Is the U.S. government’s taking a 10% stake in semiconductor maker Intel a “creative idea” that has “never been done before,” as White House press secretary Karoline Leavitt recently told the press? Hardly. Governments have been nationalizing industries since governments have existed. In virtually every instance, the state takes power under the auspices of a national emergency. These days, of course, any inconvenience is a crisis in politics, and so President Donald Trump has decided to run the semiconductor industry.
It’s something of a quaint question these days to wonder under what constitutional authority a president can unilaterally buy into a private company with taxpayer funds. Surely if former President Joe Biden had “invested” in a major energy concern under the power of, say, a climate emergency, Republicans would have melted down over “socialism.” Which wouldn’t be exactly right. Socialism is the state running the means of production. Fascism is a planned state-run top-down capitalist economy.
The trajectory is usually the same. First, subsidize an industry. Then, you save it. Then, you own it. Not that long ago, the U.S. government took majority stakes in considerable corporate entities such as AIG and General Motors. We called them bailouts back then.
Intel is already a welfare queen. When Congress passed the CHIPS and Science Act, it handed out $52.7 billion to build up chip manufacturing in the United States.
Most American companies design chips and then send production to expensive facilities, called “fabs,” to factories in long-standing peaceful trading partners such as South Korea and Taiwan. Though, since the COVID-19 supply chain problems, semiconductor manufacturers such as TSMC and Samsung have been investing tens of billions in building fabs in the United States. All of which undermines the contention that there’s a crisis that necessitates the federal government becoming an investor in a private company. Indeed, the contention that there is a national security risk is also undercut by the administration’s decision to allow Nvidia and AMD to sell advanced chips to Chicom companies as long as they kick back 15% of the profit to the federal government.
In any event, Intel wants to do both, design and manufacture chips. It was handed the biggest chunk of CHIP’s money. At last count, it got $8.5 billion from the government, not counting the $11 billion in low-interest federal loans. Intel lost almost $19 billion in 2024. As far as we can tell, the company did little to improve its prospects with the money, leaving the Biden administration to brag about its new childcare facilities rather than any advances in manufacturing. Intel’s new massive chip-making facility, originally set to open in 2025, is now looking at 2030 or 2031. Maybe.
It’s unsurprising, as the company has spent a decade falling behind its competitors and making inferior products. It is unlikely that pumping funds into a company is going to fix that culture. But, of course, if Intel were a roaring success, it wouldn’t need taxpayer funds.
Then, taxpayer stakes create all kinds of terrible distortions. Intel’s stock price jumped last week when the news of Trump pondering a stake is a perfect example of how. Everyone knows that if the U.S. government is a shareholder in Intel, it becomes too big to fail. The White House is not only incentivized to give the company an unfair competitive advantage, but it would also be incentivized to pressure other companies to use Intel chips, and it could become a big customer itself, whether the product is the most innovative or most affordable.
Treasury Secretary Scott Bessent says the administration dictates how the company is run. Considering the president has already urged shareholders to dump the CEO before it even held any stock, one can be highly skeptical of that claim.
The political pressures would be immediate. Companies, for instance, often restructure and modernize to succeed. That might mean downsizing and automating (and, gasp, using foreign parts and workers) to stay competitive. Intel fired 15,000 employees last year, and plans to cut another 20,000 this year. How are voters raised on the glories of “manufacturing jobs” going to feel when the government has a stake in a CEO who is firing thousands of workers? Would an economic “populist” president like JD Vance, who views the economy as a social engineering project, allow Intel to shed workers? And when a Democrat wins the White House one day, which will happen, rest assured they will push for more union control, more “green” policies, and technocratic control that would undermine the company even further.
The company, in turn, will do all it can to placate the government — in this case, a single person — rather than act in its best long-term interests. A pristine example of this dynamic can be seen in the electric vehicle fiasco. The federal government pressures, subsidizes, mandates, and funds big American car companies to produce EVs, a product that loses tens of thousands of dollars on each item and billions a year. No stakeholder in their right mind would support a money-losing lateral technology (at best) that plays in a niche unless the government was backing its play. Then again, everyone knows the government would never let GM fail.
This isn’t the first company the Trump administration has bought into. The Department of Defense invested $400 million in taxpayer money, making it the single largest shareholder in MP Materials, a mining company. The administration has reportedly pondered buying a stake in Chicom propaganda and tracking app TikTok, as it continues to ignore the law and allow it to exist.
Perhaps the most dangerous aspect of the proposal is that we’re normalizing the idea that presidents can essentially nationalize industries they find important. If Republicans are fine with ownership stakes of semiconductors because they’re made in South Korea, what limiting principle stops them from taking stakes in oil companies during price spikes or agricultural companies during inflation? Isn’t healthcare more vital than semiconductors?
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This is where populist “industrial policy,” the Right’s version of top-down control economics, ends. Politicians are better at directing the economy and redirecting to the “working class” or other deserving people, saving our culture, and making America great by directing winners and losers. In truth, there’s little difference between the progressive and populist economic outlook, save that the latter drapes a flag over its statism.
The results, though, will be the same.