ECON-431 Fiscal Policy in the US

This article from CNN highlights the growing need for workers to fill the labor demand brought about by the increased construction due, in part, to the rise of demand for infrastructure projects funded by the IIJA. The goal of increasing investment and construction into infrastructure is being hindered by shortage of workers, especially with a lack of immigrants.

According NBC the CHIPS act is helping spur critical investments in semiconductor plants in Arizona, which will have spillover effects on the local economy, creating thousands of local jobs, for both high and low skilled workers.

This CNN article explains that for the CHIPS and Science Act to achieve its goal for the US to produce the most advanced chips in the world by 2030, the US must triple the number of college students hired for semiconductor production in just six years, which would be a significant challenge.

According to this Brookings article due both to domestic disinterest and unequipped talent forces, the semiconductor workforce supply will need to garner more of a reliance on immigration policy reforms if the CHIPS Act, as well as other U.S. industrial policies, is to maximize their full benefits. They argue for an increase the number of available employment-based visas (EBV, fixed at 140,000 per year) which, unlike standard visas, allow international individuals to become lawful permanent residents and for a revision in prolonged and bureaucratic regulations regarding these EBVs. In addition, they advocate semiconductor jobs be included with those which are free from the lengthy immigration processes.

This research conducted by Semiconductor Industry Association and Oxford University analyzes the wide labor supply imbalance in the semiconductor industry with a projected growth of the semiconductor industry's workforce by 115,000 jobs by 2030 and approximately 58% of these new jobs risk going unfilled at current degree completion. While the semiconductor industry has existing programs to recruit, train, and employ a skilled workforce, this report presents three core recommendations to strengthen the U.S. technical workforce and meet the growing demands of the semiconductor industry and other related sectors.

This article from the New York Times highlights current efforts of semiconductor manufacturers the government, and academic to attract and train workers. The Biden administration plans to establish workforce hubs in key cities to train underrepresented workers in semiconductor manufacturing. Companies such as Intel and Micron are investing in partnerships with community colleges and universities to train technicians and expand relevant curriculum. Academic institutions are also expanding programs to attract students to the semiconductor industry, including quick start programs, apprenticeships, and undergraduate and graduate engineering programs.

This Wall Street Journal piece contrasts two Taiwan Semiconductor Manufacturing subsidiary chip plants, in Japan and the US contrasting how quickly Japan builds their plants, while in the US, building confronts there have been many setbacks. It also contrasts the differences in the approach to industrial planning.

According to the New York Times, the CHIPS Act may have “kick-started” investment in the Chip industry, more long term investment will be needed if the US is to rebuild its industrial infrastructure.

According to the New York Times Biden is funding multibillion dollar grant to Intel for chip manufacturing with the goal of relying less on East Asian producers and growing the chip manufacturing in America. However, there is fear that there are not enough qualified workers to make the chips. T.S.M.C has already pushed back manufacturing to 2025 because of a lack of expertise.

This Wall Street Journal article argues while The Build America, Buy America provision in the IIJA expanded requirements for the use of American-made products in federally funded projects, confusion and bureaucratic waste have arisen as governments struggle to comply. These mandates and waivers increase time and costs for government purchases, potentially inflating project expenses by up to 25%.

Forbes explains that the IIJA already has led to over $400 billion in investment in all 50 states, which has helped communities in multiple ways, from Internet connection to infrastructure repairs, and cheaper electricity.

This article from the Center for Foreign Relations explains how the infrastructure act is especially important now because of how it is combatting cyber security issues through its support of infrastructure being manufactured in the US. For example, 80% of the cranes that are used in America being manufactured by China and since these cranes have advanced software and sensors, they pose a security risk.

This article from the Wall Street Journal explains the immense amount of money granted to several chip manufacturers to jump start the industry in America. There is also hope that in addition to boosting the chip industry in America, it will also limit China’s influence with import tariffs. Some chip manufacturers are also a bit frustrated with the pace at which they receive money to subsidize this industry.

Gov. Kemp of GA argues that there was already an investment boom in his state before the massive federal subsidies and that in the the IRA has contributed towards inflation.

This article from the Louisiana Weekly suggests that the IIJA and IRA can stir up investment in “sacrifice zones,” areas where the environmental health of the area and residents are sacrificed in favor of economic prosperity for others. These bills may be able to create sustainable industries with good- paying jobs, with targeted subsides evidence of place-based policies.

This article provides details on where the funding from the IIJA has gone so far, and what it is doing to help. There has been funding given to different international airports to upgrade their infrastructure. Some money has been used to upgrade and create bridges. With a significant amount of funding still to be distributed there seem to be many projects in the works that will upgrade the infrastructure nationwide.

This Brookings article highlights the contemporary importance of government investment in underdeveloped regions. For a nation with such significant regional divides, it is essential for a government that is attempting regionally based industrial policy to stimulate development by interacting in unique ways with “concentrations of talent, suppliers, and knowledge” that are spread across the country. Place-based industrial policy can be defined by its targeted intervention in local economies with a “bottom-up” approach. This article his article continue identifies 19 place-based industrial policy programs and provides program description, funding level, authorizing legislation, and implementing agency.

Key takeaways from this table include: (1) the importance of the CHIPS Act, with 77% of place-based industrial policy funding coming from this act alone; (2) the significant role of the Commerce Department who oversees about 69% of all place-based industrial policy spending, the practice of funding through grants- which serve as an “award system” that can “align local actors around a shared vision;” and (3) the prominence of clusters- as cluster strategies can aggregate employment opportunities and create economies of scale.

This Brookings article discusses a critical aspect of Biden’s Industrial Policy: investments in specific U.S. locations to achieve broader national objectives. This approach has led to the creation of 19 explicitly place-based industrial policy programs, amounting to approximately $80 billion in authorized spending. These programs, along with additional clean-tech subsidies, aim to

stimulate local economies and address regional disparities. Three reasons are provided for testing place-based strategies: targeting specific local market problems, facilitating grounded problem-solving, and fostering civic engagement through local collaboration. Despite potential concerns regarding the efficiency and effectiveness of these policies, there is optimism that well-designed programs can achieve their goals without being overly influenced by political biases.

This Brookings article advocates for targeted investment in selected cities and regions with untapped potential, leveraging existing assets such as universities, research institutions, and skilled workforce. By fostering innovation clusters in these areas, the authors believe that the benefits of tech-driven growth can be more widely distributed across the country, reducing regional disparities and creating opportunities for broader economic prosperity. They propose specific policy recommendations to support the growth of these centers, including increasing federal funding for research and development, investing in digital infrastructure, and incentivizing private sector investment in emerging tech industries outside of traditional hubs.

Previously known for farming and mining industries, Chatham County, NC is quickly becoming a hub for semiconductor manufacturing under the bipartisan CHIPS Act. This particular place- based policy is being directly funded through federal awarding, specifically, through the Regional Technology and Innovation Hubs grant program. Wolfspeed, a firm founded in NC, is planning a $5 billion facility and is projected to bring 1,800 jobs to the area.

This article from the NYT argues that infrastructure funding is primarily being used to combat climate change by upgrading the overall infrastructure. It is currently difficult to know the effect on jobs.

According to this trade journal article, Federal subsidies funded by the IRA are not only going to US firms but also to foreign firms. This has led to friction with South Korean companies, major manufacturers of clean energy products. In addition, there is ambiguity in the rules as the cooperation with Chinese companies, which as suppliers of raw materials, are critical to the clean energy production supply chain.

This Economic Policy Institute report underscores the obstacles in achieving full employment and increasing real incomes amidst climate change and a swift shift to a lower-emission economy. Macroeconomic policymakers face two key challenges in transitioning to a lower-emission economy. Firstly, ensuring adaptation strategies sustain full employment and income growth amid climate shocks. Secondly, determining how macroeconomic stabilization policies can effectively support the necessary economic changes for emission reduction (abatement).

This American Enterprise Institute report argues that Biden’s climate agenda, while singularly focused, lacks economic efficiency and transparency. It claims that despite massive subsidies and regulatory efforts, the transition to clean energy is economically inefficient, with estimates suggesting significant costs to households and the economy. Moreover, evidence challenging the existence of a climate crisis, coupled with adverse effects of unconventional energy sources, suggests that the administration's agenda is driven more by ideology than practical considerations.

According to the American Enterprise Institute, Biden’s policies aimed at combating climate change are backfiring, particularly in the fossil fuel industry. While seeking a long-term decline in fossil fuel production for environmental reasons, the administration's actions are paradoxically driving up current prices by encouraging foreign producers to increase output. This has led to OPEC+ implementing production cuts, further boosting the market power of foreign producers and raising global oil prices. Despite attempts to address these issues, such as proposing "NOPEC" legislation to sue OPEC for price-fixing, the consequences are complex and could worsen relations with oil-producing nations such as Saudi Arabia and Russia.