Let the Chips Fall Where They May

Washington Post, March 18, 2025 Magazine Work

How a whale fall — a feast on a dying mammal descending to the ocean floor — explains the Chips Act.

While delivering his windy address to a joint session of Congress this month, President Donald Trump dropped a beehive atop one of President Joe Biden’s most treasured legislative triumphs: the Chips and Science Act of 2022 (Creating Helpful Incentives to Produce Semiconductors). Proving that even Trump can be right on occasion, the president flayed the Chips Act as a wasteful giveaway.

“Your Chips Act is a horrible, horrible thing,” Trump said, puncturing Biden’s flesh with his hot stinger. And horrible it is. The program is pelting the hugely profitable semiconductor sector with about $39 billion in federal subsidies to build and upgrade U.S. chip factories. This payout serves as a textbook example of “rent-seeking” — the economic term for how corporations and individuals use the public purse to extract profits for themselves without creating any new value. If Intel, TSMC, Samsung, Micron, Texas Instruments and the other beneficiaries of the bill had done their business with a revolver and a getaway car, you’d call the Chips Act what it is: grand larceny.

Other industries engage in rent-seeking, of course. Agriculture. Medicine. Telecommunications and entertainment. Defense contractors. Banking. And this series will get to them. But let’s first track how and why the Chips giveaway came to be.

Although the Chips Act was a bipartisan winner in Congress, the arguments for it advanced by corporations, unions and politicians never added up. As former Cypress Semiconductor Corp. CEO T.J. Rodgers wrote in opposition to the bill, the industry already enjoys high market valuation, “giving it access to cheap capital,” and needs no government largesse. Distributing “free government money” inspires “inefficient spending,” Rodgers added, and “undeserved payouts to executives and shareholders.” Claims that the act will solve supply-chain problems, such as the ones suffered during the covid pandemic, are specious, he continued, as are the assertions that it will spur technological innovation, create an economic “multiplier effect” to offset its costs and ensure national security. No less an authority than TSMC founder Morris Chang says making semiconductors in the United States instead of Asia adds at least 50 percent to their cost due to labor and regulation. (Others put the cost differential at 20 to 44 percent.)

Like other rent-seeking ventures, the Chips Act is a massive corporate hustle for government subsidies — your money. Like other rent-seeking grifts, it puts the government on the hook for the economic risks while ladling all the profits on the grifters.

One way the rent-seeking machinery operates — and it is operated for the Chips Act beneficiaries — is to line up an industry (and its lobbyists) with legislators and a president ready to bestow favors. The Chips Act pried open the treasury vault the same summer the Biden administration pushed through the $400 billion Inflation Reduction Act, which paid for renewable energy and energy efficiency programs, among other things. But Biden didn’t have to push very hard for the Chips Act: A bipartisan mob rose in a congressional chorus to hail it when it was introduced. Rep. Michael R. Turner (R-Ohio) and others called it key to national security. Sen. Sherrod Brown (D-Ohio) said it would bring the supply chain home where it supposedly belongs. Then-Senate Majority Leader Charles E. Schumer (D-New York) touted lower costs for consumers and scientific innovation.

Corporate chiefs lined up by the dozens to praise the intervention as a solution to the supply-chain problems that had left freshly built cars stranded on automakers’ parking lots during the covid pandemic for the want of simple chips costing pennies or dollars. Then-Speaker Nancy Pelosi (D-California) promised the bill would deliver 100,000 union jobs and a boosted economy. Various legislators terrorized voters with jump scares about China invading Taiwan and rendering the U.S. military chipless. “Seventy-five percent of these [advanced] chips come from East Asia, and a whopping 90 percent of them are made in Taiwan. Given the explicit threat of war by the Chinese Communist Party against Taiwan, that is a grave cause for concern,” said Sen. John Cornyn (R-Texas).

The act cleared both chambers with bipartisan majorities, and in the pork-barrel legislation tradition spread the monetary awards to at least 20 states, in particular the representative-heavy states of California, Texas, Florida, Ohio and New York. But there was one rowdy and articulate opponent of the bill on the Hill. Sen. Bernie Sanders (I-Vermont), who caucuses with the Democrats, cast the only “nay” from their Senate ranks, even though a company in his state was the receive one of the grants. Sanders, who complained that Intel, which was then profitable and is the major beneficiary of the legislation, was so profitable that during the pandemic it spent $16.6 billion in stock buybacks and paid its CEO $179 million in compensation. Sanders also beefed about two of the Chips Act beneficiaries, TSMC and Samsung, being foreign companies. Why should we subsidize foreign companies? he asked.

Sanders didn’t oppose the bill out of a philosophical opposition to industrial policy. What vexed him was that it provided so little benefit to workers while blessing the chipmakers with a cash haul. The bill was “corporate welfare,” he said, putting him on the same side of the issue as his right-wing nemeses at the Heritage Foundation, who called it a “bipartisan boondoggle.”

A whale fall lasts from a few months to decades, depending on the size of the dead whale and the speed of its decomposition. Sharks and killer whales take the first big bites of the carcass. Then come the circling seabirds and fish such as grouper and tuna. Bacteria feast on the mess, and when the whale reaches the bottom of the ocean, hagfish burrow to eat from the inside. Crabs, lobsters, snails and octopuses join the banquet to peck and claw at the remains. Finally, clams, mussels, tube worms, sea cucumbers and other deep-sea scavengers scour the bones.

Rent-seeking bills such as the Chips Act dispatch a scent that attracts lobbyists, corporations, unions, local government agencies, universities and manufacturers the way dead whale stink summons the ocean’s vultures.

Economist Anne O. Krueger coined the term “rent-seeking” in a 1974 paper that so wowed the editors of the American Economic Review, where it appeared, that they named it one of the top 20 articles published in the journal’s first century. At the age of 91, Krueger still walks the rent-seeking beat. In an article published just after the Chips Act passed, she wrote: “It is understandable that the U.S. wants to maintain its technological lead in chips. But subsidizing large existing firms and government management of the industry almost certainly will not achieve that goal.” Instead, she recommended, among other things, the stimulation of global competition, immigration policies that welcome talented workers, increased R&D and student incentives.

As Krueger told me in an interview, much corporate lobbying is transparently rent-seeking: an effort to collect money or favors from the government at the expense of the less-well-connected. A rent-seeking measure such as the Chips Act, ostensibly designed to aid domestic chip production, ends up becoming “a sprawling law showering countless billions on numerous companies for ambiguous ends,” as the Cato Institute’s Scott Lincicome put it. For instance, the Commerce Department will require a child-care plan for facility and construction workers under the act.

To mask the stench of the carcass, rent-seeking bill authors salt the meat with benefits for a wide range of foragers. Politico reporters Brendan Bordelon and Caitlin Oprysko identified them in a 2023 piece about the lobbying behind the bill. Some lobbying companies told the reporters that they were only “monitoring” the bill, or said they had no plans to apply for the subsidies. But others, such as defense contractors Northrop Grumman and General Dynamics, as well as HVAC companies such as Carrier and Trane, had obvious financial interests in the bill. So did the material suppliers, the labor unions and one foreign government: South Korea wanted to make sure foreign-owned companies would qualify for incentives. Snap was candid about securing subsidized chips for its augmented reality (AR) products. The automobile industry — Ford, GM, Toyota, Nissan, Hyundai and Honda — was well represented, as were universities that expected to cash in on the extra billions set aside for scientific research. AIPAC and FedEx lobbied, too, but didn’t say why.

Rent-seekers — unlike ocean scavengers — aren’t candid about their parasitical ways. Instead of volunteering directness about how a bill will benefit them, they shroud their advocacy with deceptions. In the case of the Chips Act, they loudly argued that the measure was essential to “national defense.” We must onshore chip-making, they said, because Taiwan’s chip foundries might fall to China in the wake of a threatened invasion, leaving our economy hostage to the Chinese. Yes, China longs to conquer Taiwan and control its chip factories. It could conceivably do that, but at what cost? Taiwan now produces 92 percent of the world’s leading-edge chips and 60 percent of its semiconductors. But instead of considering its chip industry a point of vulnerability to a Chinese attack, Taiwan calls it a strength — a “silicon shield” that will rally the rest of the chip-buying world to its defense in case of attack. Will China risk destroying the very assets it longs to control? Its economy depends on Taiwan’s chip foundries as much as the rest of the world. Does China really want to risk Taiwan trashing its precious and hard-to-replace foundries in the face of an invasion?

Even if China did succeed in cutting off U.S. supply, the Chips Act still wouldn’t solve the so-called sourcing problem. TSMC’s most advanced product, a 2-nanometer chip, is about to go into production in Taiwan. It isn’t scheduled for U.S. shores until 2028, which means by then, TSMC will probably have leapfrogged it with an even more sophisticated chip, leaving U.S. production in the company’s exhaust. By the Biden administration’s most optimistic predictions, the act will give the United States only 20 percent of the leading-edge chip market by 2030, up from its current 12 percent. So much for self-sufficiency, supply-chain improvement and national security. The idea that onshoring chip production will make the United States more secure is as logical as Trump’s plan to repaper our entire economy with tariffs — which economists recognize as another form of rent-seeking for the way tariffs protect domestic industries at the expense of consumers and economic efficiency.

A better supply-chain remedy would be a strategic chip stockpile, as suggested in a recent report from the Peterson Institute for International Economics. A dedicated military stockpile might still the nerves of national security catastrophizers. Incentives could be offered to businesses to hold larger chip inventories in case of a crisis. Other options: Simplify environmental reviews, accelerate construction permits, and coordinate with other trusted nations, such as Japan, to encourage greater supply.

Despite the Chips Act, Intel stock has gone down 50 percent over the past year, making it a kind of dying whale. In recent news, Intel seems prepared to transfer its American manufacturing facilities to TSMC, which just announced plans to spend $100 billion of its own money on chip capacity. Isn’t it ripe that a failing company, which is likely to waste its handout as it goes down the swirly, and TSMC, currently not in need of handouts because of record profits, are getting government handouts?

If TSMC takes control of Intel’s factories, competition for the advanced chip market will decline — hardly the Chips Act’s intention — and make the market even more beholden to the giants. Lincicome rightly calls subsidies for companies such as Intel that have lost their way “failure rewarded.” If post-subsidy Intel collapses or accepts a desperate merger, every economist who ever observed rent-seekers squandering finite resources will take a bow.

Where rent-seekers succeed, as they have with the Chips Act, they impose politics on economics to aid one group — usually the wealthy — at the expense of another, poorer class. These deals often look handsome from the outside: ribbon-cutting ceremonies, new buildings, a promise of saved jobs and even new jobs, additional taxes collected at the state and local levels, and sometimes even new products. However, this audit rarely factors in who benefited and who suffered from the intervention. Was the money wisely spent? Could the money have been better spent elsewhere? Did the money cement the leading companies in place at the expense of smaller firms? Did it encourage future rent-seekers to join the political carnival instead of just competing? Did the intervention produce the promised outcome, or did its scare tactics end up lining a few privileged pockets?

Rent-seekers such as Intel and others lock in inefficiencies and favor-making, winding the economic system down rather than up, and squandering resources rather than managing them efficiently. For rent-seekers, the economy is not a dynamic, growing thing but a dead hulk sinking into the deep — a prize for graveyard grazers to fight over.

This ongoing column seeks a catchier phrase to describe the act of grand larceny currently known as rent-seeking. Send your nominations to letters@washpost.com.