Democrats should stop subsidizing Tesla

Rethinking EV policy after Elon Musk’s heel turn

Now that Elon Musk has transformed himself into something closer to Lex Luthor than Tony Stark, I’m seeing tremendous interest from Democrats in the massive government contracts that Musk’s companies receive.

This is understandable as a kind of narrow gotcha.

But the reason that SpaceX and Starlink get a lot of government contracts is pretty clearly that these companies are the best in the world at providing services the government has legitimate need for. There are many fair points one can make about Musk’s selfishness and low character that might touch on his government contracts. But it wouldn’t actually make sense for a future Democratic Congress to stop using SpaceX to launch things into orbit. More broadly, “makes the world’s best rockets” is probably Musk at his most sympathetic. I wish I believed that his interest in public affairs was limited to trying to get regulatory favors to make it easier for SpaceX to build and launch more rockets! Instead, he’s telling all kinds of bizarre lies about Social Security, promoting the interests of foreign dictatorships, gutting critical foreign aid programs, and lord knows what else.

Beyond that, Democrats can’t control federal contracting.

What Democrats can do, though, is address the extremely large explicit and implicit subsidies that Tesla receives both from the federal government and — most importantly — from blue states where Democrats govern.

I want to be clear: I am not saying that Democrats should shift their policy toward electric cars just to stick it to Elon Musk. What I am saying is that there are many questions one can raise about the merits of Democrats’ current policy approach to electric cars. The whole framework deviates massively from a technocratic optimum of “subsidize nothing, finance roads with a vehicle miles traveled tax, and impose an extra tax on gasoline to cover the pollution externalities.”

Why does it deviate from the technocratic optimum? Well, the usual reasons. Democratic Party leaders think (plausibly) that a purely technocratic approach would be bad politics. But they are extremely committed to addressing climate change. And they’re taking their guidance on what it means to address climate change primarily from environmental groups that engage in a lot of fuzzy thinking about the global nature of the problem, leading them to massively over-emphasize state emissions targets. So it’s all a bit of a mess on policy substance, but it’s supposed to be politically pragmatic compared to my idealized approach.

And that’s where Musk comes in.