Trump Can Bend Biden’s Industrial Policy To Suit Him

Conventional wisdom has held that president-elect Donald Trump will cut the Chips and Science Act, which aims to boost US semiconductor production. This is based on an offhand comment he made at the end of October. But a better indicator came later that week when a reporter asked Speaker of the House Mike Johnson about the issue. 

Johnson responded as Republicans usually do when asked if they will follow Trump’s lead: “I expect that we probably will.” Within hours he reversed himself, saying the Chips Act would not be repealed. One congressman said Johnson had “apologised profusely”. On no other issue, just days before the presidential election, was agreement with Trump grounds for an apology from Republican leaders. 

What’s going on? Conservatives remain committed to “supply side” economic policy, defined broadly as efforts to increase productive investment, in contrast to a Keynesian focus on spurring consumer demand. But the traditional Republican tool, the tax cut, has struggled to deliver in recent times. Economic analyses often conclude that the tax cuts of 2001 and 2003 failed in this regard. So did the $1.7tn Tax Cuts and Jobs Act of 2017, according to the measures preferred by Kevin Hassett, chair of Trump’s Council of Economic Advisers.