Do American businesses require government subsidies to thrive?
In a Thursday post on Truth Social, President Donald Trump wrote: “Everyone is stating that I will destroy Elon [Musk’s] companies by taking away some, if not all, of the large scale subsidies he receives from the U.S. Government. This is not so!” He added, “I want Elon, and all businesses within our Country, to THRIVE, in fact, THRIVE like never before!”
It’s not entirely clear if Trump will cut subsidies to Musk’s companies. But during a press briefing a day earlier, White House press secretary Karoline Leavitt said, “I don’t think so. No.” when asked if the president supports agencies contracting with Musk’s xAI.
The federal government spends $181 billion a year on “direct cash subsidies” and “indirect industry support” for private businesses, according to a March study by Chris Edwards, the Kilts Family Chair in Fiscal Studies at the Cato Institute.
In June, during a public feud between the two men, Trump posted that the easiest way to cut spending would be “to terminate Elon’s Governmental Subsidies and Contracts,” adding he was “always surprised that Biden didn’t do it!” Musk’s Tesla Model S was launched with a $465 million Department of Energy loan, and his company has received $11.4 billion in state and federal subsidies, according to a February report by The Washington Post.
It’s not just Musk’s companies, though—the government trough is open for businesses from all industries, including agriculture, aviation, broadband, energy, education, hospitality, housing, manufacturing, transportation, and others. The $42.5 billion Broadband Equity, Access, and Deployment (BEAD) program, which aims to provide internet access to underserved and rural areas, has connected zero people. Annual farm subsidies can range “between about $15 billion to $30 billion per year,” according to a Cato Institute report.
Recent spending bills are littered with government subsidies that overpromise and underdeliver. This includes $684 million spent on eight nonoperational coal carbon-capture plants over the past 15 years, $387 million spent on a failed “clean coal” power plant in Mississippi, and $200 billion stolen from the Small Business Administration’s Economic Injury Disaster Loans (EIDLs) and Paycheck Protection Program (PPP) programs. “Everyone wants the United States to be at the leading edge of industry,” Edwards tells Reason, “but the way to do that is for the federal government to get it out of the way and to provide an open playing field for everyone.”
Yet the administration has a mixed record on subsidies in recent weeks. As part of the $9.4 billion rescissions package, Congress recently voted to cut subsidies for public broadcasting. Now, NPR and PBS have to obtain all, rather than most, of their funding from donors and sponsorships. The One Big Beautiful Bill Act claws back $500 billion in energy subsidies but also includes $52.3 billion in spending on the farm safety net, the most significant agricultural subsidy provided by the government.
Trump’s tariffs are also “akin to corporate subsidies as well“, says Edwards, with industries already facing the effects of protectionism lobbying in Washington for favorable treatment. It’s consumers who get the short end of the stick in all this, although the administration seems to be OK with this outcome. Worryingly, Trump has at times attempted to assert the executive branch’s power over private companies, such as his executive order to “combat illegal private-sector DEI preferences, mandates, policies, programs, and activities,” and those targeting various law firms.
When companies hitch their wagon to federal funding, it makes it easier for the government to wield the power of the state against them. Edwards argues that “protecting U.S. businesses through subsidies or tariffs makes them complacent and less competitive.” True competitiveness, he adds, comes from being “subjected to the full rigors of the market.”
If Trump wants American businesses to “THRIVE, in fact, THRIVE like never before!” he could act on his promise to “cut Hundreds of Billions of Dollars in spending,” by calling on Congress to cancel all federal subsidies and allow American businesses to thrive, or fail, on their merit.
