On Wednesday, while campaigning in Arizona, Joe Biden revealed that the government reached an $8.5 billion deal with U.S. chipmaker Intel to build four plants in the U.S. that will build advanced computer chips.
Commerce Secretary Gina Raimondo said the deal would enable the U.S. to manufacture 20% of the world's most advanced computer chips by 2030 and create 30,000 jobs.
“Failure is not an option — leading-edge chips are the core of our innovation system, especially when it comes to advances in artificial intelligence and our military systems,” Raimondo told reporters. “We can’t just design chips. We have to make them in America.”
Part of the corporate welfare package includes $11 billion in loans for Intel, making the package of government handouts worth more than $19 billion. Intel, as you can well imagine, is pleased as punch.
“Today is a defining moment for the U.S. and Intel as we work to power the next great chapter of American semiconductor innovation,” said Intel CEO Pat Gelsinger on the company's website. “AI is supercharging the digital revolution and everything digital needs semiconductors. CHIPS Act support will help to ensure that Intel and the U.S. stay at the forefront of the AI era as we build a resilient and sustainable semiconductor supply chain to power our nation’s future.”
As Biden takes credit for the massive corporate giveaway and Intel crows about its good fortune, did anyone ask if all this was necessary? Apparently not. And looking at the fine print would have told Biden and Raimondo that each of those 30,000 jobs was going to cost $283,000 in taxpayer money.
The math gets even worse if you read Intel's press release, which clarifies that 20,000 of those 30,000 new jobs will be temporary construction jobs connected to building new facilities in four states.
But the real kicker is the fact that Intel was already planning to build those facilities—which makes sense, because there is huge demand for semiconductors and the market is growing increasingly concerned about the fact that so many of the world's high-end chips are made in Taiwan and are thus under constant threat from China. According to Intel, the federal government's handout "supports Intel's previously announced plans to invest more than $100 billion in the U.S. over five years to expand U.S. chipmaking capacity."
Intel is a hugely successful, massively rich corporation. They don't need $8.5 billion in taxpayer money to build four plants that they were going to build anyway! They were going to spend $100 billion building plants.
And you thought federal elections weren't paid for with taxpayer dollars. This isn't the end of it either.
Unfortunately, this is likely only the start. The Biden administration still has $39 billion in CHIPS Act subsidies to distribute in the coming months, according to The New York Times. Even before that money is out the door—and long before anyone has had a chance to measure how effective the spending was—administration officials and top executives at chip-making companies agree that Congress should pass another round of subsidies.
"I do think we'll need at least a CHIPS 2 to finish that job," Patrick Gelsinger, Intel's chief executive, told the Times this week. The greedy bastard already has his hands out for more.
It isn't just the moral hazard of the federal government picking and choosing winners and losers. It's an extraordinarily inefficient strategy to achieve the goal of building chip plants and creating jobs.
National Review's Dominic Pino explains, "Supply-side orthodoxy and industrial policy often have a similar goal: to increase capital investment. But they go about pursuing that goal in very different ways." Actions like tax cuts reduce the cost of investments and allow the market to decide where to place new investments.
Using tax dollars to further Biden's presidential campaign when the spending isn't necessary piles more waste on the trillions Biden has already blown.
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