Questions Remain About Government Incentives as Intel Breaks Ground in Ohio

by J.D. Davidson

 

Although dirt began moving weeks ago at Intel’s massive $20 billion chip manufacturing site in central Ohio, local, state and federal officials, along with President Biden, praised Intel’s decision and the government incentives offered to lure the chip giant at a groundbreaking ceremony Friday.

Gov. Mike DeWine called the day historic, but an Ohio native and economics professor believes central Ohio will see little benefit from the $2 billion in state incentives and billions more in federal money given to Intel.

Gary Wagner, professor of economics at Louisiana-Lafayette, was the lead author of an academic research paper that says state economic incentives do little to benefit the state or create significant job growth. According to the paper, incentives help incumbent politicians with higher campaign contributions and easier victories.

“I grew up in northeast Ohio, and I think it is unfortunate the state and federal government are providing such a massive taxpayer subsidy to a single company. Based on the work of many, many academics who have studied these subsidies, there is very little reason to believe that central Ohio will see more jobs or higher income as a result of this decision,” Wagner told The Center Square on Friday. “Firms that receive these subsidies frequently fail to produce on their end – Foxconn in Wisconsin is a prime example – and most packages do not include a clawback provision. This is not how a free market system is supposed to operate; this is crony capitalism of the highest degree.”

Aside from the state’s $2 billion, the recent signing of the federal CHIPS Act opened $52 billion to companies producing semiconductor chips and another $10 billion to create regional technology hubs across the country.

Ohio State University President Kristina Johnson on Friday called the CHIPS Act a way to level the playing field, and Biden said the legislation was one of the most significant investments in science and technology in the nation’s history.

“It’s time to bury the label ‘Rust Belt’ and call this area the ‘Silicon Heartland,’” Biden said. “It’s fitting to break ground for America’s future here in Ohio. Americans invented this chip. Today, we’re down to producing barely 10% of the world’s chips. We need to make these chips right here in America to help bring down costs and create good-paying jobs.”

Biden also said the CHIPS Act made an historic investment into companies to build advanced manufacturing facilities in the U.S. and established guardrails to stop American companies from building facilities overseas by allowing the government to take back the money.

“The future of the chip industry is going to be made in America,” Biden said.

Despite praise from Biden and U.S. Sens. Rob Portman, R-Ohio, and Sherrod Brown, D-Brown, others in Congress, including Rep. Jim Jordan, R-Ohio, called the CHIPS Act cronyism. Jordan chairs the House Freedom Caucus.

“The Senate’s CHIPS-Plus Act not only adds $79 billion to the deficit, but also is loaded with crony capitalist handouts, Green New Deal climate initiatives and radical ‘woke’ policies,” the caucus said in a statement at the time of passage. “Worse still, it’s passage in the Senate – with the help of 17 Senate Republicans – has opened the door for even more out-of-control spending in the Democrats’ reconciliation deal with $400 billion in spending for liberal priorities and some $700 billion in tax increases.”

Intel also announced Friday it is giving $50 million to Ohio colleges and universities to create education programs that focus on the computer chip industry, with nearly $5 million going to Ohio State.

State leaders have said the planned project, which is expected to be finished in 2025, will create 3,000 long-term jobs that will pay an average of $135,000 annually and 7,000 construction jobs.

“We made it. What aspect of your life is not becoming more digital and everything digital works on semiconductors. As we came to this period in our strategy, we put our chips on the table to help the U.S. regain its manufacturing heart. Our partnership in Ohio is off to a great start. It’s been an incredible relationship,” Intel CEO Pat Gelsinger said. “This great state of Ohio has this tradition in manufacturing. You all love to build stuff, and we’re going to build things.”

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An Ohio native, J.D. Davidson is a veteran journalist with more than 30 years of experience in newspapers in Ohio, Georgia, Alabama and Texas. He has served as a reporter, editor, managing editor and publisher. Davidson is a regional editor for The Center Square. 
Photo “Joe Biden” by The White House. Background Photo “Intel” by David290. CC BY-SA 4.0.

 

 

 

 

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