However, arguments such as the protection of national security and the protection of infant industry can, in some cases, justify the implementation of subsidies in certain industries and nations. One of the most important argument against subsides is based on economic theory. Subsidies and price supports have existed for centuries, but now they are incredibly wasteful and completely outmoded for world markets. Subsidies, fostering the protection of domestic industries have a negative effect on employment, the budget deficit, and other economic aspect. The economic implications of subsidies are significant.
Government subsidies given to the private industry usually end up hurting the economy.
A subsidy sponsors unprofitable business enterprises and often favors one firm over another. In addition, government support to import-threatened industries seems to contain the growth of bilateral trade between developed and developing nations. Government subsides revitalize the import-threatened industries through sustained investments in capital intensive assets, thus creating permanent barriers to bilateral trade. Naturally, sponsoring unprofitable and profitable industries by subsidies requires high government expenditure. Subsides are most commonly funded by revenues derived from trade tariffs and internal federal income taxes.