3 Ways the Tech Oligarchs' New Subsidy Is Ripping You Off
Billionaire plutocrats at Apple, Google, Microsoft, Cisco, and other tech companies don’t spend all their time deciding whether or not to boycott your state or lecture you on the “correct” voting laws. No, sometimes they have time to plot ways to rip off the taxpayers to the tune of more than 50 billion dollars.
At least, that’s what a new coalition of tech companies wants in a new effort to lobby Congress for subsidies and other “incentives” for the production of semiconductors. According to Fox Business:
The Semiconductor in America Coalition, made up of chip buyers including Amazon Web Services, Apple, Google and Microsoft, and manufacturers like American Micro Devices, Intel, Nvidia and Texas Instruments, has asked Congress to provide funding for the CHIPS for America Act, which authorized domestic chip manufacturing incentives and research initiatives.
These companies want “robust funding”—provided by taxpayers, of course—for the Act’s programs which, the Coalition says, “would help America build … additional capacity” for semiconductor production.
This new demand for cash follows last year’s passage of the CHIPS for America act which included an initial payout of $10 billion for “a new federal grant program” and new tax credits, which, unless accompanied by reductions in spending, only amount to tax increases for everyone who doesn’t receive the credit.1 The coalition also expresses its dismay over the fact that Federal “investment”—i.e., government spending—on semiconductor research has “fallen flat” as a share of GDP.
In other words, America’s tech oligarchs want to buy subsidized semiconductors, and they think regular people should pay for it all while also subsidizing research.
And, of course, no attempt at ripping off the taxpayers would be complete without an appeal to patriotism and economic nationalism.
The coalition was careful to mention that the global share of semiconductors produced in the United States has fallen over the past thirty years. The implication is that sinister foreigners are catching up to the United States in terms of semiconductor production. In other words, the subsidies are “essential for …national security.”
This is just textbook special-interest politics: large, powerful business groups are lobbying the regime to subsidize their products or inputs. This lowers the cost to these businesses while raising the cost to taxpayers and competitors.
But it raises the cost to ordinary Americans in a variety of ways that aren’t just measured in dollars. Here are some of them:
One: Malinvestment
Every time a government extracts resources from private owners via taxation, it is redistributing wealth. But this redistribution doesn’t occur according to the wishes of consumers—i.e., market allocation. Rather, these resources are now doled out according to the wishes of government planners and pressure groups.
This redirection of resources away from market allocation inflates prices in some areas, while depressing prices in others. It creates bubbles in “demand” for certain products and services as generated by the arbitrary purchasing decisions of government bureaucrats.
In the case of the semiconductor subsidy scheme, labor and capital are redistributed by government planners to the semiconductor industry, even if a functioning marketplace would have put those resources elsewhere. The “seen” effect is that more semiconductors are built. The “unseen” is the countless important and in-demand products and services that won’t be provided in the marketplace.
Two: Reduction in Consumer Choice
Politically, the entire scheme rests on the assumption that the consumers aren’t to be trusted with their own money, and their money must be spent in the “correct” places by government agents. That is, every subsidy, tariff, tax, or money-printing scheme requires that regular people hand over a portion of their own wealth to bureaucrats to put it in the "right" places.
In the case of the semi-conductor subsidy, the tech plutocrats worry that a “shortage” of semiconductors will cause the prices of various tech products and services to increase. As a result, it stands to reason that consumers may spend less money on those products and services. This could impact the tech sector's revenue and profits.
Consumers ought to be free to change their spending habits, of course, and they ought to be able to re-arrange their spending so as to fit their own personal budgets and desires.
But the oligarchs and bureaucrats don’t like that sort of thing, and they don’t like the consumer having the freedom to simply spend less in the tech sector. They found a way to protect their revenue and profits: simply force consumers to spend in the tech sector whether they want to or not.
So, the regime forcibly redistributes’ the consumers resources. This represents a loss of consumer “welfare," which we can define as the consumer engaging in voluntary market action to increase his own welfare according to his own individual valuations. The oligarchs want to reduce this welfare in order to increase the oligarchs’ welfare. It’s as simple as that.
Three: Reduced Competitiveness for Other Sectors and Businesses
The situation is more complex than just a transfer of cash from taxpayers to certain subsidized industries.
When the regime subsidizes a particular industry, business, or sector, this results in an increase in prices for competing businesses and industries. For example, if the regime decides to subsidize semiconductor makers, these firms will then have more resources to bid up the wages they pay, and the prices they pay for various resources necessary for production. This means that firms in other sectors now must compete more heavily for labor and raw materials or any other factor that the semiconductor industry is now buying up in larger amounts.
This is especially repugnant in the case of the semiconductor scheme because most of the large tech firms in question have already been indirectly subsidized for years through the Fed’s financialization efforts, and especially in the form of the Greenspan put. This has served to inflate stock prices in the tech sector and has benefited large publicly-traded firms over smaller firms that have not been able to count on the Fed to have their back.
In other words, the semiconductor subsidy is just the latest part of a scheme to stack the deck against small business owners, employees, and customers.
We Learn Economics to Learn How They're Ripping Us Off
One can easily guess what the defenders of this latest subsidy will say. They're likely to claim that it just amounts to a small amount per household: "What's 50 billion dollars spread across so many households?" Of course, this is what advocates for tax increases, tariffs, and subsidies always say: "Just give us this one new, teeny-tiny tax/subsidy. It's not a big deal!" But if we add up all the government schemes this claim has been used to justify, we get a pretty "big deal," indeed. Moreover, as we've seen above, the real cost in terms of economic distortions, lost welfare, and harm to competitors, is quite real and beyond the dollar amounts we see in the subsidy itself.
- 1.Although tax credits are not "subsidies" per se, they are anti-competitive and amount to the regime picking winners and losers. In an environment of deficit spending and monetization of debt—an environment we now live in—a tax credit for one firm or group of firms amounts to putting a larger tax burden on all other firms as monetary inflation and deficit spending are employed to keep spending high in the face of lost revenue via tax credits. Thus, tax credits for the semiconductor industry are a way to shift the tax burden to competitors.
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