Last year, President Biden signed the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act of 2022 into law. The bill’s goal was to promote semiconductor research and manufacturing in the United States. According to the Biden administration, the CHIPS Act’s alleged benefits included reducing costs, creating jobs, strengthening supply chains, and countering China.
Unfortunately, the Biden administration subsequently announced a number of limitations on CHIPS funding that undermine its purported benefits. For example, companies seeking federal support will be required to offer affordable child-care benefits and share profits with the federal government. Stock buybacks will be discouraged. Companies will be required to pay Davis-Bacon prevailing wage rates for construction of new facilities.
These ideas have nothing to do with strengthening U.S. semiconductor manufacturing. Notably, none of them were subject to the democratic process that led to approval of the CHIPS Act in the first place. Instead, they were inserted after the fact by the Biden administration.
The goal of the CHIPS Act was to beat China, not copy that country’s central planning. Broad-based reforms, such as providing full and immediate tax expensing for research & development, remain superior to government policies that attempt to pick winners and losers. The Biden administration’s effort to bypass Congress and insert its preferred social policies into the CHIPS Act demonstrates this.