On Tuesday, President Joe Biden signed into law a $280 billion act aimed at keeping America innovative and competitive on the global market, which will use taxpayers’ money to subsidize computer chip companies and invest in research.
Biden described the CHIPS and Science Act of 2022 as a way to ensure the future of the industry is "made in America."
MIT economist Jonathan Gruber was involved in shaping some aspects of the bill, and joined Boston Public Radio on Thursday to discuss its implications for American national security and the health of the middle class.
"Seventy-five percent of all the semiconductors in the world are produced about 100 miles from China," Gruber said. "That's not very ideal in a world where we're facing enormous geopolitical concerns with China."
Semiconductor chips are tiny computer chips used in products that range from electric vehicles to smartphones, and they’ve been in short supply during the pandemic. The bill creates subsidies to build those CHIP manufacturing plants locally, said Gruber. He added that most economists historically have opposed subsidies in favor of letting the free market dictate where and how things get made.
"'If chips are made most cheaply and best in China, let 'em be made in China,'" said Gruber, characterizing the line of argument. "The economics profession has softened a bit on this in the wake of, as I said, both these national security concerns, supply chain concerns, and just a recognition that in an industry like this when the rest of the world is massively subidizing it, we need to play as well."
In addition to the $52 billion for domestic semiconductor production, the law also commits billions to 20 regional technology hubs for job creation and development in areas like chips, energy technologies and biotechnology.
"These are places that have the potential to be tech hubs, but which need a jumpstart — which need a government investment to get there," said Gruber.
This second aspect of the law is partially what Gruber focused on in his 2019 book with Simon Johnson, "Jump-Starting America: How Breakthrough Science Can Revive Economic Growth and the American Dream."
"As we've laid out in the book, the problem isn't that all the technology jobs have gone to [Boston, San Francisco, Seattle, Los Angeles and New York]. The problem is those places won't grow. They won't build the housing they need to let people come in and grow those sectors," he said. "San Francisco and increasingly Boston have become cities of just the rich and the poor. The middle class is being hollowed out.
"We need to create a new generation of technology hubs that middle-class people can afford to live in," Gruber continued, "and that's the idea of what we'll do with this legislation."
