Government Regulatory Template: Subsidize Demand, Restrict Supply

The government does it in health care, education, and housing.  Usually in the name of increasing access to or usage of something, they will subsidize demand.  But then at the same time they will restrict supply, giving lie to this stated justification of increasing access, making the whole exercise a crony enrichment of a small number of incumbent producers or asset owners.  The government creates low income housing programs and subsidized mortgages but limits the ability to construct new homes, thus having the primary effect not of increasing housing access but of driving up home prices for current incumbent home owners.  In health care the government subsidizes access to care in any number of ways but then restricts supply through certificates of need, onerous licencing programs, and drug manufacturing restrictions.

Now, consider solar panels.  The government has many programs to subsidize the purchase of solar panels.  Often, one can get local, state, and federal rebates and tax breaks for buying solar panels.  But at the same time:

President Donald Trump’s pledge to offer American companies more aggressive protection from foreign competition got fresh ammunition Friday, when a government board cleared the way for him to deploy a long-dormant legal weapon to restrict solar panel imports....

In the solar panel case, filed by Georgia-based Suniva Inc. and joined by Oregon-based SolarWorld Americas Inc., the ITC commissioners will now consider specific policy recommendations and submit those to the White House by Nov. 13. Mr. Trump then has two months to decide whether to impose solar trade barriers....

“We brought this action because the U.S. solar manufacturing industry finds itself at the precipice of extinction at the hands of foreign market overcapacity,” Suniva said. The firm filed for bankruptcy protection earlier this year.

This really is utter madness, even from a domestic employment standpoint.  I would be willing to be that the solar panel installation industry, which will be hurt by rising costs of solar panels, employs way more people than the US panel manufacturing industry.  The solar industry's trade association seems to agree:

“Analysts say Suniva’s remedy proposal will double the price of solar, destroy two-thirds of demand, erode billions of dollars in investment and unnecessarily force 88,000 Americans to lose their jobs in 2018,” said the Solar Energy Industries Association, which promotes solar use.

For Progressives who are suspicious of public choice theory, this is they sort of prediction public choice theory makes and should be an area where Progressives and libertarians could make common cause.  But traditionally Progressives have always been trade restrictionists, which seems crazy to me.



  1. Mike Powers:

    If you think that the foreign panels' production is not being subsidized by their governments, then you're a fool.

  2. dreck:

    And, as a consumer, I'd happily take that handout that benefits me at a cost to a foreign populace. Except, our current Republican President doesn't want that and doesn't believe in free trade.

    Same thing with goods produced in China - if I can have a product at a fraction of the price, as a consumer I do not want to be forced to only buy American at inflated prices. I already pay for American sales and marketing organizations (about a 100% markup if you compare prices, btw.)

  3. Mike Powers:

    It's not a cost to a foreign populace, though. They aren't getting paid any less--they're just mostly getting paid by the government, either in terms of straight cash or in terms of special tax breaks and subsidies only available to certain occupations or certain industries.

  4. gr8econ:

    So their government gets the money from someone other than their own taxpayers?

  5. DirtyJobsGuy:

    Since the whole solar electricity business would not exist without government subsidies and forced mandates to use solar, tariffs are the next logical step. If you look at Tucson Electric Power Company's latest Integrated Resource plan, they show solar costs both with and without subsidies. Unsubsidized the raw costs are triple the current rate from natural gas, coal or nuclear. This does not include the cost of compensating for the unreliability of solar. Rather, TEPCO notes that they will have to change from the traditional "generation follows the load demand" (i.e. we sell power when the customer wants it) to the "load demand will follow generation" (i.e. the customer gets power when the sun shines!).

    The whole mess will collapse in a heap leaving high costs to compensate. So why not tariffs as well in the mean time?

  6. Max Bnb:

    if "they" steal from their citizens, we should steal from ours too ?

  7. Max Bnb:

    tariff is a tax -- not on "them", on us

  8. Mike Powers:

    Stealing's gonna happen, bro. Might as well admit that's how the game is played. Despite myth, nobody actually respects an honorable loser; they just call him a sucker while he's alive, and sing sad country'n'western songs about him after he's dead.

    And, y'know, it's not like we're saving McDonald's jobs and fruit-picker salaries here. This is high-tech precision manufacturing. This is the future. This is, one would think, what we *want* to have in this country, as opposed to a nation of frustrated layabouts with nothing to do but collect their UBI dole check every week.

  9. me:

    Doesn't fly assuming this argument were true, the net price is still lower to us as consumers, so we're better off paying the tariff + cost and there is no subsidy.

  10. klgmac:

    " destroy two-thirds of demand, erode billions of dollars in investment and unnecessarily force 88,000 Americans to lose their jobs in 2018"

    I think the SEIA is letting their numbers slip. Claims are that the solar industry is employing hundreds of thousands of people. It sounds like those were exaggerated claims. Why am I not surprised?

    "Just under 374,000 people were employed in solar energy, according to the report, "

    Expensive electricity generated by alternative sources is already costing some people their jobs and is forcing others into energy poverty. It's truly a crime against humanity.