The Current Subsidies from the U.S. Government and Trump’s Threats to GM
The automotive industry in the United States has long benefited from government subsidies, with General Motors (GM) being a prime example. The memorandum provided1 highlights the subsidies GM has historically received, mostly from state and local governments, with federal subsidies being relatively minor.
Historical Subsidies and Current Trends
Most of the subsidies GM has received throughout its history are from state and local governments, primarily in the form of tax abatements. Federal subsidies have amounted to around $700 million, which is a relatively small portion of their overall financial support.
A subsidy tracker site provides a detailed overview of the significant financial support GM and many other major corporations receive from the government, which small businesses often lack.
One of the more recent and specific subsidies GM has received is the electric vehicle (EV) tax credit, which is set to phase out at the end of the year. Although this credit may help GM sell its Bolt car, the company reportedly incurs a loss on this model, and the credit essentially goes to the buyer instead of directly to GM.
The Impact of Trump’s Threats
Donald Trump has made several ignorant and ill-advised statements regarding these subsidies, threatening to take them away from GM. However, it is crucial to understand that the electric vehicle tax credit is an industry-wide subsidy, and cutting this benefit specifically for GM would be counterproductive.
The oil and gas industry receives substantial indirect subsidies that benefit all car manufacturers, making it difficult to target GM alone. Withdrawing subsidies from GM without a comprehensive reform of the auto industry support system would undermine America’s automotive sector as a whole.
The Future of the U.S. Auto Industry
GM has recognized the importance of focusing on the future and has stated its intention to develop an electric vehicle that can compete with imports. This shift is crucial for the company’s survival in an era where the global auto industry is rapidly transitioning to electric vehicles.
Government support, both in the form of direct tax credits for buyers and other indirect benefits, plays a vital role in supporting the U.S. auto industry and its transition towards cleaner, more efficient vehicles.
Conclusion
The debate surrounding the U.S. government’s support for automakers, particularly GM, is complex and multifaceted. Cutting these subsidies without a broader and more informed approach could have detrimental effects on the automotive sector, hurting both domestic manufacturers and consumers alike.