On the first night of the 2024 Democratic National Convention (DNC), speakers assembled to make the case for Vice President Kamala Harris to be America's next president and to provide a glimpse of what policies she might pursue. Unfortunately, it's clear that industrial policy is likely to survive and thrive in a Harris administration, despite clear examples that giving public money to private companies carries significant risk.

Some speakers took shots at former President Donald Trump, with Shawn Fain, president of the United Auto Workers (UAW), invoking the closure of a General Motors (G.M.) plant in Lordstown, Ohio. G.M. shuttered the factory in March 2019 amid slowing sales; in July 2017, Trump had told supporters in Youngstown, "Don't move. Don't sell your house," because lost factory jobs would come back.

"Trump lied, and abandoned Lordstown," intoned the announcer of a video that played before Fain took the stage. "The G.M. factory in Lordstown did close, putting thousands of people out of work, because Donald Trump doesn't care about our communities."

"In 2023, who helped bring jobs back to Lordstown, Ohio?" Fain asked during his speech. "Kamala Harris!"

But it's worth noting that G.M. closed the factory just a decade after it received $60 million from the state of Ohio to operate the facility until at least 2039. When G.M. reneged on the deal barely 10 years later, Ohio chose to let the company keep $20 million.

Then between 2019 and 2023, the factory had another occupant: Lordstown Motors, an automaker that planned to build electric pickup trucks. The brand new company purchased the factory for $20 million after borrowing $40 million from G.M. Ohio officials, having not learned a lesson from the experience with G.M., gave Lordstown Motors $24.5 million in grants and tax credits.

And yet despite all the financial assistance, Lordstown Motors entered bankruptcy in June 2023.

"Today, tens of thousands of auto jobs are returning to the United States, thanks to the policies of the Biden-Harris administration," Fain said in a UAW video released last week. "That includes jobs in Lordstown, Ohio, where auto workers at Ultium Cells are now building batteries for General Motors."

Ultium is G.M.'s electric vehicle battery cell technology. "Ultium's Lordstown plant could qualify for tax credits worth more than $1 billion a year," according to a 2023 UAW report. And in 2022, the U.S. Department of Energy announced that it would loan the company $2.5 billion to build three factories, including the one in Ohio.

Ultium is also building a $2.6-billion factory in nearby Michigan, for which that state's government agreed to give the company $666 million. And Ultium was not the only company singled out at the convention.

"Trump talked big about bringing back manufacturing jobs, but you know who actually did it? President Joe Biden and Vice President Kamala Harris," New York Gov. Kathy Hochul said, moments after Fain spoke. "Look no further than the city of Syracuse, where a company called Micron is building a $100-billion microchip factory with union labor."

In October 2022, Micron pledged to spend $20 billion by the end of the decade to build what it deemed "the largest semiconductor fabrication facility in the history of the United States," signifying "the largest private investment in New York state history." The company further noted that it "intends to invest up to $100 billion over the next 20-plus years."

But the Biden administration agreed to award that company $6.1 billion in federal handouts for its Syracuse factory and one near Boise, Idaho. New York promised another $5.5 billion in state incentives.

Of course, it's entirely likely that these deals will be every bit as lucrative as promised: Micron alone promises that its Syracuse factory will "create nearly 50,000 New York jobs, including approximately 9,000 high paying Micron jobs." But at the time of this writing, Micron has a market cap of $118 billion, suggesting that it could've made the initial $20-billion investment without state and federal taxpayers picking up so much of the tab. Similarly, even though G.M. currently has a market cap of $52 billion and it has reneged on an economic development deal in the very recent past, it still continues to benefit from public cash.

With three more nights to go, the DNC will likely feature more policy proposals for a potential Harris administration. Unfortunately, the first night indicated that industrial policy is alive and well in the Democratic Party.

The post Industrial Policy Is Alive and Well at the Democratic National Convention appeared first on Reason.com.

VinFast, a Vietnamese automaker that builds electric vehicles, announced in July that it would not begin production at its North Carolina plant for another four years. While the news is certainly a setback, the disappointment is compounded by the fact that the state is trying to bulldoze a number of private homes, and a church, to make the project happen.

In March 2022, North Carolina Gov. Roy Cooper announced that VinFast would build its first North American plant in Chatham County. The company would spend $4 billion and create 7,500 jobs, with production from the completed factory set to begin in July 2024. At its peak, the facility would be capable of producing 150,000 vehicles per year.

In exchange, North Carolina lawmakers agreed to give the company $1.25 billion in incentives, including $450 million for infrastructure, including "roadway improvements" and building out the water and sewer capacity; $400 million from the county; and a $316 million state grant paid out over 32 years, linked to the company's job creation promises. In effect, North Carolina taxpayers would be financing over 30 percent of the project.

President Joe Biden called the project "the latest example of my economic strategy at work." CNBC lauded the state's Democratic governor and Republican Legislature for "managing to put aside their very deep political divisions to boost business and the economy" when it named North Carolina America's Top State for Business.

But within two years, the deal was on shaky ground. The company announced in March 2023 that it would not be able to begin production at the factory until at least 2025 "because we need more time to complete administrative procedures," according to a company spokesperson.

Then in July 2024, in a press release about manufacturing output in the previous quarter, VinFast announced that it had "made the strategic decision to adjust the timeline for the launch of its North Carolina manufacturing facility, which is now expected to begin production in 2028," in order to "optimize its capital allocation and manage its short-term spending more effectively."

While this is disappointing news for many—company executives, shareholders, North Carolina state officials—it's worse for residents in the area.

Many of the state and county incentives are dependent upon VinFast meeting certain metrics: While the state doled out $125 million to reimburse the company for site preparation costs, it can claw back that entire amount if VinFast fails to hire at least 3,875 people—just over 50 percent of the required total. There are further clawback provisions if it doesn't hire at least 6,000 people and doesn't invest at least $2 billion into the project.

But even if the deal falls apart and the state gets its money back, some things can't be undone. As part of the deal, the North Carolina Department of Transportation (NCDOT) would conduct "roadway improvements" at the future site of the facility. As detailed in an August 2022 project overview, "private property is needed to construct the improvements proposed by the roadway project." And while the NCDOT "works to minimize impacts such as the number of homes and businesses displaced by a road project, some impacts are unavoidable."

In total, the state expected that the roadwork would "impact" five businesses, 27 homes, and Merry Oaks Baptist Church, which had stood since 1888. This meant the state was authorized to purchase the properties from the owners—or if the owners refused to sell, the state could simply take the properties through eminent domain.

Eminent domain, authorized by the Takings Clause of the Fifth Amendment, allows government entities to seize private property for public use, as long as the owner receives "just compensation." Of course, the only thing that separates this from a normal real estate transaction is that the use of eminent domain implies that the property owner did not want to sell but was forced to anyway.

While an electric car factory does not qualify as a "public use," the state is planning to bulldoze the houses, businesses, and church to make way for a new roadway interchange that will accommodate traffic to and from the site. Of course, under the U.S. Supreme Court's 2005 decision in Kelo v. New London, the state would also have been justified to seize property to give to a purely private party, with Justice John Paul Stevens writing that "there is no basis for exempting economic development from our traditionally broad understanding of public purpose."

In fact, that seems to be just what happened: In July, after VinFast announced its latest delay, the Raleigh News & Observer reported that so far the state had spent $96 million—nearly all of it on site preparation and infrastructure—and purchased four homes, with negotiations ongoing with other homeowners and two businesses. And sadly, "North Carolina has acquired two businesses and Merry Oaks Baptist Church through eminent domain, meaning negotiations fell short and the state took over the land after paying the previous owners fair market values assessed by a state-approved appraiser."

In July 2023, VinFast offered to donate up to three acres of land from its 2,000-acre parcel to Merry Oaks Baptist Church so the congregation could relocate. But a better solution would have been for VinFast to simply shoulder the burden of development in the first place, first by footing the bill for the project itself and then by obtaining land where the government did not forcibly remove any obstacles in the way.

The post VinFast Delays Production After North Carolina Seizes Property for Factory Site appeared first on Reason.com.

Robert F. Kennedy Jr. won applause at the Libertarian National Convention by criticizing government lockdowns and deficit spending, and saying America shouldn't police the world.

It made me want to interview him. This month, I did.

He said intelligent things about America's growing debt:

"President Trump said that he was going to balance the budget and instead he (increased the debt more) than every president in United States history—$8 trillion. President Biden is on track now to beat him."

It's good to hear a candidate actually talk about our debt.

"When the debt is this large…you have to cut dramatically, and I'm going to do that," he says.

But looking at his campaign promises, I don't see it.

He promises "affordable" housing via a federal program backing 3 percent mortgages.

"Imagine that you had a rich uncle who was willing to cosign your mortgage!" gushes his campaign ad. "I'm going to make Uncle Sam that rich uncle!"

I point out that such giveaways won't reduce our debt.

"That's not a giveaway," Kennedy replies. "Every dollar that I spend as president is going to go toward building our economy."

That's big government nonsense, like his other claim: "Every million dollars we spend on child care creates 22 jobs!"

Give me a break.

When I pressed him about specific cuts, Kennedy says, "I'll cut the military in half…cut it to about $500 billion….We are not the policemen of the world."

"Stop giving any money to Ukraine?" I ask.

"Negotiate a peace," Kennedy replies. "Biden has never talked to Putin about this, and it's criminal."

He never answered whether he'd give money to Ukraine. He did answer about Israel.

"Yes, of course we should,"

"[Since] you don't want to cut this spending, what would you cut?"

"Israel spending is rather minor," he responds. "I'm going to pick the most wasteful programs, put them all in one bill, and send them to Congress with an up and down vote."

Of course, Congress would just vote it down.

Kennedy's proposed cuts would hardly slow down our path to bankruptcy. Especially since he also wants new spending that activists pretend will reduce climate change.

At a concert years ago, he smeared "crisis" skeptics like me, who believe we can adjust to climate change, screaming at the audience, "Next time you see John Stossel and [others]… these flat-earthers, these corporate toadies—lying to you. This is treason, and we need to start treating them now as traitors!"

Now, sitting with him, I ask, "You want to have me executed for treason?"

"That statement," he replies, "it's not a statement that I would make today….Climate is existential. I think it's human-caused climate change. But I don't insist other people believe that. I'm arguing for free markets and then the lowest cost providers should prevail in the marketplace….We should end all subsidies and let the market dictate."

That sounds good: "Let the market dictate."

But wait, Kennedy makes money from solar farms backed by government guaranteed loans. He "leaned on his contacts in the Obama administration to secure a $1.6 billion loan guarantee," wrote The New York Times.

"Why should you get a government subsidy?" I ask.

"If you're creating a new industry," he replies, "you're competing with the Chinese. You want the United States to own pieces of that industry."

I suppose that means his government would subsidize every industry leftists like.

Yet when a wind farm company proposed building one near his family's home, he opposed it.

"Seems hypocritical," I say.

"We're exterminating the right whale in the North Atlantic through these wind farms!" he replies.

I think he was more honest years ago, when he complained that "turbines…would be seen from Cape Cod, Martha's Vineyard… Nantucket….[They] will steal the stars and nighttime views."

Kennedy was once a Democrat, but now Democrats sue to keep him off ballots. Former Clinton Labor Secretary Robert Reich calls him a "dangerous nutcase."

Kennedy complains that Reich won't debate him.

"Nobody will," he says. "They won't have me on any of their networks."

Well, obviously, I will.

I especially wanted to confront him about vaccines.

In a future column, Stossel TV will post more from our hourlong discussion.

COPYRIGHT 2024 BY JFS PRODUCTIONS INC.

The post RFK Jr. Pays Lip Service to the Debt While Pushing Policies That Would Increase It appeared first on Reason.com.

A powerful New Jersey businessman has been accused of Mafia-like behavior in order to enrich himself and his associates on the taxpayer's dime. But is it all that different from business as usual?

At a press conference this week, New Jersey Attorney General Matt Platkin announced a 13-count indictment, with charges including racketeering and extortion, against six defendants—chiefly George Norcross III, whom the New Jersey Monitor referred to as "a Democratic kingmaker widely regarded as New Jersey's most powerful unelected person." In an impressively bold move, George Norcross attended the press conference and sat in the front row, apparently even refusing to switch seats when asked by someone from Platkin's office.

According to the indictment, George Norcross has "led a criminal enterprise" since 2012, whose members "would extort others through threats of economic and reputational harm" in Camden, New Jersey. Specifically, in 2012–13, George Norcross and other indicted co-conspirators "used their political influence to tailor New Jersey economic development legislation to their preferences."

The Economic Opportunity Act of 2013 expanded the state's existing economic development grant programs, allowing a developer to claim "a credit of up to 35 percent of its capital investment, or up to 40 percent for a project located in a Garden State Growth Zone," defined as "the four New Jersey cities with the lowest median family income"—which would include Camden, the state's poorest city. The credits were intended to bring companies to the state or keep them from leaving. Recipients could claim the credits or sell them to other New Jersey taxpayers.

In 2019, The New York Times found that before that law passed, one attorney "was allowed by lawmakers to edit drafts of the bill in ways that opened up sizable tax breaks to his firm's clients." That attorney's firm was Parker McCay—whose CEO was George Norcross' brother, Philip Norcross, who is also indicted. The indictment alleges that after the law passed, Philip Norcross told a group of people, "We re-wrote a tax credit law…that says in essence, if you come to Camden, we're going to give you one hundred percent tax credit for all capital and related costs" over 10 years. "It will cause real havoc, it's unlimited."

Once the law passed, according to the indictment, the defendants "extort[ed] and coerce[d] others" in order to obtain their property along the Camden waterfront, "then occupied the properties they obtained interests in and sold the tax credits they obtained for millions of dollars."

George Norcross also apparently leaned on members of the Camden city government—including then-Mayor Dana Redd, who is also indicted—to pressure owners and developers to sell by denying necessary building permits or publicly disparaging them.

In one given example, George Norcross allegedly threatened a developer who refused to sell, saying he would "f**k you up like you've never been f**ked up before." City officials also denied him a permit to redevelop another site he owned, at Philip Norcross's insistence.

In the end, that developer apparently sold the rights to tax credits that eventually totaled $240 million, for a fraction of that amount. On one property, he sold credits for $1.95 million that would eventually total $18 million.

If this all sounds like a plot from The Sopranos, well, it basically is: For much of its run, the mobsters at the center of that show made money from a waterfront rejuvenation project in Newark, obtained through underhanded dealing with a crooked state official and which afforded plenty of no-show jobs and opportunities for graft.

The allegations against George Norcross are shocking, and yet also unsurprising. After all, the entire affair originated with a state economic development program, which already bears at least a passing resemblance to a Sopranos-style racket.

In 2019, The New York Times found that "over five years, 12 companies threatened to leave New Jersey" for New York—with each company even listing the exact same office complex as its intended destination—"unless the state provided tens of millions in tax credits." In each case, the New Jersey government agreed, totaling over $100 million in taxpayer money, and each company stayed. But the Times found that "nearly all of the 12 companies never seriously considered moving to New York." The leasing agent for the New York office complex even acknowledged, "We are aware that often times the tenant has no intention at all of relocating."

State economic development incentive programs are often sold on these sorts of "but for" incentives—as in, but for this tax break or grant, this company would go elsewhere. But these are rarely actually the deciding factors in a company's decision: In a 2018 paper, Timothy Bartik of the W.E. Upjohn Institute for Employment Research found that "typical incentives probably tip somewhere between 2 percent and 25 percent of incented firms toward making a decision favoring the location providing the incentive. In other words, for at least 75 percent of incented firms, the firm would have made a similar decision location/expansion/retention decision without the incentive."

Companies lobby for state-level handouts, even if they were likely to set up shop in that state anyway. And even by the state agencies' own numbers, the expenditures are rarely worth the cost.

"Beyond the state-specific political ramifications, the case also highlights a persistent problem in corporate subsidy programs that extends well beyond New Jersey: They're too easily corruptible, and they create a vicious feedback loop between political actors and politically connected corporations," writes Pat Garofalo in the Boondoggle Substack. "There's a very clear connection in academic literature between corporate subsidies, political donations, and ultimately corruption."

The George Norcross case, Garofalo writes, "highlight[s] the nexus between corporate tax handouts and corruption that is very often there but not usually this blatant."

Ultimately, the entire affair would just be a lurid story but for the fact that it involved hundreds of millions of dollars in state incentives which will ultimately be borne by New Jersey taxpayers.

The post N.J. Businessman Indicted for <i>Sopranos</i>-Style Economic Development Racket appeared first on Reason.com.

Congressional Budget Office (CBO) projections provide valuable insights into how a big chunk of your income is being spent and reveal the long-term consequences of our government's current fiscal policies—you may endure them, and your children most certainly will. Yet, like most other projections looking into our future, these numbers should be taken with a grain of salt. So should claims that CBO projections validate anyone's fiscal track record.

So much can and likely will happen to make projections moot and our fiscal outlook much grimmer. Unforeseen events, economic changes, and policy decisions render them less accurate over time. The CBO knows this and recently released alternative scenarios based on different sets of assumptions, and it doesn't look good. It remains a wonder that more politicians, now given a more realistic range of possibilities, aren't behaving like it.

First, let's recap what the situation looks like under the usual rosy growth, inflation, and interest rate assumptions. Due to continued overspending, this year's deficit will be at least $1.6 trillion, rising to $2.6 trillion by 2034. Debt held by the public equals roughly 99 percent of our economy—measured by gross domestic product (GDP)—annually, heading to 116 percent in 2034.

The only reason these numbers won't be as high as projected last year is that a few House Republicans fought hard to impose some spending caps during the debt ceiling debate. The long-term outlook is even scarier, with public debt reaching 166 percent of GDP in 30 years and all federal debt reaching 180 percent.

No one should be surprised. To be sure, the COVID-19 pandemic and the Great Recession made things worse, but we've been on this path for decades.

Unfortunately, if any of the assumptions underlying these projections change again, things will get a lot worse. That's where the CBO's alternative paths help. Policymakers and the public can better see the potential risks and opportunities associated with various fiscal policy choices, enabling them to make more informed decisions.

For instance, the CBO highlights that if the labor force grows annually by just 0.1 fewer percentage points than originally projected—even if the unemployment rate stays the same—slower economic growth will lead to a deficit $142 billion larger than baseline projections between 2025 and 2034. A similarly small slowdown in the productivity rate would lead to an added deficit of $304 billion over that period.

Back in 2020, the prevalent theory among those who claimed we shouldn't worry about debt was that interest rates were remarkably low and would stay low forever. As if. These guys have since learned what many of us have known for years: that interest rates can and will go up when the situation gets bad enough. So, what happens if rates continue to rise above and beyond those CBO used in its projections? Even a minuscule 0.1-point rise above the baseline would produce an additional $324 billion on the deficit over the 2025-2034 period.

The same is true with inflation, which, as every shopper can see, has yet to be defeated. If inflation, as I fear, doesn't go away as fast as predicted by CBO—largely because debt accumulation is continuing unabated—it will slow growth, increase interest rates, and massively expand the deficit. To be precise, an increase in overall prices of just 0.1 points over the CBO baseline would result in higher interest rates and a deficit of $263 billion more than projected.

Now, imagine all these variations from the current projections happening simultaneously. It's a real possibility. The deficit hike would be enormous, which could then trigger even more inflation and higher interest rates. The question that remains is: Why aren't politicians on both sides more worried than they seem to be?

What needs to happen before they finally decide to treat our fiscal situation as a real threat? President Joe Biden doesn't want to tackle the debt issue. In fact, he's actively adding to the debt with student loan forgiveness, subsidies to big businesses, and other nonsense. Meanwhile, some Republicans pay lip service to our financial crisis, but few are willing to tackle the real problem of entitlement spending.

The time for political posturing is over. The longer we wait to address these issues, the more severe the consequences will be for future generations. It's time for our leaders to prioritize the nation's long-term economic health over short-term political gains and take bold steps toward fiscal responsibility. Only then can we hope to secure a stable and prosperous future for all Americans.

COPYRIGHT 2024 CREATORS.COM.

The post The Congressional Budget Office's Alternative Scenarios Forecast a Dire Economic Picture appeared first on Reason.com.

Luxury electric automaker Rivian made several big announcements this week related to its expanding product line. At the same time, though, the company announced that it would pause construction on a factory in Georgia that received some of the most generous taxpayer-funded incentives in state history.

On Thursday, Rivian unveiled three new vehicles that will be available in the coming years. The company already offers the R1T and R1S, a luxury truck and SUV, respectively, which start at $70,000–$75,000 and can cost $100,000 or more. CEO R.J. Scaringe announced the R2, a smaller and more modest SUV that would be available in 2026 with prices starting at $45,000, as well as the R3 and R3X crossovers, also expected to be less expensive than the R1 series.

As Reason has documented, Rivian went public in November 2021, promising luxury electric vehicles that would be both stylish and rugged. The following month, the company—which only had a single factory in Illinois—struck a deal to build its second factory in Georgia: Rivian would spend $5 billion on the factory, and in exchange, Georgia state and local governments authorized up to $1.5 billion in tax credits and incentives.

In the years since, however, the company has struggled. In May 2023, Bloomberg reported that the company had lost 93 percent of its share value, and its market cap reflected "almost no value beyond the company's cash hoard." In the fourth quarter of 2023, the company lost $43,372 on each vehicle sold, up from a $30,648 per-vehicle loss in the third quarter.

Branching out into the more affordable R2 and R3 models is key to Rivian's long-term survival, opening up its product line to appeal to more than just those who can pay over $75,000 for a luxury vehicle. And to do this, it had to make some adjustments.

"To enable R2 to be launched earlier and with a considerable reduction in the capital required for its launch, Rivian plans to start production of R2 in its existing Normal, Illinois manufacturing facility," the company announced. It is also pausing construction in Georgia: "Rivian's Georgia plant remains an extremely important part of its strategy to scale production of R2 and R3. The timing for resuming construction is expected to be later to focus its teams on the capital-efficient launch of R2 in Normal, Illinois."

The move is expected to save the company $2.25 billion "as compared to the original forecast of launching the first line of R2 production at Rivian's Georgia site."

In October, the company announced that the Georgia site was "95 percent graded" and "nearly ready for construction to begin." Notably, under the incentive agreement, Georgia officials paid over $32 million for "clearing and grading" the site.

One year ago, almost to the day, Scaringe reaffirmed the company's dedication to the Georgia project, telling The Atlanta Journal-Constitution, "We're committed to this state and this project," adding that "the future of our company in terms of scaling and growing really relies on the future of this project. There's not another option. We're not planning an alternative. This must work."

The electric vehicle market, while growing, is in flux, due to softening consumer demand and persistently high interest rates. Just last month, Apple—the first company in history to ever record a $3 trillion valuation—canceled its decade-long quest to develop an electric car. General Motors and Ford have also rolled back pledged investments in electric vehicles.

In that sense, Rivian's pivot would be perfectly reasonable—companies must be free to adapt to changing circumstances in a way that benefits both their customers and their shareholders. But as with any central planning scheme, state economic incentives don't tend to allow for those sorts of dynamic pivots. In this case, Georgia officials mortgaged a large amount of taxpayer money on a plan that foresaw the company continuing on a path that no longer seems financially feasible.

The post Rivian Pauses Construction at Factory That Costs Georgia Taxpayers $1.5 Billion appeared first on Reason.com.

As Argentine President Javier Milei continues to slash government spending, he aims to limit state support for local film production too, sparking protests from the industry. But rather than hinder the nation's film industry, Milei's reforms could encourage innovation among Argentine filmmakers and lead to a domestic cinematic boom. 

Government intervention reaches every facet of Argentine culture, from radio and television to music and literature, but nowhere is it more visible than in cinema. Argentina follows the French model of cultural protectionism, where a government agency farms taxes from the film industry to fund domestic production.

Except for a few countries with large film industries, several nations—especially in Europe and Latin America—have adopted different variations of the French model, arguing that their domestic markets are not large enough to sustain private movie studios. The allure of the French model lies in its potential for governments to promote specific values through film. It's equally appealing to filmmakers who believe studio interference and mass market appeal compromise their artistic visions. Video essayist Evan Puschak claims the French model "support[s] an independent cinema that is bold in terms of market standards and that cannot find its financial balance without public assistance." 

But the French model is flawed, and nowhere are these flaws more visible than in Argentina, where the National Institute of Cinema and Audiovisual Arts (INCAA) carries it out.

The main issue with the INCAA is its fiscal voracity: Beyond its 10 percent cut of every movie ticket, the institute collects taxes from the entire telecommunications sector. More recently, it has begun seizing revenue from streaming platforms. As a result, prices have skyrocketed, rendering movie theater outings and home movie watching unaffordable luxuries for many Argentines.

What does the INCAA provide in return to taxpayers? Very little. 

Since its establishment, the organization has been plagued with inefficiencies. Argentina's cinema law allocates half of the INCAA's revenue solely to administrative expenses, leaving the other half for its purported function of film production. But in practice, as much as 70 percent of the INCAA's funds end up in the administrative sinkhole while the institute operates at a deficit, relying on subsidies from the national government.

When it comes to film promotion, rather than tying its grants to commercial success, the INCAA distributes subsidies without taking into account any audience feedback. The results speak for themselves: Out of the 241 Argentine movies released in 2023, less than 20 had over 10,000 viewers in theaters, and only three of those made a profit at the box office. Most Argentines choose to watch foreign productions instead, with only around 10 percent of ticket sales going to domestic films. 

Argentine movie critic Gustavo Noriega wrote that "an Argentine filmmaker who doesn't find success is equivalent to an unproductive public employee."

The French model has failed to bring innovation and profit to the Argentine film industry. Film journalist Leonardo D'Espósito tells Reason that Argentine cinema has become "stagnant within a few themes" and "inoffensive, innocuous." Instead, D'Espósito says filmmakers focus on "surface-level, minimal, folkloric accidents."

But things are changing. In prioritizing Argentina's socioeconomic emergencies, Milei plans to reduce the state's footprint in cinema and the arts. While the INCAA falls under the Ministry of Human Capital, Milei plans to limit INCAA spending, establish criteria of accountability and efficiency, and offer incentives to supplement the grants with private investment. Ultimately, these measures have the potential to transform Argentine cinema from a fledgling industry to a market ripe with potential. 

"They shouldn't be afraid of the market," Argentine filmmaker Ariel Luque tells Reason, referring to his colleagues. In Argentina, "film schools don't teach any other way of funding besides the INCAA. People tell me they were never taught how to do a market study or seek investors." Luque's support of Milei has led to hostility from within the film community, which he says has been co-opted "for Gramscian purposes" by Kirchnerism, the left-wing movement that ruled Argentina before Milei.

"Cinema stopped being about the public and became about propaganda," Luque says. "There's no cinema without an audience….The state as a producer doesn't work. State intervention in art is always self-serving."

Although skeptical of a withdrawal of state support for film, D'Espósito is optimistic about some of Milei's reforms. "Great works," he says, are those that show "'the local' touch on universal themes" and can "captivate other spectators" from different cultures. And those can be translated to other cultures, captivate other spectators," he said. He is hopeful that Milei's changes could lead to a realistic, market-friendly, and export-oriented film policy, citing South Korea as an example.

Milei's plans do not mean the demise of Argentine cinema. Instead, they offer filmmakers an opportunity to showcase their ingenuity and tap into the financial resources available in the global market.

The post Milei's Free Market Reforms Can Reshape Argentine Cinema appeared first on Reason.com.

The White House this month announced plans for how it will direct billions of dollars in funding toward semiconductors, marking a new phase in the implementation of the CHIPS and Science Act.

The $280 billion legislation, signed into law in 2022, aims to bolster semiconductor production in the U.S. President Joe Biden's administration said Monday that it will funnel $1.5 billion to GlobalFoundries, a semiconductor manufacturing and design company, to increase its domestic output. Perhaps more significant, however, was Biden's dispatch earlier this month announcing the administration will use at least $5 billion to establish a National Semiconductor Technology Center (NSTC), which will, among other things, support "the design, prototyping, and piloting of the latest semiconductor technologies," according to the White House. 

This latest effort is part of the government's expensive and protectionist public-private partnership meant to address concerns over a reliance on foreign countries, like China, for chips.

"Semiconductors were invented in America and serve as the backbone of the modern economy," the White House said in a statement. "But today, the United States produces less than 10 percent of global supply and none of the most advanced chips."

The NSTC will supposedly also play a crucial role in expanding the semiconductor workforce to manufacture computing chips that can complement advances in artificial intelligence and related industries. Semiconductors are projected to become a $1 trillion industry by 2030, according to McKinsey & Company.

The CHIPS and Science Act has several eyebrow-raising elements, including $81 billion for the National Science Foundation—doubling the agency's budget over five years. Another $24 billion will go toward tax credits meant to subsidize and incentivize private companies to invest in semiconductors.

While the legislation was likely well-intentioned, it was doomed to have protectionist ramifications. "To defeat China, the argument goes, the U.S. must adopt the tactics of the Chinese Communist Party, at least when it comes to high-end manufacturing," Reason's Eric Boehm wrote in January 2023. But that ham-handed approach to industrial policy and corporate welfare drives up the deficit and hampers economic growth at very little benefit to the taxpayer, who are forced to fund these initiatives. 

It's likely unsurprising that many large corporations lobbied for the CHIPS and Science Act, including Meta, Microsoft, Google, Amazon, Apple, Northrop Grumman, Carrier, Trane, and General Dynamics, as well as labor unions like the American Federation of Labor and Congress of Industrial Organizations and the Communications Workers of America. "Big government means big lobbying," wrote David Boaz, a senior fellow at the Cato Institute. "When you lay out a picnic, you get ants. And today's federal budget is the biggest picnic in history."

The CHIPS and Science Act passed with bipartisan support. But its detractors were also made up of strange bedfellows. Sen. Bernie Sanders (I–Vt.) and then-Rep. Kevin McCarthy (R–Calif.) both referred to the law as "corporate welfare" and a "blank check." Sanders went as far as to call it a "bribe."

"When the government adopts an industrial policy that socializes all the risk and privatizes all the profits, that is crony capitalism," Sanders said.

He's not wrong. The law "is another episode of politicians granting favors to their friends in the semiconductor industry," Veronique de Rugy, a contributing editor at Reason and a senior research fellow at the Mercatus Center, wrote last year. Such an approach "punishes those who aren't elite or can't organize to extract favors from politicians."

Michelle Nuzzo-Kelly is an apt example. She was among the residents of Burnet Road near Syracuse, New York, who received several offers to purchase her home. But those offers didn't come from private buyers: They came from the government, as Onondaga County sought to expand a plot of land so it could attract a developer. Micron, one of the world's largest semiconductor manufacturing firms, is now set to build a facility there, thanks to lucrative taxpayer-funded subsidies from the state and federal government.

"The offers to buy Nuzzo-Kelly's home were never really just offers," Boehm wrote when covering the case in November 2022. "They were demands backed by a threat to use government power to force her to sell."

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