Last August, President Joe Biden signed the Chips and Science (or CHIPS) Act into law, promising over $50 billion to domestic semiconductor manufacturers to boost domestic production and “counter China.” Pivotal in drafting and negotiating on behalf of the law was Sen. Mark Kelly (D-Ariz.), who beat out Republican candidate Blake Masters in the 2022 midterm elections.
“After over a year of hard work, our landmark microchip manufacturing bill is now law,” the senator said in a statement after the bill’s passage last year, adding that the measure would boost Arizona’s competitiveness in the chip industry and be a “big loss for China.”
However, one economist argued that the policy is actually more aligned with the values of communist China than those of American free enterprise.
“The CHIPS Act is just another example of top-down industrial planning that is more reminiscent of Maoist China than an ostensible market economy,” Mises Institute senior fellow Robert Murphy told The Epoch Times.
Kelly also predicted a return of manufacturing jobs as a result of the law, but Murphy, who received his Ph.D. from New York University in 2003, argued the law’s inclusion of a wage floor is not conducive to that end.
“If they want to ‘create manufacturing jobs,’ then it’s counterproductive to insist on union wage rates,” the economist added. “That means U.S. employers won’t be able to hire as many workers as they otherwise would.”
Another concern among free-market economists is that by flushing historically uncompetitive American firms with new capital, the law will disincentivize innovation by artificially propping up the revenue of domestic chip companies without their needing to improve the product. When asked about this, Kelly, a former astronaut, argued corporate profits are frequently reinvested into research and development, so this should be no different.
“Taiwan Semiconductor Manufacturing Company (TSMC), just as an example, is investing $40 billion of their own money to be able to make this product,” he told The Epoch Times on Wednesday. “This is a small piece of what they needed—to make the economic argument—to close the gap with manufacturing these things in China or Taiwan.”
“We don’t want this technology manufactured in a country which we view as our biggest adversary,” he said.
Also speaking with The Epoch Times on Wednesday was Sen. Todd Young (R-Ind.), who similarly stressed the geopolitical concerns that were the impetus behind the bill’s passage.
“We’re in a global competition here,” he said. “As it relates to the highest-end chips, there’s a national security justification for having domestic supply.”
Murphy acknowledged that parts of the law are not all bad but still disagreed with the implementation strategy, saying it leaves too much discretion to the federal government.
“There are some individual elements that are defensible—such as providing investment tax credits—but even there, it would make more sense to give a broad-based tax rate reduction on all businesses, not targeted breaks where the government picks politically favored firms and techniques.”
From The Epoch Times