The Political Notebook 7.22.22
Ducey pitches industrial policy. Summer school is no substitute for a comprehensive, statewide plan to remedy Covid-related learning losses.
Computer chip subsidy bill isn’t about beating China
Gov. Doug Ducey recently issued a Twitter thread in support of the bill pending before Congress to heavily subsidize computer chip manufacturing in the United States. His crescendo was: “If we don’t pass this, America loses and China wins. It’s that simple.”
Well, it’s not that simple. And proclaiming such is a disservice to both productive political discourse (not that that is to be expected on Twitter) and free market principles.
The bill is a work in progress, as it has been for some time. In its current state it includes $76 billion in direct subsidies to domestic chip manufacturers in the form of grants and tax credits.
In and out of the bill has been hundreds of billions in additional spending for research, technology centers and other forms of indirect support for the industry.
This would be a significant step toward the creation of an industrial policy for the country. With an industrial policy, government favors certain economic sectors over others and strongly influences the flow and use of capital in those sectors.
The United States has done less of this than European social democracies, and that has contributed to our economy performing better than theirs.
There are two basic arguments advanced for the federal government to underwrite computer chip manufacturing in the United States. The first is a national security one, the other a broad-based economic one.
If our war-making capability requires a certain quantity and quality of computer chips, and the decision is reached that our security requires that they be domestically manufactured, that could be secured through a targeted, straightforward defense procurement. A big step into industrial policy isn’t required.
After the global economy rebounded from Covid, there was a shortage of computer chips. As a result, there was a shortage of a wide-range of consumer products: cars, computers, tablets, smart phones. Computer chips make all sorts of consumer products do what they do.
Markets respond to price signals. Chip production has increased. Manufacturers dependent on computer chips have looked to shoring up their supply chains.
The United States shouldn’t be sallying forth into a new era of industrial policy for consumer products. A temporary shortage of cars or smart phones isn’t a national emergency or a national security risk. It’s an inconvenience that markets can work out.
China has made dominating computer chip manufacturing a national objective. But it is at the low end of the product scale at present. There’s little reason to believe that its model of state capitalism will catch up and eclipse what a freer market system can produce.
While the United States has lost market share in end product manufacturing, we still are the dominant player in the intellectual property that makes the chips do what they do and enables them to be produced.
Foreign chip manufacturers supplying the United States, principally from Taiwan and South Korea, were already expanding capacity here without the subsidies. Given the geopolitical threat China poses in the region, it’s a sensible diversification for them.
This isn’t some critical chess move in a geopolitical competition between the United States and China. It’s actually a question of whether taxpayers should subsidize domestic chip manufacturing for consumer products.
A crescendo for that proposition wouldn’t be as ringing.
Not the way to remedy Covid-related learning losses
The Ducey spin machine has been quick to tout his summer school program as a huge success in remedying Covid-related learning losses among K-12 students.
Ducey set aside $100 million from Covid federal funding for the summer schools. Roughly 100,000 students are attending .
That’s a lot of students. But Arizona has 1.1 million public school K-12 pupils. So, this barely scratches the surface in remedying Covid-related learning losses.
And it's not clear how much of that is being done even for the 100,000 who are attending. Nor is it likely to become clear. The programs weren’t set up for systematic evaluations of that specific question.
Some federal Covid relief money earmarked for K-12 education went to the governor, some went to the superintendent of public instruction, and some went directly to school districts. In all, the state received in excess of $4 billion.
The tragedy is that this was ample to conduct a truly comprehensive, statewide program to identify and remedy Covid-related learning losses. When schools reopened, students could have taken diagnostic tests about learning skills with individual instruction to catch up on deficiencies.
But there is no comprehensive, statewide approach being taken. The governor doles out some money here, the superintendent there. Districts are using their money in various ways.
Any specific remediation of Covid-related learning deficiencies is the result of haphazard and uncoordinated interventions, not the product of a comprehensive, statewide plan ensuring that no child was left out or short-changed.
The students in our state have never been more poorly served.
Reach Robb at robtrobb@gmail.com.