Fifty-five years ago, the Apollo 11 Lunar Module made history by landing humans on the moon. This monumental achievement, however, came with a hefty price tag. From 1960 to 1973, the US federal government invested $25.8 billion into Project Apollo, which equates to about $318 billion in 2023 dollars or $1,534 per person in the US at the time.
Project Apollo had clear, time-limited, non-economic goals: landing on the moon and outcompeting the Soviets in space. Today, government spending projects, often referred to as ‘industrial policies’, aim to allocate resources to specific industries to drive economic growth. However, these policies often have both economic and non-economic goals, making their success harder to measure.
For instance, the Creating Helpful Incentives to Produce Semiconductors (CHIPS) and Science Act and the Inflation Reduction Act (IRA) have attempted to shift resources to semiconductors and green energy to boost economic growth. However, these policies risk investing money in the wrong places, leading to less economic growth. Sometimes, the market doesn’t fund something because of weak consumer demand or more efficient ways to allocate resources.
The CHIPS and Science Act provided $79 billion in direct funding for the semiconductor industry and authorized Congress to spend another $200 billion on the industry in the future. This means the total cost of the incentives will reach nearly $280 billion, an average cost of $822 per person in the US. The IRA, on the other hand, originally estimated its green energy tax credits would cost $271 billion. However, recent estimates of the total cost range from $780 billion to $1.2 trillion. Assuming an estimate of $990 billion, the IRA will cost an average of $2,926 per person in the US.
Comparatively, the Apollo program was more expensive than CHIPS but significantly less expensive than the IRA. The question then arises: was winning the Space Race worth $1,500 per person in the US? For CHIPS and Science and the IRA, it’s too early to determine whether the costs are worth it as the jury is still out on how these projects will affect productivity and growth. However, history suggests that they may redistribute resources from taxpayers to favored industries and companies without generating broad-based economic gains, and potentially even causing economic losses.
As we continue to invest in industrial policies, it’s crucial to consider the lessons learned from Project Apollo and other historical spending projects. The cost of progress is high, but with careful planning and strategic investment, we can ensure that our resources are used effectively to drive economic growth and innovation.
Stay informed and make responsible financial decisions by understanding the implications of government spending and tax policies. Remember, as taxpayers, we all have a role to play in shaping our nation’s economic future.