MDlaxfan76 wrote: ↑Tue Feb 28, 2023 6:16 pm
Farfromgeneva wrote: ↑Tue Feb 28, 2023 3:28 pm
MDlaxfan76 wrote: ↑Tue Feb 28, 2023 12:10 pm
Farfromgeneva wrote: ↑Tue Feb 28, 2023 9:02 am
Ugh, this is why I can be part of the Dems even if I reject 98% of my legacy Rep party these days. (NYT daily)
Social policy through semiconductors
When the bipartisan CHIPS Act passed last year to provide $52 billion to promote chip-building in America, trade experts hailed it as the most significant investment in industrial policy in a half-century.
But new disclosures about what companies must do to get the CHIPS money — including guaranteeing child care for workers and refraining from stock buybacks — show that the Biden administration is also keen on using federal dollars to reshape corporate America.
The CHIPS Act is increasingly about more than, well, chips. To be sure, the law is meant to revive America’s semiconductor industry by funding research and manufacturing in the U.S., reducing a reliance on foreign production for critical tech components. It’s also been described as a national security measure. (It’s worth noting that lawmakers from both parties have already questioned whether the already-profitable chip industry needs such funding.)
But there are strings attached to the money:
Those seeking $150 million or more must guarantee affordable, high-quality child care for plant workers. (Some of the federal subsidies can go toward meeting the requirement.) Commerce Secretary Gina Raimondo said this was a way to ensure women can stay in the work force.
Companies also need to share part of any unanticipated profits with the U.S., a move that federal officials said was meant to ensure accurate financial projections.
Preference for funding will go to companies that promise not to buy back stock. The requirement is rooted in growing Democratic opposition to a financial maneuver that critics say diverts money to Wall Street investors when it could be reinvested in the company.
It’s perhaps the White House’s broadest effort yet to use policy to influence business. While the U.S. government has attached conditions to federal funding in the past — the Biden administration already imposed tougher labor standards and “Buy American” provisions on the Inflation Reduction Act — this goes further.
Such moves are unlikely to please conservatives, who have accused the White House of pursuing progressive social goals through policy when it hasn’t been able to get them through Congress. “Rube Goldberg-ing new mandates into an expensive and misguided industrial policy is no way to make social policy,” Eric Boehm writes in Reason.
I assume you meant cannot, not "can"...
What aspect do you find particularly objectionable and why?
I didn't have an issue, for instance, with the Buy American provisions in the IRA bill.
The Dems, and particularly the moderate wing looking to rebuild support among working class voters not necessarily on the coasts, are looking for ways that move the needle in working class folks' lives. Especially younger working class families with children, making it easier for household formation and having children...
They'd largely ignored these folks, as had the GOP, for several decades...at least so far as substantive policy measures (child tax credit being an exception...but now gone). Here's an opportunity to not ignore...
These are big companies who could get a $150 million plus loan, not SMB's, so setting expectations about child care, or family leave, etc are not onerous, rather they are definitely doable efficiently. Lots of very large companies do these measures, at least to some degree...but not all do...however want our dough, then take care of your employees. And yes, we need to get women back into the workforce. (BTW, the family leave thing...which doesn't appear to have been included, is very much a dad thing too when its "parental" not merely maternal...there's actually a bi-partisan effort brewing to get this sort of thing done for dads.)
No stock buybacks? Heck, makes a ton of sense to me...we've seen money flow from Washington to companies to shareholders, ignoring reinvestment much less workers...that's not the objective of this program.
I'd need to see the "excess profits" calculation, as that sounds problematic, but in principle I can see why they'd be saying they want to share in any unexpected windfall returns...I think we should be thinking that way about all sorts of government risk funding, eg tech risk, Pharma, etc...
Tying investment to private capital allocation is a disaster waiting to happen every single time. Historically must be 100% I suspect.
Two separate issues to be addressed separately. Don’t provide the funds to Private enterprise do it in house. No different than the typical outsource vs build decision every company makes and with appropriate long term planning and scenario analysis which is transparently presented to owners and their primary agents. That’s not what this is.
Split the oversight or employment requirements from the investment. It’s dishonest and opaque to combine them and then sell it as only one
Thing and intentionally ignore all the second order problems that can come (see bush’s tax code change 20ish years ago and how it drove investment/capital allocation away from income generation and the follow on consequences for the working class).
But they don’t want to. It allows them to sell the need to fix the problems they created by doing it this way which will come. Political iatrogenics.
Or as the girl on Black Jeopardy says about Caitlyn Jenner being on a magazine cover…”ummm I don’t know, you can’t do EVERYTHING”
Can watch the entire skit or just jump to about 2:45 for specific reference but the whole thing is excellent:
https://m.youtube.com/watch?v=O7VaXlMvAvk
your response seems overly complicated and is difficult to parse...at least for a slow poke like me.
Could you address each objective a bit more clearly as to what you are actually object and why?
(For my benefit, the cultural references is distracting from my comprehension.)
By "investment" do you mean that providing funds to these companies when they move business to the US, build factories, empty people, etc should not be done by government, should only be done by private finance?...I'd understand that argument, but I'm not sure that's what you're saying.
In the "out-source" comment are you referring to requiring them to provide affordable childcare (most companies do this with an out-sourced provider, who occupies space on campus)...is the CHIPS Act not allowing that as the way a company accomplishes the requirement?
why not accompany these dollars with such requirements? Are they actually "opaque" or do the companies know up front what they need to do to get these otherwise "free" dollars?
As to the "investment" accomplishing an ROI, the objective, at least as I hear it, is not to try to maximize ROI in direct financial returns to the government, but if the company does exceedingly well it's considering that a 'windfall'. Unexpected, but no one crying about sharing.
The stock buyback thing makes huge sense to me.
Typed up a reply once in computer but forced re/login erased it then felt like I should reply so did a faster one on my phone while trying to make dinner for family, get son (and myself) ready for lacrosse practice and get the Hobart game set up on tv. Should’ve skipped the last part clearly.
US Capital investment - meaning “investment above”, taxpayer/citizen capex
Meant if the govt wants to control capital allocation of a private business they should separate that from the decision to invest in US infrastructure. If they want to control the income statement and balance sheet of the operations that provide the construction and development of the infrastructure being invested in then do it internally as a govt controlled and owned entity, not subbing it to Fluor Corp or Bechtel then telling them what their gross margins need to be utilized for.
Stock buybacks-how do you determine allocated overhead and therefor profits. These businesses are low margin high volume not tech businesses so pushing 200bps of s,g&a one way or another is massive unlike in software or similar.
If we want companies to do these things, that’s a separate discussion and should be segregated. If we don’t want profits from the expenditures then take the investment in house, employ those people and provide those benefits. There will be perverse incentives coming out of it and skew outcomes in some way we don’t like ultimately as the private sector will figure out some other arbitrage. How about the fact that large companies can spread healthcare companies more cheaply than small ones so it’s picking the winners that way. There’s a million examples.
Just require businesses to provide child care or cap project level profits explicitly if that’s what we want. Don’t pretend we’re allowing private incentive structures and private risk/reward outcomes and then put the thumb on the scale and cause all sorts of exogenous shocks.
This isn’t a statement in the merits of demanding or wanting these things, it’s about the second order spiraling of costs to society from tying the two together this way as well as perverted outcomes and new rent seeking opportunities.
