Eight Months In, What Is Happening With Biden's CHIPS Act?

Joe Weisenthal (0:10)

Hello, and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

Tracy Alloway (0:15)

And I'm Tracy Alloway.

Joe Weisenthal (0:17)

Tracy, you know, one of the things we talk about and the themes we come back to quite a lot is just this idea of like US government, really all government, but I guess sort of US centric government intervention, active role in the economy, which is something that I would say is like characterized a lot of like early Biden policymaking so far.

Tracy Alloway (0:36)

Yes, and a perhaps unappreciated role at certain times. So we talked a lot about the history of Silicon Valley and how there was a lot of US government money that actually flowed into both that place and that industry and that had a massive impact.

And now fast forward to the post pandemic era and it feels like we're seeing a bit of a resurgence.

Joe Weisenthal (0:58)

Yeah, that's a good thing that you remind that reminder. Like it feels like the US political appetite for public investment, public direction of money and capital into certain industries, it ebbs and flows.

Sometimes that's really out of favor. Let's say in his anti-capitalism or something like that. And clearly, at least the last few years, it's been sort of back in favor or at least, maybe even a little bit under Trump, but certainly under Biden in a very significant way, both with the CHIPS Act and of course, the Inflation Reduction Act of seriously public investment and the infrastructure bill, public investment into different industries.

Tracy Alloway (1:37)

Right, I think we spoke about this with Ezra Klein, the new sort of supply side liberalism, this idea that the pandemic really exposed a lot of fault lines in the economy and also in supply chains. And now there's a lot of attention focused on actually fixing those.

And I'm glad you mentioned one of the preeminent sort of set pieces of this particular type of policy, which is of course, the CHIPS Act. So the big CHIPS Act, other than the Infrastructure Act, the CHIPS Act is the kind of, I guess, the shining symbol of this new direction.

Joe Weisenthal (2:12)

Well, you mentioned supply chains, and we did a lot of episodes on broken CHIPS supply chains. So this brings it together. But here's the other thing that I think is key, which is that if there's gonna be momentum on this front, if active public investment into industry is going to be something that's sustained, and not just like a two year, a couple bills passed, there's a big question like, is it being done well? Are people happy with the results? And I presume if people are happy with the results and people see change, then maybe there's more momentum.

And if people are like, oh, this is what happens every time the government gets involved in some industry and it's red tape and cost overruns and wasted taxpayer money and so forth, then that really sort of like kneecaps any momentum.

Tracy Alloway (2:55)

Yeah, and it feels like the stakes are quite high for this particular program, the CHIPS Act, because it is symbolic in many ways. First of all, there is always, I would say, a almost knee-jerk suspicion of government spending from certain parts of America. But then secondly, this particular bill, I believe it did come with some new sort of conditions attached to it, requirements that companies receiving government funding have sufficient childcare, things like that, and that has garnered additional scrutiny recently. So there are lots of questions over exactly how this is being implemented and how we'll measure its success.

Joe Weisenthal (3:35)

You mentioned scrutiny. I think some of it's from our own colleagues at the Bloomberg opinion side.

There was a headline eight days ago, $52 billion chip making plan is racing towards failure. That was the opinion side of the house. That's not our opinion. Nonetheless, this is the question. So let's have this question. Like, where are we? This bill was passed last August. We're already seeing a lot of activity in the wake, but how's it actually going? I'm very excited about our guests. We're going to be speaking with Mike Schmidt, Director of the CHIPS Program Office, as well as Todd Fisher, Chief Investment Officer of the CHIPS Program Office. I didn't even know CIOs were a role within government, so that's interesting.

Anyway, Mike and Todd, thank you so much for coming on Odd Lots.

Mike Schmidt (4:19)

Thank you.

Thank you, Joe. Thank you, Tracy, for having us, really. I'm a big fan of the podcast, so very excited to be on. This is Mike Schmidt. I'm the Director of the Program Office, and Todd is our Chief Investment Officer. And we're excited to be here to talk CHIPS. Fortunately, your listeners won't need us to explain how critical CHIPS are, given all the episodes you've already done on it. But just to lay that foundation, CHIPS are critical to virtually every technology that underpins modern life, anything with an on-off switch, automobiles and medical devices, but also satellite communications and military technology.