It’s been a little over a year since President Biden signed the CHIPS and Science Act, which invested $231 billion into semiconductor manufacturing in the United States, into law. Despite the fact that those investments are already creating economic growth around the country, most Americans don’t recognize the impact that the CHIPS Act is already having on the national economy. Today, Ronnie Chatterji, the former CHIPS Coordinator at the White House, joins the pod to provide a better understanding of what the CHIPS Act really does and why it matters.
Aaron Chatterji is the Duke University Professor of Business and Public Policy. He was previously the White House CHIPS Coordinator and Acting Deputy Director of the National Economic Council in the Biden Administration.
Twitter: @RonnieChatterji
CHIPS Act: National security is priority for funding, analyst says https://finance.yahoo.com/video/chips-act-national-security-priority-150516934.html
Website: https://pitchforkeconomics.com
Twitter: @PitchforkEcon
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Nick’s twitter: @NickHanauer
Goldy:
One of the advantages of listening to Pitchfork Economics is that you get to listen to Nick talk to the person who designed the CHIPS Act and explain it to you.
Ronnie Chatterji:
The CHIPS Act is going to help make sure that we diversify our supply chains, that we make more here in the United States of America. That’s not just going to protect our national security, it’s also going to create a lot of economic opportunity.
Nick Hanauer:
When you think about it, it makes you optimistic.
Ronnie Chatterji:
We could do big things.
Nick Hanauer:
No-
Ronnie Chatterji:
I feel the same way, Nick.
Nick Hanauer:
If only people knew.
Speaker 4:
From the home offices of Civic Ventures in Downtown Seattle, this is Pitchfork Economics with Nick Hanauer. The best place to get the truth about who gets what and why.
Nick Hanauer:
I’m Nick Hanauer, founder of Civic Ventures.
Goldy:
I’m David Goldstein, senior fellow at Civic Ventures.
Nick Hanauer:
Goldy, it’s been a little over a year since President Biden signed the Chips and Science Act, which intends to rebuild the semiconductor industry in the United States, and I just couldn’t be more excited to have our friend Ronnie Chatterji come on the podcast to talk about that because he was the CHIPS man. He was the deputy director of the National Economic Council until a month or so ago, and was the coordinator for the CHIPS program within the White House. The CHIPS bill was designed to effectively industrialize the United States in this sector and bring chip manufacturing back to the United States, which is an enormously important and consequential endeavor. Ronnie is definitely one of the smartest and most interesting people I’ve met in DC over the last few years.
Goldy:
Yeah, it’s an important program, Nick, and I don’t think it’s very well understood or has been very well explained by the media. I think one of the advantages of being you is that when you have questions about something like the CHIPS Act, you get to go meet with the guy who designed it and have him explain it to you in person it.
Nick Hanauer:
Yes, exactly.
Goldy:
That means that one of the advantages of listening to Pitchfork Economics is that you get to listen to Nick talk to the person who designed the CHIPS Act and explain it to you in person. I don’t know, Nick, is it trickling down?
Nick Hanauer:
Maybe, we’ll see. The CHIPS Act was really one of the coolest pieces of legislation that the Biden Administration has passed, in fact, that any administration has passed in a very, very long time. But it’s so wonky and so technical and so hard to understand that I think basically nobody knows about it. Today, dear listener, you’re going to hear from perhaps the world’s leading expert on what it was and what it is and why we did it and what the benefits will be. With that, let’s talk to Ronnie.
Ronnie Chatterji:
I am Ronnie Chatterji. I’m a professor of Business and Public Policy at Duke University in Durham, North Carolina, and formerly the White House Chips coordinator and served for over two years in the Biden Administration.
Nick Hanauer:
Ronnie, tell our audience what CHIPS is and how you got involved.
Ronnie Chatterji:
Sure. I can start by where I got involved. It started in April of 2021 when I joined the Commerce Department as the chief economist and Secretary Raimondo came to me with a question, and as an economist who’s worked in government before, including in the Obama Administration with a lot of business leaders across industries, I thought I’d heard them all, all the kinds of questions you would get about economics and economic policy. But when she came to me with that question in 2021 spring, it was a question I hadn’t heard before, and she basically asked, “What’s going on with all the wood?” And I said, “Excuse me, what do you mean, lumber?” And she said, “Yeah, lumber prices are reaching all time highs. Is this a supply chain issue? Is there something else going on? How do you figure out what’s wrong with this market and how we fix it?”
And as someone who had worked in policy before, I’d never known who the supply chain person in government was. In the Obama Administration, if you had asked me who’s the supply chain person, I wouldn’t know where to look. Maybe it was me, but I wasn’t sure. But here in the Biden Administration, I found myself on point for figuring out how supply chains worked. I think at the same time I was doing that, this was happening all across the world because in Europe, in Asia, in particular, key supply chains were being snarled and policymakers were being forced to grapple with the questions that none of them really had a toolkit for. We didn’t have the right data, we didn’t know what questions to ask, and honestly we didn’t even know the language to use, so I went about investigating the lumber market and came up with some interesting insights.
When prices started coming down a few months later, I took credit for it, but I don’t think it was just me. I can show you a graph that says Chatterji joined and prices go down, but we know that’s not how it works. What I did find is a method to approaching these supply chain bottlenecks. We ran that playbook again with steel, we ran it with PPE, we ran it with aluminum, and that’s when I first started to really get in depth with semiconductors, computer chips, being the more common vernacular. We had a chip shortage during March of 2021, and it had a lot of impacts on the macroeconomy. One thing you’ll see directly was that there’s a lot of computer chips in automobiles, and one third of core CPI, the consumer price index, which is one of the indices we look at to measure inflation. One third of that was driven by auto prices going up in 2021. Think about that. One third of inflation coming from autos, and a big part of that was, we could not get the chips, and so folks like me-
Nick Hanauer:
Ronnie, a modern car has like a thousand chips in it, or something like that?
Ronnie Chatterji:
That’s correct, and electric vehicles are going to be more.
Nick Hanauer:
Yes. The problem is, if one is missing, you can’t drive the car, right?
Ronnie Chatterji:
That’s exactly right.
Nick Hanauer:
Yeah.
Ronnie Chatterji:
That’s exactly right, Nick. You look at dealer lots and you’d see all these cars and you’d say, what’s wrong with that car? Why can’t you sell it? Well, we don’t have the chips in. We can’t sell it because we don’t have the chips. Look, it could be something like the driver assist system, the thing that beeps when there’s someone in the adjacent lane. It could be your airbag or your tire pressure monitor, all things you need in the car. That’s really how I got started working on chips, and then in August 2022, we passed the Chips and Science Act. At this point, I should tell you what I told my kids that day, which is that CHIPS stands for creating helpful incentives for the production of semiconductors. We’re good at nothing else if not branding. CHIPS and Science passed in August 2022.
I was there when the president signed the bill and he said, today is a day for builders, and what CHIPS is going to do is build manufacturing facilities across the United States to make chips. We’re going to build research and development facilities across the United States to make sure that we maintain and extend our leading chips, and we’re also going to support the kinds of diplomatic engagements and workforce investments we need to make this reality. That’s how I got started. That’s where I ended up managing the CHIPS implementation for the White House, and I spent the next year working on the National Economic Council after leaving the commerce department, starting the program, and basically sending out the implementation across multiple government agencies. That’s what I did and where I came from and why I’m proud to have done that work.
Goldy:
But wait a second, you claim to be an economist, and I remember my Econ 101 textbook and it tells me that government spending like this is just going to crowd out private investments, so you’re going to destroy chip manufacturing in the US. Is that what happened?
Ronnie Chatterji:
No, it’s not. Goldy, I think you’re one of those people, you took Econ 101, but I’m going to politely recommend that we take Econ 102, and maybe some further economics classes because-
Goldy:
I’ll admit, Ronnie, I did not take Econ 101. I’m one of those weirdos that just read the textbook.
Ronnie Chatterji:
Even better, even better because when you read it, you understand how markets fail, and how some of the assumptions of economic modeling really fall short on key national security reasons. You think about this, I mean, it may make economic sense with some simple model from Econ 101 that all the chips are just made in one part of the world, including the most advanced chips, and the ones that go into our missile defense systems are satellites. All of our military work. It may make sense that all that’s being made in one place, from sort of an efficiency perspective, but certainly from a national security perspective, it doesn’t. We need resilience. We need to make sure these chips are coming from multiple places, and the CHIPS Act is going to help make sure that we diversify our supply chains, that we make more here in the United States of America. That’s not just going to protect our national security, it’s also going to create a lot of economic opportunity. That’s where I think Econ 101, 102 and beyond are really strongly supportive of what we’re doing with the CHIPS program.
Nick Hanauer:
Yeah. Can you just speak to that a little bit more, Ronnie? I think that the CHIPS bill is about a lot more than shoring up our supply chains. Chips today are one of the most vital technologies powering our economy and enabling technological leadership in a lot of industries. America used to dominate that, and now over the last 30 years, we allowed ourselves to fall farther and farther behind. I think what’s most exciting about this bill is addressing that deficiency, that weakness.
Ronnie Chatterji:
I think you’re right, Nick. I mean, when I talk to folks here in North Carolina and across the country, what they get excited about is the idea that we ought to lead the world in these key manufacturing industries. All of them know that we used to lead the world in this. I mean, chips were invented in the United States of America. When you think about the story of the first computer chips, we needed them to power the space program, and the Air Force was a big purchaser of chips, and that drove a ton of commercial investment to try to satisfy that demand. Over time, the commercial providers started to get better and better in what they were doing, and we essentially created a commercial market for chips based on those early investments from the government. It goes back to Goldy’s point there, which is that even the most innovative industries we think of today as coming from some sort of a free market malu, actually, they came in many places through government contracts, saving investment, and then they ended up being sort of commercial leaders.
That’s exactly what happened in the chips industry. We used to make one third of all the most advanced chips in the United States of America in 1990. As recently as last year, we were making less than 10% or about 10% of those chips here in the United States. If you look at the cutting edge, the leading edge of chips, we really don’t make any of those in the United States anymore. We design a lot of the chips, but they’re made elsewhere. That division between where we make stuff and where we invent stuff ends up being a big vulnerability because chips go into everything, not just automobiles, but the electric gear, your washer dryer, your refrigerator, anything with an on and off switch, and that’s why the CHIPS Act is so important.
Nick Hanauer:
Yeah, and I think what’s really important to underscore is that it was policy that produced that leadership in the first place. It was policy that let it slip away, and it definitely was the policy of our global competitors that enabled them to dominate these industries. For example, Taiwan, which currently dominates chip making, that didn’t happen as a consequence of the pluck of a few entrepreneurs. The government of Taiwan made huge investments to make that industry go in that place, as did Japan and South Korea, to gain a foothold for those countries too. I think what’s really important to remember is that if you want to compete in this domain, it’s an all hands on deck endeavor, right?
Ronnie Chatterji:
Yes.
Nick Hanauer:
It’s not like opening a restaurant.
Ronnie Chatterji:
Oh, no. To your point, Nick, I mean that’s where the leaders are today, exactly where those massive government investments were made. TSMC in Taiwan, the Japanese companies are very active in the chemical space that’s key for chips, and of course Samsung and other companies in South Korea, and it’s no coincidence that it was government policy, and so I think… President Biden stood there in August 2022 after signing a bipartisan bill because I think both Republicans and Democrats realized that we need to be doing this here in the US, and because of the national security importance alone, I think you’ve got a lot of folks on board, but the economic opportunity, my goodness, to create these fantastic jobs across the industry, that’s a whole nother opportunity that we are working on and something I’m really passionate about. That’s where I think we’re starting to turn the corner because of the CHIPS Act. $161 billion of private sector investments since the CHIPS Act were passed. Goldy, that’s the answer to your question. We haven’t sort of crowded out private investment, we’ve crowded it in, and that’s what I’m really proud of.
Nick Hanauer:
Give us more detail about what the bill itself does. Break it down for us.
Ronnie Chatterji:
Sure. We have $52.7 billion of appropriations for the Chips and Science Act. There’s other parts that are in the texts that there’s not appropriations for, so it’s really important to remember where the 52.7 billion is going. The lion’s share of that money, about $39 billion is going to the Commerce Department to finance manufacturing investments in the US. When you build a big factory in America, they’re called FABS. When you build these FABS in America, the government can support the construction of those FABS, and any company, domestic or international is eligible if they’re building in the United States and they satisfy the requirements of the program, which we can get into in a little more detail.
39 billion will go towards that. $11 billion in a separate unit in the commerce department will go do financing, research and development. I do want to pause on that for a second because we know R&D is not sexy, but it is essential to us maintaining our lead, essential in terms of having a vibrant industry because we’re not going to lead the next generation if we’re not inventing today. We’ve fallen behind in several of those key research development metrics, and the 11 billion for the CHIPS Act will set up a national semiconductor technology center which will be a hub of activity for research and development to make sure that we lead the world again in chips research. The balance of the money is for diplomatic engagements with our partners and allies and workforce and training programs for the National Science Foundation.
Nick Hanauer:
Wow. Is that R&D hub going to be physically located somewhere, or is it a distributed sort of thing?
Ronnie Chatterji:
It’s a policy called Right Now, there will be a physical presence for the National Semiconductor Technology Center, but the commerce department… This is one of the things they started to lay out under in partnership with myself at the White House to figure out what the best way is to get the bang for the buck on R&D. As you all know, in technology businesses, there can be a lot of great opportunity from people being co-located in one place, trading ideas. On the other hand, you want to take advantage of knowledge from all across the United States of America and attract the brightest. There’s a balance there between a centralized hub and a distributed model, and I’m confident the groundwork we laid, they’ll get it right.
Nick Hanauer:
Wow, that’s awesome.
Ronnie Chatterji:
The other pieces that I just mentioned, the bill, one is, the treasury department is releasing guidance for a tax credit. Again, these are some of the things that are really powering a lot of our industrial strategy through the IRA, and it’s true in chips as well, that tax credit, 25% investment tax credit on qualified investments in manufacturing facilities will be a huge incentive to build here in the United States. Proud to have been part of the group that led that effort to release the preliminary guidance, and now they’ll be finalizing it soon. And then finally, the Department of Defense has a microelectronics commons program that will make sure that the chips that are really important for military applications are also getting the research development that they need. It’s really a full spectrum program across a bunch of agencies. Getting those agencies to work together really was my full-time job for the last year, and I think they’re off to a great start.
Nick Hanauer:
Can you tell us more about what has already happened? I mean, you said there’s been about 150 billion of private investment already. That must not account for future investment against these tax incentives.
Ronnie Chatterji:
Yes.
Goldy:
To be clear, that’s a $150 billion, and the 39 billion really hasn’t been spent yet?
Ronnie Chatterji:
You’re right. I think that’s the first headline I’ll tell you. I mean, when you talk about $161 billion, we are talking about investments that the private sector is making before any of the money has actually been invested from the CHIPS Act, and so I think what’s amazing is, the signal of President Biden signing the CHIPS Act with bipartisan support, putting the world on notice to say, we’re going to build an America again, and we’re going to build the most advanced technologies. That has led the private sector to put huge bets down in America, across the country, including in my home state, in North Carolina, in Texas, New York, Ohio, Oregon, all across the country. Now, as they’re seeking to allocate the chips money, you’re going to see more investment that goes on top of that, but that 161 billion is just before the money has been handed out.
I think that accomplishment number one is basically setting a tone for the investment environment. Back to Goldy’s point, a lot of folks think that when government is trying to strategically support sectors, it’s going to result in inefficiency or less private market activity. Well, here’s the counter example. The president signed the bill and we got more investment, and other countries are looking around trying to figure out how they’re going to do the same. Now we’re in the stage where we’re releasing notices of funding. Notices of funding are basically documents that tell applicants how to apply for the funds. It’s a very wonky but important step in government to say, here’s how you apply, here’s the things you need to abide by. Here’s the things you can and can’t do. And then it results in applications.
I’ll tell you the other big milestone, over 400 statements of interest, which is the first step in the application process from organizations around the country. For folks who said that we wouldn’t have enough interest or there were somehow too many restrictions, clearly that’s not borne out by the data, 400 applications or 400 statements of interest already that will translate, I’m sure, into many applications. That’s where we’re at in terms of the program getting set up, all this within a year of it being passed.
Goldy:
But how can you possibly make a profit building chips in the United States if you have to provide daycare to your workers?
Ronnie Chatterji:
Goldy is interesting.
Goldy:
It seems impossible to me. Explain.
Ronnie Chatterji:
Goldy, it was interesting when that provision was discussed a lot. I think what people missed in that discussion, and I just think it’s been so long since we’ve had these conversations in America before, particularly when it comes to the opinion newspapers and stuff, or opinion pages of major newspapers. But when you think about this, the companies that are by and large in this industry are already providing childcare for their employees across the world. The idea that they couldn’t do that in the United States, somehow it would make these very complicated chips unprofitable.
I mean, I just knew that that wasn’t going to stand up to scrutiny, and I just waited, knowing that we’d see a lot of statements of interest from industry. Also, having been someone in government who interfaced a lot with industry, I knew that that was not going to be a major sticking point at all. That was something these companies knew how to do, and so when I saw those articles on those opinion pages, I just thought they need to actually talk to more people in the industry and in business, and they realized that we will have challenges, no doubt, but providing childcare to your employees or coming up with a plan to do so, definitely not one of them, not reflected at all in the interest we’ve seen in the program.
Nick Hanauer:
What does the future look like? I mean, where have we seen… When I was last in DC and we were hanging out in your office, you gave me a really interesting example of what was happening just in your little neighborhood where you work, near Duke.
Ronnie Chatterji:
Yeah. I can tell you, I can just paint a picture-
Nick Hanauer:
Just anecdotally. Yeah.
Ronnie Chatterji:
Of course, because look, when I’m on the sidelines watching my kids play soccer, people don’t know what the CHIPS Act is. They don’t know the amount of money. I mean, people have obviously more important things in their daily life to focus on, and they just want the bottom line, what’s going on? What I’ll say is, have you seen the new investment that we’re making in North Carolina? $5 billion to build silicon carbide chips here in North Carolina by a company called Wolfspeed. A lot of people have heard of that because President Biden came down here, and I was proud to accompany him here to announce that investment. Why is Wolfspeed and silicon carbide so important? Well, silicon carbide is basically used to produce chips that are really good in particular industrial applications, one of those is electric vehicles, and then folks start to say, okay, well where are those chips going to go?
Well, it turns out there’s a company called VinFast, a Vietnamese company that’s setting up an electric vehicle production plant right here in North Carolina, very close to where all this is happening, and that company is going to buy the silicon carbide semiconductors from Wolfspeed. And then you start to think, oh gosh, okay, now we see the link between electric vehicles, which we know is so important to the climate transition and the connection to chips, and that market is going to scale up as more EV supplier or more EV companies are buying chips and silicon carbide equipment. Then the next piece is batteries. You need batteries, right? Well, Toyota is building a battery plant here in North Carolina near Greensboro, which is again, in this triangle triad region that I’m proud to live in. Again, you have Toyota, you have VinFast and you have Wolfspeed, and it’s a mix of companies from all around the world choosing to invest here in North Carolina, creating tremendous opportunities for folks.
The last piece is, the other thing you need for batteries is lithium. Well, there’s a lithium processing company in North Carolina, Albemarle, which is located near Charlotte. You put all those things together, you start to see the beginnings of what industrial strategy looks like at the ground level. It’s creating jobs, particularly for folks who don’t need a college degree to do things in manufacturing. It’s creating advanced manufacturing roles that are going to pay well, and it’s connected both to the climate transition, but also national competitiveness and national security. We can lead the world, be more prosperous and more safe with clusters like this in North Carolina around the country. When I started to just tell folks about the companies, the jobs, what’s going on, that’s when people really get it. That’s when I got it, when I saw what was happening right here in North Carolina, and similar stories across states in the entire country.
Goldy:
You know what really jumped out at me there is that you use the term industrial strategy instead of the more familiar industrial policy, and it seems to be a much better way of describing what we’re doing, because policy doesn’t necessarily imply strategy.
Ronnie Chatterji:
That’s right.
Goldy:
But this is a strategy. It’s a coherent strategy.
Ronnie Chatterji:
It is. I think about that term a lot because I teach business strategy often to my MBAs, where you set an objective and you allocate resources and set priorities to reach that objective. We understand what some of the objectives are for the United States of America. I give President Biden a ton of credit for that, setting clear objectives with regards to our climate, with regards to developing new technologies to make us more secure and to bring back manufacturing, and when you put all those things as the objectives, then you start to think about how to allocate resources.
Again, he did things people didn’t think he could do. He signed a bipartisan Chips Act, he signed the Inflation Reduction Act, he signed the infrastructure bill, another bipartisan one, including a stimulus act at the beginning, so all these different bills getting signed at a time people thought we were hopelessly polarized, they constitute the resource allocation decisions, and that’s guiding the strategy to reach a certain objective, and that’s what you’re seeing on the ground. Those pieces are in play, there’s going to be lots of opportunities and challenges to pursue. It’s going to fill my [inaudible 00:24:02] card up for a long time just to help out and make sure these things are successful. Goldy, I think it’s a strategy that’s going to pay off, and we’re already seeing the benefits here in North Carolina.
Nick Hanauer:
Super cool. Can you speak for a minute to the intersection of the Inflation Reduction Act, CHIPS and infrastructure? Because one of the things that we’ve talked about a lot on the podcast is that when you add all this stuff up, also including the American Rescue Plan, it’s the most economic legislation any president has passed. Holy crap, maybe since Eisenhower or something like that. But it all fits together in this pretty cool way. Certainly the IRA and CHIPS fit together in a really important and real way. Can you speak to that?
Ronnie Chatterji:
I’d be happy to, and I’m glad you also mentioned the American Rescue Plan, I should have named it more specifically in my last comment, but it’s a key part of the puzzle and something I’ve been proud to support as well. I mean, I think when you look at it, we have to industrialize the United States of America, both to build back our economic prowess, but also become more secure from a national security perspective. And if we’re going to re-industrialize, we’re going to have to do it in a way that’s less carbon intensive than what we did in the past. We’ve done this in America before, if you remember, right? After World War two, the chips example is a good one. We invested in a number of strategic sectors, but a couple of things that we need to do better this time is, we need to make sure that we’re decarbonizing and reducing carbon emissions as we do that, and we need to benefit more people in a broader set of Americans in our industrial strategy.
When you put together the CHIPS, the Inflation Reduction Act, the American Rescue Plan, and the infrastructure bill, you’re seeing the pillars of such a strategy. I think infrastructure in my mind is one of the most important down payments you can make in America. It’s a way to make sure that we move people and ideas at 21st century speed, and so if we’re going to make stuff in America, you have to be able to move stuff in America, and that’s where infrastructure is going to be really, really important. I think when you think about chips, they’re the linchpin of every industry, an input into every key industry. Anything that requires the on and off switch we talked about earlier. If we have a foothold in the chips industry, that’s going to be really, really important to re-industrializing the entire United States, the American economy.
And then of course, if we’re going to decarbonize, we’re going to need new technologies in solar and wind and carbon capture across the board, and we are going to need to manufacture those here and make sure we have robust trading relationships with partners and allies to make sure we procure the supplies we need. And if you look at every aspect of the Biden agenda, that is how they fit together. I think it was an accomplishment to get it passed legislatively. It’s going to take another big lift to implement this stuff altogether. That’s really what I’ve been focused on, and I’m very interested in going forward.
Nick Hanauer:
The darnedest thing is, when you think about it, it makes you optimistic.
Ronnie Chatterji:
We could do big things. I feel the same way, Nick. We could do big things.
Nick Hanauer:
It’s insane, but if only people knew.
Ronnie Chatterji:
That’s the other challenge. I agree with you.
Goldy:
I don’t know, Nick, I’ve been told the government should never pick winners and losers, and in this case, the Biden Administration is clearly that the winner they’re picking is the American people, and that just seems wrong to me. That’s up to the market to decide.
Ronnie Chatterji:
I mean, Goldy, you’re right. I mean, I think the other thing we should do, I think it’s just continue to have discussions with folks on industrial strategy, these particular initiatives. You’re right, a lot of people have this picking your winners, picking winners or loses like the one-liner the folks have, but you start to double click on that and you realize that people are less familiar with the arguments, counter arguments underneath that, because it’s been a long time since we had this debate in America. I’ve read a ton about this and continue to read a ton about these debates, and I’m talking to people all around the country about it, we just need to engage folks and show them the evidence about what’s working, and also be upfront when it’s not. There’s going to be-
Nick Hanauer:
There’ll be failures-
Ronnie Chatterji:
Failures-
Nick Hanauer:
Yeah, absolutely.
Ronnie Chatterji:
We’ve learned a lot from the failures of the past, and so I think with some humility as well, we’re going to be able to make progress. Again, I think a lot of this has bipartisan support, which is great, and if we can deliver on it, hopefully we’ll build coalitions for future industrial strategy pieces as well.
Nick Hanauer:
Let’s just stipulate that President Biden is reelected, and go way out on a limb and let’s say that Democrats retained both houses. I guess my question is, if you had the political power in the next cycle, what else would you do, with respect to this stuff? What didn’t get done that you wish had gotten done in this space?
Ronnie Chatterji:
Yes. I mean, there are two key things I would do. One is going to be a boring one that I think is necessary. The other one is going to be a more interesting one. The boring one is, we do need to finish the job on implementation. It’s been said elsewhere, but this is the most important, the most boring part of politics. We pass the bill and then people forget about it, and they say whatever happened there. And then when we do the impact evaluations, the evidence building later we find out that we did not achieve our goals. In this case, we need to keep folks who care about this, focused on the implementation. I’ll give you one quick example. Workforce, right? We can cut a lot of ribbons and say, we’re opening a factory. We can talk about labor shortages or skill issues, whatever language people have used, but at the end of the day, if we don’t train enough people in America to work in these jobs, if we don’t create good jobs, we’re not going to be able to fulfill the goals of the strategy.
What President Biden has done won’t have the impact that we think it will unless we have the workers, and so getting that part right is a multi-year process, it’s something we’ve got to keep going with. And if we have control of those levers of government and we were able to pass an agenda to do more on workforce investment and training to help the implementation of all these bills, that would be, to me, a number one priority. The second thing I think is, there are other critical industries, in particular, discussions around artificial intelligence and quantum where we’re going to need to take a careful look over our competitive position, what our partners and allies are doing, what our rivals are doing, and make necessary investments against those to make sure we retain, in many cases, our technological lead and where there’s manufacturing implications and other industries manufacturing applications as well.
In cases where we’ve fallen behind, we need to catch up and take the lead. I think there’s a whole set of critical technologies that go beyond chips. Some of them are chips adjacent that we’re going to need to build a new industrial strategy for. Some of them are going to be very manufacturing intensive, and some of them are highly technological, but could eventually end up scaling and manufacturing as well. Those are the areas that I’d like to focus on. I think, honestly, you’re going to have a lot of folks interested across both political parties in that agenda. They might attack it from different angles, but I think there’s actually a lot of room for common ground too.
Nick Hanauer:
Yeah, that’s great. Ronnie, one final question. Why do you do this work?
Ronnie Chatterji:
I do this work because of what I saw in North Carolina with the confluence of investments that are going to change people’s lives. I have this funny thing where whenever I see these businesses start, I always think about the Little League team. I used to play Little League where I grew up and the teams were sponsored by local businesses, and it meant something to play for the local business and have that on your shirt, and I would ask my friends, what business do you have there and where do your parents work? Everybody was connected to one of the local institutions. I think about these companies that are locating in my backyard now. I think about the civic involvement they’re going to do, the families that are going to come here and are already here, who will benefit from them.
I see communities getting built, that are going to be really prosperous and vibrant and diverse, and I’m like, this is why we do the work. This is why we pass the bills. This is why we have a strategy so we can see the impact on the ground in places like North Carolina, but also across the country. Seeing the connection between the macro and the micro is why I became an economist and why I like to do things both in government and business. I think you can scale impact that way. That’s why I’m here.
Nick Hanauer:
That’s fantastic. Okay, buddy. Thank you so much for being with us.
Goldy:
I got to admit, Nick, I didn’t do a lot of prep getting into this like I do. When we talk to an author, I’d like to read the book, I’d like to know what we’re talking about. I tried to understand the CHIPS Act from reading what was in the mainstream press, but man, now I think I really understand it.
Nick Hanauer:
Yeah, and it’s so cool. The early returns are incredibly favorable, but it’s not hard to understand why nobody really knows, right? It is as wonky a piece of legislation as you could imagine.
Goldy:
I think, Nick, on the surface, it looks like, oh, just another typical, we’re going to invest in this thing, it’s no different from investing in bridges or roads or whatever, it’s government money going to big corporations, and so it doesn’t sound exciting to people, but I think what jumped out at me, there were two specific things. One is, and we talked about it a bit, there’s difference between strategy and policy, and what’s absolutely clear, both with the CHIPS Act and the Inflation Reduction Act and the Infrastructure Act and everything else the administration is doing, there is an actual strategy guiding what the president is now calling Bidenomics. There’s a strategy behind this, and that is very different from having just a bunch of policies.
Nick Hanauer:
That’s right, and the CHIPS Act falls squarely within the Bidenomics, slash, middle out economics framework of making really important investments in our material and social capacity as Americans, and the chips-
Goldy:
Right, and with the end being benefiting the American people, and that’s why there’s such an emphasis on training, that’s why there’s such an emphasis on job standards and pay, why things like childcare are important. It’s a cycle. It’s a virtuous cycle that not only does it benefit workers to have childcare available, but it benefits the employers because there’s a shortage of workers and this is one of the ways to get qualified people back into the workforce working full time because they can then afford to take care of their children.
Nick Hanauer:
That’s right.
Goldy:
I think the other thing that stood out to me, and this is something we didn’t discuss as directly, and this is getting back. I jokingly bring up Econ 101 a lot and getting back to the textbooks, and one of the things that the market is supposed to do is efficiently allocate resources.
That’s one of the alleged benefits of the market, is efficiency. Allegedly, government is inefficient, that’s why you don’t want it picking winners and losers. The market is efficient. Whether that’s true or not, is not the point here. The point here is that there’s a difference between efficiency and resiliency. What we’ve built over the past 40 years with this emphasis on efficiency, on cost-cutting and efficiency, and that’s what leads to a lot of the outsourcing and offshoring is we created a not very resilient economy. We saw that in the pandemic, when you don’t have resiliency, everything can collapse at once. So if you’re not manufacturing chips here and the Chinese shut down their plants, or hoard the chips for themselves or hoard the masks and so forth for themselves, and we don’t have it here, everything grinds to a halt, and so a lot of this strategy is about building resiliency in the American economy, even if maybe it costs a little more.
Nick Hanauer:
Yeah, and just to be clear, when we talk about efficiency, because that word is used so often, what we were really talking about was capital efficiency, right?
Goldy:
Right.
Nick Hanauer:
We were talking about returns on invested capital, and of course, the big problem with capitalism is the maniacal focus on capital to the exclusion of all else, but resiliency, sustainability, paying people enough to get by without food stamps, all these things, being excluded from that. This is just such an exciting turn away from that neoliberal market fundamentalist paradigm towards a much, almost certainly be a much more successful way of generating broad-based prosperity for everybody. In any case, what a cool thing to have been part of, and to have accomplished. We’ll have to talk to Ronnie more about it in the future.
Speaker 4:
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