Awwww-kward! Democrats spent the last two years hewing to a hardline progressive agenda, so much so that their single-party governance only produced two major pieces of legislation. One was a bipartisan infrastructure bill, and the other a party-line American Rescue Plan stimulus bill that touched off a massive inflationary wave.
Now Democrats need another big legislative win for the midterms, and Politico reports that their new package of tax breaks may succeed. But the beneficiaries are, um …
But they are on the verge of passing a new $24 billion credit for the semiconductor industry, with legislation now on a glide path to President Joe Biden’s desk.
It’s hardly what Democrats had envisioned as their biggest achievement on taxes this election year.
Some lawmakers acknowledge the awkwardness of pivoting from a slate of family-friendly breaks to one that will benefit multibillion-dollar corporations, especially after long complaining that businesses were not paying their fair share in taxes.
Many semiconductor firms pay well below the 21 percent corporate tax sticker price. Intel, which would be one of the biggest beneficiaries of the plan, told investors it paid 8.5 percent last year.
“It looks terrible,” said Sen. Michael Bennet (D-Colo.).
Democrats ran on tax hikes for the wealthy … and failed to pass those. They ran on expansion of child tax credits, which ran out of steam. They ran on the Green New Deal and pursued it as though they had 60+ seats in the US Senate, only to discover mathematics at about Month 14 of their single-party control of Washington. Now they want to spend $76 billion to relocate semiconductor supply chains out of China and incentivize domestic production.
Crony capitalism FTW!
It’s not a bad idea, but it’s also a bipartisan idea, which means that they’re not going to get a lot of credit for innovating on this point. It’s also coming about 16 months late, given the supply-chain crises that have bedeviled the US during Joe Biden’s administration. If Democrats hadn’t been so obsessed with its Green New Deal reconciliation package and other progressive hobby-horse agenda items, this might have passed near the top of the session.
That would have gone a long way to helping ease the chip shortage that has made cars more expensive and less available, as the Washington Post notes today:
Rental counters at the Detroit airport have run out of vehicles recently. Dealerships all over town are reporting scarce inventory. And buyers are facing months-long delays and soaring prices before they can get their hands on a new truck or SUV.
The root problem is the same across the country — a global deficit of computer chips that has forced automakers to slash output, causing shortages of new and used vehicles. But the predicament feels particularly offensive here, Detroiters say.
“This is an auto manufacturing city. It shouldn’t be short of cars,” said Benyam Tesfasion, a cabdriver who has been busy shuttling travelers from the airport to pick up rental cars at locations 10 or 20 miles away. Another feature of his daily travels, he says, is driving past giant parking lots where automakers are stockpiling newly manufactured cars that are still awaiting a few final chips.
Detroit’s experience shows how thoroughly the nearly two-year-old semiconductor shortage has upended manufacturing — and foisted change on one of America’s most beloved consumer markets.
That supply-chain crisis was a lot more acute than the hoary progressive wish list that’s been percolating around Washington DC for two decades or more. Democrats on Capitol Hill obsessed over their pet causes rather than deal with the real crises facing American consumers, including and especially the runaway inflation that they themselves touched off in March 2021.
Now they will have to pass this just to score a W on the board, but it’s going to cost them. Their opponents and even some allies will accuse Democrats of selling out to tech corporations, with some justification, by stuffing tax credits in their pockets while the same corporations pay effective tax rates well below that of average Americans. (And for that matter, well below that of oil companies, too.) As Michael Bennet admits, it looks terrible, and the timing stinks as well, given the slide into recession that is all but inevitable at this point.
In the long run, incentivizing the relocation of supply chains out of China and other hostile regimes back to the US is smart policy. But that’s why Donald Trump’s tax cut incentivized the same supply-chain policies and allowed corporations to bring capital back into the US, too. I wonder how many of these Democrats will cheer their tax breaks while attacking the Trump tax package this time around — and how many media “fact checkers” will chide them for it. “All” and “none,” respectively, I’m sure.