The Financial Times has done some useful reporting in its new lead story, Forty per cent of Biden’s major IRA manufacturing projects delayed or paused. However, it’s hard to know what the “so what” of this analysis is without having context. Is this number good, bad, or in line with expectations?
We’ll get to the meat of the findings soon, but some of the unanswered questions were:
What were the timing//completion expectations? Did they make adequate allowance for normal teething delays?
How do these results compare to similar non-government manufacturing initiatives in these particular industries?
How many of these projects (particularly ones going well) were things that the companies were planning to do anyhow? This is a general risk of subsidies and incentives, that they often wind up paying for things that would have happened regardless.
In other words, unless there is a basis for comparison, it is hard to know what these findings mean.
Admittedly, given the many industries and projects, it would take a vast amount of work for the pink paper to have come up with a solid answer. But they could at least have acknowledged the need for good benchmarks and gotten some quotes from experts.
Separately, it is curious that the Financial Times ran this story, framing it as critical of the Administration. The Financial Times, like most of the orthodox media, has been solidly in the anti-Trump camp. Is this article a reflection of a different Financial Times loyalty, to strong-form neoliberalism, so that dirigisme is suspect and must be undermined when it rears its ugly head?
The data summary:
The authors also conducted over 100 interviews of companies and state and local official. That’s an analytically sound approach to help understand results. However, it appears they were using this method primarily to gather anecdotes rather than help qualify what the findings said about program performance. For instance, as we’ll see, some of the delays were the direct result of how the Biden Administration launched the program, specifically that deficient guidelines slowed up the launch of many projects. But other interviewees report that they paused or cancelled projects out of fear that an incoming Trump Administration would cancel or hamstring the program. So the interview findings are more atmospheric than diagnostic.
Additional impediments are arguably in the “shit happens” category, such as difficulty in finding workers or a slackening of demand. But again, in at least some of these cases, there is more here than meets the eye. For instance, faltering EV demand in the US is significantly due to US automakers not being able to make these vehicles to meet a low enough price point….when the Chinese can. And adequacy of supply of charging stations is another US buyer concern.
On the “labor shortages” theme, hopefully knowledgable reader will pipe up as to how much of this obstacle is due to an actual shortage of workers with relevant skills (which is entirely possible) versus employers not being willing to pay enough to attract them (particularly if they would have to relocate).
Snippets from the story:
The US president’s Inflation Reduction Act and Chips and Science Act offered more than $400bn in tax credits, loans and grants to spark development of a US cleantech and semiconductor supply chain.
However, of the projects worth more than $100mn, a total of $84bn have been delayed for between two months and several years, or paused indefinitely, the FT found…
The delays raise questions around Biden’s bet that an industrial transformation can deliver jobs and economic returns to the US, which has offshored its manufacturing for decades.
A point this humble blog and many other have raised is that restoring manufacturing prowess, even if that can be achieved, will take one to two decades. The US has not only ceded far too many skills at all levels (not just the factory floor but also supervisors and managers) but also has gutted public education, meaning many workers may not be able to fill important roles without remedial training. For instance, I have seen more than occasional complaints from manufacturers that they can’t find workers who can read blueprints or worse, are too weak in reading and numeracy to fill certain roles.
Back to the story:
Among the largest projects on hold are Enel’s $1bn solar panel factory in Oklahoma, LG Energy Solution’s $2.3bn battery storage facility in Arizona and Albemarle’s $1.3bn lithium refinery in South Carolina.
While many delays have been made public, others have not been announced. Forty minutes away from Albemarle’s inactive site is a facility where semiconductor manufacturer Pallidus said last year it would relocate its headquarters from New York and open manufacturing operations, investing $443mn and creating more than 400 jobs. Operations were expected to start in the third quarter of 2023, but the building sits unused.
“You’re holding your breath and seeing what transpires,” said Ted Henry, city manager of Bel Aire, Kansas, where Integra Technologies announced a $1.8bn semiconductor factory last year but has not moved forward with the project due to uncertainty over government funding.
Henry was clearly willing to talk. Yet the reporter appears not to have probed to find out what “uncertainty over government funding” was about.
We later see that this could be the reason…but why not firm that up?
While the IRA’s tax credits extend until 2032 and the Chips Act awards generous funds to selected applicants, companies often cannot receive funding until they achieve certain production milestones.
On the “government procedures holding things up,” the story later provides more examples:
Some of the delays are policy driven. Slow government rollout of Chips Act funding for semiconductor projects and lack of clarity on IRA rules have left a number of projects at a standstill.
Nel Hydrogen, an electrolyser manufacturer, has paused its $400mn factory project in Michigan due to uncertainty over tax credit rules for hydrogen. Anovion, a battery parts manufacturer in Georgia, delayed its $800mn factory by more than a year due to lack of clarity over the IRA’s electric vehicle regulations.
The article recites that participants announced over $220 billion in investments in the first year of the IRA, which includes projects “reshored” from abroad. But we then learn that many have run into high labor costs and supply chain issues. But we aren’t told what those supply chain problems were. The one example is actually downstream, not upstream. Taiwan Semiconductor Manufacturing Company delayed a second fab. That whacked its suppliers Chang Chung Group and KPCT Advanced Chemicals who paused their projects. The article implies the latter two were also IRA beneficiaries but it not as clear as it should be. But in any event, the usual understanding of supply chain problems is being unable to get needed inputs, such as when automakers in the Covid recovery were hamstrung by being unable to get needed electronics. Here, we don’t know exactly why Taiwan Semiconductor Manufacturing Company postponed its second fab, but the loss of orders led suppliers to hold back on their expansions.
The piece describes how the plunge in solar panel prices thanks to a Chinese glut and the oft-lamented weak EV demand in the US have led some IRA projects to be mothballed.
Finally, the piece explains that the Republicans really hate the IRA, with no Team R Congresscritters supporting the legislation even when their districts could/would benefit.
Ironically, here if beneficiaries in Republican districts were going ahead with their IRA enterprises, it would make it harder for an incoming Trump Administration to cancel them. They might need to find a way to finesse gutting the program while grandfathering projects that were underway. So delays and pauses out of political worries could be self fulfilling.
Mind you, this piece did some very useful gumshoe work. It’s just too bad that the editors didn’t let the writers go a bit further to reach firmer conclusions.
Yves S: Is this article a reflection of a different Financial Times loyalty, to strong-form neoliberalism, so dirigisme is suspect and must be undermined when it rears its ugly head?
From FT readers’ comments, that’s definitely one strain of thinking. I found the piece unsatisfactory, like you, because it doesn’t say much what the reasons for failure were so far.
I confess I read it expecting to confirm my priors i.e. reindustrialization is close to impossible for the US because of all the reasons Michael Hudson has outlined and because its major corporations have pursued a decades-long policy of pursuing share buybacks and cutting costs by laying off trained labor and skimping on research and investment, so that now there’s simply not enough trained labor in the US to re-industrialize.
But would the FT, coming from its neoliberal finance-centric POV, be able to recognize or even conceive of that? Not easily, I suspect.
I’d say the neoliberal types are just too short term greedy to make this all work out. Manufacturing is inherently capital intensive and the more advanced it is, the more intensive it is.
Maybe the neoliberals who looked down on manufacturing for so long truly thought that it was something that could be done like a switch. It can’t be.
The money in the Western world is being used to make the rich richer, not to do anything that is truly productive.
Some skills would require decades and the rich would have to pay higher taxes to pay for better quality public education. It has to be the rich because most of America now lives paycheck to paycheck. The declining middle class can’t afford to pay higher taxes. Considering they’ve spent decades lobbying for lower taxes and everything else the rich have done, that isn’t going to happen.
Basically the West would have to abandon neoliberal economics and the rich would have to be less greedy. That is not going to happen.
Me: So now there’s simply not enough trained labor in the US to re-industrialize.
Case in point —
The US Navy’s warship production is in its worst state in 25 years. What’s behind it?
https://apnews.com/article/navy-frigate-shipyard-workforce-retention-318c99f2161c4284e5ddcf0c1fa2b353
‘The Navy’s ability to build lower-cost warships that can shoot down Houthi rebel missiles in the Red Sea depends in part on a 25-year-old laborer who previously made parts for garbage trucks.
‘Lucas Andreini, a welder at Fincantieri Marinette Marine, in Marinette, Wisconsin, is among thousands of young workers who’ve received employer-sponsored training nationwide as shipyards struggle to hire and retain employees.
‘The labor shortage is one of myriad challenges that have led to backlogs in ship production … at a time when the Navy faces expanding global threats …. Navy shipbuilding is currently in “a terrible state” — the worst in a quarter century, says Eric Labs, a longtime naval analyst at the Congressional Budget Office. “I feel alarmed,” he said. “I don’t see a fast, easy way to get out of this problem. It’s taken us a long time to get into it.”’
And so on.
I spent the last 2/3 of my career in DoD weapon system acquisition. The first part doing “logistics” support of the type systems I later worked to acquire.*
My observation about government funded R&D is very negative. In theory we started with a mission need, a market survey [sort of] of what we think war would look like and what shortfalls to cover. It became “build it and the war will go that way”! IOW fight the last war, anyway.
That seems to be the background of IRA projects. Build it and they will come. But IRA projects do not have MICIMATT continually raising the budgets to cover missed milestones.
The second observation: “we” were always overly optimistic about how our designs were “mature”. That includes reliable and available over time. Plant capacity should not depend on immature tech.
Seems both issue afflict IRA projects. I do not see any green tech that is technically ready for mass deployment!
If they could be assured demand!
Trump can talk tariffs.
*I suspect wind farms, for one, have grossly underestimated the burden to maintain (if they can) watt delivery over time. Risks run beyond the set up.
US manufacturing productivity has been declining since 2011, or for the last 12 and a half years:
https://fred.stlouisfed.org/graph/?g=m2mB
January 30, 2018
Manufacturing Productivity, * 1988-2024
* Output per hour of all persons
(Indexed to 1988)
https://fred.stlouisfed.org/graph/?g=m2mx
January 30, 2018
Manufacturing Productivity, * 1988-2024
* Output per hour of all persons
(Percent change)
From the story this seems relevant.
“A potential Donald Trump victory in November’s presidential election has added to the uncertainty. While the bulk of IRA-related manufacturing investments have flowed to Republican-controlled districts, the law received no votes from party members in Congress. At campaign rallies the former president has vowed to “terminate” the IRA if elected”
As for Biden industrial policy looking much like Biden foreign policy, “Never underestimate Joe’s ability to….”
Well, you know the rest. Also I think vaguely heard about a lithium refining plant in SC but you do wonder whether potential environmental disasters have been shunted off to the red states. Or maybe this one was a gimme for Clyburn. Never underestimate Joe’s ability to reward his cronies..
as i have predicted for many years since 1993, what bill clinton did, in most cases cannot be reversed, at least by conventional methods.
every thing bill clinton did, was to enrich a tiny few to the detriment of billions world wide.
as i have stated, we are no longer a advanced economy.
its plainly evident its to late for reform, can’t be done.
————————
meet the black servant of the white entitled, white supremacist free trading nafta democrats: Atlanta Prosector Fani Willis Sent Black Educators to Jail for daring to criticize bill clintons charter school disasters
https://blackagendareport.com/atlanta-prosector-fani-willis-sent-black-educators-jail
Atlanta Prosector Fani Willis Sent Black Educators to Jail
Margaret Kimberley, BAR Executive Editor and Senior Columnist
23 Aug 2023
“Atlanta is no mecca for Black people. It is a political plantation where the white overseers rule. Fani Willis’ prosecution of Black teachers was an awful example of the power dynamic in that city.
“Our children have been cheated by those who have willfully torn apart black communities through displacement and gentrification, underfunded and privatized public schools, and then have criminalized black educators for a dysfunctional system that was designed to fail.” – Shani Robinson , Atlanta teacher prosecuted by Fani Willis
Willis is now in the news as the person who charged Donald Trump and 18 other people in a 41-count indictment charging them with a conspiracy meant to overturn the 2020 election. But she and other prosecutors must be scrutinized. One must always assume that defendants are being overcharged, and that the RICO statute is being misused so that the state can act with nefarious intent. All skin folk aren’t kinfolk, and the prosecution of Black Atlanta educators is Exhibit A which proves the case.
Margaret Kimberley is the author of Prejudential: Black America and the Presidents. You can support her work on Patreon and also find it on the Twitter and Telegram platforms. She can be reached via email at margaret.kimberley(at)blackagendareport.com.”
———————–
remember it was bill clinton that not only unleashed these monsters on us, he also showered them with tax payer money: A spokesperson for New York City’s largest charter network resigned in protest, stating she can no longer defend Success Academy’s “racist and abusive practices”
remember, bill clinton unleashed these monsters onto us: Nearly half of New Orleans’ all-charter district schools got D or F grades; what happens next?
bill clinton vowed to create 1000’s of charter schools, 1 reason: the Clinton-era Community Tax Relief Act of 2000 made it possible for funds that invested in charter schools to double their money in 7 years.
https://www.forbes.com/sites/petergreene/2018/08/13/how-to-profit-from-your-non-profit-charter-school/#553c67aa3354
its bill clintons polices period: Who Is Profiting From Charters? The Big Bucks Behind Charter School Secrecy, Financial Scandal and Corruption: Hedge Fund Managers and Real Estate Developers
https://www.alternet.org/2013/05/who-profiting-charters-big-bucks-behind-charter-school-secrecy-financial-scandal-and/
bill clintons polices were the ultimate stock scams: Getting rich on Charter Schools with the Clintons’ New Markets Tax Credit, everything bill clinton did was to goose stock prices
https://medium.com/@NYArteacher/getting-rich-on-charter-schools-with-the-clintons-new-markets-tax-credit-5a830390fe9f
https://ny.chalkbeat.org/2020/6/23/21300811/success-academy-liz-baker-pr-staffer-leaves-amid-turmoil-over-race
Yep, Clinton(s) and Obama were disasters. I don’t blame people who want to throw a hand grenade (Trump) into that milieu. Unfortunately, that’s not likely to be constructive. As the Russians say, things are never so bad they can’t get worse.
We fabricate. It’s the opposite of organic processes. So we are out here in the universe standing on our heads looking at everything from the wrong end and naturally we have a false definition of profit. There would be no question about the benefits of an “industrial” organic process because it would start with the slag heap and work backwards to the product we think we want. And in the process create cleanup jobs and benefits along the entire chain. Take dear old Rio Tinto bullying it’s way into Serbia to mine for lithium, and in their impatient drive for financial profits which must occur on an artificial time scale (only god knows why) Rio Tinto is polluting Serbia with abandoned mine waste – specifically boron, at toxic levels. Rio Tinto should have mitigated excess boron at the get go. They aren’t stupid. And any number of other “externalities.” Socializing costs is counterproductive but environmentalizing costs will be an extinction event. Hello all you neoliberals – one of your very own prophets, Forbes, said decades ago, “There’s cash in all that trash.”