Memo To POTUS: America Is Not A Corporation And You Ain’t Its CEO, Part 1

Donald Trump has a profound misunderstanding about where prosperity comes from and the role of the US President in our constitutional Republic. To wit, prosperity comes from the exertions of free men thriving on free markets, while the job of the President is to keep the state solvent, small and out of the way.

The opposite of this proper role of government is statism—and it comes in all shades of ideology from the Marxist Left t0 the populist Bannonite Right. The core commonality accross the statist spectrum, of course, is the belief that politicians and officialdom can do more and better for the growth rate and wealth level of the economy in which the people labor than they can do for themselves.

In this respect, the Donald is among the worst of the lot of statists who have occupied the Oval Office in recent decades. He apparently thinks that the US economy is essentially an enlarged version of the Trump Organization and that it will advance mainly owing to his stratagems and deal-making.

For instance, yesterday he was crowing about the announcement by Taiwan Semiconductor (TSMC) that it will invest $100 billion over a period of years in five manufacturing plants in Arizona. The unstated implication was that if they stay on Taiwan they will get the Donald’s tariff treatment, but if they come over here to make their chips they can a get a fulsome dollop of Sleepy Joe’s CHIPS Act lucre.

And we do mean that these slick crony capitalist operators from abroad know how to milk the Washington subsidy cow. In fact, back in 2020 TSMC promised the Donald himself that they would build a $12 billion “fab” (wafer fabrication plant) in Arizona, which they promptly recycled into three such plants and $65 billion at a White House shindig with Joe Biden several years later. And, now, they have upped the ante to $100 billion and 5 facilities—neither of which figures they claim are duplicative of their Biden and Trump 1.0 promises.

Ok, we’ll take TSMC’s word for it, but in that case they will be harvesting a stunning $41 billion in 25% investment tax credits on $165 billion of investments—plus $6.6 billion of CHIPS grants and $11 billion of cheap loans, also from Joe Biden’s leftover slush fund. That’s nearly $59 billion in all or 36% of the gross investment.

But for crying out loud. Fab plants are the blast furnaces of the digital era, but its none of Washington’s damn business where steel ingots or semiconductor chips come from. That’s the market’s business, not the purview of politicians.

Indeed, as a practical matter—free market principles aside—wafer fabs are so damn expensive that whoever owns and operates them will need to sell their output to the highest bidder on the world market in order to get a decent return. For instance, a state-of-the-art semiconductor fab with advanced nodes (e.g., 3nm, 2nm) typically costs between $20 billion and $30 billion for a facility with a capacity of around 50,000 wafer starts per month (WSPM), using 300mm wafers.