SCOTT DETROW, HOST:
What happens when the federal government owns part of a company? That is one of many questions about federal policy right now as the Trump administration aggressively pushes for stakes and oversight of major private companies. This week, the White House announced it was taking a 10% stake in the struggling technology giant Intel. Commerce Secretary Howard Lutnick says the administration is considering similar moves with other companies tied to the defense industry as well. We called up Michael Strain to walk us through what this could lead to. He is the director of economic policy studies at the American Enterprise Institute, a conservative-leaning think tank. Welcome to the show.
MICHAEL STRAIN: Thanks so much for having me on.
DETROW: What was your first response to this Intel deal when you heard about it?
STRAIN: Well, my first response was surprise and concern. This is an unprecedented action by the U.S. government outside of a crisis situation. And even if you think that Intel needs more support from the government, taking an ownership stake is really just about the most aggressive way the government could provide that support.
DETROW: Yeah. This is an administration, this is a president that is very comfortable leaning on companies, people, organizations to do what he wants. What are your concerns in terms of two or three or four steps the line about how it could play out in real life? What are your worries? What are you thinking about?
STRAIN: Well, I think this is bad for Intel. You know, Intel is going to have to do a whole lot of things in order to maintain its competitiveness. And some of those things are going to be politically unpopular, like closing factories, laying off workers. You know, now that the government owns 10% of Intel, the government may pressure Intel not to do politically unpopular things.
DETROW: Like, hey, we have to close a plant in this swing state for a financial reason, but now we might not do that because we're being told not to?
STRAIN: Yeah, exactly. And so that's going to be bad for Intel.
DETROW: Yeah.
STRAIN: I think this is going to be bad for customers in the chip market in general. You know, if you're a business and you're, you know, taking government contracts, are you going to feel like you have to buy from Intel even if buying from Intel doesn't make the most business sense for you?
DETROW: You said earlier, outside of a crisis. I mean, this has happened before in different ways. I mean, I think the most prominent example is the 2008 financial crisis. Shortly after that, the Obama administration took a major short-term stake in U.S. automakers. The auto industry especially, you could argue that worked out pretty well for the companies, for the markets. How different to you is this?
STRAIN: Well, I think it's quite different. You know, those were policies that were enacted during a crisis. And those were policies that were designed to be temporary. We are not in a crisis right now, and the equity stake in Intel and the possibility of future equity stakes are not designed to be temporary. You know, if you think that Intel needs more taxpayer support, then you could extend loans under favorable terms to Intel. You could do greater subsidies to the semiconductor sector more broadly.
DETROW: Can I ask you something on that point, though? I want to read you a quote from White House economics adviser Kevin Hassett, who said, "in the past, the federal government has been giving away money lickety-split to companies, and the taxpayers have received nothing in return." And Senator Bernie Sanders, who I imagine is not one of your favorite members of Congress on policy - but the point is he's not normally a Trump ally. He's made a similar point. Is there an argument there that something like this is better than just a tax break or a subsidy or a bailout?
STRAIN: No, I don't think so. You know, I think that Mr. Hassett's quote, you know, really does reflect just a fundamental misunderstanding of the role of the government in these situations. You know, the government is not one business out in the market competing with other businesses. The job of the government is to advance the prosperity and security of the American people. And that happens when American businesses are doing as well as they can to generate that prosperity.
You know, secondly, this is going to be bad for the taxpayer. This is going to cost money. The U.S. government has already given Intel billions of dollars of taxpayer money that could be used to fund hospitals or to reduce the budget deficit. Or that could just be left in the pockets of the people who earned the money. This relationship is going to mean that more good taxpayer dollars will be chasing bad investments in Intel. So even if you agree with Mr. Hassett's frame, which I do not, I think this is still going to be a bad deal for the taxpayer.
DETROW: I'm curious, Michael, if it feels kind of lonely at the American Enterprise Institute right now.
STRAIN: (Laughter).
DETROW: I mean, this is a Republican president. You have many conservative voices going along with this and either not saying anything or agreeing or protesting in a very mild way. What do you make of this moment as a conservative?
STRAIN: You know, I think it's a difficult moment. I think it's incumbent on people in Washington who genuinely believe in traditional conservative commitments about the importance of free markets, the importance of limited government, the importance of the rule of law. It's important for those people to speak out. And I agree with your characterization that not a lot of that is happening. And that is troubling. But I think it makes it all the more important for people who are willing to speak out to do so.
DETROW: Michael Strain, director of economic policy studies at the American Enterprise Institute. Thank you for talking to us about it.
STRAIN: Thanks so much for having me on.
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