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Congress should set the objectives
Clarity from day one
A flexible pool of strategic capital sounds appealing: here is a pile of money, now figure out what's important. Running the CHIPS operation showed the value of the alternative. Once the bill passed, the aim was clear: bringing leading-edge production here would keep faith with the purposes of the legislation and with the bipartisan coalition that enacted it. From day one the office mobilized around that objective and attracted people with relevant experience who wanted to be part of it.
Bipartisan continuity
That clarity carried through a bumpy transition. There has been a fair amount of bipartisan continuity in advancing the CHIPS objectives, which would be much harder if people had different ideas of what to do with a flexible pool of capital.
Congress picks the industries
The design this points to has Congress choosing five or 10 industries and committing resources to them at a high level. The executive then gets a lot of discretion over process and the mix of tools, from baseline non-discretionary incentives to discretionary ones. Inside the executive, the many offices doing this work could be rationalized into something like a big bureau of industrial investment or economic security at Commerce, with counterparts at Energy and DOD. China sets long-term objectives and sticks to them, and in the American system bipartisan legislation is how that stability gets created.
Why does legislation outlast administrations?
A president can reverse an executive order, but a statute stays in force until Congress changes it. Changing a law needs majorities in both chambers and a signature or a veto override. Bipartisan laws start with support from both parties, which makes repeal less likely. The CHIPS and Science Act passed the Senate 64 to 33 in July 2022.
How do tax credits differ from grants?
A tax credit is available to any company that meets the rules in the law, so the government does not choose winners. A grant is negotiated, and an agency decides who gets how much and on what terms. The first gives companies predictability. The second gives officials leverage over the details. The CHIPS investment tax credit appears in Section 48D of the Internal Revenue Code.
How does China keep policy stable?
China sets national priorities through Five-Year Plans, a practice dating to 1953. The plans are drawn up by the Communist Party and the central government, and provinces and ministries then write their own targets to match. One party governing for decades means no change of government resets them. The first plan covered 1953 to 1957.
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