Senate Central Planning: Advancing Semiconductor 'CHIPS' Subsidy Scheme

P. Gardner Goldsmith | July 25, 2022
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From the fall of the Roman Empire to Mao’s Cultural Revolution and FDR’s insane and cronyist “New Deal,” central-planning has been shown to be both immoral and economically disastrous.

But politicians measure success differently than we do. For them, it seems that success is about increasing control and influence.

And the U.S. Senate offers us a new example of this pathology, in the form of the opaque-but-advancing, $52 billion “CHIPS” Act, the text of which they have not released, but which House Speaker Nancy Pelosi's hubby, Paul, seems to find "interesting," and which Senators have moved, step-by-step, towards passage.

As Larry Ramer reported Wednesday, for InvestorPlace, via MSN:

“The Senate voted 64-34 to move the legislation, known as the CHIPS (Creating Helpful Incentives to Produce Semiconductors for America) Act, forward. In the coming days, the bill will have to be voted on multiple, additional times by both houses of Congress.”

Yes, it’s called “CHIPS,” as in computer chips -- such brilliant, unmatchable wordplay only seems to pop up in government.

Darragh Roche writes for Newsweek:

“The legislation would provide $52 billion in government subsidies to companies that produce semiconductors, according to Senate aides, in an apparent effort to see those firms ramp up production.

The bill also provides for a four-year, 25 percent tax credit designed to encourage companies to open more plants in the U.S. That tax credit has an estimated value of $24 billion.”

Who says there isn’t a Santa Claus?

While the tax credit can be separated from the immorality of this subsidy package (it is, after all, a pause of tax theft), it is worth mentioning that politicians often use tax codes to manipulate those they tax (or don’t), in order to steer social behavior towards politically preferred ends.

And that’s just the start, for this CHIPS scheme epitomizes the millennia-old conceit of central-planners.

Related: Food Prices: How Biden’s Authoritarianism Has Contributed To Farmers’ Massive Fertilizer Shortage | MRCTV

This cash-filled political piñata also contains an amendment -- introduced by none other than NY Senator Chuck Schumer (D) – that hands even more cast to the federal government itself, bringing the grand total for this monstrosity to $250 billion.

Which fits the “evolution” of most spending bills. If a Senator previously opposed the CHIPS bill, this latest permutation could shovel a couple billion to his or her favorite federal agency, which, in turn, will shower that cash on some program or state "nail" that the politicians say needs hammering.

It’s mostly unconstitutional spending, done in ways that the politicians know will win over their “adversaries” and local special interests, and which, in the end, always increases the size and burden of the bureaucracy.

Of course, they and their special interest pals offer trite rhetoric about “saving American jobs” and what they deceptively portray as “competitiveness,” and Carroll notes that these are just the kinds of trigger-terms that Jim Farley and Pat Geslinger (CEOs of Ford and of Intel, respectively) used July 19, in a CHIPS-loving Op-Ed for the Wall Street Journal:

“’The pandemic supply-chain shock exposed a problem that had been mounting for years,’ they write. ‘The U.S. share of global chip manufacturing has declined to 12% from 37% in 1990. South Korea and Taiwan, notably, have spent years actively investing in [read: subsidizing] their own chip manufacturing, creating an uneven playing field for U.S. chip makers that harms our economy and global competitiveness.’”

Ahh, yes. Competitiveness. It’s always great to hear people push anti-competitive, politically-directed favoritism by employing the term “competitive” as if it has anything at all to do with the central planning. Just what the U.S. percentage of “global chip manufacturing” has to do with better living standards for people remains unanswered in the special-interest-op-ed. Essentially, it’s the argument of the “seen” versus the unseen, as explained by 19th Century French economist, Frederic Bastiat. Politicians might pick a certain industry, compare it to a similar industry elsewhere, and claim a disparity needs “repair” through redirecting consumer spending, via political means, towards the “lacking” native industry.

But that’s an improper “measurement.” If there are fewer sales of New England peaches in the U.S. because peaches don’t grow well in the region, and local land and other resources are better utilized doing other things, should politicians compare those sales to Georgia peaches and claim New England farmers need subsidies extracted from the consumers, who could save by buying the Georgia peaches?

It's important to note, here, that this is $52 billion dollars taken from taxpayers, meaning all this cash won't go to the businesses and industries on which the consumers would otherwise be spending them. It's a reallocation of wealth, mandating spending via a bloated government rather than letting it flow where the free market guides.

Of course, internationally, government-imposed lockdowns, regulations, and inflated money stock all have contributed to this chip problem, but getting government further involved will not solve anything or free creative potential from government-created chains. It steers consumer money where consumers would not have placed that cash.

Indeed, if U.S. consumers can get something for less, it leaves them with more money leftover to buy new products – from the US or from anywhere else, developing new breakthroughs that would be lost if they’d been stripped of their free choice.

Politicians must know this, but they choose political connections, not acknowledging that central-plan fallacy has been pushed and exposed over and over.

In fact, fans of Michael Crichton might recall that at the close of his 1992 novel “Rising Sun,” he thanked then-Senator Al Gore for Al’s insight regarding the great value of Japan’s central-plan to subsidize computer chip making, a plan that would see their market share rise -- and please politicians, who thought that chip-making was the key money-maker for computers.

But it turned out that the Japanese government’s bet with consumer money and redirection of consumer choice was wrong. In just a few years, it became clear that the value for computers was not the chips -- which could be made cheaply, anywhere, and revealed low profitability -- but the software that went on them. The Japanese central plan failed, and, interestingly enough, Mr. Crichton soon discovered that Gore was wrong about something else: Climate, which Crichton correctly pointed out in his 2004 novel, “State of Fear.”

The point of economics is to get more for one’s toil, not less, and, even if a foreign government is subsidizing an industry, as unfair as that is, consumers should be free to choose or not choose that item. Likewise, they should not have to spend tax money to prop up the industry they avoided.

Central planning – in every nation – eventually fails, and we should be left out of political plans like CHIPS.

But, of course, ALL political action – from what special-interest-favoring schemes like CHIPS, to what often gets depicted as “acceptable, basic governance” like schools or police -- is central planning. All of it.

The more people wake up to this fundamental fact, the better chance there is that their progeny will live in a freer, more productive world.

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