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Chips Bill Attracts Opponents of “Corporate Welfare”

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Chips Bill Attracts Opponents of “Corporate Welfare”

Author: Greg Valliere

July 19, 2022

THE LEGISLATIVE CARNAGE in Washington may claim a new victim — the bill to assist Intel and other computer chip manufacturers, which is attracting opposition on the left and right.

ONCE CONSIDERED A SHOO-IN for passage this summer, the measure has attracted an epithet: “corporate welfare,” which is despised by free-market conservatives and the populist left.

AN ACUTE SHORTAGE OF SEMICONDUCTOR CHIPS afflicted auto makers and other computer-reliant companies earlier this year, prompting Senate Majority Leader Chuck Schumer to introduce a package of aid costing upwards of $70 billion — largely benefitting chip giant Intel.

MOST MEMBERS OF CONGRESS signed on to the measure, which Schumer initially sold as a boost for U.S. manufacturers who are competing with China. But then a classic supply-demand response took over — the chips shortage began to subside, as manufacturers scrambled to produce more chips, while global demand slumped.

A GLUT OF CHIPS now afflicts the industry, according to an editorial in this morning’s Wall Street Journal. If there truly is a glut, many members of Congress will ask why they should pass a huge windfall for Intel.

CONSERVATIVE REPUBLICANS question why they should spend billions more, while Socialist Sen. Bernie Sanders and other progressives vow to block huge aid to profitable companies. At the center of this debate is a Congressional aversion to picking winners and losers, which has led to numerous cuts to the Schumer bill.

SENATE MINORITY LEADER MITCH McCONNELL had threatened to scuttle the bill if Democrats tried to pass the remnants of Build Back Better via the reconciliation process. But since the BBB measure is in tatters, McConnell still might support something for chip makers. The chips bill should clear a procedural hurdle today in the Senate; a final deal with the House could drag on past the August recess.

WITH THE BILL possibly headed for a haircut, Democrats face still another obstacle to what’s left of their agenda. The remnants of BBB would allow negotiations for some Medicare prescription drugs, and would provide funding for Obamacare recipients. But these provisions first must win approval from the Senate parliamentarian.

BOTTOM LINE: We’re now at the beginning of a new era of tighter fiscal policy; massive federal spending has fallen out of favor since it gets some of the blame for high inflation. Corporate welfare has little support in this climate.


The views expressed in this blog are those of the author and do not necessarily represent the opinions of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies.

The views expressed in this blog are provided as a general source of information based on information available as of the date of publication and should not be considered as personal investment advice or an offer or solicitation to buy and/or sell securities. Speculation or stated believes about future events, such as market or economic conditions, company or security performance, or other projections represent the beliefs of the author and do not necessarily represent the view of AGF, its subsidiaries or any of its affiliated companies, funds or investment strategies. Every effort has been made to ensure accuracy in these commentaries at the time of publication; however, accuracy cannot be guaranteed. Market conditions may change and AGF accepts no responsibility for individual investment decisions arising from the use of or reliance on the information contained herein. Any financial projections are based on the opinions of the author and should not be considered as a forecast. The forward looking statements and opinions may be affected by changing economic circumstances and are subject to a number of uncertainties that may cause actual results to differ materially from those contemplated in the forward looking statements. The information contained in this commentary is designed to provide you with general information related to the political and economic environment in the United States. It is not intended to be comprehensive investment advice applicable to the circumstances of the individual.

AGF Investments is a group of wholly owned subsidiaries of AGF Management Limited, a Canadian reporting issuer. The subsidiaries included in AGF Investments are AGF Investments Inc. (AGFI), AGF Investments America Inc. (AGFA), AGF Investments LLC (AGFUS) and AGF International Advisors Company Limited (AGFIA). AGFA and AGFUS are registered advisors in the U.S. AGFI is a registered as a portfolio manager across Canadian securities commissions. AGFIA is regulated by the Central Bank of Ireland and registered with the Australian Securities & Investments Commission. The subsidiaries that form AGF Investments manage a variety of mandates comprised of equity, fixed income and balanced assets.

About AGF Management Limited

Founded in 1957, AGF Management Limited (AGF) is an independent and globally diverse asset management firm. AGF brings a disciplined approach to delivering excellence in investment management through its fundamental, quantitative, alternative and high-net-worth businesses focused on providing an exceptional client experience. AGF’s suite of investment solutions extends globally to a wide range of clients, from financial advisors and individual investors to institutional investors including pension plans, corporate plans, sovereign wealth funds and endowments and foundations.

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©2023 AGF Management Limited. All rights reserved.

Written by

Greg Valliere

Greg Valliere

Chief U.S. Policy Strategist

AGF Investments

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