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Economy

President Joe Biden

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Should Washington push an "industrial policy"? That is, should the U.S. government get involved in promoting certain domestic industries?

Darn straight it should. And that goes double when it comes to semiconductors. Computer chips are the little brains that run appliances, airplanes, mobile phones and cars. You can't have a modern economy without them.

We saw what happens when key manufacturing activities go offshore. During the COVID-induced supply chain crisis, Western manufacturers couldn't get their hands on the chips they needed to meet demand for their products. Some had to close or slowed production.

American automakers were especially handcuffed. General Motors, for one, blamed the chip shortage for a 15% drop in its U.S. deliveries of new vehicles in the second quarter from a year earlier.

And so it's hard to overstate how bringing chip-making to this country is good for this country. It would not only create many thousands of American jobs; it would ensure that other U.S. manufacturers don't have to beg Asians for semiconductors.

Toward that end we should hail the Chips and Science Act, championed by the Biden administration. It was astounding that 187 Republican House members voted against the bill, though gratifying that 24 did.

The GOP leadership had joined Chinese lobbyists in opposing it. Never mind that chip independence had the full-throated support of several former Trump officials, notably former National Security Adviser H.R. McMaster. To partisan robots, the national interest rarely overrides the joys of political warfare.

Commerce Secretary Gina Raimondo rightly called the $52 billion in new semiconductor money "rocket fuel for our global competitiveness."

Asia dominates the production of semiconductors. Taiwan makes 65% of the world's semiconductors and accounts for nearly 90% of the advanced chips. And if China attacked and took over Taiwan, an adversary would have a stranglehold on America's — and the world's — manufacturing.

Meanwhile, the Chinese government has been pouring hundreds of billions of dollars into its own semiconductor industry. So, by the way, have the Europeans.

This is part of a bigger picture in which the U.S. has been reversing decades of "off-shoring" factory jobs to lower wage countries. Almost 350,000 jobs will be "reshored" this year — on top of about 265,000 added in 2021. The chips act and the Inflation Reduction Act are fueling many of the moves with tax breaks and other economic incentives.

"Globalization is in retreat," economists at Barclays told their clients.

Supply chains have become an economic battlefield of the 21st century. In a jarring example, Europe faces an energy crisis for having become dependent on Russia for gas and oil.

Raimondo, a former venture capitalist, has been wonderfully aggressive on this front. When Taiwan's GlobalWafers abandoned a plan to spend $5 billion on a plant in Germany, she called the CEO and nabbed the factory for Texas. Here come 1,500 jobs.

Citing the chips bill, U.S. semiconductor companies say they plan billions in new investment, and their jobs pay very well.

President Joe Biden preened at the recent groundbreaking for a new $20 billion plant Intel is building near Columbus, Ohio. Beside him stood two good Ohio Republicans, Gov. Mike DeWine and Sen. Rob Portman.

The Chinese government has been pouring money into other hot tech fields, such as artificial intelligence and robotics. These are areas in which the United States used to have a safe lead.

"We need America to dominate in certain areas of technology," Raimondo said. "Critical minerals, electric vehicle batteries, semiconductors, artificial intelligence." This obviously goes beyond jobs. It's about national security.

Well, is America going to compete or not? Washington just put its chips on chips. That would seem a smart wager.

Reprinted with permission from Creators.

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Electric vehicle charging station

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Car manufacturer Honda and electronics conglomerate LG announced plans to build a $4.4 billion facility for electric vehicle battery production in Ohio on August 29. The announcement comes two weeks after the Inflation Reduction Act, which contains incentives for consumers to buy electric vehicles with American-made components such as batteries, was signed into law by President Joe Biden on Aug. 15.

The two multinational companies expect the facility's construction to begin in 2023, with the plant ready to commence production by 2025. It is the first investment announced by Honda toward producing their own batteries since the company said it would go all-electric by 2040.

Honda’s CEO Toshihiro Mibe noted in the company's statement that “Honda is committed to the local procurement of EV batteries which is a critical component of EVs. This initiative in the U.S. with LGES [LG Energy Solution Ltd.], the leading global battery manufacturer, will be part of such a Honda approach.”

The production of a majority of electric vehicle batteries currently in use occurs in China, but Biden has enacted multiple policies to encourage shifting production to the United States and create jobs for American workers. In a March 29 statement, the White House said its efforts “to build a clean energy economy are driving companies to make more in America rebuild our supply chains here at home, and ultimately bring down costs for the American people.”

The Inflation Reduction Act passed Congress with only Democratic votes in the face of uniform Republican opposition in the House and Senate. Vice President Kamala Harris advanced the law with a tiebreaking vote in the Senate, and it was later signed by President Joe Biden.

As part of the Inflation Reduction Act's $369 billion in funding focused on clean energy and reducing climate change, there is a subsidy for car buyers of $7,500 on electric vehicles. The law requires that qualifying vehicles are largely assembled in the U.S. with components made in America, and phasing out previous credits that didn't require U.S.-based production. Provisions for incentives were also included for companies like Honda so they can continue to compete in the U.S. market, and other carmakers such as Tesla, GM, and Ford have cars on the market that will already qualify for new credits.

Additionally, the Infrastructure Investment and Jobs Act, which Biden signed into law in November 2021, has $3.1 billion in subsidies for companies who choose to build electric vehicle-related facilities domestically.

Multiple companies have announced plans to build production facilities in the U.S. since both laws passed and other policies championed by President Biden went into effect, planning billions in investments and thousands of new jobs in multiple states around the country.

GM announced in January that it would be investing $7 billion in Michigan across 4 facilities focused on electric vehicles and battery production. Biden released a statement praising the decision.

In May, Stellantis and Samsung SDI announced that together they would spend $2.5 billion to build a battery production plant in Kokomo, Indiana. The companies stated the facility is projected to create 1,400 new jobs in the area. That same month, Hyundai said that they would be building a $6.5 billion EV factory outside of Savannah, Georgia, which they project would create 8,100 jobs for the state.

In July, Panasonic said they will build a $4 billion electric vehicle battery plant in De Soto, Kansas after forging a partnership with Tesla to supply batteries for that company’s line of cars.

Reprinted with permission from American Independent.