Pass the CHIPS, Then Pop the Champagne

The CHIPS bill to support US electronic defense and industrial infrastructure should be passed to send a clear message to China
By J.G. Collins
J.G. Collins
J.G. Collins
J.G. Collins is managing director of the Stuyvesant Square Consultancy, a strategic advisory, market survey, and consulting firm in New York. His writings on economics, trade, politics, and public policy have appeared in Forbes, the New York Post, Crain’s New York Business, The Hill, The American Conservative, and other publications.
July 24, 2022Updated: July 26, 2022


NEW YORK—It’s rare that one would find socialist Sen. Bernie Sanders (I-Vt.) and conservative Fox News commentator Steve Moore on the same side of an issue, let alone legislation, but the CHIPS bill, expected to go before the Senate next week, is just such an instance.

I happily oppose both of them, though Moore more so than Sanders.

The Creating Helpful Incentives to Produce Semiconductors for America Act, or the CHIPS for America Act (HR 7178), provides a wide variety of incentives and grants to support domestic chip production, innovation, and expertise. (See this link for specific details.) The Congressional Budget Office (CBO) has scored the cost of the bill at $79 billion over nine years, to 2031.

Sanders sees the bill as “corporate welfare,” largely for Intel, Texas Instruments, Micron Technology, Global Foundries, and Samsung, and is demanding that the chip manufacturers give the United States an equity stake in their companies in exchange for taxpayer support, abstain from stock buy-backs, not outsource their work overseas, stick with their existing collective bargaining agreements and remain neutral in union organizing efforts.

As what former Sen. Rick Santorum once dubbed a “blue collar” conservative, there’s not much in Sanders’ position with which I take issue; perhaps his requirement that the company “remain neutral” in union organizing efforts. To the extent allowed by law, I think companies have a right to present the case as to why their workers should not be unionized so that they can make an informed decision. But other than that, they seem reasonable. (And, lest you doubt my own “conservative” bona fides, my liberal friends think I make Steve Bannon seem like Mr. Rogers.)

Moore’s opposition is more generalized and more ideological. Like most conservatives who came of age in the 1970s and 80s, he has a libertarian bent, so he is opposed to government support of private companies. It’s a view he shares with Sanders, who says it “socializes all the risk and privatizes all the profits.” Sanders called such subsidies “crony capitalism’ in a recent press release.

But both of them are wrong for different reasons, particularly Moore.

Moore’s view is wrong, as is most economics that is borne of blind fealty to ideological dogma.

While it is taboo among my fellow conservatives to “choose winners and losers” in the economy, that seems to be the case only when one reaches the pinnacle of politics in the national arena. I say that because virtually every Republican governor who has sought the presidency in my lifetime has engaged in some form of what economists call “industrial policy.”

Industrial policy, as defined by the OECD, is “any type of selective government intervention or policy that attempts to alter the structure of production in favour (sic) of sectors [or activities] that are expected to offer better prospects for economic growth in a way that would not occur in the absence of such intervention in the market equilibrium.”

Did your governor-cum-presidential hopeful sign over an abandoned factory for $1 to a manufacturer who promised to make it productive again? Or engage in “Payment-in-Lieu-of-Taxes” or a PILOT agreement to subsidize a new commercial development? Then he or she engaged in industrial policy. Even Republican presidential-flavor-of-the-month Gov. Ron DeSantis does industrial policy. But if DeSantis gets on the 2024 presidential campaign trail, you can probably bet your next month’s rent or mortgage payment that he will loudly condemn “picking winners and losers” at some point on the campaign trail.

Ditto that with former South Carolina Gov. Nikki Haley, another of the wannabe Republican nominees for president. She’s voiced her opposition to the CHIPS bill as that evil “picking winners and losers” industrial policy that real conservatives are supposed to eschew like the Black Death.

And, sure enough, to signal to the “conservative” Republican base, Haley resigned from the Boeing board of directors in 2020 to prove her “conservative” bona fides because her colleagues on the board all voted to receive federal government funding to help Boeing get past the pandemic.

I had to chuckle at Haley’s move a bit because there would be no Boeing if it were not for U.S. industrial policy. The reason that Boeing even exists—and that Boeing has led the world in the production of commercial jetliners—is because it developed the first commercially viable jetliner, the legendary Boeing 707. But the 707 was built on the airframe of the Boeing KC-135 Stratotanker, the “flying gas station” of the U.S. Air Force, after it adopted the practice of mid-air refueling of other aircraft in the 1950s! (The industrial policy that created Boeing continues even to this today, with the Boeing 767, shown in this link, being built on the same airframe as the KC-45 Pegasus tanker, shown in this one.)

Boeing KC-135 Stratotanker at Kandahar International Airport in 2019
Boeing KC-135 Stratotanker at Kandahar International Airport in 2019, via Wikimedia Commons, shown here with an engine upgrade. It is indistinguishable from the legendary Boeing 707, shown in this link here with its original 1950/60’s era engine configuration.

Fact is, the industrial policy conservatives like Haley and Moore abhor has been the backbone of most U.S. innovation and development for most of the 20th century. The wrist-watchfour-wheel drive trucks and utility vehicles; facial tissues, tea bags, toilet paper, and tampons—even much of the food in your child’s lunch box—were all born out of the United States or allied governments seeking to fulfill a sometimes urgent government need, usually in wartime.

In the civilian sphere, patent No. US6799176B1, described as a “Method for scoring documents in a linked database,” was funded by a National Science Foundation government grant. You know it better as “Google.” The internet itself was derived from a program of the Defense Advanced Research Projects Agency (DARPA).

And even before that, in the earliest days of the nation, the government was picking “winners and losers.” While Congress shelved Hamilton’s “Report on Manufactures” when he presented it in 1791, it enacted the tariffs he recommended just six months later. Everything from the Telegraph to the Trans-Continental Railroad would come from the government “picking winners and losers.”

Our course, politics, and business can breed, if not corruption, then at least the appearance of it, and, certainly, the opportunity for it. That’s been proven from the Teapot Dome Scandal to the Solyndra scandal of the Obama administration. So, it’s a prerequisite that government funding or incentives of private businesses be thoroughly transparent, with detailed reporting of expenditures in an “online” checkbook, as well as stringent and continuous oversight, frequent audits, and other tools to ensure money is not being wasted.

The CHIPS bill is a necessary element in maintaining both our national defense and our economic security. It should not be thwarted by libertarian dogma that, in many instances, is simply wrong.

Chips today are as critical to maintaining a resilient national defense infrastructure as ball bearings were to The Greatest Generation’s defense infrastructure in World War II. Not only must there be a source of supply here in the United States, but we must innovate and maintain it, including “legacy” chips for our older defense systems. (Fun Fact: While it’s been overhauled and upgraded, the Boeing B-52 will have been a critical element of the U.S. defense arsenal for 75 years by the end of this decade.)

And all that is to say nothing of the chips we use for our cars, our computers, our major appliances, and internet infrastructure. They are what the logistics and supply chain experts call “mission critical.” What you want done cannot get done without chips and a ready supply of them.  (I speak from experience. When our old dishwasher broke down in October, but was still under warranty, we were told the chip to fix it would not be available until February. February!)

An Important Word

Re-shoring U.S. chip manufacturing might be misinterpreted by China as our “stepping back” from Taiwan because Taiwan’s chips are so critical to our economy. It could send a dangerous and unintended message to Beijing and the belligerent elements of the Chinese Communist Party. It should not, and Congress and the president should ensure that it doesn’t.

To make that clear to all the world, simultaneous with the signing of the CHIPS bill, President Joe Biden should announce—clearly and unequivocally—and surrounded by the leadership of both houses of Congress as well as the ambassadors of Australia, India, Japan, and South Korea—that we have abandoned our policy of “strategic ambiguity” with respect to Taiwan in favor of “strategic certainty”—that the United States will fully defend Taiwan from Chinese aggression, particularly invasion, and that any attempt to “quarantine”—blockade—the island by the Chinese Navy or interfere with Taiwan’s airspace, will be treated by the United States as an act of war upon both Taiwan and the United States.

To back it up further, we should offer an additional sale of weaponry to Taiwan to defend itself and schedule joint exercises with “The Quad”—Japan, Australia, India, and us—to protect the Straits of Taiwan.

Taiwan represents so much more for the United States than being the world’s biggest chip manufacturer. It is an issue for our defense of the freedom of the seas and support for refugee populations fleeing persecution by nations hostile to American interests, the very reason Taiwan came to be after the communist takeover in China.

We need to make clear to all concerned that enhancing our own defense will never be done by abandoning the sacred bond of a long-standing, erstwhile, and important ally.

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.