At a time of massive income and wealth inequality, the American people are sick and they are tired of the unprecedented level of corporate greed that is taking place from one end of this country to the next. …
They are sick and tired of CEOs making 350 times more than the average worker, while over half of our people live paycheck to paycheck
Back in March of 2022, with very little media attention or coverage, the United States Senate passed a bill to reboot the semiconductor manufacturing industry in the United States after years of American chip companies systematically destroying domestic production by outsourcing all of their production to low wage countries such as China. The bill has stalled in Congress, as many Republicans and Democrats alike have balked at the $52 Billion dollar subsidies to very wealthy chip companies such as Nvidia and Intel. The bill finally made some headlines again recently, when information came out that Paul Pelosi, husband of House Speaker Nancy Pelosi, and quite possibly one of the greatest stock day traders of all time, purchased millions of dollars of stock in Nvidia and other public chip companies in anticipation of the bill finally passing Congress. It will be interesting to see now that Paul has made his stock purchases, whether Nancy will quickly call for a floor vote on the bill to send on to the President’s desk.
The CHIPS For America Act came about largely as a knee jerk reaction to hypothetical supply chain issues caused by Chinese lockdowns during Covid 19. Apparently car companies, defense contractors, and many others were constrained in production due to the lack of available chips needed in their products. Semiconductor companies, in turn, said that if there was more manufacturing right here in America, that all of these shortages and supply issues could have been avoided. What the CEOs of these companies failed to mention, however, is equally telling if not outright dark and sinister.
The End of the Golden Age of US Chip Manufacturing
During the 60’s, 70’s, and 80’s, America enjoyed domestically manufacturing chip for roughly 90% of the global semiconductor market. By the 90’s, that share had plunged to 37%, as Japan competed heavily in the space and dumped their chips for a loss into the US market to bankrupt the old guard US chip legends, like Fairchild and National Semiconductor and Texas Instruments. Today, only 12% of all chips are manufactured within the United States, and the vast majority of these chips are highly specialized or are subject to national security export restrictions.
Now, all of our chips are made in China or other countries where we can still pay a slave wage. Intel has massive sweatshops throughout Asia. 90% of all chips are now made in Asia (Ask yourselves why are there still no chip factories in Africa?) And suddenly, out of the blue, we need to bring chip manufacturing back to America for the sake of national security? Follow the money and the money laundering…
A Failure of Governance
The simple truth is that as US chip manufacturers were shutting down domestic production and shifting it overseas, the US Government did nothing to prevent it in the name of national security. Instead, regulators took a laissez faire approach and simply ignored the dangers and risks that surrounded the reliance on foreign sources for domestic chip demand. As technology has progressed over the last fifty years, dependence on critical semiconductors has only increased to the point that products can no longer be built without them.
Global Covid lockdowns which caused factory shutdowns in various Asian countries (and China in particular) along with port shutdowns quickly exacerbated the problem on the supply side and forced the US government to finally acknowledge that foreign dependence for chip supplies was a national security issue and just bad business in general. To revive the chip manufacturing industry in the US, lawmakers quickly introduced the CHIPS for America Act, a bill designed to incentivize chip manufacturers to build factories in America. In rushing to create this package, lawmakers failed to investigate or recognize the historical factors that led to the lack of domestic production and the fact that the current situation was one that was created knowingly and voluntarily by the behemoth multinational chip giants themselves. Yet, here they all were, lined up to demand a taxpayer handout if they were to return and reinvest in America, which is not reinvesting at all, but rather using free money and getting a free ride.
Chip Companies Made Record Profits and did not Reinvest in their Companies
As Senator Sanders points out, in 2021, five of the top semiconductor companies that stand to gain the lion’s share of subsidies made over $70 billion in profits. Rather than investing the profits back into their businesses, such as building new fabrication plants in the United States or Mexico, the executives at the companies instead received record bonuses and used the profits for stock buybacks to inflate the value of their company’s shares for existing shareholders.
These companies, Intel, Texas Instruments, Micron Technology, Global Foundries, and Samsung, have actually invested very little in fixed costs over the last two decades and have focused their expenditures on chip design instead. The fabrication has largely been outsourced to companies such as Global Foundries and TSMC, two of the largest semiconductor fabrication companies in the world, who would also receive subsidies from this bill. Rather than investing their profits in creating new maufacturing capacity in North America, these companies have decided that it is not their problem and it is something that the US Government must address.
$52 Billion in subsidies for billion dollar corporations
As noted earlier, the CHIPS act allocates $52 billion in free taxpayer money to the largst semiconductor companies in the world. Rather than using their profits, they would instead receive a check from the US Government to build their plant for them. It is very similar to cities who pay to build the new sports arena for very wealthy soprts franchises in the name of peripheral economic benefit.
Not only do some of the largest and wealthiest US semiconductor companies get these handouts, but foreign companies are eligible to receive them as well. TSMC is a Taiwanese company, largely owned by the Taiwanese government. Global Foundries is owned by the United Arab Emirates. In essence, we are giving away US taxpayer money to foreign governments to create businesses in America.
And let’s not forget about Jeff Bezos and Amazon. Amazon and Blue Origin want to get in on this money to support their own businesses. While they claim that they will offer the chips that they manufacture to third parties, the reality is that both Amazon and Blue Origin plan on using their subsidized chip facilities to supply semiconductors to Amazon and Blue Origin first and foremost. Again, the US taxpayer is doling out cash to companies that primarily intend to use it for their own purposes in turning a profit. All of it sounds very Elon Muskish.
Lobbyists, CEOs, and Politicians Use Fear Tactics to Push Passage of the Bill
Gina Raimondo, the Secretary of Commerce and former venture capitalist who is married to an executive at McKinsey and Company, has by far been the loudest to ring the Sky is Falling bells if this CHIPS Act doesn’t pass. Making the MSM rounds daily, she claims that the US will immediately drop into a deep recession if this bill is not passed. Well, we have news for you Gina – The US is already in a recession, and it’s going to get worse before it get better.
Further, Raimondo raised the spectre that unless the legislation is passed, that semiconductor companies will pull their plans to construct new plants and simply go elsewhere. Recently, on CNBC, she was quoted as saying, “It has to be done before they go to August recess. I don’t know how to say it any more plainly. This deal … will go away, I think, if Congress doesn’t act”. This raises the question, where exactly are they going to go? China has plenty of fabs, as do Korea, Japan, and Taiwan, so locations and skilled talent pools are limited.
Meanwhile, Intel and Global Foundries have threatened to delay or even postpone construction of fab plants that were already in process prior to the CHIPS Act unless the act is passed. In the interim, Intel and other semiconductor companies have spent upwards of $20 million in lobbying Congress in the first half of 2022 just to get the legislation pushed through. But then again, $20 million for $52 billion is a pretty good deal. Samsung has gone so far as to tease an additional $178 billion in investment in Texas, contingent upon the passing of the bill, although the understanding is specifically non-binding and subject to ‘future business conditions’, which is code for we may or we may not build it.
Chuck Schumer, majority leader of the US Senate, and in the pocket of IBM (headquartered in Armonk, New York) has been pushing Congress to pass the legislation, hyping up all of the jobs that the bill would create in Upstate New York. Never mind that IBM itself decimated the chip manufacturing industries in Upstate New York decades ago. Of course now that Paul Pelosi has purchased his millions of dollars of Nvidia shares, we can now expect Nancy Pelosi to bring the bill up for a vote on the House floor.
A Case Study in Corporatism and the Manipulation of Free Market Principles
While on the surface the CHIPS Act sounds too good to be true, as we dig into it we find that it is too good to be true and is in reality just another good old fashioned Washington D.C. pork barrel project wrapped in lipstick. All of the buzzwords are there – it is bipartisan, the act will create 1000’s of good paying American jobs, it will restore manufacturing competitiveness against China, it will invigorate innovation in America, and so, and so on.
TJ Rogers, former CEO of Cypress Semiconductor, said it best when he said that the bill will do little to actually impact the domestic semiconductor manufacturing base in America and will just end up being a waste of taxpayer money (note: the woman interviewing him is as dumb as rocks however). Yet, with the exception of Bernie Sanders, TJ Rogers, and a handful of others, the mainstream narrative is pushing hard to give billions of dollars to corporations hat don’t need it. Rather than encouraging competition and instigating innovation in the semiconductor space, this bill will stifle competition and innovation, and will simply lead to more status quo of the large semiconductor behemoths who will simply consolidate and strengthen their marketshare position, thereby earning even more billions in profit.
This bill is bad business for the semiconductor industry. It is bad business for people who believe in the principles of free market competition. But most of all, it is bad business by the US Government who should be stewarding taxpayers’ money instead of wasting it.
I do not believe that the USICA conference committee should approve a $10 billion bailout for Jeff Bezos to fly to the moon. If Mr. Bezos wants to go to the moon, good for him. He has $138 billion in personal wealth. He became $33 billion richer during the pandemic. He is the second richest person in America. And, in a given year, Mr. Bezos has paid nothing in federal income taxes.
If he wants to go to the moon, let him use his own money, not U.S. taxpayers.
Read Senator Sanders Floor Speech in Full
At a time of massive income and wealth inequality, the American people are sick and they are tired of the unprecedented level of corporate greed that is taking place from one end of this country to the next.
They are sick and tired of paying outrageously high prices at the gas pump and at the grocery store while the oil companies and the food companies are seeing profits at an all-time high.
They are sick and they are tired of struggling to pay for the basic necessities of life while 700 billionaires in our country became $2 trillion richer during the pandemic.
They are sick and tired of CEOs making 350 times more than the average worker, while over half of our people live paycheck to paycheck.
They are sick and they are tired of seeing multi-billionaires like Elon Musk, Jeff Bezos and Richard Branson taking joy rides to outer space, buying $500 million super-yachts and living in mansions with 25 bathrooms when some 600,000 people are homeless in America.
They want Congress to address corporate greed and make sure that the wealthiest people and most profitable corporations pay their fair share of taxes.
M. President, the last poll that I saw had Congress with a 16% approval rating. This to me is shocking, really shocking. And I suspect it has to do with the fact that the 16% are not yet fully aware of what Congress is doing.
So what is Congress doing? For nearly two months, a 107-member conference committee has been meeting behind closed doors to provide over $50 billion in corporate welfare with no strings attached to the highly profitable micro-chip industry.
And yes, if you can believe it, this legislation may also provide a $10 billion bailout to Jeff Bezos so that his company Blue Origin can launch a rocket ship to the moon.
M. President: For all of my friends who tell us how concerned they are about the deficit, how we cannot fund the needs of our children, how we can’t fund the needs of our seniors, a $53 billion blank check to some of the most profitable corporations in America and a $10 billion bailout to the second wealthiest person in our country is an absolute outrage. It is why the American people today have such low regard for Congress.
M. President, there is no doubt that there is a global shortage in microchips and semiconductors which is making it harder for manufacturers to produce the cars, cell phones and electronic equipment that we need. This shortage is costing American workers good jobs and raising prices for families. That is why I fully support efforts to expand U.S. microchip production.
But the question we should be asking is this: Should American taxpayers provide the micro-chip industry with a blank check of over $50 billion at a time when semiconductor companies are making tens of billions of dollars in profits and paying their executives exorbitant compensation packages? I think the answer to that question should be a resounding NO.
Let’s review some recent history. Over the last 20 years, the micro-chip industry has shut down over 780 manufacturing plants in the United States and eliminated 150,000 American jobs while moving most of its production overseas after receiving over $9.5 billion in government subsidies and loans.
In other words, in order to make more profits, these companies took government money and used it to ship good-paying jobs abroad. Now, as a reward for that bad behavior, these same companies are in line to receive a massive taxpayer handout to undo the damage that they did. That may make sense to someone. It does not make sense to me.
In total, it has been estimated that 5 major semi-conductor companies will receive the lion’s share of this taxpayer handout: Intel, Texas Instruments, Micron Technology, Global Foundries, and Samsung. These 5 companies made $70 billion in profits last year.
The company that will likely benefit the most from this taxpayer assistance is Intel. I have nothing against Intel. I wish them well. But, let’s be clear. Intel is not a poor company. It is not going broke.
In 2021, Intel made nearly $20 billion in profits. During the pandemic, Intel had enough money to spend $16.6 billion, not on research and development, but on buying back its own stock to reward its executives and wealthy shareholders.
Last year, Intel could afford to give its CEO, Pat Gelsinger, a $179 million compensation package. Over the past 20 years, Intel spent over $100 million on lobbying and campaign contributions while shipping thousands of jobs to China and other low-income countries. Does it sound like this company really needs corporate welfare?
Another company that would receive taxpayer assistance under this legislation is Texas Instruments. Last year, Texas Instruments made $7.8 billion in profits. In 2020, this company spent $2.5 billion buying back its own stock while it has outsourced thousands of good-paying American jobs to low-wage countries.
Who else is in line to receive corporate welfare under this bill?
Well, how about the Taiwan Semiconductor Manufacturing Company (TSMC)? It is in line to potentially receive billions of dollars in federal grants under this bill.
M. President: Guess who the largest shareholder of TSMC is? Well, if you guessed the Government of Taiwan you would be correct – which should come as no surprise to anybody who studies how other countries throughout the world conduct industrial policy.
So let’s be clear: When we provide TSMC money, we are giving that taxpayer money directly to the Government of Taiwan.
Samsung, another very large corporate entity from South Korea is also in line to receive federal funding under this bill.
In other words, not only would this bill be providing corporate welfare to profitable American corporations, but we would literally be handing over U.S. taxpayer dollars to corporations that are owned or controlled by other countries.
And on and on it goes.
M. President: Let me be clear. I believe in industrial policy. I believe that it makes sense, in certain occasions, for the government and the private sector to work together to address a pressing need in America.
Industrial policy to me means cooperation between the government and the private sector. Cooperation. It does not mean the government providing massive amounts of corporate welfare to profitable corporations without getting anything in return.
M. President: The question is will the United States government develop an industrial policy that benefits all of our society, or will we continue to have an industrial policy that benefits the wealthy and the powerful?
M. President: In 1968, Dr. Martin Luther King, Jr. said: “The problem is that we all too often have socialism for the rich and rugged free enterprise capitalism for the poor.”
I am afraid what Dr. King said 54 years ago was accurate back then and it is even more accurate today.
We have heard a lot of talk in the halls of Congress about the need to create public-private partnerships – and that all sounds very good. But when the government adopts an industrial policy that socializes all of the risk and privatizes all of the profits that’s not a partnership. That is crony capitalism.
Some of my colleagues make the point that the microchip industry is enormously important for our economy and that we must become less dependent on foreign nations for micro-chips. I agree. There is no argument about that. But we can and must accomplish that goal without simply throwing money at these companies while the taxpayer gets nothing in return.
In my view, we must prevent microchip companies from receiving taxpayer assistance unless they agree to issue warrants or equity stakes to the Federal Government.
If private companies are going to benefit from generous taxpayer subsidies, the financial gains made by these companies must be shared with the American people, not just wealthy shareholders. In other words, if micro-chip companies make a profit as a direct result of these federal grants, the taxpayers of this country have a right to get a reasonable return on that investment.
Further, if micro-chip companies receive taxpayer assistance, they must agree that they will not buy back their own stock, outsource American jobs overseas, repeal existing collective bargaining agreements and must remain neutral in any union organizing effort.
This is not a radical idea. All of these conditions were imposed on companies that received taxpayer assistance during the pandemic and passed the Senate by a vote of 96-0.
Bottom line: Let us rebuild the U.S. microchip industry, but let’s do it in a way that benefits all of our society, not just a handful of wealthy, profitable and powerful corporations.
Moreover, M. President, I know this may be a radical idea in the halls of Congress, but no. I do not believe that the USICA conference committee should approve a $10 billion bailout for Jeff Bezos to fly to the moon. If Mr. Bezos wants to go to the moon, good for him. He has $138 billion in personal wealth. He became $33 billion richer during the pandemic. He is the second richest person in America. And, in a given year, Mr. Bezos has paid nothing in federal income taxes.
If he wants to go to the moon, let him use his own money, not U.S. taxpayers. The House did the right thing by not providing Jeff Bezos with a $10 billion bailout in its version of USICA. The conference committee should follow the House’s lead on that issue. I yield the floor
In 1968, Dr. Martin Luther King, Jr. said: “The problem is that we all too often have socialism for the rich and rugged free enterprise capitalism for the poor.”