Tangle - The controversial computer chip bill.

Episode Date: July 20, 2022

On Tuesday, the Senate took the first step to advance what lawmakers are calling "CHIPS-plus," a piece of legislation that aims to combat the global chip shortage impacting everything from the automaker industry to the video game industry. Plus, a question about Isaac's debate at Freedom Fest in Las Vegas last week. You can read today's podcast here.You can subscribe to Tangle by clicking here or drop something in our tip jar by clicking here.Our podcast is written by Isaac Saul and produced by Trevor Eichhorn. Music for the podcast was produced by Diet 75.Our newsletter is edited by Bailey Saul, Sean Brady, Ari Weitzman, and produced in conjunction with Tangle’s social media manager Magdalena Bokowa, who also created our logo.--- Send in a voice message: https://podcasters.spotify.com/pod/show/tanglenews/message Hosted on Acast. See acast.com/privacy for more information.

The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada, which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed. Learn more at flucellvax.ca. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police

procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. From executive producer Isaac Saul,

this is Tangle. Good morning, good afternoon, and good evening, and welcome to the Tangle podcast, the place where you get views from across the political spectrum, some independent thinking without all that hysterical nonsense you find everywhere else. welcome to the Tangle Podcast, the place where you get views from across the political spectrum, some independent thinking without all that hysterical nonsense you find everywhere else. I'm your host, Isaac Saul, and on today's episode, we are going to be talking about semiconductor chips and the chip shortage and the piece of legislation in Congress that is trying to address this. It might sound kind of boring and wonky and techie and geeky. It's not. It's

actually a huge deal and something that could affect a lot of people's everyday lives. So I hope you stay tuned. As always, though, before we jump in, we're going to start off with some quick hits. First up, President Biden is considering declaring a climate emergency in order to unlock federal funds and take executive action to address climate change. Number two, 47 House Republicans joined Democrats to pass legislation last night that would repeal the Defense of Marriage Act and enshrine marriage equality, including the right to same-sex and interracial marriage, into federal law. The bill passed 267 to 157. Number three, a Delaware court set a five-day trial date for

the Elon Musk Twitter dispute in October. Number four, Dan Cox, a state delegate with the full support of Donald Trump, won his primary to become the Republican candidate for governor in Maryland. won his primary to become the Republican candidate for governor in Maryland. Votes are still being tallied in the Democratic primary. Number five, the European Union introduced a bill to begin rationing natural gas, warning the continent about fears Russia will tighten supply. All right, that is it for our quick hits section. Before we jump into our main topic, I want to quickly reiterate my plug from yesterday. There's 24 hours left now.

We are currently running a podcast listener discount on Tangle memberships. If you go to readtangle.com slash podcast right now you can subscribe to become a tangle member at 20 off our yearly subscription this is something we did once many months ago we will probably not do again for a really long time and there is only about 24 hours left on it so i hope you do it a reminder memberships are basically what makes this podcast happen it is how we pay our team to edit it it's how we pay our team to edit it. It's how we pay our team of editors who edit the newsletter. It does everything. The memberships do everything. We make very little money off our advertisements. So please, if you enjoy the podcast and you want

it to keep going, please, please, please become a Tangle member. You can get 20% off right now if you go to readtangle.com slash podcast. That's readtangle.com slash podcast. All right, that's it for the promo, which brings us to our main topic today, which is the computer chip bill in Congress. On Tuesday, the Senate took the first step to advance what lawmakers are calling Chips Plus, a piece of legislation that aims to combat the global chip shortage, impacting everything from the automaker industry to the video game industry. After months of negotiating larger bills, like the U.S. Innovation and Competition Act in the Senate

or the American Competes Act in the House to increase semiconductor chip production and better compete with China and Taiwan, some members of Congress appear to be pushing a slimmed-down version of the House and Senate bills to get something done before the August recess. There is enough bipartisan support among Democrats and Republicans to address the national chip shortage through previous bills that have moved through Congress. But Senate Minority Leader Mitch McConnell had threatened to tank any bill if Democrats pursue their reconciliation legislation.

Currently, this includes raising taxes on the wealthy and corporations, as well as incentives to address climate change. Now that Senator Joe Manchin, the Democrat from West Virginia, has effectively pressed pause on that possibility, Republicans are looking to move forward on a semiconductor chip bill. Key Republicans are now signaling openness to passing a bill that would provide $52 billion in incentives for the domestic semiconductor industry. Senator John Cornyn, the Republican from Texas, said Monday that Manchin's announcement means, quote, we're in a posture where we can go forward with the chips funding

and other related provisions. Top Democrats also supported switching tactics to a slimmed down bill, saying they were fearful chip manufacturers would build plants elsewhere if they didn't soon enough. Gina Raimondo, the Commerce Secretary, said that chipmakers are now considering where to build plants in order to match global demand and that the U.S. needs to keep up with foreign competitors courting those same companies. The U.S. currently has just 12% of the world's chipmaking capacity, down from 37% in 1990. The Senate could vote this week on a narrower version of the bill that has already passed. That version would contain $52 billion in financial incentives and research funding, including $39 billion in grants to subsidize new factories in the United States, $1.5 billion to encourage 5G competition, and a 25% tax credit for investments

in semiconductor manufacturing. It would also prohibit aid recipients from expanding or building new manufacturing plants for certain semiconductors in China, according to a draft reviewed by the Associated Press. While Democrats and Republicans agree the issue is an urgent matter, they can't agree on what should be done in the bill and how to address it. Today, we're going to take a look at some arguments from the left and the right on how to move forward and then my take. First up, we'll start with what the left is saying. The left is divided on the bill, with some arguing against corporate bailouts and others saying it's an American industry in need of government subsidies.

Some say there are better ways to shore up our supply chain than subsidies that may end up benefiting shareholders over taxpayers. Others say the industry is too important for the government not to intervene. The Washington Post editorial board argued there are better ways to address our supply chain issues. Legislators are almost certain to sever the CHIPS Act from the larger USICA, pushing through $52 billion in aid to the semiconductor industry, including $39 billion in grants to subsidize new factories in the United States. That move was already likely, even with Mr. McConnell holding the rest of the bill hostage, the board wrote. Legislators are also hoping to add on a little more, such as an investment tax credit for

semiconductor manufacturing and a program to bolster alternatives to Chinese-made 5G technologies. The thinking is that the CHIPS Act is urgent because unless it passes quickly, companies impatient for the subsidies it would provide will build their factories in countries where incentives are already in place. The problem is, the CHIPS Act has never been the only way, or even the best way, to achieve that aim, the board said. Lawmakers have attached some strings to the money the bill would dole out, but there's still a risk that the funds would largely benefit shareholders rather than taxpayers. There's also a risk that no matter how well the United States spends its dollars, it can't keep up with China, which is used to funneling far more government resources into industry. Other parts of the competition

package took a smart tack, supporting academic research in critical areas and facilitating immigration by students and talented professionals. These interventions, along with a robust free market, are essential to success. In The Guardian, Senator Bernie Sanders, the Democrat from Vermont, argued against giving companies a blank $50 billion check. Let's review some recent history, Sanders wrote. Over the last 20 years, the microchip industry has shut down more than 780 manufacturing plants in the United States and eliminated 150,000 American jobs while moving most of its production overseas after receiving over $9.5 billion in government subsidies and loans. In other words, in order to make more profits, these companies took government

money and used it to ship good-paying jobs abroad. Now, as a reward for that bad behavior, these same companies are in line to receive a giant taxpayer handout to undo the damage that they did. That may make sense to someone. It does not make sense to me. The company that will probably benefit the most from this taxpayer assistance is Intel. I have nothing against Intel. I wish them well, Sanders said. But let's be clear, Intel is not a poor company. It is not going broke. In 2021, Intel made nearly $20 billion in profits. During the pandemic, Intel had enough money to spend $16.6 billion not on research and development, but on buying back its own stock and rewarding its executives

and wealthy shareholders. Last year, Intel could afford to give its CEO, Pat Gelsinger, a $179 million compensation package. Over the past 20 years, Intel spent more than $100 million lobbying and campaign contributions while shipping thousands of jobs to China and other low-income countries. Does it sound like this company really needs corporate welfare? In 1968, Dr. Martin Luther King Jr. said, the problem is that we all too often have socialism for the rich and rugged free enterprise capitalism for the poor. I'm afraid what King said 54 years ago was accurate back then, and it's even more accurate today. The Boston Globe editorial board said the U.S. should approve the $52 billion before it goes elsewhere.

There are some inputs that are so critical to the economy, so vital to national security, that the federal government has a special duty to nurture and protect them, the board wrote. Computer chips are in that category. They run our cars and computers, our smartphones and smart bombs. There is scarcely a consumer electronic device today that doesn't include semiconductors. When the pandemic-related chip shortages shut down auto factories over the past couple of years and sent prices soaring, the whole world learned a painful lesson in the centrality of the silicone wafers. Big subsidies for a thriving industry can be difficult to swallow, but Congress doesn't have a choice, they said. In China, Singapore, Taiwan, and Europe, governments are pouring massive sums into semiconductors. And if Washington doesn't

compete, the country's shrinking share of semiconductor production could shrink even further. Without a steady domestic supply of chips, our economy and our military prowess are put at real risk. Domestic manufacturers have put plans for new semiconductor plants on hold in places like Ohio and Texas while they wait on word from Congress. Drag out the process too long, the companies have warned, and they'll go overseas. Alright, that is it for what the left is saying, which brings us to the right's take. The right is mostly against the bill, arguing the shortages are easing and the government should stay out of it. Intel and Ford CEOs published an argument for the subsidies in

the Wall Street Journal opinion section, which were including to offer a counter to Senator Sanders' argument. Some say the best way to win over foreign competition is to cut regulations and scale back trade policies. The Wall Street Journal editorial board said the bill is unnecessary as the industry is already growing and the U.S. is already leading. As often happens, yesterday's shortage may be tomorrow's glut as chip firms have expanded production without subsidies, the board said. Taiwan's semiconductor manufacturing company tripled capital spending between 2019 and 2022. Intel nearly doubled capital spending during the pandemic, and Samsung last year increased its 10-year investment plan by more than 30%. Global semiconductor capacity increased 6.7% in 2020, 8.6% in 2021, and is expected to grow

another 8.7% this year. The risk of overcapacity is growing as China heaps subsidies on its semiconductor industry as part of its Made in China 2025 initiative and the U.S. and Europe race to compete. The other claim for the bill is that the U.S. must subsidize domestic chip making to compete with China, but this also isn't persuasive, they said. The companies like to point out that the U.S. share of the world's chips has fallen to 12% from 37% in 1990. They don't mention that the US leads in chip design, 52%, and chip making equipment, 50%. Seven of the world's 10 largest semiconductor companies are based in the US. China trails American companies by years in semiconductor technology. Chip fabrication has moved to South Korea and Taiwan because many chips

are commodities with low margins. But chip makers are working to diversify their manufacturing bases to avoid future supply disruptions and have announced $80 billion in new U.S. investments through 2025. Samsung plans to add a $17 billion factory in Texas. TSMC has a $12 billion plant under construction in Arizona. Jim Farley, the CEO of Ford, and Pat Gelsinger, the CEO of Intel, called on Congress to pass the bill, noting that semiconductor chips are needed for automobiles, smart devices, hospitals, and the military. The flu remains a serious disease. Last season, over 102,000 influenza cases have been reported across Canada,

which is nearly double the historic average of 52,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages 6 months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection is not guaranteed.

Learn more at flucellvax.ca. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history,

and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+. The pandemic supply chain shock exposed a problem that has been mounting for years. The US share of global chip manufacturing has declined to 12% from 37% in 1990. South Korea and Taiwan, notably, have spent years actively investing in their own chip manufacturing, creating an uneven playing field for U.S. chip

makers that harms our economy and global competitiveness, they said. Fortunately, a solution is within reach. As soon as this week, the Senate will hold a vote on funding the CHIPS Act, which would provide $52.2 billion in grants to the U.S. semiconductor industry. In addition to boosting production of leading-age and legacy chips, the act would help level the playing field with global competitors. The global chip shortage not only endangers our access to essential technology, it also risks eating into Americans' wages in the form of reduced hours and higher consumer prices, they wrote. Without intervention, shortages of chips, including the legacy chips widely used in the auto, medical device, and defense industries,

are expected to persist as investment in the U.S. stalls. This legislation is vital to many American industries, including ours, that have dealt with significant disruptions. We urge lawmakers on both sides of the aisle to move quickly to address this crisis. By funding the CHIPS Act, Congress will help consumers protect patients and strengthen the American economy and national security. In the Washington Examiner, Yifang Zhang and Christine McDaniel said the CHIPS legislation is a distraction from the Bigger China Challenge. The worst of pandemic-related supply chain disruptions appear to be behind us. Still, manufacturing plants can take years to build, they said. As these plants ramp up production,

one can imagine a flurry of complaints about continuing low-price foreign competition, legitimate or otherwise. Having already paid up front, the government will be tempted to protect new plants at the expense of U.S. consumers and taxpayers. The computer chip program will likely resolve over time. The underlying challenges posed by China are here to stay. Instead of giving away $52 billion, why not address why a multi-billion dollar chip maker doesn't choose America to begin with? First, we should streamline regulatory burdens on building manufacturing plants. The Business Roundtable has proposed ways to do that responsibly, they wrote.

Second, stop forcing ties between a subsidized private sector and labor unions. The Justice Department's multi-year corruption investigation into the United Auto Workers Union should give us a reason for pause. Third, scale back on trade policies, especially so-called Section 232 and 301 tariffs, that prevent all U.S. manufacturers from accessing inputs and from competing with China at globally attractive prices. Countering the China challenge requires an ultra-competitive American manufacturing sector. Handing out $52 billion doesn't get you there, so why not keep it and put it to better use? All right, that is it for the left and the right's take, which brings us to my take. So I never thought I'd get the opportunity to say this in Tangle, and I'm going to grab it before it disappears. I agree with Bernie Sanders and the

Wall Street Journal editorial board. Who says our country is divided? In all seriousness, it's hard not to be ruffled by the pleading from major semiconductor manufacturers when both the red-blooded American capitalism-loving Wall Street Journal editorial board and the healthcare is a human right Vermont socialist senator are warning of corporate welfare, greed, and glut. It's worth taking notice. The Wall Street Journal editorial board notes that Intel CEO Pat Gelsinger is lobbying Congress for subsidies while also backing Chinese startups and threatening to delay building a factory in Ohio unless Congress passes the bill. Sanders, meanwhile, focused on Gelsinger's $179 million compensation package and the company's $20 billion in profit, all while it spent $16.6 billion buying back its own stocks to spread the wealth around. You don't have to pick a side here. You can hold both these things and conclude our system is fundamentally broken when this company is pushing for $52 billion of congressional aid.

But that alone doesn't mean Congress should balk. It's worth stating clearly what is at stake here. While the chip shortage is easing, the risk of another shock is hard to overstate. We need the chips for the automotive industry, especially the environmentally friendly kinds that are being ramped up in production right now. We need them to produce new laptops, new PCs, new smartphones. We need them to run hospitals, as there are so many chip-dependent devices from ventilators, blood pressure monitors, pacemakers, insulin pumps to even defibrillators. We need them for the military, unless we want to take the risk

of running our own weapons systems on foreign-made products. As we're learning about energy right now, a heavy reliance on foreign governments for essential goods is dangerous. It gives away critical leverage on the global stage, and if it can be avoided, it should. With all that in mind, it's not just as simple as Intel doesn't deserve this money. Of course they don't. But if European and Asian countries are subsidizing this industry through their governments, this isn't simply a matter of private markets and private competition. If we let the competition become our private market versus their private markets and public subsidies, the companies at risk have made it clear we'll probably lose. Then there's Taiwan. That's the country that has some 60% of the world's chip manufacturing capacity. It's also a country increasingly at threat of an invasion or

attack by China and always at risk of natural disaster. We're just one of several global superpowers who are trying to prepare for what happens if or when Taiwan can no longer supply the world its chips, or if, for whatever reason, the tap gets turned off. All of this makes the issue incredibly tough to suss out. The best case scenario would be to avoid throwing government subsidies at a growing, thriving, high-demand industry drowning in profits. But that means beating the foreign competition and building plants on U.S. soil without government help. The next best scenario is passing the CHIPS Act and shoring up the supply chain long-term, understanding that the $52 billion price tag is worth the cost over time. The two worst scenarios are one, not allowing the government to subsidize this at all and losing any potential plants on U.S. soil, leaving us in the same vulnerable position we were when the pandemic started.

Or 2. the worst case scenario would be passing this subsidy bill and losing the plants to foreign competition anyway, which also seems at least possible. If Congress is going to do this, they need to do it with some serious strings attached. Strings that both assure we end up building American-based plants and ensure those companies are leveraged to grow and ramp up production, not turn around and buy back shares or beef up their already monstrous profits. That's going to be a tough pill for the private industry to swallow, but if they're taking our money, it's medicine that should be mandatory. it's medicine that should be mandatory. All right, that is it for my take, which brings us to your questions answered. This one is from Gary in Houston, Texas. He said, are you planning to share your experience from the Freedom Fest debate in Vegas? I know a few people who have attended in the past, and I bet the discussions were spirited to say the least. Thanks for the informative

newsletter. I'm just starting my third year as a subscriber. Gary, three years. Wow. Thank you for subscribing. Everyone, please be like Gary. Remember, if you're listening to this, read Tangle.com slash podcast. You can get a 20% discount on our subscription right now. So as I told Tangle subscribers in our Friday edition last week, I went to Freedom Fest on Saturday in Las Vegas to debate conservative radio host Wayne Allen Root about whether the election was stolen. Backstage, Root was a really nice and interesting guy. On stage, he was a bit more of a performance artist, I think. Unfortunately, the debate itself wasn't the kind of substantial election integrity debate I was hoping for. Root did not really present any new evidence or really compelling points about how to fix things. He mostly referenced his experience as a Las Vegas

voter and a world-class gambler and made a lot of analogies to sports betting in an attempt to prove that the game was rigged. We also debated whether Trump should run again in 2024. I was pretty happy with my opening and just received a copy of the debate video. It was live streamed on Fox Nation, but unlike other main stage events, they have not posted it online. That might be because I referenced the retractions they had to issue, but I'm inquiring about the copyright rules around it to see if I can share the video with my readers. On the whole, the folks at FreedomFest were really nice, and the event was really fun, so I hope to go back again. One attendee who has been several times described it as, quote, 30% libertarian, 30% republican, and 30% hucksters, with the rest a

random assortment of folks like me who are there for various presentations. My sense was that this was a pretty good description of who was in attendance. For instance, there were a number of very questionable gold investment schemes and healthcare products. There was also Steve Forbes, Andrew Yang, and Glenn Greenwald. The only really unfortunate moment came toward the end of my opening 10 minutes when a section of the crowd attempted to boo and jeer me into silence as I made the case for why Trump should step aside and allow another Republican to run for president in 2024. One woman accused me of being a Democratic plant and asked me how much money I was being paid. The moderator, National Review reporter a Democratic plant and asked me how much money I was being paid. The moderator, National Review reporter John Funn, asked me to sit down when he couldn't quiet the crowd immediately, and I had to finish my remarks in my second chance at the podium. At the end,

another person rightly criticized us for not getting a chance to discuss substantive issues like how to reform our election systems. So it was a mixed bag, but I thought my points about the holes in the stolen election theories landed well, and I got a lot of quiet compliments too. They did a vote by applause after the debate on who won, and the crowd predictably sided with Root, but it was a good deal less enthusiastic than I thought it would be. All told, the trip was great. I'm hopeful they will invite me back. I hope to share some footage soon, and I actually left feeling more confident in my stance about the 2020 election than I did going in.

All right, next up is our story that matters. Democrats in the 10 closest Senate races are outraising Republicans among donors who have less than $200, a metric where the GOP has historically had the advantage. The indicator is considered one of the strongest signs of a candidate's strength and points to a Republican struggle to create a small donor apparatus independent of former President Donald Trump, who still drives the party's fundraising efforts. For instance, in Arizona, the Democratic nominee, Senator Mark Kelly, has raised $23 million from small donors compared to just $2 million raised by Blake Masters, Jim Lamone, and Mark Kelly, has raised $23 million from small donors compared to just $2

million raised by Blake Masters, Jim Lamone, and Mark Brnovich, the top three Republican challengers combined. GOP big money donors are keeping the money race competitive, but it's one of the few encouraging signs for Democrats in a midterm cycle that could still be disastrous. Axios' Lachlan Markay has the story. You can read it with a link in today's newsletter. All right, next up is our numbers section. China's percentage of the global demand for chips is 60%. The percentage of chips used in China that are imported or manufactured locally by foreign suppliers is 90%. The number of new semiconductor firms registered in China in 2020 is 15,000. The number of the world's largest 10 semiconductor

companies that are based in the U.S. is 7. The amount of investment already announced in U.S.-based chipmaking companies is $80 billion. The percentage of the world's chipmaking capacity that is controlled by Taiwan is 61%. All right, that is it for our numbers section. And last but not least, our have a nice day section. The iconic grove of giant sequoia trees in Yosemite National Park is no longer under direct threat from wildfires. The Washburn fire that threatened the trees is now 50% contained, but the real trick wasn't firefighting or luck of the wind. It was prescribed fire prevention practices over the last 50 years that reduced the amount of forest floor fuel, allowing the blaze to pass through without harming the grove. The fire entered the grove and luckily we had 50 years

of prescribed fire history, Garrett Dickman, a forest ecologist with the Yosemite National Park, told NPR. So it could have been a very different outcome if we hadn't been preparing for this fire for decades. NPR has the story on the surviving forest and how forest preparation can help contain fires in the future. All right, everybody, that is it for today's podcast. Like I said, one last time, today is your last chance to get a 20% discount on a Tangle subscription and support our work. If you go to readtangle.com slash podcast, it's an exclusive offer just for podcast listeners.

Please go check it out. Either way, we'll see you right back here tomorrow, same time. Peace. Our newsletter is written by Isaac Saul, edited by Bailey Saul, Sean Brady, Ari Weitzman, Peace. Diet 75. For more from Tangle, subscribe to our newsletter or check out our content archives at www.readtangle.com. We'll see you next time. 2,000 cases. What can you do this flu season? Talk to your pharmacist or doctor about getting a flu shot. Consider FluCellVax Quad and help protect yourself from the flu. It's the first cell-based flu vaccine authorized in Canada for ages six months and older, and it may be available for free in your province. Side effects and allergic reactions can occur, and 100% protection

is not guaranteed. Learn more at FluCellVax.ca. Based on Charles Yu's award-winning book, Interior Chinatown follows the story of Willis Wu, a background character trapped in a police procedural who dreams about a world beyond Chinatown. When he inadvertently becomes a witness to a crime, Willis begins to unravel a criminal web, his family's buried history, and what it feels like to be in the spotlight. Interior Chinatown is streaming November 19th, only on Disney+.