Raimondo needs narrow focus on subsidies
WASHINGTON >> It would be easier to be sanguine about the government’s coming dispersal of $52 billion in subsidies for semiconductor manufacturing and research if Commerce Secretary Gina Raimondo did not celebrate it so lavishly. Her language suggests that what should be a narrow national security measure might become a broad, perennial temptation for government.
But, then, were she (Harvard rugby player and magna cum laude graduate, Rhodes scholar, Yale Law School graduate, venture capitalist, Rhode Island governor) not in charge of the dispersal, the Senate might not have passed it 64-33. Here are the problems regarding chips and her terminology.
Many chips are designed in the United States, but 90%, and 100% of the most sophisticated ones, are manufactured elsewhere. This is an economic and military vulnerability.
Chips are ubiquitous in consumer goods. According to the Wall Street Journal, in 2021 the average new car contained 1,200 chips (e.g., a shortage of 40-cent parts for windshieldwiper motors in F-150 pickup trucks caused Ford to fall 40,000 short of its production goal). Automakers lost $210 billion in sales because of troubles with the chips supply chain during the pandemic.
Even more troubling, 98% of the chips the Defense Department purchases are manufactured and packaged in Asia. Ninety-two percent of the most sophisticated chips come from a single Taiwanese firm. Some materials used in chip making (e.g., fluorspar and tungsten, and neon gas harvested during steel manufacturing) come primarily from China. (Until recently, Russia and Ukraine were sources of neon gas.)
Speaking in her office in the Commerce Department building, which is named for a previous secretary (an engineer: Herbert Hoover), Raimondo is emphatic: The reason for subsidizing the “on-shoring” of chips manufacturing is “100% national security.” Manufacturers should “produce what the market decides, but do it in America.”
In a November speech, however, Raimondo said these “transformational” subsidies will enable “reimagining our national innovation ecosystem well beyond Silicon Valley.” And she anticipated “new collaborations among businesses, universities, labor, and local communities” concerning “advanced computing, biotechnologies and biomanufacturing, and clean energy technologies.” Hence, “we are working across the government” to “invest in core critical and emerging fields of technology,” for “revitalizing” manufacturing.
So, far from being “100% national security,” the rationale for the $52 billion (and more; read on) is government-driven transformation of, potentially, American society.
Congress has also provided a $24 billion tax credit (over 10 years) for “fabs” — chip manufacturing facilities — and more than $170 billion (over five years) for research. Raimondo says all of this “modern industrial strategy” (President Joe Biden’s description) is “rooted deeply in America’s history — from Alexander Hamilton’s Report on Manufacturers to President Lincoln’s intercontinental railroad.” Not exactly.
Hamilton’s protective tariffs, the “internal improvements” (roads, canals, etc.) of Henry Clay’s “American system” and the 1862 Morrill Act(which created land grant colleges, especially to promote scientific agriculture) were designed to facilitate individual striving to propel a fast-unfolding and unpredictable future. They were not measures to implement a government-planned future featuring things the government thinks it knows are, or should be, “emerging.” When during World War II the government dictated the production of ships, planes, tanks and howitzers, this was a focused response to an immediate emergency, not an attempt to be socially “transformational.”
Government always needs but rarely has epistemic humility, an understanding not just of what it does not know, but what it cannot know. Such as what unplanned-by-government human creativity will cause to emerge, over the horizon. And how government planning of the future, by allocating resources, can diminish it.
Today, government should first do what it actually can do. According to Raimondo, about 76,000 students each year receive from US. universities advanced degrees in engineering disciplines germane to manufacturing chips. Of those graduates, about 43% are US. citizens or residents. Raimondo says the nation needs in the next decade 1 million engineering graduates who are willing and legally allowed to remain here and work in US. fabs, which are coming because of the subsidies. But what about the workforce the fabs presuppose? Why not staple green cards to the engineering diplomas of noncitizens and nonresidents?
Raimondo, 51, the Biden administration official perhaps most admired in Congress and among private-sector leaders, is the Democrat most qualified to be president. Her implementation of a narrowly targeted program to rectify one national vulnerability can be an audition for a higher office for which she has impressive skills. It should not become a pilot program for broad government “reimagining” of this and that, for which government has no aptitude.