Those who have long preached in favor of free markets and against socialism are being thrown for a loop with President Trump's move to have the U.S. government take a 10 percent stake in struggling chipmaker Intel — and his willingness to make similar deals with more companies.
It's a major development in the battle for the dominant economic philosophy on the political right as free-marketers and populists duke it out over the appropriate level of government intervention in the age of Trump and beyond.
Libertarian-leaning Sen. Rand Paul (R-Ky.) called the deal a "terrible idea," suggesting on social media the Intel stake is a "step toward socialism." Rep. Warren Davidson (R-Ohio) warned in another post that "America will not outperform China by being more like China."
Sen. Eric Schmitt (R-Mo.), meanwhile, made a national security argument when asked about the government taking a stake in Intel.
"You can't have the only chipmaker in the United States go down, which is what the concern is," Schmitt told NewsNation on "The Hill Sunday," adding that he thought the Intel arrangement would be a "temporary" move.
The Intel deal — made after Trump had a meeting with its CEO, whom he had called on to resign — gives the government a nearly 10 percent stake in the chipmaker, paid for with about $11 billion in grants from the CHIPS and Science Act and other U.S. government grants.
It might not end there. National Economic Council Director Kevin Hassett said Monday morning on CNBC that it is "absolutely" possible that the U.S. government takes more equity stakes in U.S. businesses. Trump posted on social media: "I will make deals like that for our Country all day long."
It's quite the change from Tea Party-era rhetoric bemoaning government "picking winners and losers" and "crony capitalism" — and has won a thumbs-up from self-described democratic socialist Sen. Bernie Sanders (I-Vt.).
Trump had already shaken the free market capitalists with his protectionist and retaliatory tariff policies, but they were pleased by Trump's extension and expansion of tax cuts in the One Big Beautiful Bill Act.
His embrace of taking ownership of private companies as a part of American industrial policy, though, is an affront to not only the reigning economic wisdom on the right, but the philosophical principle of independence for private companies.
"Conservatives for years have bemoaned exactly this kind of muddling of the public and private sector — when it came to baking the cake, questions about DEI, and all these other things," Akash Chougule, president of the pro-free market Foundation for Research on Equal Opportunity, told me. "Government is now one of the major drivers of Intel, and conservatives are not going to be in control of government forever, and now have to ask ourselves what that means."
Scott Lincicome, vice president of general economics and trade at the libertarian Cato Institute, wrote in a Sunday Washington Post op-ed that "Intel will face constant pressure to align corporate decisions with the goals of whatever political party is in power."
It is rare but not unprecedented for the government to take a stake in private companies, as those who remember the bailouts in the aftermath of the 2008 financial crisis know.
The U.S. notably took a 60 percent ownership in General Motors, eventually selling off the last of its stake in 2013 for an overall loss of more than $11.2 billion. It took 92 percent ownership of insurer AIG, with the government making $22.7 billion after it sold its remaining shares in 2012.
Government investments in exchange for equity stake aren't just limited to crises. The Department of Defense (DOD) this year announced a $400 million deal with rare-earth minerals company MP Materials that gave DOD 15 percent ownership, making the department the company's largest shareholder — a deal that was highlighted by Oren Cass, founder and chief economist at the right-wing populist think tank American Compass.
"An equity stake is a sensible tool in the industrial policy toolkit where the government is supplying cash that a firm could not otherwise access to fund major capital projects important to the national interest," Cass wrote in his organization's Commonplace Magazine, while recognizing that such an investment would likely not be enticing to firms with a strong balance sheet.
Some on the right who were opposed to the CHIPS Act investments as a whole think that getting a potential return on investment is perhaps a small consolation for the billions spent on trying to boost American industry. And others, like Schmitt, rationalize it on the basis of national security.
Chougule, though, said that what started as a "legitimate pandemic response the chip shortage" has "transformed into this completely absurd, broad based industrial policy with no real limiting principle for any objective observer who isn't just blindly either supporting the administration or blindly just favoring greater government intervention in the economy."
So, which economic principles will win out? In another sign of the power of Trump, few on the right beyond free-market activists and libertarian-leaning Republicans are speaking out against the move to take ownership stakes in private companies.
And Trump, predictably, is dismissing critics: "You do have stupid people say, 'Oh, that's a shame.' It's not a shame. It's called business," he told reporters in the Oval Office on Monday when asked about the criticism.
The opinion writers weigh in: Trump Wins Bernie Sanders Endorsement, by The Wall Street Journal's James Freeman… The Intel Deal is a mistake, from The Washington Post editorial board.
No comments:
Post a Comment