The America COMPETES Act of 2022
The last 10 days or so, President Trump has made major joint announcements with Apple and the major chip, semiconductor business sector companies. The ‘news’ is these firms will be spending hundreds of billions to build manufacturing plants in the U.S.
The contrast with “Competes Act of 2022” is most notable as these companies want no part of taking government money to build a plant and allowing government to get its hooks in them.
This piece was first published in October 2022.
You will recall during the pandemic it became obvious that the US was dependent on other countries for some critical supplies, like antibiotics.
In addition, we experienced supply chain problems with cargo ships backed up at some ports for extensive periods of time because of our extended lockdown.
One of those items was semiconductors, or chips, which similar to antibiotics, were manufactured elsewhere – primarily China.
So, Congress and the administration to the rescue. Right?
Well, read on and form your answer to that question.
We’re all aware that government over spending, particularly the last two years, has created a host of other problems for the country and its citizens. We’ve had a cost prohibitive, 2nd Covid Relief package, a massive infrastructure program and most recently a misnamed bill titled “Inflation Reduction.”
But squeezed in among the 42 bills signed into law the last two years was another whopper, the America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (America COMPETES) Act of 2022, signed into law in June of that year.
This lengthy bill has 12 sections. The first, titled Division A, appropriates 52B to support the relocation of semiconductor manufacturing back to the US. The other 11 sections, Divisions B through K, are about the creation of numerous new entities and collaborations to advance the technology for semiconductors.
Sticking with Division A, so far five smaller chip companies have indicated interest in accessing some of the $52B largess, primarily to build plants in Ohio. Intel Corp hasn’t, but has the option to apply for some of it. The only restriction under the law is companies granted this money cannot use any of it to buy back stock or to pay dividends.
So, the bi-partisan, Congressional and Biden administration answer is to use taxpayer money to build new semiconductor plants in the US. In addition, we will spend another $300B to advance the technology.
While the D.C. crowd was patting themselves on the back for passing the America COMPETES Act of 2022, I didn’t hear one word about:
- How the incredible growth in semiconductor technology has advanced to the point it has without government support, or
- Why semiconductor companies relocated their manufacturing operations from the US to China and elsewhere in the first place.
If you’re going to solve a problem, you’d think you’d want to start with defining and understanding what caused the problem.
The problem is not semiconductor companies don’t have, or have access to, the resources to build their own plants or to develop their own research. That’s never been a problem. But the obvious solution to our semiconductor problem – in the minds of our genius, political leaders – is to subsidize the building of manufacturing facilities here and advances in the technology. Get it?
So, like subsidizing ethanol for years before stopping and now subsidizing the purchase of electric cars, our government is adding the spending of gobs of money we don’t have to subsidize the building of manufacturing plants
At least with electric vehicles it’s a tax credit and not money out of pocket.
But in the same time frame, several months after the COMPETES bill was signed, Congress passed an “inflation reduction” bill which added a minimum 15% corporate income tax to the pile – hardly an incentive for business to locate here. Oh, and that “inflation reduction” bill spends tens of billions to subsidize the solar panel industry – in addition to doubling the size of the IRS.
No one can question the giant strides made in semiconductor research and development. Chips have gotten smaller and smaller with incredible increased capacity – all without the government. The technology is not a problem. Why spend $300M to solve a problem that doesn’t exist? A solution looking for a problem.
If anyone in Washington wanted to fuel our economy, eliminate shortages of critical supplies, and solve supply chain issues, they would stop and think about why current circumstances present a problem, how this problem developed, and consider changing those things that caused the problem in the first place.
Building plants for manufacturers is a huge, sucking, sink hole. Putting the government hooks into critical supplies manufacture and distribution will not increase and quantity or quality of those supplies. Just the opposite.
One does not need to go further than the most recent example for business failures after government involvement – Venezuela.
What needs to happen is for our federal government to create a business-friendly environment.
Unneeded regulations and rules need to be negated. The corporate income tax should be abolished.
Those types of incentives would incentivize businesses to locate and operate here and would generate all the private sector capital needed – both domestic and foreign – to make all the manufacturing, supply chain problems and technology advancement a distant memory.
And all without government spending a dime.
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Have a great and prosperous week.
Hug somebody.
References:
SPIDER Bytes
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