As Washington policymakers block a $15 minimum wage, stall new infrastructure investments, and halt student debt relief initiatives, they may be nearing agreement on an issue that has bipartisan support: funneling billions of federal dollars to companies already raking in huge profits.
In this latest iteration of Bipartisan Bailoutism, party leaders are depicting the initiative as a populist crusade to bolster America’s economic competition with China and strengthen national security. The rhetoric obscures how the policy is simply a no-strings-attached corporate subsidy to a cash-rich industry that has become notorious for offshoring manufacturing jobs and spending more on enriching shareholders than on capital investments — all while spending big on lobbying and campaign contributions.
This week, the Senate is considering legislation offered by Senate majority leader Chuck Schumer (D-NY) that would deliver $52 billion to microchip manufacturers in the name of fortifying an industry seen as crucial to national security and economic development in the coming decades. The legislation represents the third in a series of high-profile corporate bailouts in the last decade, following the 2008 Troubled Asset Relief Program that enriched Wall Street banks and the 2020 CARES Act, which created massive Federal Reserve bailout funds for industry under the guise of COVID-19 relief.
But unlike those predecessors, Schumer’s legislation comes with almost no strings attached — it would not even require corporate recipients to offer equity stakes in exchange for the cash. Coupled with a separate $10 billion for Jeff Bezos’s space company, this is Bailout 3.0 — a lobbyist-optimized direct subsidy that could provide a new template for funneling unregulated and unlimited cash to any already profitable industry with cachet in Washington.
Schumer structured his legislation with few restrictions as two of his former top aides were just hired to lobby for Intel and are lobbying on the bill, according to federal records we reviewed. They are part of an industry that spent over $6.3 million on lobbying and $6.7 million on campaign donations in the last year.
As Senator John Cornyn (R-TX) now moves to strip one of the few worker protections included in Schumer’s bill, critics argue that the lack of controls could end up subsidizing already profitable corporations, their executives’ enormous pay packages, and stock buybacks that enrich shareholders.
The fear is warranted: The top five semiconductor manufacturers that stand to most benefit have reported more than $136 billion in revenue and $35 billion in profits last year, and they paid their top executives over $90 million in that time, according to financial records we reviewed. Even as lawmakers depict the bailout as a desperately needed rescue, some semiconductor behemoths are simultaneously bragging to shareholders about their current profits.
Amid a global semiconductor shortage, bill proponents say they are concerned about the increasing reliance of microchip supply chains on Chinese manufacturers.
“At its core, the US Innovation and Competition Act is about maintaining America’s role as the global economic leader,” Schumer said on Monday in a speech before the Senate.
But the financial data suggest the shortages have little to do with American semiconductor companies lacking financial resources — and yet the Senate legislation is primarily about funneling corporate giants even more money.
“The amendment is similar to what was in the CARES [Act], and what it basically says is we shouldn’t be giving out $53 billion to some very large profitable corporations and get nothing in return, so we’re talking about warrants where we would get a piece of the action,” Senator Bernie Sanders (I-VT) told The Hill about his proposed amendment to attach restrictions to the funds. His amendment would give the government an equity stake in the companies receiving subsidies, and place restrictions on stock buybacks and executive compensation for companies that accept the funds.
Sanders is reprising a role he has long relished: he has repeatedly led legislative crusades — at times against Democrats — to require companies to agree to more pro-worker commitments as a condition of accepting corporate subsidies.
Billions for Corporations That Are Bragging of Huge Profits
Lawmakers on both sides of the aisle have framed the bill as a bipartisan effort to improve the United States’ manufacturing position against China. The concern is valid: while the United States leads the world in design of semiconductors — which can be found in everything from personal electronics to cars to drones — China leads in manufacturing.
In part, that’s because American semiconductor companies have offshored manufacturing to China and Southeast Asia. In 2004, Intel’s then-CEO, Craig Barrett, defended a company decision to outsource jobs, saying: “You shouldn’t think of offshoring as a recent phenomenon. This has been happening for decades. It seems the press has just discovered it recently because it is an election cycle, especially in the United States.”
Sanders’s initiative is designed to stop that. Companies receiving funding would have to agree to certain requirements that were included in the CARES Act last year: not to buy back their own stocks, not to outsource American manufacturing jobs overseas, not to repeal existing collective bargaining agreements, and to remain neutral in any union organizing effort. Additionally, the amendment includes restrictions on executive compensation and employee classification, and requires collective bargaining agreements for contractors and subcontractors.
Without that amendment, the bill would empower commerce secretary Gina Raimondo to unilaterally dole out $50 billion to huge semiconductor giants, like Intel and Texas Instruments, with few strings attached — even though many of those companies have a long history of offshoring production and using extra cash to enrich shareholders rather than making domestic capital investments.
Last year, the top five semiconductor companies — Intel, Texas Instruments, Micron Technology, Analog Devices, and NVIDIA — devoted over half of their combined $35 billion in profits to stock buybacks, while authorizing massive pay packages to their CEOs. In all, the thirteen largest US-based chip companies spent more on dividends and stock buybacks last year than on capital investments, according to the Coalition for a Prosperous America, a domestic manufacturing advocacy group.
The companies that stand to most benefit exemplify the trends: Intel offered its new CEO, Pat Gelsinger, a signing bonus of more than $100 million worth of equity; Texas Instruments spent $6 billion on paying dividends to shareholders and stock buybacks while paying its CEO, Richard Templeton, $19 million last year; and Micron Technology paid its CEO, Sanjay Mehrotra, $20 million.
Even as lawmakers suggest the semiconductor industry desperately needs a cash infusion, semiconductor companies have been boasting about their cash haul.
Just last month, Intel executives bragged of “strong first-quarter results driven by exceptional demand” while reporting $3.4 billion of profit, paying $1.4 billion in dividends, and spending $2.3 billion on stock buybacks.
Similarly, Texas Instruments just touted $1.7 billion in first-quarter profits, and $4.5 billion spent on shareholder dividends and buybacks.
Schumer Aides Turned Semiconductor Lobbyists
Schumer, the bill’s author, has close ties to the semiconductor industry, both in Washington and in his home state of New York.
In January, Intel hired former Schumer communications director Israel Klein and former Schumer defense aide Brian Greer, now working for the lobbying firm Klein/Johnson Group. Both registered to lobby for Intel in January. They have disclosed lobbying on “issues related to domestic semiconductor manufacturing, Chips Act funding.”
Earlier this year, two major microchip companies announced at press conferences hosted by Schumer that they were opening new plants in upstate New York.
In March, Schumer’s office announced that a new collaboration between IBM and Intel in New York would “add hundreds of new jobs to the Capital Region at IBM’s Albany Research Center.”
The next day, his office issued a press release declaring that the senator had personally spoken with Intel’s CEO about building a new plant in New York.
“After announcing that a strategic partnership between Intel and IBM will bring hundreds of new semiconductor R&D jobs to New York’s Capital Region, U.S. Senate Majority Leader Charles E. Schumer followed up on his efforts to cement Upstate New York as the global hub of the semiconductor industry and pitched Intel’s recently-appointed CEO Pat Gelsinger, on how Intel should build on its new partnership with IBM and locate their next semiconductor fabrication (‘fab’) plant in Upstate New York,” the press release said.
In April, Schumer announced alongside GlobalFoundries CEO Tom Caulfield that the semiconductor manufacturing company would be moving its corporate headquarters from Silicon Valley to upstate New York.