America’s Semiconductor Industry Doesn’t Need $52 Billion in New Subsidies To Stay Ahead of China

“Rather than countering a perceived threat from China, lawmakers risk bogging down one of the most innovative and successful parts of the American economy with an industrial policy that will force chipmakers to care more about what makes Washington happy than what is best for their own businesses.”

“Companies that, by the way, admit they don’t need the cash to be competitive. Intel, one of the world’s biggest chipmaking companies, is in the process of building a $20 billion fabrication facility in Arizona. In March, CEO Pat Gelsinger said the project “would not depend on a penny of government support or state support.” (Though he immediately followed that comment by saying that “of course…we want incentives” and it appears that Congress is prepared to dutifully provide them.)”

“According to the Semiconductor Industry Association, a trade group, American-based firms control 47 percent of the global share of the semiconductor industry—a far cry from congressional concerns about the U.S. losing its competitive edge.”

“The trick that lawmakers are trying to pull here is to focus on where semiconductors are made. But this doesn’t really matter. It’s true that a smaller share is manufactured in the U.S. today than 30 years ago, but that’s the result of natural shifts in the market, not evidence of a collapse in American technological prowess.
Indeed, American companies are still at the forefront of semiconductor development—earlier this month, American-based IBM announced a breakthrough in the development of the world’s first two-nanometer chip.”

“It takes a long time to make semiconductors—up to 26 weeks, in some cases—and production is still ramping up again in the wake of last year’s disruptive pandemic. This isn’t a nationalist issue in which some evil foreigners are cutting off America’s share of semiconductors, but a market-based issue that will be resolved as chipmakers increase production capacity to catch up to increasing demand.
But what about China? Yes, the Chinese government is investing heavily in semiconductor-making technology, but it remains far behind America in terms of technological know-how. A recent Nikkei report shows that China mostly manufactures nothing smaller than 14-nanometer chips, which are several generations behind the most advanced chips being made elsewhere—remember, IBM just announced plans for a two-nanometer chip. Closing that gap will be difficult now that America has banned the sale of semiconductor-manufacturing equipment to China (and enforced that ban even when the sale involved other countries).

If there is one major worry for the global supply chain of semiconductors, it is the island of Taiwan. The majority of the world’s semiconductors are made in Taiwan, which is home to the Taiwan Semiconductor Manufacturing Company, by far the world’s largest chipmaker. There are obviously many complicated geopolitical issues involving Taiwan that America and the world’s semiconductor industry will have to navigate in the coming years—but it is downright foolish to believe that $52 billion in subsidies will make a meaningful impact in that complex situation, or in a global market that was worth $425 billion last year alone.”

“All it will do is shovel $52 billion of taxpayer money (some of it probably borrowed from China, ironically enough) to successful businesses flush with cash.”

Foxconn Finally Admits It Won’t Create 13,000 Jobs in Wisconsin

“When you subsidize something, the old adage goes, you’ll get more of it.

But some ideas make so little economic sense that even the largest corporate subsidy ever awarded by a state government isn’t enough.

It’s been obvious for quite some time that Wisconsin’s highly touted deal with Taiwanese tech giant Foxconn was going to fall well short of the lofty promises made by the project’s supporters. Then-President Donald Trump, for example, predicted in 2018 that the planned factory on the outskirts of Milwaukee would be nothing less than “the eighth wonder of the world.”

Exactly how short it will fall is now official. In filings with the state, Foxconn says it now plans to employ 1,454 people and invest about $672 million into its still-under-construction factory in Mount Pleasent, Wisconsin. That’s a long way from the $10 billion that the company initially promised to spend building a plant that would have employed 13,000 workers. In response to the amended contract, the state will recover $2.77 billion of the subsidies originally promised to Foxconn—though the company will still receive $80 million from Wisconsin taxpayers, according to a statement from Gov. Tony Evers.

But recovering those subsidies won’t bring back the residential neighborhood that was flattened to make space for the factory. Developers bulldozed 75 homes, some of which were seized through eminent domain, because why should mere houses full of people stand in the way of the eighth wonder of the world?

The town of Mount Pleasent invested more than $1 billion in the project—effectively mortgaging its entire future on the promise of thousands of new jobs and the tax-paying residents who would come to fill them. Those jobs won’t be coming, but the town did have its credit rating downgraded.”

“From the outset, the deal didn’t make sense. Foxconn promised to make Wisconsin a hub for the manufacturing of HD television screens and other high-tech products, but the company never explained how it planned to make the math work. Besides the relatively higher cost of American labor, there were serious supply chain and logistical issues to be overcome for a factory that was, as TechCrunch put it in 2019, “essentially [in] the middle of nowhere, without the sort of dense ecosystem of suppliers and sub-suppliers required for making a major factory hum.””

“The state’s Legislative Fiscal Bureau, a number-crunching agency similar to the federal Congressional Budget Office, calculated that it would take the state until 2043 to recoup the $3 billion handout, which was the largest such subsidy in Wisconsin history. Even if all 13,000 promised jobs went to Wisconsinites, the tab would be more than $230,000 per job created, the bureau found.”

“The entire saga provides an obvious lesson about the wasteful mistakes that state governments make when they throw tax dollars at businesses that promise to create jobs. The best way to create jobs in any state, of course, is to provide a stable economy with comparatively low taxes and a light regulatory touch for all—not to provide special treatment for some and stick others with the bill.

But there’s also a lesson here for politicians who would pursue economic nationalism through greater industrial policy at the federal level. Trump saw the Foxconn deal not only as a way to create jobs, but as proof that reorienting supply chains was a matter of political will rather than economics. The factory, he said in 2018, was evidence that his policies were “reclaiming our country’s proud manufacturing legacy.”

If the largest subsidies ever offered to a foreign company were insufficient to make the Foxconn deal work, maybe that says something about the ability of our political leaders to steer the economy.”

The Government Is Making Us Fat and Susceptible to Viruses

“In all the coronavirus coverage, one issue that rarely makes the headlines is the correlation between body weight and the severity of COVID-19’s effects. And one angle that virtually never makes the headlines is how the government funds the unhealthy foods that increase obesity rates, thereby increasing our susceptibility to such diseases.
Last month the Centers for Disease Control and Prevention (CDC) released a study showing that nearly 80 percent of those hospitalized with COVID-19 were overweight or obese. After age, body weight is the second greatest predictor of COVID-related hospitalization and death. Almost three quarters of all Americans ages 20 and up are overweight, and close to half of that group is considered obese.”

“Not only is the U. S. government not making any efforts to reduce the obesity epidemic, it is actively subsidizing food that contributes to the problem. The U.S. Department of Agriculture recommends that people fill half their plate with fruits and vegetables, yet the vast majority of its food subsidies—$170 billion from 1995 to 2010—go toward the major ingredients of junk food, such as corn, wheat, rice, soy, and milk.”

“We have the power to make real changes in the way we eat and move. The government could help that process by taking its thumb off the scale and ceasing to subsidize these foods.”

Schumer Insists on Keeping Beachfront Bailouts for Wealthy Americans’ Vacation Homes

“The National Flood Insurance Program (NFIP) run by the Federal Emergency Management Agency (FEMA) is $20.5 billion in the hole, even after Congress canceled $16 billion in debt in 2017. This financial shortfall is largely because the program does not charge nearly enough in premiums to pay for the flood damage on the properties it insures. For decades, taxpayer bailouts of the NFIP have enabled people to live and build in flood-prone areas instead of bearing the risks themselves.

In order to address this problem, the NFIP has been working on its new Risk Rating 2.0 initiative, with the aim of charging premiums that more accurately reflect the unique flooding risks of individual properties. The agency had planned to release its updated rates later this year.

Not so fast, says Senate Majority Leader Chuck Schumer (D–N.Y.). The senator’s office recently informed FEMA that adjusted premiums could have a “severe impact” on homeowners, and urged Congress and the Biden administration to work together toward “affordable protection” for flood-prone communities.”

“lots of beachfront dwellers in New York (and elsewhere) have been “unfairly” taking advantage of taxpayers. A recent study by the nonprofit research group First Street Foundation calculates that the average estimated annual loss for each of the 4.3 million properties most at risk of flooding is $4,419, whereas NFIP premiums average $981. In other words, their flood insurance premiums would have to increase 4.5 times over their current rates to fairly cover the flooding risks to these properties.”

“as a result of “direct government provision of subsidized insurance, private markets no longer generate price signals regarding the cost of living in severe-weather regions.” Suppressing the true cost of insurance encourages “private parties to (rationally) assume excessive risk, and dump the cost of living in the path of storms on others. Indeed, much of the development of storm-stricken coastal areas is due to insurance subsidies, and would likely not have happened at the same magnitude otherwise.””

The Left’s New Constitution

“Consider the Emergency Relief for Farmers of Color Act, a $5 billion monstrosity that Georgia Senator Raphael Warnock snuck into the $1.9 trillion American Rescue Plan Act of 2021. The bill aims to provide payments to “Black farmers, Indigenous farmers, and farmers of color.” It includes $1 billion to address “systemic racism” at the Department of Agriculture.

The bill never says explicitly that blacks, Native Americans, or farmers who are immigrants from Latin America or their descendants should receive benefits; instead, it uses the term “socially disadvantaged famers.” For example, it instructs the secretary of agriculture to “forgive the obligation of each socially disadvantaged farmer or rancher who is a borrower of a farm loan made by the Secretary to repay the principal and interest outstanding as of the date of enactment of this Act on the farm loan.”

Warnock’s bill explains that “the term ‘socially disadvantaged farmer or rancher’ has the meaning given the term in 19 section 2501(a) of the Food, Agriculture, Conservation, and Trade Act of 1990.” As that law explains, “The term ‘socially disadvantaged group’ means a group whose members have been subjected to racial or ethnic prejudice because of their identity as members of a group without regard to their individual qualities.” Department of Agriculture regulations also “define socially disadvantaged farmers and ranchers as belonging to the following groups: American Indians or Alaskan Natives, Asians, Blacks or African Americans, Native Hawaiians or other Pacific Islanders, Hispanics, and women.”

In other words, membership in any of these racial, ethnic, or gender categories automatically entitles a farmer to benefits, “without regard to individual qualities.” As University of Maryland professor George La Noue has written, “social disadvantage is, as a practical matter, established at birth, and cannot be challenged by evidence of a successful life.” These are the makings of a rigid caste system in America.”

“These and other bills in the works create entitlements based on race or ethnicity, not need. If the Duchess of Sussex, Meghan Markle, were to turn part of her California estate into farmland, she, too, would get federal money, as could former President Barack Obama, NBA legend Michael Jordan, and Senators Ted Cruz and Marco Rubio. It is that absurd.”

“All of this is likely unconstitutional, violating the Fourteenth Amendment’s Equal Protection Clause, as well Titles VI and VII of the 1964 Civil Rights Act.”

“Will the courts strike down these laws? Or will they use them to build on the illegitimate new “constitution” of racial preferences? We will see.”

The Foxconn Con

“Two years after Taiwanese tech giant Foxconn broke ground in Wisconsin, the massive LCD factory and accompanying tech campus the company promised to build in exchange for $3 billion in state subsidies does not exist and “probably never will,” The Verge reported in October. The company’s Wisconsin outpost was supposed to create 13,000 jobs; as of this year it employed no more than 281 people.”

The Feds Have Doled Out Record Farm Subsidies To Save Trump’s Campaign

“The New York Times details the “gush of funds” Trump has promised U.S. farmers—with more on the way. Some say total farm subsidies could top $40 billion this year. The Times says the figure may be as high as $46 billion. Either figure would be a record.”

“Critics have seized on the manner in which the Trump administration is subsidizing farmers—mostly outside of the traditional (though also lousy) programs funded under the five-year Farm Bill.
“[T]he bulk of USDA payments to farmers since 2017 have flowed through stop-gap programs created by the Trump administration, with payment limits far larger than those that apply to the traditional farm program,” Successful Farming reported in August.

The combination of farm subsidies included in the current Farm Bill and subsidies doled out under Trump’s executive order means, the Times reports, that two out of every five dollars American farmers receive this year will come directly from taxpayers.

Critics, including many Democrats, argue the funds are being doled out as political favors. They appear to have a point. Last month, for example, during an election rally in Wisconsin, Trump announced additional payments to farmers totaling $13 billion.

Non-partisan observers have also labeled them political handouts. “The Government Accountability Office found last month that $14.5 billion of farm aid in 2019 had been handed out with politics in mind,” The Week reports. The Times, citing the same GAO report, also highlighted by some Democrats, shows farm subsidies last year appeared to be directed to “big farms in the Midwest and southern states,” mirroring at least some segments of Trump’s farm base.

That same base has been hit hard by tariffs championed by Trump. In 2018, I predicted (as did many others) that Trump’s international trade tariffs would spur retaliatory tariffs and harm U.S. farmers and consumers in the process. They did just that.

But because Trump’s tariffs hurt U.S. farmers, and because he wants them to vote for him again, he’s sending them cash. That cash even has a name. Last year, one farmer NPR food-policy writer Dan Charles spoke with says he and his fellow farmers have taken to referring to the tariff-induced subsidies as “Trump money.”

“The U.S. Department of Agriculture simply sent [the farmer] a check to compensate him for the low prices resulting from the trade war,” Charles explains.

Most of Trump’s subsidies have gone to large producers.

“Despite the record amount of farm welfare payments doled out by this administration, the smaller struggling family farmers get next to nothing while wealthy landowners and massive, highly profitable agribusiness hoover up most of the federal dollars,” says Don Carr, a senior advisor with the Environmental Working Group, in an email to me this week. “I’m old enough to remember when a Minnesota millionaire qualifying for a puny food stamp benefit was a scandal, yet few feathers get ruffled when rich land barons collect million-dollar government welfare checks.””

The Feds Have Doled Out Record Farm Subsidies To Save Trump’s Campaign

“With the presidential election now just over two weeks away, President Donald Trump has mounted a frantic effort to ensure America’s farmers, a key Trump voting bloc, will support his flagging re-election campaign. In short, he’s shoving piles of cash their way.

The New York Times details the “gush of funds” Trump has promised U.S. farmers—with more on the way. Some say total farm subsidies could top $40 billion this year. The Times says the figure may be as high as $46 billion. Either figure would be a record.”

“Non-partisan observers have also labeled them political handouts. “The Government Accountability Office found last month that $14.5 billion of farm aid in 2019 had been handed out with politics in mind,” The Week reports. The Times, citing the same GAO report, also highlighted by some Democrats, shows farm subsidies last year appeared to be directed to “big farms in the Midwest and southern states,” mirroring at least some segments of Trump’s farm base.

That same base has been hit hard by tariffs championed by Trump. In 2018, I predicted (as did many others) that Trump’s international trade tariffs would spur retaliatory tariffs and harm U.S. farmers and consumers in the process. They did just that.

But because Trump’s tariffs hurt U.S. farmers, and because he wants them to vote for him again, he’s sending them cash. That cash even has a name. Last year, one farmer NPR food-policy writer Dan Charles spoke with says he and his fellow farmers have taken to referring to the tariff-induced subsidies as “Trump money.””

$75 billion in Band-Aids won’t cure ailing airlines

“Sadly, as long as demand for air travel remains so deflated, there’s no way to avoid airlines restructuring and slimming down their payroll. Subsidies provided through the cover of payroll programs aren’t necessary to protect an industry that could restructure through bankruptcy. Airline bankruptcies aren’t the equivalent of an airline collapse. They can continue to fly safely during the process where a judge imposes a stay on creditors’ claims and gives the airlines breathing room until consumers are ready to come back.

Importantly, the bankruptcy process is fair. It shifts the cost of this crisis onto those airline investors who make good returns during good times and should shoulder the decreased value of their investments, instead of taxpayers. Without a bailout, airlines won’t just be flying the friendly sky, but the fairer sky—for all taxpayers”