“The largest semiconductor manufacturer on the planet agreed to open factories in the U.S. instead of abroad. The company wants the government to pick up the tab for the difference in cost, even as it postpones production.”
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“In a January 2023 earnings call, TSMC Chief Financial Officer Wendell Huang said that while he couldn’t give an exact number for the financial discrepancy between building in the U.S. and Taiwan, “the major reason for the cost gap is the construction cost of building and facilities, which can be 4 to 5x greater” in the U.S.
Of course, part of that gap can be explained by factors like the difference in the cost of living—by one estimate, over twice as much in the U.S. as in Taiwan. But in November 2022, a month before Biden announced the project, TSMC wrote in a public response to questions from the Commerce Department that it doesn’t “see access to capital as a significant barrier to growth in the US”—rather, specific factors making the project more expensive included “federal regulatory requirements that increase project scope and cost.”
Rather than forking over billions of dollars to a single company, the Biden administration should take steps to ease regulatory burdens on expanding companies. Similarly, plenty of firms could benefit from a greater number of high-skilled workers, like those proficient in science, technology, engineering, and mathematics (STEM) fields. And yet foreign nationals who graduate in STEM fields from American universities face near-impossible challenges to stay in the country and most end up going elsewhere. Congress could help that situation by raising the number of green cards that can be issued annually.
With TSMC’s delay, Biden and Congress have an opportunity. TSMC admits that its issues are bureaucratic, not financial, so there’s no need to shovel more money at a wealthy company. Instead, lawmakers should get rid of cumbersome regulations and create a more welcoming environment for both businesses and workers.”
“Government favoritism in the form of subsidies, tariffs, and other interventions allocates resources (labor and capital) differently than the way resources are allocated by consumers spending their own money. Ordinarily, businesses—spending their investors’ money—compete for these consumer dollars. Industrial policy rests on the assumption that such market outcomes don’t adequately support higher causes such as national security. If that’s true, it’s all the justification industrial policy needs. Nothing needs to be said about jobs.”
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“As Noah Smith reminded his readers in a recent blog post, “Most of the actual production work will be done by robots, because we are a rich country with very high labor costs and lots of abundant capital and technology. Automated manufacturing is what we specialize in, not labor-intensive manufacturing.””
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“Be wary of those who push industrial policy as a means of job creation. It’s a short-sighted approach that distracts us from the more important question, which is whether hindering the market allocation of resources is truly justified for national security or other valid reasons.”
“Biden declared a new national emergency and immediately used it as the justification for creating a new screening system that will limit Americans’ ability to invest overseas.
The new rules, which have been in development since last year, will prohibit private equity and venture capital firms from investing in China-based businesses working in a variety of high-tech fields”
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“Narrow or not, this is the first time that the U.S. government has targeted outgoing investments in such a manner.”
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“There are only two other countries—South Korea and Taiwan—that have outbound investment screening systems”
“Fitch Ratings..downgraded the U.S. government’s credit rating due in part to Congress’ erosion in governance. Indeed, year after year, we see the same political theater unfold: last-minute deals, deficits, and, all too often, the passage of gigantic omnibus spending bills without proper scrutiny, along with repeated debt ceiling fights and threats of shutdown.
But these are just symptoms of a budget-making process that remains in desperate need of reform. With legislators chronically delinquent about following their own rules, the change may need to be as much cultural as procedural. No matter how good the rules are, they’re useless if politicians ignore them. And in a world where politicians are rarely told no when it comes to creating or expanding programs, most simply refuse to have their hands tied or behave as responsible stewards of your dollars.”
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“What we need is a comprehensive budget process under which programs like Social Security, Medicare, and Medicaid are no longer permitted to grow without meaningful oversight. Combined with other mandatory, more-or-less automatic spending items, they make up more than 70 percent of the budget. Thus, they must be included in the regular budget process and subjected to regular review. Only then will our elected representatives be forced to stop ignoring the side of the budget that requires their attention the most.”
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“Enter a “Base Closure and Realignment Commission (BRAC)”-style fiscal commission, an idea promoted by the Cato Institute’s Romina Boccia. This commission would be staffed with independent experts appointed by the president. It would be “tasked with a clear and attainable objective, such as stabilizing the growth in the debt at no more than the GDP of the country, and empowered with fast-track authority, such that its recommendations become self-executing upon presidential approval, without Congress having to affirmatively vote on their enactment,” Boccia explains.
I’m uneasy about delegating the president power to appoint “experts.” Unfortunately, Congress has proven they will never seriously address the problem unless forced to. The idea is not unprecedented. Congress has already delegated a lot of its legislative power to administrative agencies and the executive branch. It’s also how the political class dealt with the closures of military facilities after the Cold War—another set of hard choices they refused to make on their own.
What’s more, Congress would retain some veto power. If they disapprove of the proposal, the House and Senate can reject it through a joint resolution within a specified period. Whether it’s the best solution to address our fiscal problems remains to be seen, but it’s worth considering.”
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“Making continuing appropriations automatic in case of a lapse could remove the threat of shutdowns.”
“For existing operators, they find that automation had real costs. Operators in a city that transitioned to mechanical switching were substantially less likely to have any job 10 years later than operators in cities that were slower to automate; those that did find work tended to find worse, lower-paying jobs.
But Feigenbaum and Gross also examine the results for young white women coming of age during automation, who just a few years earlier would’ve been ideal candidates for telephone operator jobs. Remarkably, they find little or no negative effects at all: they were just as likely to find work as they would have been before, and job openings in fields like secretarial work and restaurants increased even as telephone operation was automated away. Some of those jobs (like restaurant work) paid less, but others were competitive with telephone operation.
This is just one case, and economists have a long way to go in understanding how automation affects workers — a question that is more important than ever with the rapid progress in AI. But telephone operation appears like a mostly heartening example. Even though a job that once employed 2 percent of all working women was automated away, new workers entering the labor market were not significantly worse off.”