Biden-Harris administration’s spending of $8.5 billion leads to loss of 15,000 jobs at Intel
Currently, the stakes are low — both literally and metaphorically.
A couple of years ago, Joe Biden and Kamala Harris championed their “Chips Act” with the goal of bringing the semiconductor industry back to the United States from Taiwan, China, and Singapore.
The price tag for this legislation was a hefty $280 billion in corporate subsidies. It was arguably the most significant corporate welfare bill in American history.
Companies like Intel, Micron, Global Foundries, Polar Semiconductor, Taiwan Semiconductor Manufacturing Company, Samsung, BAE Systems, and Microchip Technology were among the direct recipients of this law.
This initiative was highlighted as one of the key achievements of the Biden-Harris administration. A massive job creator meant to help America regain its technological leadership.
Even many Republicans in Congress voted in favor of these subsidies despite the federal government already borrowing over $1 trillion annually.
Major Failures
However, today, the failures far outweigh the successes — and in a spectacular manner.
Intel was one of the primary beneficiaries of the Chips Act, receiving an $8.5 billion grant announcement in March, a $25 billion tax incentive, and likely the majority of an $11 billion federal loan program. And that was just the beginning.
In return, Intel recently announced a 15% reduction in its workforce, resulting in 15,000 job losses.
The outcome was a double loss for America: billions of dollars spent and thousands of jobs lost.
On the other hand, Nvidia, which did not receive any government assistance, has been the top-performing stock over the past 18 months, generating hundreds of billions in returns for American shareholders. While its chips are primarily manufactured in Taiwan, it creates numerous jobs domestically.
The Chips Act was projected to be the crowning achievement of the Biden-Harris administration. A significant job creator with hundreds of billions in subsidies to bring the semiconductor industry back to the U.S. However, it now appears to be heading towards disaster.
Perhaps these layoffs make business sense and will help Intel regain its former glory. Nonetheless, the company’s newfound dependence on government means that all decision-making is now influenced by Washington rather than the market.
Their focus has shifted towards maximizing taxpayer funds rather than creating value for customers.
How many times must we learn the same lesson? The government is terrible at selecting winners and losers. Remember Solyndra and Fisker Auto?
Struggles with Corporate Welfare
Politicians gamble — with your money — and consistently lose.
Corporate welfare almost never pays off. It has been attempted with steel, autos, solar panels, and electric batteries.
Take a look at how this approach has hindered the electric vehicle industry. Biden has allocated tens of billions in subsidies, mandates, and other incentives to an industry that was already on a path to success when Donald Trump left office. Consequently, car companies are experiencing significant losses as they pursue this “free” money.
EV sales would likely be higher if politicians had stayed out of the industry.
Alternatively, consider the Green New Deal passed by the Biden administration — deceitfully labeled the “Inflation Reduction Act” — providing hundreds of billions to solar and wind companies.
Today, the industry is still struggling, contributing less than 10% of American energy, while the oil, gas, and coal industries, which are unsubsidized, still account for 80% of energy production. The oil and gas industry even pays taxes instead of solely relying on government funding.
Flawed Policy
The concept of a national industrial policy rests on the belief that certain sectors are of such critical importance that they cannot be left to the private sector. While this may hold true for defense industries, recent experiences with electric vehicles and green energy show that government intervention is detrimental to business success.
Interestingly, the Biden-Harris administration aims to raise the corporate tax rate to 28% for successful corporations that do not rely on government subsidies and utilize these funds to support struggling industries. This approach is unsustainable and mirrors the path taken by failed socialist regimes.
We propose a law that prohibits the government from subsidizing companies with over $100 million in sales. The savings could then be used to reduce tax rates for all individuals.
The failure of the Chips Act serves as a reminder that the best government policy for the economy is to refrain from excessive interference.
Therefore, Congress should halt the remaining $100 billion allocated to the semiconductor industry to avoid further wastage. It is unwise to continue investing in a failing initiative.
Stephen Moore chairs Unleash Prosperity, while Phil Kerpen serves as the executive director. Moore is also a visiting fellow at the Heritage Foundation, and Kerpen heads American Commitment.
