Biden’s subsidies are working a little too well

Crowd surfing. U.S. subsidy machine is grinding into gear. coming days are likely to see announcements of big handouts for chipmakers, designed to help m increase domestic production. And companies are alrey availing mselves of tax perks targeted at infrastructure and sustainable energy. se acts of largesse by President Joe Biden’s ministration are working, but with side effects.

Chips Act of 2022 was designed to bolster U.S. semiconductors, and contained $39 billion of financial aid for domestic production, about 70% of which was subsidies for production of vanced chips. Producers can also receive tax credits equal to 25% of qualifying cost of ir facility. law’s sibling, Inflation Reduction Act, gives incentives for production and purchase of clean energy, storage and efficiency.

Recipients, though, are competing for scarce resources when turning ir plans into reality. Construction costs for factories and industrial buildings have risen 40% over four years according to U.S. Bureau of Labor Statistics. Samsung Electronics’ chip plant in Texan town of Taylor was $8 billion above initial estimates last year according to Reuters' sources. Finding enough skilled workers is also a problem, and is one reason Taiwan Semiconductor Manufacturing's second chip plant in Arizona has been delayed.

Even as value of subsidies falls, measured in purchasing power, demand for m is red hot. Commerce Department said in February that vanced chipmakers are requesting $70 billion of assistance, or twice as much as is available. fact re are more guests than cake is a concern, especially in a semiconductor industry known for historical booms and busts. Japan, Europe and China are all pursuing ir own domestic chip-making campaigns.

problems se subsidies attempt to target are real. American infrastructure is undeniably underinvested and overweared. In chips, U.S. produces about 10% of world’s semiconductors and none of most vanced sort, and new investments put it on path to produce 20% of all vanced logic chips by 2030. But reality of subsidized investment, with cost overruns and herd-like thinking, is messy. risk is that some of handouts fall short, and ors work too well.