In today’s episode of the 24/7 Wall St. Podcast Doug McIntyre and Lee Jackson discuss the billions of dollars that Biden is sending to foreign companies, and the unsustainable level of spending today. One could argue the administration is creating jobs. Others could argue it’s a level of spending simply can’t be supported today.
Transcript:
This is Doug McIntyre, the editor-in-chief at 24-7 Wall Street.
I’m in New York and I’ve got Lee Jackson in Louisiana, our senior editor for everything from stock market, public companies, the economy, finance.
Here’s today’s question.
The U.S. government appears to be handing out money to foreign technology companies, and I can’t figure out how that works.
Well, I guess what they do is they go in there and they do the CHIPS Act, which is part of this gargantuan spending that we’ve discussed over the last few episodes.
And Samsung, $6.6 billion for plants that are in, let’s double check, in Texas, for a fab in Texas.
And then Taiwan Semiconductor, $6.6 billion to build a third fab in the lovely state of Arizona.
So what is the theory behind this?
If you’re the Biden administration, what’s the thought process that gets you to write checks this size?
What are you trying to get done?
I think the ultimate goal here is to get production here take it away from any sort of potential uh input from the chinese communist party and although samsung is is is not based in china and neither is taiwan semi because they’re in taiwan but I think they’re trying to move that here but again it’s it’s so oblique because I guess it’ll create jobs here and I guess uh If they export from here, couldn’t other countries put tariffs on it?
So I’m not really sure what the total end game is.
I mean, I understand it a lot better if it’s a grant to say Intel or an American-based company, but neither of these companies are based in the United States.
So it seems to me that the theory is that we’re better off having strategic assets, which I think at this point with the rise of AI and Bitcoin, the need, the more sophisticated chips are going to become highly valuable.
And until things ramp up, not easily available.
Yeah.
So perhaps the strategic argument is that it kind of prevents some foreign entity of putting a kibosh on us vis-a-vis, you know, shutting down them in another country.
So yeah, I think you’re exactly right.
The U.S. has tried very hard to get what you and I would describe as sort of labor jobs, whether it’s factories, these kinds of jobs back.
Overall, leaving this aside, has that worked?
Is the United States either buying or getting jobs that went offshore back at this point?
Well, I mean, you know, that push started Years ago, and it’s been going on for years.
And, you know, it’s pretty hard to import enough corporate entities back to the United States or get them positioned in the United States to fill all those jobs.
And again, you’re not assembling iPhones or putting together tennis shoes for Nike.
The fab jobs are pretty highly skilled workers.
And so… I don’t know.
I don’t know if you can replace, you know, it’s not like manufacturing cars or things of that nature.
What do you think the reaction to this is among taxpayers?
As people understand that the United States is spending money on this, what do you think people’s reactions are?
I think for many years, people looked the other way.
You know, when it was 10 trillion, then it was 15 trillion around Obama, and then Trump up at 20 billion.
But I think they’re now starting to see, and we discussed this before, just our debt service on government bonds is going to be more than the defense budget.
I mean, that’s absurd.
And I think, I think the average citizen and the hard working tax paying citizen, and I mean people with good jobs, because remember these days, a family of four to live a decent upper middle-class life, what do you have to make?
150, 200 between the two working parents.
And I think, I think people are really starting to see, we have a huge problem and it’s, it’s probably closer to being a real big problem than many people think.
Well, I don’t think this is over.
It’s hard to say strategically what is next.
One of the things that will happen without any question is that The United States does not want to see all of the activity with AI and Bitcoin.
Let’s just call it farming, but basically solar installations.
They don’t want to see all of that go to South Africa or Ireland.
Or India.
So it seems to me like one of the next chess moves is going to be even more complex.
And that’s the ability to supply electricity. companies to get them to come to the United States because electricity is going to become a scarce commodity.
I can see the government making the decision that they’re willing to underwrite renewables infrastructure to either get or keep AI firms in the United States.
Or they do the right thing and commit to reopening and starting nuclear so they can really generate the kind of electricity that’ll be needed because renewables will never do it.
Never.
And the one thing that’s interesting about all this is that, you know, Intel, a year or so ago, maybe a little bit longer, was proposing a $20 billion massive fab in Ohio, and they’re tapping the brakes on that.
So that’s a company that’s based here.
So… It’s going to be a quagmire, and I don’t know how they’re going to pull out of it.
Well, I wish you were right about nuclear, but the Americans remain afraid that nuclear reactors fall apart and everybody dies of radiation poisoning.
I know that the current generation of these reactors doesn’t fall into that, but there’s still a panic mode among Americans.
Yes.
Well, the Europeans that were shutting them all down are now being forced to open them back up because they’re out of power.
And if we have any sort of, especially with LNG exports from here, permits are being declined or being stalled.
Something’s got to give.
Yeah.
Well, look, the next time we see the American government buy some more big businesses and get them to relocate to the United States, You and I will get together and try to figure out why that strategic decision was made for that company with that set of products or services.
Until then, I’ll see you very soon.
Thanks a lot, Doug.
Good to see you.
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