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Tag: Crony Capitalism

  • The White House thinks taking partial ownership of a Canadian mining company will reduce the national debt

    Since being reelected, President Donald Trump has falsely claimed his tariffs will reduce the national debt. Trump is now taking this marketing pitch to sell another one of his economic policies: government ownership in private companies. 

    On Wednesday, the Energy Department announced that the government will be taking a 5 percent stake in Canadian mining firm Lithium Americas and a 5 percent stake in Thacker Pass, the company’s lithium mining project in Nevada. This equity stake builds on a $2.26 billion loan from the Biden administration Energy Department to the company last year to “help finance the construction of facilities for manufacturing lithium carbonate” at Thacker Pass, which has the largest confirmed lithium reserves in North America. The deal, according to Energy Secretary Chris Wright, will ensure “better stewardship of American taxpayer dollars.”

    The White House has taken this messaging further. “This is a creative solution by the president of the United States to tackle our nation’s crippling debt crisis,” White House press secretary Karoline Leavitt said on Wednesday. “The president is focused on how can the United States government make more money, how can we make our country wealthy and rich again? Cutting some of these unique, creative deals with companies around the world and here at home is just one way that the president is seeking to do that.”

    These types of “creative deals” have become a hallmark of the second Trump administration. Since Trump’s return to the White House, the federal government has taken a “golden share” of U.S. Steel, granted export licenses to American chipmakers in exchange for a cut of the revenue generated from their sales, and, more recently, became the largest shareholder of Intel by taking a 10 percent stake in the company (worth about $9 billion at the time of acquisition and $17 billion today). 

    The deals have been justified as a way to protect America’s economic and national security interests, and the Lithium Americas announcement is no different. “It’s in America’s best interest to get that mine built,” Wright told Bloomberg. “Lithium Americas needs to raise some more capital so the mine is financially sound….We’re leaning in with a large amount of debt capital, so it’s just a more commercial transaction.”

    Like the other government stakes before it, the economic justification for this deal is flimsy. At the time of the initial Energy Department loan in 2024, global lithium demand was experiencing unprecedented growth, which has continued and is expected to continue as the use of semiconductors, electric vehicles, and renewable energy sources becomes ubiquitous. With the mine expected to produce 400,000 metric tons of battery-grade lithium carbonate each year and generate over $2 billion in revenue (according to a January estimate), there is no reason why taxpayers need to finance a project that the market seems to think will be profitable. 

    The White House’s argument that this will tackle the “crippling debt crisis” could be even flimsier. Scott Lincicome, vice president of general economics at the Cato Institute, tells Reason that taking a 5 percent stake in a $2 billion project is a “rounding error for our debt problem.” The national debt currently stands at over $30 trillion held by the public. Lincicome points out that “the only way to get money back is by selling the stake, which [the Energy Department] doesn’t plan on doing.” At the end of the day, he adds, this deal has less to do with addressing the national debt and “everything to do with exercising more control over private businesses.”

    The White House has made several questionable claims to justify Trump’s takeover of the economy. Arguing that a government stake in an already federally backed project will shrink the national debt could be its weakest argument yet.

    Jeff Luse

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  • Trump says he ‘paid zero’ for $11 billion federal stake in Intel. Here’s the downside.

    President Donald Trump negotiated a deal last week for the U.S. government to take a substantial ownership stake in an American company. Despite his assurances, Trump’s socialistic transaction is a terrible deal not only for the parties involved, but for the entire U.S. economy.

    “It is my Great Honor to report that the United States of America now fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future,” Trump posted Friday on Truth Social. “The United States paid nothing for these Shares, and the Shares are now valued at approximately $11 Billion Dollars. This is a great Deal for America and, also, a great Deal for INTEL. Building leading edge Semiconductors and Chips, which is what INTEL does, is fundamental to the future of our Nation.”

    “I PAID ZERO FOR INTEL, IT IS WORTH APPROXIMATELY 11 BILLION DOLLARS,” Trump added on Monday. “All goes to the USA. Why are ‘stupid’ people unhappy with that?”

    As of this writing, Intel’s market cap is around $110 billion, so a 10 percent stake would indeed be worth $11 billion. But despite what Trump says, this was not a freebie.

    “Under terms of the agreement, the United States government will make an $8.9 billion investment in Intel common stock,” the company announced. “The government’s equity stake will be funded by the remaining $5.7 billion in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program….The $8.9 billion investment is in addition to the $2.2 billion in CHIPS grants Intel has received to date, making for a total investment of $11.1 billion.”

    Intel added that “under the terms of today’s announcement, the government agrees to purchase 433.3 million primary shares of Intel common stock at a price of $20.47 per share, equivalent to a 9.9 percent stake in the company.” According to the Financial Times, that was “below Friday’s closing price of $24.80, but about the level where they traded early in August. Intel’s board had approved the deal, which does not need shareholder approval.”

    The Financial Times added that under the agreement, “the US will also receive a five-year warrant, which allows it to purchase an additional 5 per cent of the group at $20 a share,” but only “if Intel jettisons majority ownership of its foundry business, which makes chips for other companies.” Trump may be expanding state ownership of private industry, but at least he seems to have no interest in seizing the means of production.

    The CHIPS Act grants were approved under Trump’s predecessor, President Joe Biden. Before leaving office, Biden’s administration rushed to finalize many such grants, even as Intel was the worst-performing tech stock in 2024; the government actually agreed to less than initially allocated when the company failed to hit certain milestones.

    Instead of rescinding those grants, as Trump reportedly threatened to do, he instead demanded a tenth of the business, as a result making the U.S. government Intel’s largest shareholder.

    Every part of this transaction flies in the face of any sincere interpretation of free markets, including the Biden administration’s original sin to approve billions of dollars for a struggling company. It is perhaps telling that as Reason‘s Eric Boehm noted last week, the idea that the U.S. government should take a piece of Intel in exchange for CHIPS Act funding was first floated by Sen. Bernie Sanders (I–Vt.). Trump and his allies are now issuing talking points that could have come from the socialist senator himself.

    If the U.S. government insists upon dishing out taxpayer money to private companies, is there any reason it shouldn’t, as U.S. Secretary of Commerce Howard Lutnick put it to CNBC, get “a piece of the action”?

    There are many reasons, in fact. “The most immediate risk is that Intel’s decisions will increasingly be driven by political rather than commercial considerations,” Scott Lincicome of the Cato Institute wrote Sunday in The Washington Post. “With the U.S. government as its largest shareholder, Intel will face constant pressure to align corporate decisions with the goals of whatever political party is in power.”

    Not only that, Lincicome writes, but “Intel’s U.S.-based competitors…might find themselves at a disadvantage when vying for government contracts or subsidies, winning trade or tax relief, or complying with federal regulations. Private capital might in turn flow to Intel (and away from innovation leaders in the semiconductor ecosystem) not for economic reasons but because Uncle Sam now has a thumb on the scale.”

    Such market distortions may seem abstract, but they can have devastating consequences for the American industrial economy. “Will investors and entrepreneurs stay away from critical industries that might also see the U.S. government eager to get more involved?” Lincicome wonders. “Will future presidents, Republican or Democrat, use this noncrisis precedent to carry out their own adventures into corporate ownership with their own economic and social priorities attached?”

    Indeed, White House National Economic Council director Kevin Hassett told CNBC on Monday that he’s “sure at some point there’ll be more transactions, if not in this industry, [then] in other industries.”

    Trump has made several such deals just since reentering office in January. He leaned on Intel competitors Nvidia and AMD to give 15 percent of proceeds from Chinese sales to the government; he demanded veto power over U.S. Steel as part of its sale to the Japanese company Nippon Steel; and MP Minerals, which operates a rare earth mineral mine in the U.S., got a $400 billion government investment that made the Department of Defense its largest shareholder.

    In his Monday morning Truth Social post defending the Intel agreement, Trump said, “I will make deals like that for our Country all day long.”

    But as Lincicome notes, Republicans likely won’t be in power forever; in time, a Democratic president would have the same influence on Intel—and beyond.

    “This is a product of both parties forgetting a cardinal rule of politics: don’t give yourself powers you don’t want your opponents to have,” writes Ryan Young, an economist at the Competitive Enterprise Institute. “The Democrats who passed the CHIPS Act likely did not foresee Republicans using it to essentially nationalize Intel. Similarly, Republicans cheering government takeovers of chipmakers will somehow be surprised if Democrats invoke similar powers in the health insurance, energy, and other industries when they are in power again.”

    Joe Lancaster

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  • Joe Biden paid $89 million to boost electric motorcycle production. It’s failing.

    In 2024, President Joe Biden’s Energy Department awarded $1.7 billion in grants to increase domestic manufacturing of electric vehicles (E.V.s), including $89 million to Harley-Davidson to expand its manufacturing plant in Pennsylvania for electric motorcycle production. At the time, Energy Secretary Jennifer Granholm claimed the funding would “ensure that our automotive industry stays competitive.” Then-Sen. Bob Casey (D–Pa.) championed the grant, with his office declaring that it would “help Harley Davidson make investments necessary to hit its goal of producing more zero-emission motorcycles.”

    More than a year later, it appears that this funding plan is failing.

    Despite the $89 million in government subsidies provided to LiveWire, which was initially launched as part of Harley-Davidson but has since spun off, the company has sold only 55 electric motorcycles in the second quarter of 2025, a 65 percent decline compared to the same quarter in 2024. In the second quarter of 2025, LiveWire’s electric motorcycle business yielded $800,000 in revenue. Overall, in the second quarter of 2025, the company generated $5.9 million in consolidated revenue from its electric motorcycles and electric bikes.

    LiveWire has operated at a loss since its founding in 2021. After peaking at $46.83 million in 2022, annual revenue has declined for two consecutive years, dropping 43 percent from the company’s peak year in 2022. The company has never had a profitable quarter, a trend that is expected to continue through 2025.

    While it’s projected sales of up to 3,000 electric motorcycles over the past two years, LiveWire has sold only 2,418 electric motorcycles since its inception in 2021. Last year, the company sold just 612 motorcycles, falling short of its 2023 sales of 660 machines and well below its initial 2024 projection of 1,000 to 1,500 bikes. Despite a history of missing sales targets, LiveWire again projected sales of 1,000 to 1,500 electric motorcycles for 2025.

    A significant appeal of gas-powered motorcycles lies in the owner’s ability to customize their bike. By design, electric motorcycles are quiet and difficult to modify.

    Although the upfront cost of LiveWire electric motorcycles is significantly lower than most new Harley-Davidson gasoline models, LiveWire’s financials suggest that the market has clearly expressed its preference. The $89 million grant to Harley-Davidson is only one in a long list of failed, costly green energy projects funded by the Biden administration, which also includes a $9.63 billion loan to Ford to build three manufacturing plants for the company’s E.V. batteries in Tennessee and Kentucky. Only one of these factories has been built—and has yet to roll out batteries—while the other two have no set opening date.

    In May, amid a continued decline in sales, Harley-Davidson suspended its full-year financial forecast due to the imposition of President Donald Trump’s tariffs. If the company’s second-quarter financial outlook is any indication of future performance, there will be little relief to come. In the second quarter of 2025, Harley-Davidson’s revenue dropped 19 percent year-over-year, with global motorcycle shipments down 28 percent. To date, tariffs have cost the company $17 million in 2025.

    Like many other projects before it, government funding has not helped LiveWire turn a profit. It has instead artificially prolonged its financial runway and potentially discouraged disruptive thinking and entrepreneurial spirit.

    Tosin Akintola

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  • Georgia taxpayers lose $160,000 for every job created by film tax credits

    Georgia taxpayers lose $160,000 for every job created by film tax credits

    For nearly two decades, Georgia has lured big-time Hollywood movie studios with the promise of lucrative tax breaks for filming in the state.

    And here’s a predictable plot twist: Handing out welfare to wildly successful movies—like Avengers: Endgame, which earned more than $2 billion at the box office but nevertheless also qualified for tax credits because it was filmed in Georgia—hasn’t been a good deal for taxpayers.

    A new audit of Georgia’s Film Tax Credit program found that the state “loses money” on the program. A lot of money, actually: about $160,000 for every job the program creates. Georgia is now spending about $1.3 billion annually on the program, but it generates a return on investment of just 19 cents per dollar, the auditors conclude.

    “This program should be halted immediately,” J.C. Bradbury, an economics professor at Georgia’s Kennesaw State University and a longtime critic of government subsidy schemes, posted on X (formerly Twitter). In a 2020 paper, Bradbury estimated that the state’s film tax credit program cost about $110,000 per full-time job created and that every Georgia household was on the hook for about $230 in additional taxes every year because of the program’s existence.

    In addition to highlighting the tax credit program’s costs, the new audit also suggests that the film industry has inflated the supposed benefits of the program. Georgia’s film tax credit is responsible for creating about 34,000 jobs annually in the state, according to the new audit, but that’s well short of the 59,700 annual job-creation figure that a recent industry-funded study claimed, reported Variety.

    Created in 2005, Georgia’s subsidies for movie and TV production are the biggest such pot of cash available anywhere in the country. Production companies that spend at least $500,000 in the state during a single year are eligible for tax credits equal to 20 percent of their in-state expenditures. There is no cap on qualifying expenditures for production companies, and there is no aggregate cap for annual or lifetime tax credits, according to the audit report.

    There’s no doubt that Georgia’s program has influenced where movie and TV production takes place. The new audit concludes that the program has induced “substantial economic activity in Georgia,” but that’s simply evidence of the fact that lighting a lot of money on fire will eventually produce some heat. The underlying numbers suggest that Georgia’s subsidies are doing a poor job of generating economic growth or creating jobs.

    It’s been the same story pretty much everywhere else, though many states have gotten wise to the film tax credit scheme. In 2009, 44 states subsidized movie and TV production with some combination of rebates, tax credits, and grants. Today, just 22 states and Washington, D.C., offer those programs.

    Even though Georgia’s program has a long history of bipartisan support, changes could be coming. As Reason‘s Joe Lancaster reported earlier this year, Lieutenant Gov. Burt Jones and Georgia Speaker of the House Jon Burns (R–Newington) have pledged to undertake a thorough review of the state’s tax credit programs, including the film tax credit, with an eye toward “ensuring a significant return on investment for Georgia’s taxpayers.”

    With this new audit in hand, Jones and Burns should do their best Thanos impressions and turn Georgia’s deeply flawed movie welfare program to dust.

    Eric Boehm

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