Congress has been trying to figure out how to deal with the microchip industry for many years. As you probably know, Alan Grayson, who gave up his House seat to run for the Senate— and was then sabotaged by Schumer, who preferred to lose the race (which is exactly what happened) with a proven Sinema-quality idiot, than win with an independent thinker like Grayson— is running for his old, and now open, Orlando House seat again. He’s eager to tackle issues like the chip industry and the question of American competitiveness. This morning, he told me that in regard to whether our industrial and defense base would survive an attack on the Taiwanese semiconductor industry, “the solution, as I see it, would be just to require that a certain percentage of production of strategic chips be produced in U.S. factories, even under Taiwanese ownership. We already do this with thousands of defense-related items. I think that the Taiwanese producers would have no objection to it; on the contrary, they might welcome it. The alternative policy of throwing billions of dollars at new competitors based in the U.S.: (a) is blatant corporate welfare, and (b) won’t work. These chips aren’t like potato chips; you can’t just throw potatoes into a fryer and expect them to come out. The Taiwanese have roughly 50 years of expertise in this, and we don’t.” (You can help Grayson get back into Congress here.)
This morning, in an e-mail to his supporters, Bernie wrote that “If you need another reason as to why the vast majority of Americans are disgusted with the status quo, corporate dominated politics of today, here it is. This week the U.S. Senate will be voting on a bipartisan $52 billion giveaway to the very profitable microchip industry. No strings attached. Just a blank check. $52 billion. Here shared his thoughts on the bill and the 107-member conference committee working on it with The Guardian a couple of days ago. “There is no doubt,” he acknowledged, “that there is a global shortage in microchips and semiconductors which is making it harder for manufacturers to produce the cars, cellphones and electronic equipment that we need. This shortage is costing American workers good jobs and raising prices for families. That is why I fully support efforts to expand US microchip production. But the question is: should American taxpayers provide the microchip industry with a blank check of over $50 billion at a time when semiconductor companies are making tens of billions of dollars in profits and paying their executives exorbitant compensation packages? I think the answer to that question should be a resounding NO.”
Let’s review some recent history. Over the last 20 years, the microchip industry has shut down more than 780 manufacturing plants in the United States and eliminated 150,000 American jobs while moving most of its production overseas– after receiving over $9.5 billion in government subsidies and loans.
In other words, in order to make more profits, these companies took government money and used it to ship good-paying jobs abroad. Now, as a reward for that bad behavior, these same companies are in line to receive a giant taxpayer handout to undo the damage that they did. That may make sense to someone. It does not make sense to me.
In total, it has been estimated that five big semi-conductor companies will receive the lion’s share of this taxpayer handout: Intel, Texas Instruments, Micron Technology, Global Foundries and Samsung. These five companies made $70 billion in profits last year.
The company that will probably benefit the most from this taxpayer assistance is Intel. I have nothing against Intel. I wish them well. But, let’s be clear. Intel is not a poor company. It is not going broke.
In 2021, Intel made nearly $20 billion in profits. During the pandemic, Intel had enough money to spend $16.6 billion, not on research and development, but on buying back its own stock to reward its executives and wealthy shareholders. Last year, Intel could afford to give its CEO, Pat Gelsinger, a $179 million compensation package. Over the past 20 years, Intel spent more than $100 million on lobbying and campaign contributions while shipping thousands of jobs to China and other low-wage countries. Does it sound like this company really needs corporate welfare?
Another company that would receive taxpayer assistance under this legislation is Texas Instruments. Last year, Texas Instruments made $7.8 billion in profits. In 2020, this company spent $2.5 billion buying back its own stock while it has outsourced thousands of good-paying American jobs to low-wage countries.
In 1968, Dr Martin Luther King Jr said: “The problem is that we all too often have socialism for the rich and rugged free enterprise capitalism for the poor.”
I am afraid what King said 54 years ago was accurate back then and it is even more accurate today.
We have heard a lot of talk in the halls of Congress about the need to create public-private partnerships– and that all sounds very good. But when the government adopts an industrial policy that socializes all the risk and privatizes all the profits that’s not a partnership. That is crony capitalism.
In my view, we must prevent microchip companies from receiving taxpayer assistance unless they agree to issue warrants or equity stakes to the federal government. If private companies are going to benefit from generous taxpayer subsidies, the financial gains made by these companies must be shared with the American people, not just with wealthy shareholders. In other words, if microchip companies make a profit as a direct result of these federal grants, the taxpayers of this country have a right to get a reasonable return on that investment.
Further, if microchip companies receive taxpayer assistance, they must agree that they will not buy back their own stock, outsource American jobs overseas or repeal existing collective bargaining agreements, and they must remain neutral in any union organizing effort.
This is not a radical idea. All of these conditions were imposed on companies that received taxpayer assistance during the pandemic and passed the Senate by a vote of 96-0.
Bottom line: let us rebuild the US microchip industry, but let’s do it in a way that benefits all of our society, not just a handful of wealthy, profitable and powerful corporations.
Many people have been urging Ro Khanna to run for president. He told me a few weeks ago that he’s sticking with Biden. I suspect that if Biden decides not to run, Khanna would be behind Bernie and if not him, Elizabeth Warren. My guess is that eventually he will run, but not in 2024; just a guess. When it comes to policy, which is what Khanna lives for, there a lot more clarity. This afternoon, he told me what has gone into his own thinking about the USICA, the bill dealing with industrial competitiveness and, specifically, the microchip industry. He put it right into context with a reminder that “middle class wealth has declined nearly 25% since 1980” and that “it was a colossal mistake to ship our means of making a living offshore— millions of good paying jobs gone because of free market absolutism. Both parties messed up. It was all about the bottom line and lower prices. It decimated hometowns and took away dignity. We need to make things in America.”
He explained that the U.S. doesn’t just “need need to produce semiconductors, batteries, next generation of steel… but masks, basic PPE, basic supplies. This will take more than tax cuts and deregulation. That’s where Trump was wrong. Like in the 1940s, it will take a mobilization of the American people, businesses, educational institutions, and, yes, the government, to industrialize this nation. We can finance the opening of new factories. We can build a new workforce. You shouldn’t be forced to leave your hometown to get a job. What America needs is a trade surplus again. Can anyone guess last trade surplus? 1975. How about we have a goal by end of this decade of having a surplus? Let’s build our productive capacity again. Let’s have a victory for production. More important than the bloated defense budgets…”