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URL:  http://boards.fool.com/am-why-should-the-government-subsidize-any-30558322.aspx

Subject:  Re: big oil subsidies Date:  2/23/2013  3:53 PM
Author:  rmhj Number:  418428 of 436677

AM: Why should the government subsidize ANY business?

Just asking here. Not saying they shouldn't. Just asking why they should. And IF they should, which businesses should they (meaning WE) subsidize?


Traditionally, there are several reasons to subsidize:

(1) To guaranteee a minimum supply of some staple. E.g., farms are subsidized for several reasons: (1) a surplus costs far less to the country than a food shortage; (2) it helps guarantee moneys to the rural/poor parts of the country, thereby helping the economy; (3) it helps to avoid large swings in food/foodstuff/commodity prices, which helps all the rest of the economy.

(2) To guarantee some supply or protect it against the vagaries of foreign supplies. E.g., the government maintains supplies of helium, oil, and other products that it considers important for defense purposes. (It used to maintain supplies of rare earth elements, too, but stopped. Now China is the only major supplier, and have decided to reserve most of their production for domestic customers.)

(3) To provide a shared commodity that benefits all above and beyond its cost. E.g., public roads, public schools, the creation of housing standards, automobile standards, drinking water standards, &c. By guaranteeing availability of these resources to the public, the public gains by their use more than their cost. This particularly applies when the costs and benefits of the shared commodity may be difficult to assess or charge directly.

rj
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