The Trump administration is reportedly negotiating to turn Intel’s $10.9 billion CHIPS Act subsidies into a 10 percent equity stake in the company. If finalized, Washington would be among Intel’s largest shareholders.
That should set off alarm bells for anyone who still believes in free markets. A conservative administration that came to power promising deregulation and opportunity is now taking steps that blur the line between capitalism and state management of industry.
This move is part of a larger pattern.
Earlier this year, the Pentagon took a preferred equity position in MP Materials, the country’s largest rare-earth mining firm, effectively giving the government direct financial leverage over a critical supply chain. After Nippon Steel’s bid for U.S. Steel, the administration negotiated a “golden share” in the company, giving Washington veto power over decisions ranging from executive pay to plant closures.
Abroad, Trump officials have reportedly floated proposals that would grant the US government direct payments from foreign resource revenues in exchange for trade or security guarantees.
Some conservatives defend these arrangements as “strategic.” They argue that America cannot afford to rely on foreign suppliers for semiconductors, rare earths, or steel. National security, they insist, justifies extraordinary measures.
But once government crosses the line into equity ownership, the game changes. It’s no longer about setting fair rules of the road—it’s about Washington joining the race as a participant. That undermines competition, politicizes corporate decisions, and exposes taxpayers to risks they never agreed to take.
Economics 101: What’s Wrong With Equity Stakes
The first lesson comes from opportunity cost. Every dollar the government spends buying shares is a dollar it cannot use to reduce taxes, retire debt, or provide genuinely public goods.
The resources are scarce, and putting them into Intel stock means less available for other, possibly more valuable, uses. Economists from Adam Smith to Milton Friedman have warned that when governments redirect capital for political reasons, the result is misallocation.
The second lesson is about incentives. Private investors demand efficiency because their money is on the line. Government officials, by contrast, make decisions based on politics. If Intel falters, will Washington push for restructuring and accountability—or will politicians double down to save face? History suggests the latter.
From Amtrak to Solyndra, government ownership often locks in inefficiency rather than driving improvement.
The third lesson concerns public choice economics. Once government owns part of a firm, special interests swarm. Lobbyists push for favorable regulation, subsidies, and procurement contracts that tilt the playing field. This breeds cronyism—where success depends on political access instead of innovation.
Thomas Sowell put it plainly: “The first lesson of economics is scarcity. The first lesson of politics is to disregard the first lesson of economics.”
Government-as-investor is the embodiment of that tension.
Lessons From History
This kind of industrial policy is not new. Japan’s Ministry of International Trade and Industry (MITI) famously tried to steer the country’s industries in the 1980s, funneling state resources to “strategic sectors.” Yet the results were mixed at best. Japanese chipmakers, once dominant, fell behind precisely because competition gave way to cozy relationships with bureaucrats.
Closer to home, the federal government nationalized passenger rail with Amtrak in 1971, promising efficiency and profitability. Fifty years later, Amtrak still relies on billions in subsidies and remains unable to compete with private alternatives where they exist.
Similarly, the 2009 federal bailout of GM and Chrysler made taxpayers temporary shareholders. The firms survived, but at the cost of distorting the bankruptcy process and politicizing capital allocation.
These examples show that once government enters the boardroom, it rarely leaves.
Why Conservatives Should Worry
Perhaps the most troubling aspect of the Intel stake is not economic but political. Conservatives long criticized Democrats for pursuing industrial policy through the CHIPS and Science Act. Yet now, under Republican leadership, we see the same tactics—only bigger.
If the right normalizes government equity stakes in the name of security, they will have no credibility left to oppose similar measures when the left expands them to other industries.
This is a bait-and-switch for the conservative movement. Tax cuts and deregulation were supposed to unleash private enterprise. Instead, Washington is embracing what can only be called corporate socialism—profits privatized, losses socialized, and taxpayers held hostage to the fortunes of politically connected firms.
A Better Path Forward
National security threats can happen, but equity ownership is the wrong response. Instead, policymakers should focus on conditions that encourage all firms to invest and innovate in the United States:
Broad-based tax reform that lowers rates and removes carveouts.
Regulatory streamlining that shortens permitting timelines and reduces red tape for manufacturing and energy projects.
Sound money that preserves purchasing power and reduces uncertainty for investors.
Rule of law and strong property rights, ensuring businesses know their assets won’t be subject to political manipulation.
Spending restraint that limits government growth to the pace of population plus inflation, freeing up resources for the private sector. Cutting spending is not just fiscally responsible; it’s the only way to ensure the government cannot continue to expand its role as the investor of last resort.
If Intel or any other company cannot survive without a government equity injection, then it may not deserve to survive. That is how markets work: failure clears the way for success. Shielding firms from discipline delays the very innovation policymakers claim to seek.
Conclusion
The Trump administration’s Intel play is more than a one-off—it’s a signal of a broader shift. By taking equity stakes in private firms, the government ceases to be a referee and becomes a competitor. That distorts markets, undermines incentives, and saddles taxpayers with risks.
The lesson from Economics 101 is timeless: scarce resources must be allocated by markets, not ministries. The role of government is to set clear, neutral rules—not to hold stock certificates. If conservatives abandon that principle, they hand their opponents the blueprint for permanent industrial policy.
America doesn’t need Washington in the boardroom. It needs Washington to cut spending, balance the books, and let markets do what they do best: allocate capital, reward innovation, and drive prosperity.
Intel’s future should be decided in the marketplace—not in the halls of the Treasury.
