I don't disagree with the main point, that the three companies has benefited from subsidies. But it's framed as if this is unique, where in reality you'll find subsidies in these (and many other) industries.
# Cars
GM, Chrysler etc. bailed out for $85B. Sector subsidized in other ways too.
# Space
Most of the space industry is paid for by various governments (some satellites are the only exception). NASA is about half of SpaceX revenue, certainly a large chunk.
# Energy
IMF recently released a report[1], where fossil fuel subsidies are estimated at $1.9 trillion. Other types of energy are subsidized too, solar in China, nuclear in France, etc.
Regarding Space... SpaceX's primary competitor in the US (when it comes to government launches) is a joint venture between Boeing and Lockheed Martin called ULA. ULA receives a _billion_ dollars a year just to maintain their ability to launch rockets (they still get paid enormous sums of money for each launch on top of the subsidy).
On top of that, they were recently awarded an 11 billon dollar 'block buy' contract covering launches over the next five years. The award occurred suspiciously just before SpaceX was supposed to be certified to launch DoD payloads (and therefore would have been eligible to compete for those launches).
Note: That 11 billion figure doesn't include the 5 billion dollars worth of annual subsidies they will receive over the duration of the contract
> Nevada at first offered its standard package of incentives, in this case worth $600 million to $700 million
Considering that there is such a thing as a "standard package of incentives" from a single state and it already amounts to about half of the largest listed bullet points in this article makes this sound almost ordinary.
Regarding your comment on energy - I hadn't thought about that but the worst of the fossil fuel subsidies has to be turning large portions of the corn crop into ethanol then ruining the performance (and sometimes internal parts) of our internal combustion engines. It's truly the worst of both worlds!
True. And closer to our space, years ago I started an online/offline school with a dream of becoming what General Assembly is now. The marketing costs made my venture less palatable. GA was smart to get a $200K grant from NYC to get over that hump.
>>that the three companies has benefited from subsidies.
More to the point, America has benefited tremendously from subsidizing these companies. Elon Musk was a South African born Canadian (before he took American citizenship). He could have probably based these companies in any country of his choosing. Now America has at least 2 more private companies that are breaking new ground in their respective fields, and adding to America's GDP (and befitting the world in the process). Even if govt. funding played only a small part in the success of these companies, I would say this makes a strong argument for govt. subsidies.
Don't forget agriculture, aerospace/defense, banking. Hard to get bent out of shape when someone gets a slice of the pie that is trying to improve things.
E&P companies are effectively subsidized through wildly favorable tax treatment that allows them to expense all capital costs upfront which are usually not deductible. Most independent E&P's (ie the ones who are almost entirely responsible for the shale boom) pay virtually no cash taxes whatsoever.
Its even more common for companies to prove their business models without making taxpayers pay for it.
It's generally easier to influence politicians to give away other people's money than it is to convince customers to use their own. EVERY business should have to do that without special help.
The entreprenurial government takes risks, and once in a while succeeds so wildly that the company can pay off the loans quickly.
"Tesla’s management knew that if they couldn’t get the government’s money at 3 or 4 percent interest, their next cheapest source of capital would cost 10 times more, a whopping 30 to 40 percent annually. [...] And if the government had wanted to bargain like a real venture capitalist, Tesla’s desperate need for cash gave the feds the power to demand options on half the company’s stock, or more." (http://www.slate.com/articles/business/moneybox/2013/05/tesl...)
Well Elon would be more inclined to invest his own money the less risk that existed. Government subsidies definitely reduce risk. (Just pointing out that this doesn't refute the articles claim)
I don't think that justifies it. Every business has investors. Some also receive large amounts of government subsidy. Per the article, some of Musk's businesses are in the latter category, for good or ill.
Any mixed economy is riddled with subsidies. Together with taxation, it skews incentives from whatever they were without, and redistributes resources in a way the market would not. (Whether you think that's a good thing is political.)
- How many people would be getting degrees without government grants of some sort?
- Tax relief on debt is huge for corporations.
- Tax relief on mortgages is huge for individuals in many countries.
- Government itself has to spend money in one place and not another.
Of course there is the question of whether he gets more benefit that your average Joe from the largesse of the government. To that I'd say he does, but the benefits to everyone else of what he's up to are wide ranging but thinly spread.
TL;DR: "Subsidies are handed out in all kinds of industries, with U.S. corporations collecting tens of billions of dollars each year [...] and the incentives for solar panels and electric cars are available to all companies that sell them.
[...]
But public subsidies for Musk's companies stand out both for the amount, relative to the size of the companies, and for their dependence on them."
And? So is gasoline and petroleum products. And so is corn products through ethanol, which is legally mandated to be in fuel at 10% for no good reason.
The US doles out $15 to $20 billion annually toward subsidies for fossil fuels. $4 to $5 billion goes to the oil industry.
Exxon and Chevron paid $120 billion in income taxes in just the last three years. US oil majors pay among the highest corporate tax rates on earth. Exxon and Chevron are getting about $1.3 billion in tax breaks per year combined.
Supermarkets are fueled by 'government subsidies'; the poor get welfare and go off and spend there.
Freight companies are fueled by 'government subsidies'; the roads are hardly paid for by them solo. Oh, and the supermarkers they are delivering to are fueled by 'government subsidies'.
My grandfather was a truck driver. He was fueled by...
And so on. The government is supposed to support Good Things (or at least get out of the way of them). The way that the media seem to be obsessing over spending recently is really rather silly.
It turns out that when the government draws a bunch of taxes and then spends it, markets get distorted. Then the government takes credit for anything good that the markets do with the money, and opportunity cost is ignored because it's incalculable.
This thread's lack of comments by libertarians is striking. It gives the impression that some of them (I don't know who) are not opposed to government taxes and spending in principle, as they often claim, but to government taxes and spending on things they don't like -- which isn't a principle or argument, it's just a self-centered complaint.
It reminds me of people who talk about freedom as a principle, but what they mean is freedom for themselves.
Because it's a pointless argument. The government is so involved in the economy that marking the point of entry for subsidies is arbitrary and losing game for libertarians, because a progovernment argument can get as no true Scotsman on any libertarian position
Libertarianism is fundamentally about self interest. If the government is doing something in their interest, you can be pretty sure that they won't complain.
Libertarian (mostly) here - I don't think Musk or anyone else should be getting subsidies or sweet loan deals.
If the government wants to run a federally funded research lab for say, battery tech, fine. But I'm not on board with them picking the winning businesses, and putting the public's money at risk in the process.
The entrepreneur who most closely resembles a Rand hero couldn't have done it without government loans and subsidies. That should tell you something.
Markets do some things very well. Hard core innovation isn't among those things. If anything, really deep and difficult innovation requires shelter from market forces, since market forces always pull toward short term thinking and delivering what people already want. There is never a market for something genuinely new-- such markets must be bootstrapped.
I hear a lot of sour grapes in this article ... the only part worth discussing is whether SolarCity and Tesla Motors can reach self-sufficiency before the funding is removed.
Governments provide these sort of grants specifically to encourage certain behaviors. I don't think Musk is the only one pursuing these credits, etc., but perhaps he's better at it than most? His only real advantage is that he doesn't have the baggage (bureaucracy, history, etc) of the entrenched players ... they could, in theory, partake of the same government largess.
Well the question is, can Tesla survive to make the affordable EV they promise? Do they even have the cash to build out the factory to support that car in any volume? Can they find new tax credits to shore up the bottom line; its been suspected the battery swap station was only for a specific tax credit and there still is only one station and its operational status is questionable.
Love Space X, think Solar City is a great idea, but not keen on Tesla simply because they seem hell bent on having EVs that are not affordable and each improvement seems aimed at speed performance numbers instead of distance. I was really hoping the D was going to be for increased range but instead it was 0-60 first and AWD second.
edit: after reading up on the home battery offerings they really aren't that impressive... I need to dig up the articles that revealed all of its short comings
Subsidies are sometimes the only way that amazing things like this can happen. Extremely rare opportunities are often expensive to take advantage of. Without spreading the cost the way a nation-state can, there might not be enough people willing to support efforts to, say, get GPS satellites into space and enable entirely new industries and technologies.
Sure, it might not be with the explicit support of every taxpayer who contributed, but that will happen in every government just as it will happen in a family trying to decide where to vacation.
I, for one, hope that subsidies continue to go to those who can take us new places. As long as it's not purely because it's some congressman's nephew's new company.
I don't think it's a surprise that Tesla would not exist without government subsidies (I say this as someone who thinks the Model S is an excellent car). From a piece in today's WSJ:
...Tesla likely might not even exist without a former State Department official whom Mr. Musk hired to explore “what types of tax credits and rebates Tesla might be able to drum up around its electric vehicles,” which eventually would include a $465 million government-backed loan...
In 2017, he plans to introduce his Model 3, a $35,000 car for the middle class. He expects to sell hundreds of thousands a year. Somehow we doubt he intends to make it easy for politicians to whip away the $7,500 tax credit just when somebody besides the rich can benefit from it—in which case the annual gift from taxpayers will quickly mount to several billion dollars each year...
That part about the $7,500 tax credit is rather ignorant. As currently structured, it's limited in the number of times it can be applied to vehicles from any given manufacturer. After 200,000 vehicles sold, the credit drops off rapidly and then disappears altogether. If Tesla succeeds in their goal of selling hundreds of thousands of Model 3s per year then the credits will quickly expire for them and the ongoing cost to taxpayers will be zero.
The law could conceivably be changed, but the odds of that seem remote.
In regards to SpaceX that is simply a mischaracterization, they do not receive subsidies they have contracts with the government. SpaceX received money from NASA to help develop its Falcon 9 rocket, but this is little different than other procurement programs, and was just a component of a large ISS cargo delivery contract, the bulk of which is a straightforward deliver cargo get paid / don't deliver cargo don't get paid system.
Yep, thank god the government (state and federal) are actually investing in something positive. I am glad there are subsidies for clean energy (production and consumption) and the development of cost effective space transportation.
When one looks at the Gov't balance sheet, the opportunity cost of these investments is amazing. The outflow is such a drop in the bucket vs. the potential (and current) value that is is a fucking no-brainer.
I think a tax advantage can be considered a subsidy only when others are actually taxed more due to not receiving it. Nobody is taxed at infinity, so nobody who isn't charged infinity has received infinity subsidy. On the other hand, it might make sense to consider things like the mortgage tax deduction as a subsidy for home ownership, because people without mortgages really are charged more. All of this is arguable of course, but I think it's in line with the spirit of the word "subsidy" to think of it this way.
There is also a matter of finance. When that money is given and with what strings attached. But even if you are right, if the competition is taxed more than you it brings into question how competitive you actually are.
"The payoff for the public would come in the form of major pollution reductions, but only if solar panels and electric cars break through as viable mass-market products.
For now, both remain niche products for mostly well-heeled customers."
I don't know. It seems that Tesla is missing an opportunity for building an empire like Ford did.
The figure compiled by The Times comprises a variety of government incentives, including grants, tax breaks, factory construction, discounted loans and environmental credits that Tesla can sell. It also includes tax credits and rebates to buyers of solar panels and electric cars.
Right. Along this kind of thinking, we can also add the Iraq war and the unmentioned trillions in subsidies that accrue when you would actually charge a market price for environmental damage and add all that to Shells liabilities.
"He definitely goes where there is government money," said Dan Dolev, an analyst at Jefferies Equity Research. "That's a great strategy, but the government will cut you off one day."
As opposed to military spending, where persistent hundreds of billions are spent without anyone giving a damn.
[+] [-] sandstrom|11 years ago|reply
# Cars
GM, Chrysler etc. bailed out for $85B. Sector subsidized in other ways too.
# Space
Most of the space industry is paid for by various governments (some satellites are the only exception). NASA is about half of SpaceX revenue, certainly a large chunk.
# Energy
IMF recently released a report[1], where fossil fuel subsidies are estimated at $1.9 trillion. Other types of energy are subsidized too, solar in China, nuclear in France, etc.
[1] http://www.imf.org/external/pubs/ft/wp/2015/wp15105.pdf
[+] [-] JshWright|10 years ago|reply
On top of that, they were recently awarded an 11 billon dollar 'block buy' contract covering launches over the next five years. The award occurred suspiciously just before SpaceX was supposed to be certified to launch DoD payloads (and therefore would have been eligible to compete for those launches).
Note: That 11 billion figure doesn't include the 5 billion dollars worth of annual subsidies they will receive over the duration of the contract
[+] [-] the8472|11 years ago|reply
> Nevada at first offered its standard package of incentives, in this case worth $600 million to $700 million
Considering that there is such a thing as a "standard package of incentives" from a single state and it already amounts to about half of the largest listed bullet points in this article makes this sound almost ordinary.
[+] [-] smoyer|11 years ago|reply
[+] [-] frankdenbow|11 years ago|reply
[+] [-] sgnelson|11 years ago|reply
[+] [-] threefour|11 years ago|reply
http://techcrunch.com/2011/01/24/nyc-general-assembly-200k-g...
[+] [-] _nedR|10 years ago|reply
More to the point, America has benefited tremendously from subsidizing these companies. Elon Musk was a South African born Canadian (before he took American citizenship). He could have probably based these companies in any country of his choosing. Now America has at least 2 more private companies that are breaking new ground in their respective fields, and adding to America's GDP (and befitting the world in the process). Even if govt. funding played only a small part in the success of these companies, I would say this makes a strong argument for govt. subsidies.
[+] [-] 3am|10 years ago|reply
[+] [-] bedhead|11 years ago|reply
[+] [-] stretchwithme|11 years ago|reply
It's generally easier to influence politicians to give away other people's money than it is to convince customers to use their own. EVERY business should have to do that without special help.
[+] [-] CHaro|11 years ago|reply
#agriculture Monsonto
[+] [-] 11thEarlOfMar|11 years ago|reply
- Tesla re-paid a 495 million government loan 10 years early.[0]
- Musk personally invested $100 Million in SpaceX
- Musk personally invested $275 Million in Tesla[1]
[0]http://money.cnn.com/2013/05/22/autos/tesla-loan-repayment/
[1]http://www.businessinsider.com/elon-musk-borrows-150-million...
I don't consider Musk to be mooching off of the government. He's put everything on the line.
[+] [-] calibraxis|10 years ago|reply
"Tesla’s management knew that if they couldn’t get the government’s money at 3 or 4 percent interest, their next cheapest source of capital would cost 10 times more, a whopping 30 to 40 percent annually. [...] And if the government had wanted to bargain like a real venture capitalist, Tesla’s desperate need for cash gave the feds the power to demand options on half the company’s stock, or more." (http://www.slate.com/articles/business/moneybox/2013/05/tesl...)
Important to deflate startup myths: corporate moochers love how government welfare "socializes the risks and privatizes the rewards." (http://www.project-syndicate.org/commentary/government-inves...)
[+] [-] jusben1369|11 years ago|reply
[+] [-] hackuser|11 years ago|reply
I don't think that justifies it. Every business has investors. Some also receive large amounts of government subsidy. Per the article, some of Musk's businesses are in the latter category, for good or ill.
(I won't try to define or debate "mooching".)
[+] [-] lordnacho|11 years ago|reply
- How many people would be getting degrees without government grants of some sort?
- Tax relief on debt is huge for corporations.
- Tax relief on mortgages is huge for individuals in many countries.
- Government itself has to spend money in one place and not another.
Of course there is the question of whether he gets more benefit that your average Joe from the largesse of the government. To that I'd say he does, but the benefits to everyone else of what he's up to are wide ranging but thinly spread.
[+] [-] danmaz74|11 years ago|reply
[...]
But public subsidies for Musk's companies stand out both for the amount, relative to the size of the companies, and for their dependence on them."
[+] [-] kefka|11 years ago|reply
[+] [-] adventured|11 years ago|reply
The US doles out $15 to $20 billion annually toward subsidies for fossil fuels. $4 to $5 billion goes to the oil industry.
Exxon and Chevron paid $120 billion in income taxes in just the last three years. US oil majors pay among the highest corporate tax rates on earth. Exxon and Chevron are getting about $1.3 billion in tax breaks per year combined.
[+] [-] ElComradio|10 years ago|reply
[+] [-] stegosaurus|11 years ago|reply
Supermarkets are fueled by 'government subsidies'; the poor get welfare and go off and spend there.
Freight companies are fueled by 'government subsidies'; the roads are hardly paid for by them solo. Oh, and the supermarkers they are delivering to are fueled by 'government subsidies'.
My grandfather was a truck driver. He was fueled by...
And so on. The government is supposed to support Good Things (or at least get out of the way of them). The way that the media seem to be obsessing over spending recently is really rather silly.
[+] [-] justinmk|11 years ago|reply
[+] [-] hackuser|11 years ago|reply
It reminds me of people who talk about freedom as a principle, but what they mean is freedom for themselves.
[+] [-] mempko|11 years ago|reply
[+] [-] dnautics|10 years ago|reply
[+] [-] coliveira|10 years ago|reply
[+] [-] brandonmenc|10 years ago|reply
If the government wants to run a federally funded research lab for say, battery tech, fine. But I'm not on board with them picking the winning businesses, and putting the public's money at risk in the process.
[+] [-] Daishiman|11 years ago|reply
[+] [-] api|11 years ago|reply
Markets do some things very well. Hard core innovation isn't among those things. If anything, really deep and difficult innovation requires shelter from market forces, since market forces always pull toward short term thinking and delivering what people already want. There is never a market for something genuinely new-- such markets must be bootstrapped.
[+] [-] smoyer|11 years ago|reply
Governments provide these sort of grants specifically to encourage certain behaviors. I don't think Musk is the only one pursuing these credits, etc., but perhaps he's better at it than most? His only real advantage is that he doesn't have the baggage (bureaucracy, history, etc) of the entrenched players ... they could, in theory, partake of the same government largess.
[+] [-] Shivetya|11 years ago|reply
Love Space X, think Solar City is a great idea, but not keen on Tesla simply because they seem hell bent on having EVs that are not affordable and each improvement seems aimed at speed performance numbers instead of distance. I was really hoping the D was going to be for increased range but instead it was 0-60 first and AWD second.
edit: after reading up on the home battery offerings they really aren't that impressive... I need to dig up the articles that revealed all of its short comings
[+] [-] andrewstuart2|11 years ago|reply
Sure, it might not be with the explicit support of every taxpayer who contributed, but that will happen in every government just as it will happen in a family trying to decide where to vacation.
I, for one, hope that subsidies continue to go to those who can take us new places. As long as it's not purely because it's some congressman's nephew's new company.
[+] [-] mempko|11 years ago|reply
[+] [-] declan|11 years ago|reply
http://www.wsj.com/articles/the-savior-elon-musk-1432938547
...Tesla likely might not even exist without a former State Department official whom Mr. Musk hired to explore “what types of tax credits and rebates Tesla might be able to drum up around its electric vehicles,” which eventually would include a $465 million government-backed loan...
In 2017, he plans to introduce his Model 3, a $35,000 car for the middle class. He expects to sell hundreds of thousands a year. Somehow we doubt he intends to make it easy for politicians to whip away the $7,500 tax credit just when somebody besides the rich can benefit from it—in which case the annual gift from taxpayers will quickly mount to several billion dollars each year...
[+] [-] mikeash|11 years ago|reply
The law could conceivably be changed, but the odds of that seem remote.
[+] [-] JulianMorrison|11 years ago|reply
[+] [-] InclinedPlane|11 years ago|reply
[+] [-] dylanjermiah|11 years ago|reply
[+] [-] WalterSear|11 years ago|reply
[+] [-] mempko|11 years ago|reply
[+] [-] vonklaus|11 years ago|reply
When one looks at the Gov't balance sheet, the opportunity cost of these investments is amazing. The outflow is such a drop in the bucket vs. the potential (and current) value that is is a fucking no-brainer.
[+] [-] manigandham|11 years ago|reply
That's basically saying we could charge you infinity, but since we didnt, you have infinity subsidy.
Edit: To the downvoters: this is what "incentives" are when considered in tax terms.
[+] [-] sanderjd|11 years ago|reply
[+] [-] iamcurious|11 years ago|reply
[+] [-] foota|11 years ago|reply
[+] [-] touristtam|10 years ago|reply
I don't know. It seems that Tesla is missing an opportunity for building an empire like Ford did.
[+] [-] revelation|11 years ago|reply
Right. Along this kind of thinking, we can also add the Iraq war and the unmentioned trillions in subsidies that accrue when you would actually charge a market price for environmental damage and add all that to Shells liabilities.
[+] [-] smrtinsert|10 years ago|reply
As opposed to military spending, where persistent hundreds of billions are spent without anyone giving a damn.
[+] [-] paulsutter|10 years ago|reply
Could anyone make more effective use of tax dollars than Elon Musk? If anything, allocate more public funds to him.