Thu, Jul 7, 2022 2:21 PM
By J.D. Davidson, The Center Square
A bipartisan group of attorneys general from around the country want Congress to agree upon more than $50 billion in incentives to increase domestic microchip production they say will help both supply chain and national security issues.
Ohio Attorney General Dave Yost and Vermont Acting Attorney General Joshua R. Diamond led the call in a letter that encourages Congress to reach an agreement on legislation that passed the House and Senate but remains stalled in conference.
“Virtually all modern-day products and amenities depend on microchips,” Yost said. “So, it’s absolutely vital that domestic chip production become a national priority.”
The letter cited the country’s overreliance on foreign microchip production and newly built vehicles waiting on chips from overseas.
“Increasing domestic production will not only ease supply-chain issues for consumer products, it will also serve to ensure that the equipment our nation relies on to defend itself and its allies is available when we need it,” the letter sent to congressional leadership said.
The money plays a key role in Intel’s planned $20 billion investment in Ohio, which includes a new computer chip facility in New Albany that officials said is expected to create 3,000 full-time jobs, 7,000 construction jobs and what Gov. Mike DeWine called tens of thousands of additional indirect and support jobs. The project is expected to add $2.8 billion to the state’s annual gross product.
Ohio offered $2 billion in incentives to land the project.
DeWine recently told CNBC he believes Intel is threatening to delay the project to push Congress to act. Last month, Intel said it was cancelling its July 22 groundbreaking.
Intel CEO Patrick Gelsinger also told CNBC without the federal money it does not make sense for the company to move forward yet.
Gelsinger called the CHIPS Act a key to increasing manufacturing in the U.S. and the European Union and rebalancing the global supply of chips.
“Time is of the essence,” Gelsinger said during a March hearing in Washington, D.C. “American businesses in every sector across the economy are facing a semiconductor shortage," he added, “and the only way to alleviate the current supply-demand imbalance long term is to increase manufacturing capacity by funding and implementing the CHIPS Act.”
Others, like Michael Farren, a senior research fellow at the Mercatus Center at George Mason University, believe government incentives do not stimulate job growth.
“Unfortunately, the consensus pf academic research shows that the vast majority of economic development programs are a waste of money and might even slow down economic growth rather than accelerate it,” Farren said. “My best estimate is that state and local economic development programs – like the over $2 billion that Ohio has offered Intel – waste about $100 billion every year. That's enough to fund the entire state budget for 13 states.”
Farren also said he believes the CHIPS Act ramps up state competition with other states.
“Even worse, the CHIPS Act actually accelerates this ruinous interstate political competition by reimbursing state and local subsidies,” he said. “The last thing that Congress should be doing is encouraging this practice.”
The AG letter was also signed by attorneys general from Connecticut, Delaware, Hawaii, Iowa, Michigan, Minnesota, New Mexico, New York, North Carolina, Oregon, Rhode Island and Virginia.