We Need Microchips, but Not Crony Capitalism
For two months, a 107-member conference committee has been working to finalize an agreement on the US Innovation and Competition Act (USICA) which would provide more than $50bn in corporate welfare to the highly profitable microchip industry with no strings attached.
There is no doubt 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 $50bn 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 $9.5bn 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 $70bn 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 $20bn in profits. During the pandemic, Intel had enough money to spend $16.6bn, 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 $179m compensation package. Over the past 20 years, Intel spent more than $100m on lobbying and campaign contributions while shipping thousands of jobs to China and other low-income 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 $7.8bn in profits. In 2020, this company spent $2.5bn 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.
Bernie Sanders is a US senator from Vermont and the Chairman of the Senate budget committee
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