Semiconductors are a national security priority. The high cost of building them here has become a national security liability. This reasoning was persuasive enough that the CHIPS Act passed with bipartisan support; 17 Republican senators backed the final bill. And there is a lot to like in the legislation. But it is very hard to read the guidelines the administration just released and see a serious effort to lower costs. The government is adding subsidies with one hand and layering on requirements with the other.
Page 11, for instance, encourages a pre-application that includes an environmental questionnaire “to assess the likely level of review under the National Environmental Policy Act.” Page 20 mandates that applicants prepare “an equity strategy, in concert with their partners, to create equitable work force pathways for economically disadvantaged individuals in their region,” which should include “building new pipelines for workers, including specific efforts to attract economically disadvantaged individuals and promote diversity, equity, inclusion and accessibility.” Page 21 asks for a plan “to include women and other economically disadvantaged individuals in the construction industry,” “strongly encourages” the use of project labor agreements and sets out requirements for “access to child care for facility and construction workers.”
Pages 23 and 24 ask applicants to detail how they will include minority-, veteran- and female-owned businesses, as well as small businesses, in their supply chain and offer seven bullet points detailing how this might be done, including dividing supply chain requirements “into smaller tasks or quantities to expand access” and “establishing delivery schedules for subcontractors that encourage participation by small, minority-owned, veteran-owned and women-owned businesses.” Then there are requirements for “a climate and environment responsibility plan,” as well as community investments in areas like transit, affordable housing and schools.
Many of these are good goals. But are they good goals to include in this project?
“What they’re trying to do with industrial policy is incredibly difficult,” Adam Ozimek, the chief economist at the Economic Innovation Group, told me. “If you try to build a highway and your costs are too high, you just throw more money at the problem. The highway still gets built. But when you’re trying to catalyze the expansion of a globally competitive industry, there’s something pass/fail about it. That’s not the kind of environment where you want to be trying to accomplish seven or eight other goals, especially when people from that industry say the reason they don’t invest as much in the United States as they used to is the red tape and the costs.”
That’s not how Gina Raimondo, the secretary of commerce, sees it. “Every one of the requirements — or they’re not really requirements — nudges are for criteria or factors we think relate directly to the effectiveness of the project,” she told me. “You want to build a new fab that will require between 7,000 and 9,000 workers. The unemployment rate in the building trades is basically zero. If you don’t find a way to attract women to become builders and pipe fitters and welders, you will not be successful. So you have to be thinking about child care.”