Federal Government Bails Out Another Industry

Continuing on the theme of corporate welfare and industrial policy, one of the more recent additions to the federal dole is the once-dominant semiconductor maker Intel.

The company’s most recent earnings report disappointed investors, as the company disclosed that its manufacturing business lost $7 billion last year. 

That’s real money. But don’t weep for Intel. Thanks to the federal government, it’s going to get billions of taxpayer dollars to expand its chip making business in the U.S. Job, creativity, prosperity, national security, and a pony in every paddock are sure to follow.

Except corporate welfare does strange things to companies. It makes them less competitive, less innovative. And above all, it makes them more dependent of the feds for even bigger contracts, protection, and subsides. As the Wall Street Journal writes of Intel:

All told, Intel could pocket some $50 billion in federal subsidies. Yet Mr. Gelsinger wants more. American chip manufacturing “doesn’t get fixed in one three- to five-year program,” the CEO said last month. “I do think we’ll need at least a CHIPS 2 to finish that job.”

But that’s not all the taxpayer cash the company is pocketing…nor is it all the troubles it faces:

Earlier this year Intel said it is delaying work on its Ohio plant owing to “business conditions” and “market dynamics.” The factory—which is also getting up to $2 billion in state subsidies—now isn’t expected to be operational until 2027 or 2028, two to three years later than projected.

All the more time to push for that next round of subsidies.

But a more useful outlet for all that lobbying, and for industrial policy/corporate welfare advocates in general would be to re-evaluate their assumptions. Failing that, they could go to first (economic) principles. There, they will run smack into an iron rule of economics, neatly summarized in this 1993 St. Louis Federal Reserve Bank paper:

To work, the benefits and the costs of any [industrial] policy must be identified and measured correctly. Each subsidy given to an industry or firm generates an opportunity cost: the cost of foregone alternatives. In other words, to correctly evaluate a policy, you need to know not only what you’re getting, but also what you’re giving up. Based on industrial policy experiments in several countries, most economists have little confidence in the government’s ability to measure these benefits and costs properly. [emphasis added]

Or looked at historically, we have Bastiat’s story of the broken window – or, what  is seen and what is not seen.

Politicians and corporate C-Suite occupants see the activity subsides can produce – factories employing people making the latest gadgets. What cannot be seen is what the people paying for those subsidies – taxpayers of all shapes and sizes – could have done if the state had not taken their money and given in to someone else.

Those costs cannot be tallied, but they are real opportunity costs. Corporate welfare recipients and the welfare hustlers who supply them won’t admit there are such things as opportunity costs. How can pols create photo-ops and nifty talking points on activity people do on their own…and how would they possibly take credit for it?

The opinions expressed in this article are those of the author and do not necessarily reflect the positions of American Liberty News.

READ NEXT: Think Tank Scholar Exposes Washington Hypocrites

Norman Leahy

+ postsBio

Norman Leahy has written about national and Virginia politics for more than 30 years with outlets ranging from The Washington Post to BearingDrift.com. A consulting writer, editor, recovering think tank executive and campaign operative, Norman lives in Virginia.

• Norman Leahy

  https://americanliberty.news/profile/nleahy/

  

  June 13, 2024

  Candidates Picking Apart America’s Political System Is Nothing New
• Norman Leahy

  https://americanliberty.news/profile/nleahy/

  

  June 11, 2024

  Biden's Attempts At Protectionism Are Nothing More Than An Election-Year Red Herring
• Norman Leahy

  https://americanliberty.news/profile/nleahy/

  

  June 10, 2024

  Voters Must Not Let AI Muddy Modern-Day Political Waters
• Norman Leahy

  https://americanliberty.news/profile/nleahy/

  

  June 4, 2024

  Politicians Look To Insert Themselves Into Artificial Intelligence Advances