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Biden, Our Boneheaded Chip Czar | The Libertarian Institute

Posted by M. C. on November 4, 2022

Actually, it is unclear whether the Syracuse plant will even be built. The New York Times reported that Micron recently “reported a 20 percent drop in fourth-quarter revenue” and “slashed planned spending on factories and equipment by nearly 50 percent in the current fiscal year.” Fortune magazine noted that “demand for chips is collapsing just as Joe Biden signs bill” to boost U.S. production.

The one government excels at is proving time and again central planning does not work.

https://libertarianinstitute.org/articles/biden-our-boneheaded-chip-czar/

by Jim Bovard

Jubilation erupted in Washington this summer as politicians lurched towards commandeering a key swath of the American economy. Congress passed Biden-backed legislation known as the Chip Act to spend $52 billion subsidizing semiconductor production. A Washington Post headline hailed “a big month for Bidenomics” and another headline celebrated “Biden’s hot streak.”

The Chip Act’s passage sparked a volcanic eruption of economic illiteracy from the media and top politicians. Washington Post columnist E.J. Dionne proclaimed, “The chips bill means the Era of Hands-Off Government is over.” Sen. Charles Schumer (D-NY), the Senate Majority Leader, huffed, “The old laissez-faire theory is: Leave the companies alone, and they’ll do great.” Inside the Beltway, anything less than total federal domination of the economy is derided as “laissez-faire.” Schumer scoffed at the failure of laissez-faire just after Congress sharply raised taxes on corporations. Jared Bernstein, a member of the White House Council of Economic Advisers, declared, “When it comes to establishing a lasting legacy in terms of existentially necessary economic transformation, history may well put President Biden in the same sentence as FDR and LBJ.”

The exaltation occurred because “many politicians believe that Beijing’s economic planning is superior to the U.S. free-market system,” as a Wall Street Journal editorial noted. Brian Deese, Biden’s National Economic Council director, declared, “The question should move from ‘Why should we pursue an industrial strategy?’ to ‘How do we pursue one successfully?’” And since Congress passed the law, that proved that Team Biden was successful.

The Chip Act made Biden the nation’s Semiconductor Czar, and he promised that he would “personally have to sign off on the biggest grants” to companies. What could possibly go wrong?

If a picture is worth a thousand words, is a political photo opportunity worth $50 billion? Biden rushed to exploit the new law for a campaign event before the congressional mid-term elections. Last week, Biden and New York Governor Kathy Hochul held a media circus outside of Syracuse, New York to celebrate subsidies for a Micron semiconductor plant that will not even break ground until 2024. Hochul swayed the New York legislature to enact a subsidy of up to $10 billion for semiconductor producers. Micron is expected to pocket more than $5 billion—the largest corporate handout in state history. Federal subsidies will be added next year when the Chip Act starts dishing out goodies. The total subsidy per promised job exceeds $600,000 and could rise far higher.

Biden boasted that Micron’s investment in New York is “the largest investment of its kind…ever ever in history.” Because the plant will run solely on renewable energy, its production costs could be sharply higher than unsubsidized factories elsewhere in the world. Biden also boasted that the plant would be constructed solely by union members paid high wages dictated by the U.S. Labor Department. The federal and state mandates effectively guarantee that the new plant will be uncompetitive even before the first spade of dirt is overturned.

Biden bragged, “With Micron’s $100 billion investment alone, we’re going to increase America’s share of global memory chips and production by 500%.” Actually, it is unclear whether the Syracuse plant will even be built. The New York Times reported that Micron recently “reported a 20 percent drop in fourth-quarter revenue” and “slashed planned spending on factories and equipment by nearly 50 percent in the current fiscal year.” Fortune magazine noted that “demand for chips is collapsing just as Joe Biden signs bill” to boost U.S. production. The Philadelphia Semiconductor Index had declined by 35% from its high by the time the law was passed.

But Biden and Schumer, counting on the illiterates in the mainstream media, are still hailed as saviors regardless of the glut. Biden’s subsidies could help turn chip production in America into a cartel. Creating a surplus of chips could be ruinous for unsubsidized producers. The same pattern has repeated since the 1930s for federal agricultural subsidies that favored the largest farmers and helped drive small farmers out of business.

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