Michael Strain is correct: “Trump’s Intel deal is a threat to US economic liberty.” A slice:
Trump’s recent deal with chipmakers Nvidia and AMD, however, suggests security concerns are being used by the president as a fig leaf for rank corporate shakedowns. In that deal, Trump agreed to allow Nvidia and AMD to sell H20 and MI308 AI chips to China in exchange for the Treasury receiving 15 per cent of the revenue. Security is clearly not the president’s motivating concern.
Troublingly, the government might have its eye on equity stakes beyond Intel. Commerce secretary Howard Lutnick is reportedly exploring government stakes in other semiconductor manufacturers that received Biden-era Chips Act subsidies, such as TSMC and Samsung.
This all strikes me as not so much a strategic embrace of state capitalism as an opportunistic attempt by Trump to “get the best deal” in one-off situations. The existing deals are worrying enough. But Trump’s actions also create a troubling precedent.
Expanded state involvement will create serious challenges for the companies on the receiving end of it. Diverting time and energy from competing in the market to pleasing the president might work in the short term, as Intel’s increasing share price has indicated. But the need for political support could make it harder for the chipmaker to enact needed changes to stay competitive, including politically unpopular moves like closing plants and laying off workers. The pace of innovation will decelerate. Over the long term, this will be a bad deal for the taxpayer.
Reason‘s Joe Lancaster is understandably dismayed by Trump’s finagling for the government an equity stake in Intel. Two slices:
President Donald Trump negotiated a deal last week for the U.S. government to take a substantial ownership stake in an American company. Despite his assurances, Trump’s socialistic transaction is a terrible deal not only for the parties involved, but for the entire U.S. economy.
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Every part of this transaction flies in the face of any sincere interpretation of free markets, including the Biden administration’s original sin to approve billions of dollars for a struggling company. It is perhaps telling that as Reason‘s Eric Boehm noted last week, the idea that the U.S. government should take a piece of Intel in exchange for CHIPS Act funding was first floated by Sen. Bernie Sanders (I–Vt.). Trump and his allies are now issuing talking points that could have come from the socialist senator himself.
If the U.S. government insists upon dishing out taxpayer money to private companies, is there any reason it shouldn’t, as U.S. Secretary of Commerce Howard Lutnick put it to CNBC, get “a piece of the action”?
There are many reasons, in fact. “The most immediate risk is that Intel’s decisions will increasingly be driven by political rather than commercial considerations,” Scott Lincicome of the Cato Institute wrote Sunday in The Washington Post. “With the U.S. government as its largest shareholder, Intel will face constant pressure to align corporate decisions with the goals of whatever political party is in power.”
Vermont’s socialist U.S. Sen. Bernie Sanders only likes markets when they’re broken. Therefore his support for President Donald Trump’s foray into the semiconductor industry is the clearest sign yet that the federal government owning a piece of chip maker Intel is bad news for U.S. technology. Most of the value in the chip industry is not in making chips but in designing them—the part of the industry the U.S. dominates. But will U.S. firms continue to dominate amid a Trump-Sanders intervention?
Cato’s Walter Olson blasts “Trump’s blast of hot air on flag burning.”
Jeffrey Blehar makes clear that Trump cannot use executive orders to federalize election laws.
David Henderson and Scott Sumner are leaving EconLog.
