“Companies rushed to break ground on new factories in hopes of winning those federal incentives, driving industry spending on construction to record heights. And politically, Democratic advisers said, the building frenzy provides signs of progress that Biden can point to in nearly every state.
“By the end of the election, every voter in battleground states is going to hear this story about what he’s done to invest in America’s economic future,” said John Anzalone, the founder of Impact Research and a longtime Biden pollster. “That is just not a message that Trump has.”
Yet central to Biden’s story of a manufacturing comeback is the prospect of thousands of new jobs spurred by his new laws — and so far, those have been slow to materialize. While Biden often touts the nearly 800,000 manufacturing jobs created during his presidency, the vast majority came prior to passage of the IRA and CHIPS, when Americans’ surging demand for goods during the pandemic drove a rapid industry recovery.
Since then, hiring has stalled as the economy evened out, with manufacturing-centric swing states like Michigan, Wisconsin and Pennsylvania actually losing factory jobs in 2023.
Those conditions have left Biden selling a manufacturing jobs boom that may not arrive in full force until well after November. Most companies that broke ground after Biden’s economic bills became law in August 2022 won’t have their new plants up and running until later this year — at the earliest. In high-profile setbacks for the White House, chipmakers TSMC and Intel have both signaled plans to delay production at their newest U.S. factories until 2025.”
“Not only do we Americans still produce an enormous economic output, but the U.S. also continues to be a dominant force in manufacturing. A recent paper by the Cato Institute’s Colin Grabow even reports that American manufacturing surpasses the output of Japan, Germany, and South Korea combined. We are the world’s second-largest manufacturing economy and, better yet, we are a global frontrunner in critical sectors such as automotive and aerospace.”
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“government spending is not inherently efficient or effective. It often leads to a misallocation of resources, bureaucratic inefficiencies, and unintended consequences that exacerbate the problems government aims to solve. And when government fails, its mistakes are hard to correct. It’s a sharp contrast with the dynamic and adaptive nature of free markets. The collective decisions of millions of individuals freely spending and investing their own money are incredibly effective at allocating resources, responding to consumer needs and driving innovation. And when the market fails, people with their own money on the line don’t hesitate to change course.”
“Governments often make deals with private companies, offering generous subsidies to encourage development in their respective states. The year 2023 was unfortunately no exception.
According to a new report from Good Jobs First, a watchdog group that tracks economic development deals, 16 states promised more than $10 billion to private companies last year. The group counted 23 “megadeals,” which it defines as any agreement involving at least $50 million in subsidies to a private company.”
“A new audit of Georgia’s Film Tax Credit program found that the state “loses money” on the program. A lot of money, actually: about $160,000 for every job the program creates. Georgia is now spending about $1.3 billion annually on the program, but it generates a return on investment of just 19 cents per dollar, the auditors conclude.”
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“There’s no doubt that Georgia’s program has influenced where movie and TV production takes place. The new audit concludes that the program has induced “substantial economic activity in Georgia,” but that’s simply evidence of the fact that lighting a lot of money on fire will eventually produce some heat. The underlying numbers suggest that Georgia’s subsidies are doing a poor job of generating economic growth or creating jobs.”
“A new California law will require that most food-service workers get paid at least $20 per hour starting next year.
But hundreds of pizza delivery drivers in the Los Angeles area are about to discover Thomas Sowell’s famous adage that the true minimum wage is zero.
Pizza Hut announced Wednesday that it would lay off about 1,200 delivery drivers in Los Angeles, Orange, and Riverside counties, CBS News reported. Pizza Hut franchises are outsourcing delivery to third-party apps like GrubHub and UberEats as a cost-saving measure in advance of the new law taking effect.”
“Each year since 2018, the Center for Economic Accountability (CEA)—a nonpartisan think tank opposed to corporate welfare—has named its Worst Economic Development Deal of the Year, a dishonor awarded to the most egregious misuse of taxpayer funds nominally intended to spur economic growth.
This year, the ignoble honor goes to Michigan, which has awarded over $1.75 billion to Ford Motor Co. and Contemporary Amperex Technology Ltd. (CATL), a Chinese battery manufacturer. The two companies are jointly developing a factory in Marshall, Michigan, that would build lithium iron phosphate batteries for the automaker’s electric vehicle (E.V.) lineup.”
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“facing strong economic headwinds, Ford announced it was “re-timing and resizing some investments.” While the Michigan plant was originally intended to create 2,500 jobs, Ford changed its pledge to 1,700 jobs and lowered its potential output by 40 percent, estimated to shrink the company’s financial investment by $1 billion or more.
Since Ford originally pledged $3.5 billion, Michigan’s contribution to the project could be nearly as much as what Ford plans to spend on its own factory. Gov. Gretchen Whitmer, a Democrat, told reporters that Michigan’s investment may be “resized” as well, and “as Ford has had to make some changes…the state’s role will change as well.”
Of course, the deal’s merits were questionable from the start. When the project was first announced, Whitmer’s office claimed it would have “an employment multiplier of 4.38, which means that an additional 4.38 jobs in Michigan’s economy are anticipated to be created for every new direct job.”
This is a fanciful notion. Tim Bartik of the W.E. Upjohn Institute for Employment Research has estimated that a more typical multiplier on a local or state level is between 1.5 and 2. Last month, Bartik calculated the estimated benefits of Michigan’s proposed investment; while he was broadly positive, he noted that a 4.38 multiplier was “very high,” and “if the Ford project had a more typical multiplier—2.5 rather than 4.38—the project’s gross benefits would be less than the incentive costs.””
“”The slow rollout…primarily boils down to the difficulties state agencies and charging companies face in meeting a complex set of contracting requirements and minimum operating standards for the federally-funded chargers, according to interviews with state and EV industry officials,” the article notes.
Even with federal funds, part of the problem may also be cost, because the chargers are quite expensive to build and maintain. The types of chargers mentioned in the law are either Level 2 or Level 3, also known as Direct Current Fast Charging (DCFC). Level 2 chargers use alternating current electricity and take between four and 10 hours to charge an E.V., while DCFCs use direct current and can charge an E.V. in less than an hour.
Any long-term solution would prioritize DCFCs—no road-tripper will want to wait all day for their car to charge when fueling up a gas burner takes minutes. But DCFCs are considerably more expensive to install: A 2019 study by the Department of Energy found that while Level 2 chargers can cost up to $6,500 to install, DCFCs can cost as much as $40,000. Depending on factors like hardware costs, other estimates have put the price between $50,000 and $100,000.”
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” Ultimately, consumer choices will dictate the future of electric vehicles; if people don’t buy them at their current price and with the current technology, then companies will either innovate or come up with something better. By merely subsidizing the current thing, the Biden administration is upholding the status quo and disincentivizing other innovations that could revolutionize the industry and make environmentally-friendly vehicles truly competitive with their gas-burning counterparts.”
“GiveDirectly has been conducting the world’s largest test of basic income: It is giving around 6,000 people in rural Kenya a little more than $20 a month, every month, starting in 2016 and going until 2028. Tens of thousands more people are getting shorter-term or differently structured payments.”
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“It matters whether someone gets $20 a month for two years or $480 all at once. Those add up to the same amount of money; this isn’t a Side Hustle King situation. But how you get the money still matters. A certain $20 every month can help you budget and take care of regular expenses, while $480 all at once can give you enough capital to start a business or another big project.”
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“By almost every financial metric, the lump sum group did better than the monthly payment group. Suri and Banerjee found that the lump sum group earned more, started more businesses, and spent more on education than the monthly group. “You end up seeing a doubling of net revenues” — or profits from small businesses — in the lump sum group, Suri said. The effects were about half that for the short-term $20-a-month group.
The explanation they arrived at was that the big $500 all at once provided valuable startup capital for new businesses and farms, which the $20 a month group would need to very conscientiously save over time to replicate. “The lump sum group doesn’t have to save,” Suri explains. “They just have the money upfront and can invest it.”
Intriguingly, the results for the long-term monthly group, which will receive about $20 a month for 12 years rather than two, had results that looked more like the lump sum group. The reason, Suri and Banerjee find, is that they used rotating savings and credit associations (ROSCAs). These are institutions that sprout up in small communities, especially in the developing world, where members pay small amounts regularly into a common fund in exchange for the right to withdraw a larger amount every so often.
“It converts the small streams into lump sums,” Suri summarizes. “We see that the long-term arm is actually using ROSCAs. A lot of their UBI is going into ROSCAs to generate these lump sums they can use to invest.””
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“As you might expect, given how entrepreneurially minded the recipients are, the researchers found no evidence that any of the payments discouraged work or increased purchases of alcohol — two common criticisms of direct cash giving. In fact, so many people who used to work for wages instead started businesses that there was less competition for wage work, and overall wages in villages rose as a result.
And they found one major advantage for monthly payments over lump sum ones, despite the big benefits of lump sum payments for business formation. People who got monthly checks were generally happier and reported better mental health than lump sum recipients. “The lump sum group gets a huge amount of money and has to invest it, and this might cause them some stress,” Suri speculates. In any case, the long-term monthly recipients are happiest of all, and “some of that is because they know it’s going to be there for 12 years … It provides mental health benefits in a stability sense.””
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“you could design it such that a recipient could opt into a $500 payment every two years or a $20 payment every month.
But barring that, long-term monthly payments seem to offer the best of all worlds because they enable people to use ROSCAs to generate lump sum payments when they want them. That enables flexibility: People who want monthly payments can get them, and people who need cash upfront can organize with their peers to get that.”