Biden administration doubles down on industrial policy
The Biden administration is redoubling its efforts to win House approval of legislation that would offer tens of billions of dollars of federal subsidies to semiconductor makers who relocate their production facilities to the U.S.
It’s industrial policy on steroids, but official Washington has never let economic history stand in the way of a massive boondoggle:
“If we want to compete globally, we invest domestically, and specifically in revitalizing the semiconductor industry,” [Commerce Secretary Gina] Raimondo said…She noted U.S. chip assembly represents only 12% of the global production, down from 40% in the 1990s.
The U.S. Innovation and Competition Act, or USICA, passed the Senate with bipartisan support in June but has stalled in the House of Representatives. The Creating Helpful Incentives to Produce Semiconductors for America Act, or CHIPS Act, which is tucked inside the broader competition bill, includes $52 billion for domestic semiconductor production and incentives to invest in new semiconductor manufacturing facilities in the U.S. and establishes a National Semiconductor Technology Center.
“We need the House to pass the CHIPS Act immediately so we can get to the business of doing this,” Raimondo said.
Aside from the corporate welfare involved, there is also the rotten track record of government’s trying to pick winners:
Supercomputer policy in the 1990s, for example, was essentially aimed at supporting one politically powerful U.S. company, Cray, and ignored other American market entrants that offered different and arguably better products. Energy technology demonstration projects funded by President Barack Obama’s American Recovery and Reinvestment Act (ARRA) were dominated by unpromising (and now failed) clean coal and carbon capture projects, accounting for about five of every six dollars allocated, due in large part to the political influence of coal and ethanol producers and Obama’s affection for his home state of Illinois. Then, of course, there is Solyndra and the Obama administration’s green energy loan programs, which studies have repeatedly found to connect funding amounts to lobbying expenditures and campaign contributions, not scientific merit.
And so on. Expecting the semiconductor gambit to be any different is hoping against experience. And with billions of (borrowed) dollars on the line, it’s a hopeful delusion we simply can’t afford.