Chips Bill Attracts Opponents of “Corporate Welfare”
Author: Greg Valliere
July 19, 2022
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.
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