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Comment by ntonozzi | Hacker News Reader

Wouldn't you prioritize subsidizing local production over taxing foreign production? It just seems like a much cleaner and more straightforward way to increase local production. It seems like this has been at least somewhat effective with semiconductors over the past ten years. And then you don't have the risk of harming consumers. Everybody wins!

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Its why China is technologically eating everyone else's lunch when it comes to renewables and battery tech. Their government dumped massive amounts of money into R&D and building out manufacturing and mining infrastructure.

Heck, it's why the US has been (not for long) a leader in medicine. We've historically dumped huge amounts of money into medical research through the NIH.

Biomedical companies don't like research, they like making money. Research is expensive and by its nature filled with deadends. A biomedical companies would much rather take and run with cheap (to them) NIH research.

China is also clear on the timetable they will turn off the subsidies in order to consolidate the market into the strongest survivors.

Businesses like clear timetables which is the opposite of what Trump is doing right now. So no matter your theories about tariffs what he is doing cannot be good for business.

this narrative doesn't sound right. There isn't very much preventing anyone in any given other country from using NIH research. Moreover a substantial amount of NIH research grants goes to PIs or postdocs or grad-students who are Chinese nationals who then advance their careers back to their home country.

Universities concentrate experts, and that leads to local economies. That's why SF is right outside of Stanford. Google wouldn't be there if that wasn't where Stanford grads lived. The stories about the Chinese government's tremendous efforts to repatriate skilled professionals (like giving them entire factories to run) come about as a result of the fact that they're working against a strong default of staying in the same place.

Because when you subsidize, the taxpayer is paying for it. You are socializing the costs and privatizing the profits.

Whereas in a tariff situation, you are penalizing the consumer for creating an externality (foreign dependence).

The customer and taxpayers are generally the same people here.

So, knock on effects can dwarf direct effects. Tax foreign computer components at some insane rate and perhaps you get a domestic market but you could also see companies start moving their US data centers to Canada and Mexico. Which then has it’s own economic disadvantages.

But not exactly the same people which is the point of motivating behavior. There is at least some degree of flexibility in what you can buy.

Insane rates will of course have insane effects. Which is a separate issue.

Who pays for the tariffs if not the taxpayer?

> Because when you subsidize, the taxpayer is paying for it. You are socializing the costs and privatizing the profits.

I think that's a really good point. It's extracting money from consumers through taxes and handing them to industry in the hopes they innovate.

Tariffs though. In that case you're extracting the money from the consumer (through the international organizations being taxed) and giving the profits to the government. What are they going to do with it?

The US got dominance over the entire world's economy, an unprecedented amount of weal, and almost complete technological dominance with high taxation and direct intervention on the market. And even more, they then taught it to Japan who came and repeated basically the exact same actions with basically the exact same result. Oh, yeah, and then China did it...

Then they organized a bunch of morons to create an school teaching not to do that, celebrated them so they would teach every foreign school, and managed to stop most of the world from competing with them. But a couple of decades later everybody in a position of power there was a moron from that school.

The resources for subsidies come from the taxpayer. Plus how you and who you subsidize becomes political. Lots of complications.

The resources for subsidies come from printing new money (which is possible by having the world reserve currency), and then spending that new money for deliberate purposes instead of just giving it to the banksters to bid up the asset bubbles. In an imaginary world where we had a Congress that served the People and a mentally competent President, of course.

Who gets subsidized is indeed political, but I don't see a way to sidestep that since there's centralization as soon as you take action to prevent the currency from deflating.

Political patronage and cruelty is the point.

To be clear, the US is not unique in its ability to do this. Many other countries would benefit from understanding it! In the UK we have a government wanting to build a growth strategy around finance. It's like a parody that nobody gets (yet).

But Congress doesn't actually decide to print new money? When they decide to spend they have to raise taxes or issue debt (treasuries).

The federal reserve, on the other hand, controls interest rates and other mechanisms which actually result in money "bring created" for practical purposes.

Yes, that is one of the mechanisms that has hamstrung us from being able to appropriately respond to the economic effects of offshoring. It can obviously be changed.

Or the mechanisms themselves might not actually have to be changed if we could cast off this myopic political red herring about "the deficit". What we perceive as the balance sheet of "the government" needs to include The Fed, Fannie/Freddie, etc. Treasuries owned by other countries are the equivalent of a big savings account. Treasuries owned by the Fed are the same as all the other other debt owned by the Fed - monetary creation / monetary inflation.

Nobody says it is effective, only that it is possible.

One way could be to send the message to the market that a certain area is strategically important and any startups will have access to extremely cheap loans and not have to worry about natural resources or personel.

Then follow up on those promises, take a step back, watch the Cambrian explosion that follows and when the businesses seems to have grown legs simply scale back funding and watch them fight it out. One could even say that is exactly what has happened in the world several times over. It is not unique to China.

Subsidization also makes products viable outside of the tariff bubble where tariffs can only really make it viable to places with the same tariffs against the same source(s).

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