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Biden Administration


BIDEN POURS OUT ANOTHER $6.5 BILLION FOR THE CHIPS ACT'S COSTLY PROTECTIONISM


IT'S PART OF THE GOVERNMENT'S EXPENSIVE PUBLIC-PRIVATE PARTNERSHIP MEANT TO
ADDRESS CONCERNS OVER A RELIANCE ON FOREIGN COUNTRIES, LIKE CHINA, FOR
SEMICONDUCTORS.

Varad Raigaonkar | 2.21.2024 3:30 PM

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(DIRK WAEM/Belga/Sipa USA/Newscom)

The White House this month announced plans for how it will direct billions of
dollars in funding toward semiconductors, marking a new phase in the
implementation of the CHIPS and Science Act.

The $280 billion legislation, signed into law in 2022, aims to bolster
semiconductor production in the U.S. President Joe Biden's administration said
Monday that it will funnel $1.5 billion to GlobalFoundries, a semiconductor
manufacturing and design company, to increase its domestic output. Perhaps more
significant, however, was Biden's dispatch earlier this month announcing the
administration will use at least $5 billion to establish a National
Semiconductor Technology Center (NSTC), which will, among other things, support
"the design, prototyping, and piloting of the latest semiconductor
technologies," according to the White House. 

This latest effort is part of the government's expensive and protectionist
public-private partnership meant to address concerns over a reliance on foreign
countries, like China, for chips.

"Semiconductors were invented in America and serve as the backbone of the modern
economy," the White House said in a statement. "But today, the United States
produces less than 10 percent of global supply and none of the most advanced
chips."

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The NSTC will supposedly also play a crucial role in expanding the semiconductor
workforce to manufacture computing chips that can complement advances in
artificial intelligence and related industries. Semiconductors are projected to
become a $1 trillion industry by 2030, according to McKinsey & Company.

The CHIPS and Science Act has several eyebrow-raising elements, including $81
billion for the National Science Foundation—doubling the agency's budget over
five years. Another $24 billion will go toward tax credits meant to subsidize
and incentivize private companies to invest in semiconductors.

While the legislation was likely well-intentioned, it was doomed to have
protectionist ramifications. "To defeat China, the argument goes, the U.S. must
adopt the tactics of the Chinese Communist Party, at least when it comes to
high-end manufacturing," Reason's Eric Boehm wrote in January 2023. But that
ham-handed approach to industrial policy and corporate welfare drives up the
deficit and hampers economic growth at very little benefit to the taxpayer, who
are forced to fund these initiatives. 

It's likely unsurprising that many large corporations lobbied for the CHIPS and
Science Act, including Meta, Microsoft, Google, Amazon, Apple, Northrop Grumman,
Carrier, Trane, and General Dynamics, as well as labor unions like the American
Federation of Labor and Congress of Industrial Organizations and the
Communications Workers of America. "Big government means big lobbying," wrote
David Boaz, a senior fellow at the Cato Institute. "When you lay out a picnic,
you get ants. And today's federal budget is the biggest picnic in history."

The CHIPS and Science Act passed with bipartisan support. But its detractors
were also made up of strange bedfellows. Sen. Bernie Sanders (I–Vt.) and
then-Rep. Kevin McCarthy (R–Calif.) both referred to the law as "corporate
welfare" and a "blank check." Sanders went as far as to call it a "bribe."

"When the government adopts an industrial policy that socializes all the risk
and privatizes all the profits, that is crony capitalism," Sanders said.



He's not wrong. The law "is another episode of politicians granting favors to
their friends in the semiconductor industry," Veronique de Rugy, a contributing
editor at Reason and a senior research fellow at the Mercatus Center, wrote last
year. Such an approach "punishes those who aren't elite or can't organize to
extract favors from politicians."

Michelle Nuzzo-Kelly is an apt example. She was among the residents of Burnet
Road near Syracuse, New York, who received several offers to purchase her home.
But those offers didn't come from private buyers: They came from the government,
as Onondaga County sought to expand a plot of land so it could attract a
developer. Micron, one of the world's largest semiconductor manufacturing firms,
is now set to build a facility there, thanks to lucrative taxpayer-funded
subsidies from the state and federal government.

"The offers to buy Nuzzo-Kelly's home were never really just offers," Boehm
wrote when covering the case in November 2022. "They were demands backed by a
threat to use government power to force her to sell."

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NEXT: The Biden Administration Has Forgiven Another $1.2 Billion in Federal
Student Loans 

Varad Raigaonkar is the spring Burton C. Gray Memorial journalism intern at
Reason.

Biden AdministrationJoe BidenProtectionismTechnologyChinaEminent
DomainSubsidiesCrony CapitalismTax credits
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