COLUMBUS, Ohio—A new report from the Institute for Policy Studies recommends that the Biden administration implement restrictions on corporate stock buybacks for companies that receive federal funding through the government’s manufacturing infrastructure incentive program.
The CHIPS Act (Creating Helpful Incentives to Produce Semiconductors) provides $39 billion in federal subsidies directly to corporations for the construction of new semiconductor manufacturing facilities in the United States. The program has been touted as one of the hallmark job creation achievements of the Biden administration.
The analysis by IPS follows a public letter to the Department of Commerce from Rep. Pramila Jayapal, D-Wash., and Sen. Elizabeth Warren, D-Mass., which urged stock buyback restrictions be included in the eligibility criteria for CHIPS grants.
Stock buybacks refer to the widespread practice in which corporate boards use large portions of profits generated by the workers in the company to re-purchase shares of the company’s own stock. These purchases reduce the market supply of the company’s stock and may result in artificial increases in the share price and inflate the portfolios of shareholders.
Upward movement in a stock price can result in more demand for that stock, particularly when the bulk of day trades made by major institutional investors are executed by automated algorithms.
It is common practice for stocks to make up the largest share of the compensation package for top corporate executives and board members. Such high-ranking figures are also typically the largest non-institutional investors in a company’s own stock.
As a result, the same people who determine the timing and amount of stock being purchased by the company also stand to collect enormous profits, all while serving the shareholders’ interest by increasing the stock price. Stock buybacks thus further enrich ruling class elites who sit atop corporate boards, at the expense of workers’ wages and benefits.
This practice is especially common among semiconductor manufacturers like Intel, which diverted more than $30 billion in profits generated by workers at the company to repurchase shares from 2019 to 2023. Intel has received at least $8.5 billion in federal funding through the CHIPS Act to build a new semiconductor manufacturing facility in Columbus, Ohio.
This federal investment is further bolstered by additional state and local grants and tax abatements, as well as publicly-funded infrastructure projects to supply water, electricity, and enhanced roads to the new factory.
The Department of Commerce has already introduced several criteria for CHIPS grant recipients, including requiring that companies submit plans demonstrating they will provide affordable, high-quality child care for workers at the new plants.
Researchers at IPS, as well as Rep. Jayapal and Sen. Warren, say that it is well within the Commerce Department’s jurisdiction to place restrictions on stock buybacks as well.
The broader context of the CHIPS Act includes the emerging Cold War 2.0, in which U.S.-led finance capital seeks to prolong its rapidly declining hegemony over global trade in the face of China’s exponential economic growth under socialist governance. Currently, the overwhelming majority of advanced semiconductor manufacturing takes place in mainland China, with smaller operations in Taiwan.
These chips are essential to the production of smart phones and other popular devices, as well as advanced electronics used in military applications.
Militarism and economic domination are key pillars of U.S.-led finance capital and the CHIPS Act was passed in 2022 with bipartisan support in large part because of its proposal to protect the supply chain for U.S. military equipment while subsidizing the struggling American semiconductor industry.
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