Industrial coverage is failing, and never simply in Washington. Throughout America, officers promise to engineer the precise financial outcomes by intervening out there in simply the precise methods. Most individuals know that below Presidents Biden and Trump, the concept has exploded. Much less appreciated is how enthusiastically governors and state legislators are embracing their very own variations. They repeat the identical claims: With the right combination of subsidies, safety and political path, one authorities or one other can revive strategic industries and ship sturdy financial power.
The outcomes inform a unique story. Wherever it’s discovered, industrial coverage is producing wasted assets, distorted incentives and fragile outcomes that collapse the second political assist shifts or market realities intrude. Simply have a look at the similarities between Georgia’s well-known film-industry tax credit and some of the federal authorities’s favourite tasks.
A latest Wall Road Journal investigation into Georgia’s expertise reads like a textbook instance of how the mannequin fails. Movie-tax credit score schemes are offered as investments in enterprise “ecosystems” and middle-class jobs. In actuality, they’re both a subsidy to manufacturing firms to do what they might have carried out anyway, or they’re bribes to extremely seen, extremely cellular capital that may depart as shortly because it arrives. Georgia was the latter.
For years, Georgia marketed itself because the “Hollywood of the South,” luring blockbuster franchises with lavish, refundable tax credit (about $5.2 billion between 2015 and 2022) that might be transformed straight into money. The consequence was a short lived, subsidy-fueled surge in manufacturing adopted by a predictable collapse, which turned seen in 2023. Labor prices rose. The growth empowered unions to extract concessions. Georgia’s competitiveness eroded. Different states, like New Jersey, and international locations, just like the U.Ok., countered with richer presents or decrease labor prices.
Right this moment, Georgia is left with hundreds of thousands of sq. ft of underused soundstages and different stranded infrastructure, relics of productions which have already moved on. The numbers are damning. Auditors estimate that the state misplaced 80 cents for each greenback in outlays. Relatively than questioning the entire premise, legislators responded by doubling down and increasing incentives to movies shot elsewhere and merely edited within the state.
Georgia is just not an outlier. This similar sample has performed out repeatedly in states and cities which have tried to purchase a movie {industry}. This contains California, the place ever-larger tax credit have been justified as “retention” insurance policies relatively than real growth, at rising fiscal value and with weak proof of sturdy, web financial beneficial properties.
If movie credit are essentially the most transparently wasteful type of industrial coverage, Intel is essentially the most consequential. Underneath Biden and Trump, the already struggling semiconductor agency has been forged as a nationwide champion meant to anchor semiconductor management. Billions in public assist, preferential therapy and public possession had been alleged to ship a turnaround for the corporate.
For a time, the narrative worked. Beginning in August 2025 when the Trump administration took shares within the firm, investor enthusiasm surged and demand exploded. Shares went up by 120% in 5 months. However industrial coverage can’t repair operational actuality and notion can’t repair efficiency. Intel struggled to regulate after slicing capability on older manufacturing strains, lacked prospects for key new merchandise and was unprepared to feed the AI data-center growth. So now Intel’s inventory is crashing once more.
Then there are Trump’s tariffs, framed as industrial coverage to reindustrialize the nation, shield staff and decrease costs. As an alternative, tariffs have quietly consumed a lot of the manufacturing sector’s earnings. That is unsurprising. Most U.S. imports are inputs used to make American items. Tariffs, subsequently, are taxes on American manufacturing.
Empirical work by the Kiel Institute exhibits that overseas exporters take in solely a trivial share of the associated fee. Roughly 96% of the burden is handed to American patrons. U.S. households and companies — not overseas corporations — overwhelmingly lined the roughly $200 billion in customs income collected in 2025. Firms we import from responded not by slicing costs, however by transport fewer items to the U.S. As Kiel economist Julian Hinz put it, the tariffs amounted to an “personal aim” that raised prices, compressed earnings and weakened the very industries they had been meant to guard.
This helps clarify why a promised auto-manufacturing renaissance hasn’t materialized. Automakers and suppliers have thus far absorbed a lot of the tariff shock via smaller revenue margins, restrained pricing and selective job cuts. This isn’t sustainable. Funding selections are actually being reconsidered and a few producers, like Volkswagen, warn that new U.S. crops not make sense.
Tariffs didn’t restore competitiveness or pricing energy. They jacked up prices and made American manufacturing much less enticing on the margin.
These instances all differ intimately however share a standard logic: Industrial coverage tries to engineer outcomes whereas ignoring processes. It assumes that political favor can substitute for market incentives. That innovation and buyer demand gained’t undergo. That shielding corporations from competitors will make them stronger. As an alternative, we get fragile industries that are depending on much more political assist.
Veronique de Rugy is a senior analysis fellow on the Mercatus Heart at George Mason College. This text was produced in collaboration with Creators Syndicate.
