Joe Biden’s chips choices undermine bipartisan industrial initiatives

The writer is executive director of American Compass

Joe Biden has done an impressive job of undermining his own approach to governance in recent months. On a number of fronts, bipartisan policy has granted the federal government new authority to address some vital national problem, and each time the White House has made a point of subverting that authority and discrediting the argument that government could ever use it well.

The most recent example comes in the implementation of the Chips and Science Act, which called for more than $39bn in subsidies to support construction of domestic capacity for semiconductor manufacturing. In long-awaited guidance, the Department of Commerce announced an outlandish set of requirements for companies hoping to use the subsidies, most notably that they had to have plans to ensure affordable childcare for their workers. Any firm that considered childcare vital to hiring construction workers already had the option to offer it. But imposing a mandate on firms that didn’t see a need seems antithetical to the goal of bolstering semiconductor competitiveness.

The Biden administration’s decision is not only counterproductive with respect to chip capacity, but also an embarrassment for the broader effort to re-establish the American tradition of industrial policy. Critics warn that even if a public boost for manufacturing is worthwhile in theory, it will become a political boondoggle in practice. The president appears determined to prove the critics right, sharply reducing the chances of bipartisan support for exactly the sort of policy he claims should be a priority.

This same preference for delivering short-term political wins to progressive interest groups, at the expense of invalidating important policy principles, was on display when the administration strained last summer to sell half a trillion dollars in student-loan forgiveness. “Why is there a double standard here?” asked Bharat Ramamurti. The plan, he argued, was akin to the bipartisan Paycheck Protection Program launched early in the Covid-19 pandemic to help shuttered businesses meet payroll. If Republicans supported forgiving loans to small business owners (as was PPP’s purpose), they should also forgive loans to anyone who borrowed money to attend college (something never contemplated when the loans were made).

PPP was a remarkable legislative achievement — Doug Holtz-Eakin, a conservative former director of the Congressional Budget Office, called it “the single most effective fiscal policy ever undertaken by the United States government”. It stands for the principle that costly congressional action can be an appropriate and effective response to a crisis, helping millions of Americans make ends meet. Or at least, it used to. Now it serves as a warning to conservatives: vote for even the best and most worthy of government interventions, and your opponents will use it to justify even the worst and least worthy ones, and claim there’s no difference.

Yet another fight is brewing on trade, where Biden has taken the extraordinary action of suspending enforcement against south-east Asian nations serving as a way station for Chinese companies dumping solar panels into the American market. Using presidential power to confront Chinese trade abuses had become a bipartisan priority, but this White House is using that power instead to excuse the abuses for the sake of fighting climate change. Even some Democrats see the folly here. Senators Sherrod Brown and Bob Casey have asked Biden to reconsider the decision, while a bipartisan group in the House of Representatives has introduced legislation to reverse it.

Heading into the 2024 presidential campaign, libertarian Republicans who oppose any government interventions in the market are pointing gleefully at Biden’s mis-steps as proof that policies like the Chips and Science Act, PPP and trade enforcement merely hand Democrats more power to misuse. But that too is a mistake. Indeed, a decision like childcare-for-chips is so bizarre that one suspects the White House is actively baiting its opponents into turning against the entire project of rebuilding American manufacturing. The result is Democrats arguing for restoring US technological supremacy and Republicans arguing to just give it up: score one for the president.

Republicans should instead seize the opportunity to fight on attractive ground. Instead of a debate between progressives who would do something and conservatives who would do nothing, lean into the fight over who can deliver. Who do voters want running American industrial policy, the leaders who are hell-bent on beating China, or the ones who would sacrifice our technological edge for a childcare mandate?

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