One recurring theme that no one in Washington seems capable of learning is that the best way to destroy an industry is to have the government subsidize it.
That lesson came shining through in recent days when Intel acknowledged that it suffered a $16.6 billion quarterly loss. That is more than the entire annual budget of some states.
Wait. Isn’t this the same Intel that is in line to be the biggest corporate welfare recipient of federal aid under the CHIPS Act — the Biden bill designed to make sure that microchips are made in the United States, not China? Intel is first in the soup line to receive $8.5 billion in grants and $11 billion in subsidized loans. The checks haven’t been written yet, but this will be one of the biggest welfare checks ever written to an American company.
Maybe President Joe Biden, who had a joyous photo op with Intel officials when the bill was passed, should have second thoughts. Intel’s near broke. They were just replaced by their rival chipmaker Nvidia in the Dow Jones composite. Nvidia gets none of the stash from the CHIPS Act, yet its stock price has soared more than five-fold. It has been on a hiring spree and has made hundreds of billions of dollars for American investors — including pension and 401k plans.
Talk about politicians betting on the wrong horse.
It gets worse. Semafor Technology reports that instead of pulling the plug on this near $20 billion aid package, Biden officials and Sen. Mark Warner of Virginia — one of the lead sponsors of the CHIPS Act — “have discussed whether the company needs more help.” More?
This despite that Bloomberg reported that Intel has failed to provide federal officials with a viable plan to turn its financial woes around. Why do that when you have an umbilical cord to the federal Treasury?
Ironically, Intel made more than $20 billion in profits before the CHIPS Act welfare bill was passed. So far this year it has lost nearly $20 billion.
What is next? A federal takeover of Intel as happened with failing automakers and banks in 2008?
There is an important lesson here. Many Democrats and Republicans have become enamored with the idea of America adopting a Japanese-style “National Industrial Policy” that would direct hundreds of billions of tax dollars to nurture “strategically important industries” — such as manufacturing, tech products and “clean energy.”
The politicians think they can pick winners and losers better than private investors who allocate funds in our highly efficient multi-trillion dollar capital markets. Democratic Massachusetts Sen. Elizabeth Warren has effectively declared war on the half-trillion-dollar booming private equity industry, which she calls “vampires,” because sometimes they make bad bets.
But maybe it’s Uncle Sam that sucks the blood out of viable businesses. Look no further than Biden’s EV handouts, which have only corresponded with a massive consumer rejection of an industry that was flourishing before Uncle Sam started passing out tens of billions of dollars to the car manufacturers and strong-armed the U.S. auto industry to produce them. Over the past four years the federal government has authorized more than $300 billion in green energy subsidies including wind and solar power grants and yet the amount of power they produce has barely budged — thanks to low-priced natural gas.
If we want American industries to be number one, the government should stop giving them money and the CEOs should stop taking it.
Stephen Moore is a contributor to The Daily Caller News Foundation, senior fellow at the Heritage Foundation, and co-founder of Unleash Prosperity. His latest book is The Trump Economic Miracle, co-authored with Arthur Laffer.
While the Biden-Harris administration is still boasting of the success of the CHIPS and Science Act, the Intel Corp. announced it will cut 15,000 jobs across the nation, “as part of the broad-based cost savings plan.” New reports show that almost four hundred of those job cuts will be at the company’s Ocotillo campus in Chandler.
As reported by Phoenix Business Journal, the series of layoff has come despite an upcoming injection of billions of taxpayer dollars via the CHIPS Act aimed at expanding the Chandler facility. Intel as a whole has approximately 12,000 employees in Arizona.
In a written statement Intel explained, “As part of the broad-based cost savings plan we announced in August, we are making the hard but necessary decisions to reduce the size of our workforce. These are the most difficult decisions we ever make, and we are treating people with care and respect. These changes support our strategy to become a leaner, simpler and more agile company as we position Intel for long-term sustainable growth.”
According to The Center Square, the office of Arizona’s Democrat Governor Katie Hobbs was quick to announce the mobilization of state taxpayer-funded resources being made available to the laid off Intel workers.
Spokesman Christian Slater told the outlet, “The Governor’s Office is already mobilizing rapid response resources at DES to connect affected workers with the resources they need to receive support and find new employment. Ensuring that every Arizonan has access to good-paying jobs is a top priority for Governor Hobbs, and she will continue bringing together workers and businesses to navigate challenges, create jobs and build an economy that helps every Arizonan thrive.”
The company was recently granted up to $8.5 billion in CHIPS Act funding, leading to scrutiny over their 15k global layoffs.
I've been asking AZ politicians about this, given that AZ was one of the four states to which the money was allocated for Intel.https://t.co/m2sIsRzW1i
In an August statement, Hobbs stressed Intel’s expansion in the state after the non-specific “cost savings plan,” was announced saying, “They’re expanding here. We’re thrilled to have their expansion here. We’re working with them on workforce initiatives to grow the skilled pipeline of workers that they need. We’re continuing to do that.”
Any direct mention of the billions of dollars earmarked for Intel via the CHIPS Act was decidedly absent from the Hobbs administration’s statement. However, a statement from the office of Senator Mark Kelly (D-AZ) doubled down on the multi-billion-dollar giveaway, which failed to prevent the layoffs.
Kelly’s office wrote that the round of layoffs, “further underscores the importance of the CHIPS Act.” His office added, “American companies like Intel are facing unprecedented competition from China, but thanks to the CHIPS Act, we’re making sure Intel, and other companies can manufacture the most advanced chips right here in America—creating thousands of construction jobs, and generating even more good-paying, permanent technician jobs in Chandler and across the state that don’t require a four-year degree.”
As reported by the New York Post in August, despite the passage of the CHIPS Act, Intel suffered a staggering $1.6 billion in losses, with CEO Pat Gelsinger saying, “Simply put, we must align our cost structure with our new operating model and fundamentally change the way we operate,” per the memo published to the firm’s website. “Our revenues have not grown as expected – and we’ve yet to fully benefit from powerful trends, like AI. Our costs are too high, our margins are too low.”
When the initial announcement broke in August, Republican Senate candidate Kari Lake placed the blame for Intel’s problems squarely on the Biden-Harris administration in a post to X, writing, “For over 45 years, Arizona has been Intel’s U.S. manufacturing powerhouse. In the last job reports, Intel Shares plunged 20%, forcing them to lay off more than 15% of their employees. These are the devastating consequences #Bidenomics is having on our state. In the US Senate, I will work with President Trump to cut the deficit, turbocharge the economy, & bring back good jobs so that all companies both big & small can thrive in State 48.”
For over 45 years, Arizona has been Intel’s U.S. manufacturing powerhouse.
In the last job reports, Intel Shares plunged 20%, forcing them to lay off more than 15% of their employees.
These are the devastating consequences #Bidenomics is having on our state.
Intel’s CEO also noted that staff drawdowns through voluntary exits in September via “early retirement and separation offerings,” already had the company almost halfway to its 15k downsizing goal. But Gelsinger warned at the time, “We still have difficult decisions to make and will notify impacted employees in the middle of October.”
