The White House has a windfall to spend on semiconductor projects
A MARTINEZ, HOST:
President Biden is visiting an IBM plant in Poughkeepsie, N.Y., today. The company is announcing a $20 billion investment. It's part of what the White House calls a boom spurred by a new law that includes big subsidies for semiconductor projects. A team at the White House is working out how to spend this windfall. Here's NPR's White House correspondent Franco Ordoñez.
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FRANCO ORDOÑEZ, BYLINE: When President Biden signed a bill on semiconductors this summer, there was more fanfare than usual. Surrounded by lawmakers and industry leaders in front of the White House, Biden called the new law a turning point.
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PRESIDENT JOE BIDEN: Today is a day for builders.
ORDOÑEZ: The law has $52 billion to build chip factories in America. Chips are needed to run almost everything from cars to the weapons the U.S. is sending to help Ukraine. And the U.S. has fallen behind China on the newest technology.
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BIDEN: Unfortunately, we produce 0% of these advanced chips now. And China is trying to move way ahead of us.
ORDOÑEZ: The problem became acute during the pandemic. After years of dominating the industry, the U.S. lost ground and became too dependent on Asia for semiconductors. The White House wants to turn that back around.
RONNIE CHATTERJI: We invented this industry in the United States. I mean, there's a reason it's called Silicon Valley.
ORDOÑEZ: That's Ronnie Chatterji, the economist who Biden put in charge of helping figure out how to spend billions to revive the U.S. chip industry. He says surging car prices last year showed why this is so important.
CHATTERJI: That was one of the biggest drivers of inflation. Probably one-third of the inflation increase in 2021 was because of cars. We couldn't get the chips we needed to build the cars. And when you can't get the chips you need to build the cars, workers get furloughed, and prices go up.
ORDOÑEZ: So the White House wants to see chips made here. But this is a significant shift in thinking for Washington, stepping away from free trade. And there are hazards with government interference and the risk of wasteful spending.
SCOTT LINCICOME: This is a classic case of trying to pick the winners and avoiding the losers.
ORDOÑEZ: Scott Lincicome has warned against this for years. He's a trade economist at the libertarian-leaning Cato Institute. He says too often those who spend the most money lobbying get the subsidies, where sometimes projects end up in politically important regions instead of the places where they make the most sense.
LINCICOME: Time and time again with U.S. industrial policy projects, the government has good intentions but ends up actually backing the wrong horse.
ORDOÑEZ: Chatterji is aware of the pitfalls. Today, he's kicking off talks with Cabinet members about how to roll out the spending. And he says he's confident they can make good decisions if governments, private companies and labor all work together.
LINCICOME: And so we have to keep our eye on the ball of setting a foundation for all of industry to survive, including small- and medium-sized enterprises. That's the way we avoid that critique about picking winners that's plagued industrial policy in the past.
ORDOÑEZ: But he says getting everyone singing from the same hymn book will be his greatest challenge.
Franco Ordoñez, NPR News. Transcript provided by NPR, Copyright NPR.