Mar 1, 2023 - Politics & Policy

Biden industrial policy faces a core tension

Illustration of Benjamin Franklin from a hundred dollar bill peaking out from behind an "open" American flag

Illustration: Sarah Grillo/Axios

An announcement from the Commerce Department this week raised a few eyebrows: Companies seeking a slice of billions in available federal dollars for U.S. semiconductor investment will have to develop a plan for their workers to obtain child care.

  • But this provision sheds light on a broader tension facing the Biden administration as it moves to implement major legislation passed in its first two years.

State of play: Whether it's the CHIPS Act, the Bipartisan Infrastructure Law passed in 2021 or energy investments in last year's Inflation Reduction Act, there are inherent tensions between achieving the primary goals of the legislation and other economic and social goals.

Why it matters: These laws have been sold as essential for America's national security and climate adaptation. But those imperatives would be undermined if government restrictions result in less bang for the buck.

  • This balance will be struck in dozens of decisions on policy execution across government departments, each one small in itself, but collectively huge for determining how different imperatives are balanced.

What they're saying: "There's a tension between achieving the stated objective of the laws at issue, environmental benefits or infrastructure, and achieving these other things," Scott Lincicome, a Cato Institute senior fellow, tells Axios.

  • "If they weren't in conflict, the government wouldn't need to mandate it," he said.

The details: Inflation legislation includes "Buy American" provisions that try to ensure clean energy projects that get federal money are constructed with U.S.-made materials — which may add to the cost.

  • The Office of Management and Budget issued proposed guidance on the implementation last month, and President Biden pledged in his State of the Union to strictly enforce those principles.
  • "Tonight, I'm also announcing new standards to require all construction materials used in federal infrastructure projects to be made in America. American-made lumber, glass, drywall, fiber optic cables," Biden said.

As for the CHIPS Act, the Commerce Department said this week that child care provisions are intended to make sure semiconductor manufacturing facilities can attract the workforce they need, rather than some attempt to engineer social policy.

  • "We are not asking companies to do anything that is outside their commercial interests," Commerce senior adviser Caitlin Legacki said. "Everything we are asking them to do is good for their business."

The bottom line: The fine print of regulatory rulings in the months ahead will determine just how much bang is obtained for the billions in federal bucks newly allocated to address the age's great challenges.

Go deeper: The New York Times on Tuesday explored the Biden team's use of federal spending to shape corporate behavior, and the Wall Street Journal's Greg Ip on Wednesday examined the uneven history of U.S. industrial policy.

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