Governments offer subsidies to encourage certain economic activities, or to help achieve the larger goals of the nation. They are typically offered in the form of cash payments, grants, tax breaks or even low-interest or guaranteed loans. Subsidies can assist communities with low incomes to obtain healthcare, education or housing. They also offer benefits to businesses, like lower taxes and government purchases of their products.

Many critics of subsidy programs draw attention to the distorted incentives myrrdin-inc.com that result from them. They claim that subsidies create an unidirectional relationship between politicians and businesses which encourages them to contribute to campaigns and demand preferential treatment from the policymakers. They also note that subsidies can discourage efficiency and innovation because they make businesses that depend upon them less likely than others to invest in new technologies, or to change their business model to meet consumer demands.

These subsidies can have an impact on the budget, even if they are designed for a specific use. They could be difficult to estimate. They may also crowd out more equitable and efficient public spending.

If governments offer subsidies to the production of energy, they can lower the price of solar panels for homeowners and help companies who sell solar panels by offering tax credits or cutting their costs. They can also encourage the purchase of products or services, for example, by offering subsidies to families that pay the cost of insurance. In the same way, a government could induce people to take out federal student loans by offering them at low interest rates and providing perks such as deferment or flexible payment plans.