When Big Business Married Big Government From banking and chips to broadband and pharma, Biden has ushered in a new era of corporate dependency on D.C. By Allysia Finley
When liberals look back on the Biden presidency, they may hail its greatest accomplishment as ushering in a new era of corporate government dependency. Without fail, and no matter the industry, the administration has hooked businesses on Washington handouts while attaching conditions that put taxpayers and consumers on the hook for leftist policy preferences.
The latest example is the banking panic. The 2010 Dodd-Frank Act provided an implicit taxpayer guarantee for the country’s largest banks. With Silicon Valley Bank’s collapse, midsize banks are now arguing they’re also too big to fail and lobbying the Federal Deposit Insurance Corp. to guarantee all uninsured deposits for two years to prevent more bank failures. In other words, they want the government to backstop poorly managed banks.
Massachusetts Sen. Elizabeth Warren has lent support to the idea but demands that a government guarantee be tied to increased regulation. And don’t think she has only stronger capital and liquidity standards in mind. Like-minded officials will surely demand a ban on stock buybacks and dividends, executive compensation caps and perhaps even growth restrictions.
Government help is never free, as semiconductor companies are learning. Chip makers lobbied Congress for enormous subsidies to build plants in the U.S., which they claimed would shore up supply chains and protect national security. Republicans joined Democrats last year in approving some $39 billion in direct financial aid, plus a 25% investment tax credit.
Commerce Secretary Gina Raimondo then conditioned the grants on companies implementing the administration’s social policy. According to new rules unveiled last month, chip makers receiving more than $150 million in federal grants will have to provide child care for their employees and guarantee “family-sustaining benefits that promote economic security and mobility,” including “paid leave and caregiving supports.”
Chip makers will also have to pay construction workers union wages. Intel CEO Patrick Gelsinger, meet your new boss: Ms. Raimondo. Mr. Gelsinger was the Chips Act’s loudest business advocate, and little wonder why: Intel has been losing ground to other chip makers in recent years and recorded a $664 million loss in last year’s fourth quarter. Fortunately for Intel, the Treasury Department last week clarified that companies will be allowed to pocket the 25% tax credit—estimated taxpayer cost: $24 billion—even if they owe little or no income tax because they aren’t profitable.
Broadband providers also volunteered to become charges of the government when they backed the 2021 Infrastructure Investment and Jobs Act, which included $42.5 billion in grants for states to build high-speed broadband plus $14.2 billion in subsidies for low-income Americans to purchase internet service plans.
Here, too, the Commerce Department is imposing political conditions on the cash. Broadband providers will have to pay union wages, commit to not opposing unions, and use project-labor agreements between unions and contractors that govern terms and conditions of employment.
Commerce’s grant-funding guidelines also suggest that states require broadband providers to open up their networks to competitors as a condition of support. The administration is trying to socialize the internet through a funding back door.
Democrats learned from ObamaCare that dangling subsidies can turn businesses into permanent government dependents and allies in their cause to expand the welfare state. ObamaCare gave health insurers millions of new customers and increased their profits by heavily subsidizing premiums in return for regulations on prices and plan designs.
The 2021 American Rescue Plan Act sweetened the insurance subsidies even more. These enhanced subsidies were set to expire this year, but insurers lobbied Congress for an extension—warning, as the America’s Health Insurance Plans lobby did, that “nearly 3 million Americans would become uninsured” if the subsidies lapsed at the end of 2022.
The Biden administration is now trying to co-opt the pharmaceutical industry. In December the administration solicited ideas from private industry on how to boost biotech manufacturing in the U.S., including suggestions for financial incentives. The administration has set a goal of boosting the manufacturing speed of 10 common therapeutics tenfold in five years.
In response, the Pharmaceutical Research and Manufacturers of America lobby suggested strengthening intellectual-property protections and streamlining the permit process, among other things. Biden officials are unlikely to do either, but they may be more supportive of PhRMA’s proposal for a 25% investment tax credit as well as direct loans and loan guarantees for U.S. drug production. The administration could then tie the subsidies to progressive policies, such as price restrictions, exactly as it’s doing with chip makers.
Perhaps no industry has become as dependent on government in the Biden years as auto makers. A Goldman Sachs report last week estimated that the Inflation Reduction Act’s electric-vehicle consumer and battery-production tax credits alone could cost taxpayers $523 billion over 10 years—nearly seven times as much as the 2008-2009 auto bailout.
Auto makers are losing billions of dollars on electric vehicles, but the administration is making the industry too big to fail. How long before they ask government to backstop their losses?
Comments are closed.
