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Subsidy Silliness

Here’s a letter to Fred Hochberg, a former Chairman and President of that great geyser of cronyism, the U.S. Export-Import Bank. (The comment by Hochberg to which I refer starts around the 22-minute mark.)

Mr. Hochberg:

Appearing today on NPR’s “The 1A” you argued that, because “a lot of jobs are dependent on exports and trade,” the U.S. government should increase subsidies to American exporters.

Your conclusion is a non sequitur. It makes no more sense than would the conclusion that, because a lot of jobs are dependent on Americans eating at restaurants, the U.S. government should subsidize American restaurants. Just as there’s no reason to believe that the current amount of meals served in restaurants is suboptimal, there’s no reason to believe that the current amount of exporting is suboptimal.

You ignore the fact that subsidizing exports necessarily draws resources away from other productive uses. If the value of what American producers can get in exchange for what they export is greater than the value of resources used to produce exports, American producers do not need the spur of subsidies to convince them to produce these goods for export. And so any goods that are produced and exported from the U.S. only because their exportation is subsidized are goods for which Americans receive from foreigners payments that fail to fully cover the costs of those exports.

Export subsidies, in short, make us poorer – a reality that isn’t changed in the least if other governments are in the habit of using subsidies to make their own citizens poorer.

Donald J. Boudreaux
Professor of Economics
Martha and Nelson Getchell Chair for the Study of Free Market Capitalism at the Mercatus Center
George Mason University
Fairfax, VA 22030


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