouse, hence there's actually no dumping. Dumping can only occur of the product is purchased, then there's a cause-effect exchange to complain about. Otherwise, there's a game of chicken where the lower cost product sits there and there's a price savings/political suicide fight whether to use it.

And don't forget, those overseas mills in many instances were built by US taxpayers as part of programs to rebuild ecomomies of our WW2 adversaries. The mills were of the latest efficient design, further spreading the differential. Just like the railroads, if US mills wanted to upgrade or modernize, it was out of their pockets, but with the ability to utilize tax reinvestment credits under programs created to make that happen.

The US was not the only participant in the Allies' Marshall Plan and US industry, especially the steel and machinery manufacturers, benefited from the Marshall Plan by supplying the materials and technology needed to rebuild Europe. It is no one's but their own that these industries decided to take that income stream and keep it as profit margin rather than reconstituting itself in a more modern manner. Remember though that the Marshall Plan and the US's Mutual Security Act which followed primary aim was not fiscal but political - to thwart the spread of communism across damaged Europe. We shot ourselves in the foot playing world cop maybe, but yet we reap the benefit of it now. Just as we benefit from the likes of federal grant-fueled healthcare and technology developments through a better quality of life, whether other countries reap from it too or not.

Back to the Marshall Plan though, remember that the US and Russia were uncomfortable allies to begin with. Russia and its Eastern Bloc brethren didn't participate in the Marshall Plan at the end of the war. Instead the Soviet's created their own version - COMECON. So the example of a Soviet mill we helped build coming back to haunt us is a myth.

Let's also not also forget that the US was an ally of China and helped it and most of Asian countries to rebuild their industrial base after WWII as well. Again, we could have simply allowed ourselves to have commercial and industrial dominance, but imagine what the world would be like today had we taken such a tact.

[inkaneer]

Our tax code's not a really a compelling example, considering its willy-nilly-ness. For instance, the mortgage write-off makes sense as a direct-result economic stimulus. Buy a product from a weakened industrial sector, get a write-off.

The energy credits make sense in a secondary manner. By promoting improvement of consumer units, through conservation and off-grid production for individual consumption, the slack national grid is relieved of traffic and we become slightly less dependent on it.

But then there's politically or socially-motivated tertiary incidents. Take the tax credit for children. With each person in America, the need for civic services increases in the form of education, engineered infrastructure, public safety, potential for social services, etc. So each child adds to the tax burden, yet individuals who have children receive the benefit of a tax write-off while those without end up shouldering the shared cost. It seems to me it should be the other way around, credit the person who does not add to the network of need.

If the domestic production of such product is vital to national security, the federal government has its own system of providing contracts for goods and services to promote the health of that asset. Metals for military equipment would be one such area where we certainly wouldn't want to rely on the Soviets and I can see where US metal producers with or seeking federal contracts might consider not taking advantage of the low-cost materials to politically leverage themselves towards receipt of DOD contracts. Yet the correlation is lost on me as you state it - if no US metal producer decides to utilize (buy) the less expensive product, it goes unpurchased and sits in warehouse, hence there's actually no dumping. Dumping can only occur of the product is purchased, then there's a cause-effect exchange to complain about. Otherwise, there's a game of chicken where the lower cost product sits there and there's a price savings/political suicide fight whether to use it.

The US was not the only participant in the Allies' Marshall Plan and US industry, especially the steel and machinery manufacturers, benefited from the Marshall Plan by supplying the materials and technology needed to rebuild Europe. It is no one's but their own that these industries decided to take that income stream and keep it as profit margin rather than reconstituting itself in a more modern manner. Remember though that the Marshall Plan and the US's Mutual Security Act which followed primary aim was not fiscal but political - to thwart the spread of communism across damaged Europe. We shot ourselves in the foot playing world cop maybe, but yet we reap the benefit of it now. Just as we benefit from the likes of federal grant-fueled healthcare and technology developments through a better quality of life, whether other countries reap from it too or not.

Back to the Marshall Plan though, remember that the US and Russia were uncomfortable allies to begin with. Russia and its Eastern Bloc brethren didn't participate in the Marshall Plan at the end of the war. Instead the Soviet's created their own version - COMECON. So the example of a Soviet mill we helped build coming back to haunt us is a myth.

Let's also not also forget that the US was an ally of China and helped it and most of Asian countries to rebuild their industrial base after WWII as well. Again, we could have simply allowed ourselves to have commercial and industrial dominance, but imagine what the world would be like today had we taken such a tact.

Mortgage interest write offs were designed to promote home ownership among the middle class so that this country would not resemble other countries where the land was owned by the few rich people.  Real estate is called that because land is the only "real" estate that exists.  As for children I think it is a no brainer.  A country needs people and the only way to get them is to raise them.   Look at the Shakers and the Harmonists who practiced total celibacy.  They died out in one generation.  But I think we are off the track here.  Subsidies are not the issue.    Governments give subsidies to encourage certain activity that is deemed beneficial.   Let us not forget that the transcontinental railroads would not have been possible if the railroads were not given generous land subsidies for every mile of track they laid.   

[Philip H]

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[Scottl]

He's dead, Jim.  Put it out of it's misery, pleaseeeeee....

[sirenwerks]

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Like the continents.