Lincicome on Trump and Intel

Scott Lincicome of the Cato Institute discusses the short- and long-term risks to Intel, its immediate competitors, and American industry overall posed by Trump's ill-advised and extortionate government "investment" in the Intel corporation.

Free enterprise advocates -- and perhaps former advocates (real and pretend) in the Republican Party -- will hear many familiar themes in Lincicome's argument. For example:

The most immediate risk is that Intel's decisions will increasingly be driven by political rather than commercial considerations. With the U.S. government as its largest shareholder, Intel will face constant pressure to align corporate decisions with the goals of whatever political party is in power. Will Intel locate or continue facilities -- such as its long-delayed "megafab" in Ohio -- based on economic efficiency or government priorities? Will it hire and fire based on merit or political connections? Will research and development priorities reflect market demands or bureaucratic preferences? Will standard corporate finance decisions that are routinely (and mistakenly) pilloried in Washington, such as dividends or stock buybacks, suddenly become taboo?

These risks are already evident, and not just in historically underperforming government-owned enterprises such as Amtrak or the U.S. Postal Service...

And this will be on top of a reminder of the shocking manner in which this "deal" was proposed immediately following.

Lincicome crafts a readable and solid argument that deserves wide dissemination, and which should alarm anyone whose patriotism runs deeper than Trump's populist and increasingly empty marketing slogan, Make America Great Again:

All this undermines the risk-taking and innovation that have made American technology companies global leaders, replacing free-flowing, market-based allocation of capital with second-guessing and brute politics. Apparently the lessons of the past about the perils of state incursions into the marketplace, from Russia to Venezuela, need to be relearned.

What started as an emergency pandemic response to a U.S. chip shortage, with sincere security foundations, has evolved into government ownership of private enterprise -- a transformation entirely predictable for anyone familiar with U.S. industrial policy history and precisely the mission creep that Chips Act critics warned about from the beginning.

Yet, America's technological leadership emerged not from government direction but from competitive markets rewarding innovation and punishing corporate mistakes and inefficiency. If national security demands Washington support U.S. chipmakers, many policies -- market and nonmarket -- can achieve that objective while avoiding the risks raised by the Intel equity stake. [bold added]

Lincicome calls for Congress to stand up to the President for once. Perhaps his readers will join him by demanding the same of their own representatives.

-- CAV