{"id":35720,"date":"2025-07-31T01:19:08","date_gmt":"2025-07-31T01:19:08","guid":{"rendered":"https:\/\/www.newsbeep.com\/ca\/35720\/"},"modified":"2025-07-31T01:19:08","modified_gmt":"2025-07-31T01:19:08","slug":"bidenomics-at-3-invisible-waste-becomes-more-visible","status":"publish","type":"post","link":"https:\/\/www.newsbeep.com\/ca\/35720\/","title":{"rendered":"\u2018Bidenomics\u2019 at 3: Invisible Waste Becomes (More) Visible"},"content":{"rendered":"

Of course, not all CHIPS Act headliners are doing as badly as Intel, but others\u2019 U.S. projects also raise concerns. Industry leader TSMC, for example, is now producing some advanced semiconductors in Arizona, but\u2014as National Review\u2019s Dominic Pino reported<\/a> last October\u2014that facility wasn\u2019t spurred by CHIPS money. We\u2019ve discussed<\/a>, moreover, that the Arizona factory\u2019s current output is less advanced than its best Taiwan-made chips, relatively small, and relatively costly. TSMC doubled down on that last point in April when it hiked U.S. prices<\/a> substantially, and the most recent figures put<\/a> its Arizona-made chips at 5 to 20 percent pricier than those from Taiwan. More and better U.S.-made chips are coming from TSMC, but\u2014as Treasury Secretary Scott Bessent just lamented<\/a>\u2014the fully operational Arizona factories will satisfy just 7 percent of U.S. demand and are also being further delayed by high costs and red tape. (And they\u2019re still being flown<\/a> to Taiwan for packaging\u2014at least for now.)<\/p>\n

Speaking of red tape and delays, Micron\u2019s huge memory chip facility in upstate New York hasn\u2019t even broken ground yet and won\u2019t do so until at least late November<\/a>, thanks in large part to state and federal environmental regulations and other CHIPS Act requirements (including social policy ones<\/a>). Given that Micron still<\/a> \u201cneeds to obtain dozens of permits, from the federal Environmental Protection Agency to the town of Clay,\u201d even this new timeline appears optimistic. Regardless, the current best case is that Micron\u2019s first factory won\u2019t come online until 2029 and its entire complex won\u2019t be cranking until 2045. (Anyone wanna bet?) And analysts doubt that the struggling firm\u2019s New York output will be \u201ccost competitive<\/a>.\u201d\u00a0<\/p>\n

Other subsidized New York semiconductor facilities, it should be noted, are suffering<\/a> similar delays.<\/p>\n

Samsung\u2019s big facility in Texas has also struggled, with its opening delayed to 2026 in part because of technical problems and a disturbing lack of demand<\/a>. A newly announced deal with Tesla could improve the situation there, but it\u2019s incredibly risky<\/a> given Tesla\u2019s history of overconfident claims and Samsung\u2019s recent lagging performance versus foundry rival TSMC. Even if successful, moreover, deliveries<\/a> of the Tesla chips probably won\u2019t start until 2028, and in the meantime, Samsung has \u201cvirtually no customers\u201d lined up.\u00a0<\/p>\n

These issues might explain why Congress just quietly increased<\/a> CHIPS Act tax credits in the OBBBA, thus funneling billions more to U.S. projects that have already been announced (and itself not exactly a great sign of how things are going in the U.S. semiconductor ecosystem).<\/p>\n

Factories subsidized by the IRA have also encountered increasing difficulties. The advocacy group E2, for example, calculates<\/a> that 58 \u201cclean energy\u201d projects totaling almost $25 billion in private investment have been canceled, closed, or downsized since 2023\u2014a pace that has rapidly accelerated in the first half of 2025:<\/p>\n

\"Chart Chart by Joe Schueller.<\/p>\n

This $25 billion represents almost 20 percent of all clean energy projects announced since 2022 and doesn\u2019t include the federal, state, and\/or local subsidies that are typically attached to these projects. The bulk of the factory closures, the organization notes, came from just four industries\u2014batteries, EVs, solar, and wind\u2014and almost entirely in manufacturing (as opposed to power generation). And the E2 list expressly omits projects and facilities that have been merely delayed or idled.\u00a0<\/p>\n

Including the paused projects would undoubtedly increase the total number of distressed clean energy investments in the United States today\u2014and the potential waste spurred by the IRA. Indeed, it seems these days that not a week goes by<\/a> without news<\/a> of another green energy<\/a> manufacturing project<\/a> getting delayed<\/a> (or worse). As Bloomberg reported<\/a> earlier this month, in fact, \u201cdozens\u201d of \u201cghost factories\u201d\u2014planned green energy facilities that were started but now canceled\u2014have popped up across the country, thanks to a combination of Trump administration hostility toward green energy, certain subsidy conditions, and various market factors (\u201csoaring costs, high interest rates and slow-growing EV demand\u201d).\u00a0<\/p>\n

Several other projects, Bloomberg noted, have been delayed or downsized, and analysts expect even more reductions and cancellations in the months ahead as Republican-led cuts to IRA subsidies and related Trump administration actions start to bite (see last week\u2019s newsletter<\/a> for more). The risk, Bloomberg noted, is not only billions of wasted taxpayer dollars but a \u201csizable amount\u201d of \u201cstranded investments.\u201d Yikes.<\/p>\n

Of course, many subsidized projects aren\u2019t dead or dying today, and it\u2019s still too early to declare the CHIPS Act and the IRA total failures. On the flipside, many semiconductor and green manufacturing projects would certainly have happened without all the subsidies \u2013 something even advocates acknowledge<\/a>. Regardless, the U.S. manufacturing construction wave does seem to have crested<\/a>, and the United States\u2019 \u201cghost factory\u201d problem\u2014which reeks of Chinese industrial policy<\/a>, by the way\u2014does seem to be getting worse. None of this bodes well for U.S. industrial policy.<\/p>\n

Relearning Lessons\n<\/p>\n

The reasons for these difficulties are, as devout Capitolism readers know, just what critics warned years before<\/a> the CHIPS Act and IRA became law. Market factors like consumer demand, interest rates, and construction costs are notoriously difficult for anyone\u2014but especially politicians\u2014to predict years in advance, as are the technologies and companies that will win the distant future. Industrial policies also often favor older, politically connected incumbents like Intel (or First Solar<\/a>) instead of smaller players on the cutting edge but without a big lobbying budget. When the CHIPS Act was first working its way through Congress, for example, ChatGPT didn\u2019t exist and Nvidia was still a \u201cvideo game company\u201d with a share price well under $10. So, even in 2024, it was long-struggling Intel winning<\/a> the most government support.\u00a0<\/p>\n

It\u2019s also common for government-backed projects to stagnate when confronted with old policies\u2014environmental regulations, trade and immigration restrictions, labor requirements, sanctions, etc.\u2014or new \u201cEverything Bagel\u201d conditions attached to the new laws during their formulation or implementation, in order to appease influential groups like labor unions (itself a potential industrial policy problem<\/a>!).\u00a0<\/p>\n

After three years of CHIPS and IRA subsidies, we can see in the above reporting and elsewhere that these common industrial policy impediments are causing problems once again.<\/p>\n

The biggest impediment, however, may simply be the political uncertainty baked into any large-scale U.S. industrial policy, especially in today\u2019s hyperpartisan environment. As we discussed last year<\/a> (and the year before that<\/a>), uncertainty is always a problem with industrial policies, but the risks were especially apparent as trillions of dollars in new federal subsidies proved to be irresistible political catnip for President Joe Biden and congressional Democrats. All those \u201cBidenomics\u201d photo ops, in turn, triggered a predictable backlash among many Republican voters and politicians, regardless of the projects\u2019 possible merits.\u00a0<\/p>\n

Combine that negative partisanship with more principled and substantive subsidy opposition from many free marketers and a broad Republican victory in 2024, and we got a 2025 investment environment much more hostile to the very things the federal government was encouraging mere months earlier\u2014a bad situation then turbocharged by actual cuts to the IRA subsidies as part of the OBBBA. Even CHIPS Act implementation has been in some doubt<\/a> this year, despite more bipartisan support and a recent increase in the tax credits.<\/p>\n

This political risk was obvious years ago, but\u2014as Biden climate alumna Jane Flegal just put it on<\/a> Ezra Klein\u2019s podcast\u2014it\u2019s now something many IRA advocates belatedly seem to recognize:\u00a0<\/p>\n

One thing that I have learned throughout this process is that climate politics is inseparable from all of our other politics. So going back to the election, part of what happened here was we passed the I.R.A. as a Democrat-only bill.<\/p>\n

We live in a world now, where when that happens, there is a tendency to turn up the polarization on whatever is in the Dem-only bill on the other side of the aisle. This bill was framed as Biden\u2019s signature climate achievement. It\u2019s not, in some ways, surprising that the Republicans wanted to tear it down.<\/p>\n

Thus, Klein sums up, green energy subsidies\u2014especially for wind, solar, and EVs\u2014\u201cbecame political culture-war issues\u201d instead of scientific or economic ones. And he, Flegal, and other U.S. climate hawks are now pivoting to broader supply-side reforms\u2014permitting, especially\u2014that have far more buy-in from Republicans (and many experts, too). \u201c[T]he most important thing we can do going forward\u2014if we take affordability seriously and we take climate seriously\u2014is remove all of the nonmarket barriers to deploying this stuff as rapidly as possible everywhere,\u201d Flegal concluded (and to take on another influential interest group, the \u201cenvironmental movement,\u201d in the process).<\/p>\n

She\u2019s not alone<\/a> among the Biden alums in reconsidering their subsidy-heavy approach. And, to be clear, a supply-side pivot is smart for political and economic reasons. It\u2019s just a shame that they didn\u2019t start with that stuff instead of all the costly and troublesome subsidies. We\u2019d be in a much better place today if we had.<\/p>\n

Just How Much Waste?\n<\/p>\n

At this point, of course, the subsidy cake is pretty well-baked, and the current situation for both the IRA and the CHIPS Act may reteach us another industrial policy lesson: Government \u201csupport\u201d can generate a very large amount of public and private waste.\u00a0<\/p>\n

We\u2019ve already discussed<\/a>, for example, some of the offshore wind power projects that were started and then canceled. Bloomberg\u2019s \u201cghost factory\u201d piece also documents<\/a> several empty plots of land or half-finished factories that IRA subsidies encouraged. In my neck of the woods, a massive, vacant lot\u2014supported by $450 million in state infrastructure enhancements\u2014is the only tangible sign of a VinFast EV factory that was supposed to open last year but is now, to put it kindly, in limbo<\/a>. A few miles away from that sits an almost-completed factory for chipmaker Wolfspeed, which had been banking on CHIPS Act funds<\/a> but recently declared bankruptcy. Head South to Georgia, and you\u2019ll see a half-finished-but-now-canceled factory<\/a> of federal loan recipient Aspen Aerogels, which had already spent more than $300 million on the site. The list goes on.<\/p>\n

And then there\u2019s Intel. The Columbus Dispatch reports<\/a> that the company\u2019s Ohio facility has already received at least $1.5 billion in CHIPS Act grants, along with millions more in tax credits and state and local subsidies, including infrastructure that can\u2019t be refunded. Intel itself has invested billions more in the site and the surrounding area, and other companies have spent money too in the hope of winning future business. While Intel and local politicians confidently say the facility will still be completed eventually\u2014embracing the sunk-cost fallacy along the way\u2014that optimistic future is clearly in doubt.\u00a0<\/p>\n

Regardless, the Ohio site and all the others like it across the country represent massive amounts of finite resources\u2014time, money, materials, people, etc.\u2014that could have been better spent without governments\u2019 thumbs on the scale. In the case of lost taxpayer dollars and empty fields and buildings\u2014something<\/a> certainly<\/a> not unique<\/a> to recent U.S. industrial policy\u2014the waste is easy to see. But, as seen in the U.S. steel and shipbuilding industries, and maybe soon with Intel, waste can also happen in factories that do become operational. In those cases, the facilities make things of political, not economic, value and are kept alive not by eager customers but by ambitious (or na\u00efve<\/a>) politicians and a perpetual stream of government support and protection. As those brand new CHIPS subsidies and yet another solar tariff case<\/a> indicate, just three years into our grand industrial policy experiment, there will be a lot more of this waste to come.<\/p>\n

If so, it\u2019ll be yet another industrial policy risk we\u2019ve long understood \u2013 and another lesson we\u2019ll be forced to relearn.<\/p>\n

Chart(s) of the Week\n<\/p>\n

How to increase tax complexity and generate lots of unintended consequences<\/a>:<\/p>\n

\"\" <\/p>\n

This ain\u2019t BlackRock, folks:<\/a><\/p>\n

\"\" <\/p>\n

The Links\n<\/p>\n

U.S.-Japan deal rhetoric versus reality<\/a><\/p>\n

Properly understanding<\/a> today\u2019s GDP print<\/a><\/p>\n

Read corporate filings, not CEO statements<\/a><\/p>\n

U.S. shipbuilding common sense<\/a><\/p>\n

Trade deficit myths and realities<\/a> (more<\/a>)<\/p>\n

Trump fishes for legal excuse to tariff Brazil<\/a><\/p>\n

More trade econ confusion<\/a><\/p>\n

Cleveland-Cliffs now likes foreign investment<\/a><\/p>\n

More on Reagan the free-trader<\/a><\/p>\n

How Big Corn lobbied for U.S. sugar protectionism<\/a><\/p>\n

ICE raids cripple a Nebraska meatpacking plant<\/a><\/p>\n

Daycare and pet care and Baumol<\/a><\/p>\n

U.S. solar tariffs have been really dumb<\/a><\/p>\n

Goods-obsessed mercantilists miss the Next Big Thing<\/a><\/p>\n

Chinese industrial policy is a big problem\u2014for China<\/a> (more<\/a>)<\/p>\n

Maine \u201caffordable housing\u201d initiative causes less-affordable housing<\/a><\/p>\n

New housing paper confirms YIMBY (supply-side) policies work<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"Of course, not all CHIPS Act headliners are doing as badly as Intel, but others\u2019 U.S. projects also…\n","protected":false},"author":2,"featured_media":35721,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[11],"tags":[45,49,48,26669,46,16742,5144,26670,6512,26671,13023,927,10209,8545],"class_list":["post-35720","post","type-post","status-publish","format-standard","has-post-thumbnail","category-economy","tag-business","tag-ca","tag-canada","tag-chips-act","tag-economy","tag-green-energy","tag-industrial-policy","tag-inflation-reduction-act","tag-joe-biden","tag-labor-unions","tag-one-big-beautiful-bill-act","tag-opinion","tag-social-policy","tag-subsidies"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/35720","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=35720"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/35720\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/35721"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=35720"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=35720"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=35720"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}