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Tag: Business and Industry

  • Uncle Sam is investing now. What could possibly go wrong?

    When President Donald Trump announced in August that the federal government took an equity stake in Intel, he bragged that taxpayers had “paid zero” for part of a company now “worth $11 billion.” In reality, taxpayers paid plenty: $8.9 billion in subsidies with potentially more to come. The government simply dressed up the giveaway as an investment, which some leaders see as only the beginning.

    If you’re not deafened by Commerce Secretary Howard Lutnick’s cheers, you’ll hear economists from the right and the left expressing alarm. Politicians picking winners, subsidizing favored firms, and now grabbing government ownership stakes create the market distortions that conservatives once decried.

    Also, acting as both regulator and shareholder generates conflicts of interest on an epic scale. Will Washington regulate Intel as forcefully as the company’s competitors or tilt the field? The question answers itself.

    As troubling as the deal is, some policymakers now say it should be only a “down payment” on a U.S. sovereign wealth fund (SWF). National Economic Council Director Kevin Hassett recently told CNBC that “many, many countries” have SWFs and suggested that the Intel stake moves America in that direction.

    This idea is terrible.

    More than 90 countries operate SWFs, but look closer. These funds exist in one of two environments: undemocratic regimes like China and the United Arab Emirates (UAE); or in resource-rich countries like Norway and Kuwait whose governments generate consistent budget surpluses, often from oil and gas revenues that they then invest.

    As my Mercatus Center colleague Jack Salmon explains in a detailed Substack post, Norway has the world’s largest fund. Over the past 15 years, it’s also run average surpluses equal to nearly 10 percent of its gross domestic product (GDP). Singapore, often cited for its model SWF, runs an average fiscal surplus of 3.6 percent. The petroleum-rich UAE posts surpluses of about 3 percent.

    The United States has no surplus, running average deficits of 7 percent of GDP over the same period. Gross U.S. debt is roughly $37 trillion, with Congress flirting with adding another $116 trillion over the next 30 years if it doesn’t reform entitlement programs.

    Washington doesn’t have spare revenue; it borrows to pay bills, such as growing interest on debt we already owe. To propose borrowing even more to play the role of investment manager is fiscal madness.

    SWF advocates argue that the government can exploit a supposed “free money” arbitrage by borrowing at the risk-free rate (via Treasury securities) and then investing at the higher market rate. That premise collapses under scrutiny.

    First, the interest rates tied to this process aren’t permanently low; they rise when debt looks unsustainable, as America’s debt surely does. Second, even if borrowing costs appear lower than investment returns, private investors already pursue these opportunities. The U.S. capital market is not short of money. There’s no gain for society when the government simply displaces private investors and leaves taxpayers to shoulder both risk and additional debt.

    SWFs are political institutions and unlike private investors, governments are never disciplined by profit and loss. As then–presidential candidate Barack Obama once warned in 2008, they can be “motivated by more than just market considerations.” Their portfolios, as Salmon documents, have become playgrounds for lobbying, regulatory capture, and ideological crusades.

    In Australia, successive governments have redirected the “Future Fund” toward politically convenient projects. In New Zealand, the “Superannuation Fund” has been divesting from politically disfavored investments. South Korea’s fund has been repeatedly reshaped by bureaucratic infighting.

    Strictly speaking, these three are not classic sovereign wealth funds, but that distinction is irrelevant here. Once governments pool and invest large sums outside normal budget processes, the money becomes politicized. The evidence is overwhelming that funds become crony-capitalist tools vulnerable to shifting political winds and mission creep. They don’t insulate politics from markets; they inject politics into every investment decision.

    An American SWF would entrench rent seeking on a scale unseen since New Deal corporatist experiments. Picture trillions invested directly into equities and bonds, with Washington deciding which industries deserve support. Imagine policy decisions about energy, tech, labor standards, and even foreign relations warped by the government’s financial stake.

    Once Uncle Sam starts acquiring slices of corporate pies, the temptation to steer regulation to protect his portfolio will be overwhelming. And to those on the right who think Republicans have the proper values to pull this off, remember that you won’t always be in power.

    We don’t need another subsidy machine disguised as investment. We have something better: the U.S. economy itself. The best way to strengthen it is not through bureaucrats buying equities but by enacting structural reforms to strengthen every sector for every worker and consumer. That means lowering regulatory barriers, restraining spending, and fixing entitlements.

    COPYRIGHT 2025 CREATORS.COM

    Veronique de Rugy

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  • ‘Tariffs will simply put us all out of business’: Trump’s trade war is crushing American crafters

    As President Donald Trump’s tariffs make life less affordable and predictable for Americans, they’re also threatening to make it less creative. American craft stores are struggling to keep up with ever-changing trade policies, which are making the foreign-made products they stock more expensive and difficult to access. Many foreign craft supply companies are now unable to ship to American consumers at all.

    Dana Chadwell founded Chattanooga Yarn Company three years ago when she “saw a niche in the local market that wasn’t being filled by the big box stores such as JoAnn, Michael’s, and Hobby Lobby.” She envisioned “a place to find fine yarns for hand knitting and crochet, and a place to build community around yarn crafting.” It’s been a successful venture “in both the business and community aspect” and “I’m truly living my dreams,” Chadwell explains—but tariffs have thrown her shop into a world of uncertainty.

    Over 90 percent of her stock has been affected by tariffs, Chadwell says. “Every supplier I have, minus one, from major to minor, has had a price increase,” she continues. “Because the tariff situation has been so unpredictable…it has made long term planning impossible.”

    “I feel like I’m stuck in a reactive rather than proactive status,” says Chadwell.

    From aluminum knitting needles to printed garment fabric to bottles of oil paint, American crafters work with many materials that are produced abroad. That has left them particularly vulnerable to Trump’s trade war. Imports from Europe currently face tariffs of 15 percent, and while sky-high tariffs on China are paused until mid-November, they still stand at 57.6 percent, according to the Peterson Institute for International Economics. Worse still, Trump is doing away with the de minimis exemption, which allows goods valued at under $800 to enter the U.S. tariff-free. Casual crafters and bustling craft stores alike will see their costs go up.

    Chadwell did all of her fall 2025 shopping this past spring—something she says is typical of yarn shops. “Think about how many changes there have been to tariffs since then,” she points out. “It has been extremely chaotic.” With no hope of planning for the long term, she decided to buy more inventory than she typically would in an attempt to lock in “lower, pre-tariff costs.” As a business owner, she doesn’t intend to spend beyond her means—”I opened with no debt and intend to stay that way,” she explains—so she emptied her rainy-day fund “in order to front-load [her] ordering.”

    Chadwell has told customers that they can expect higher prices starting this fall. “I simply can’t ‘eat’ the tariffs as a small business,” she says. She’s stopped carrying certain products “due to tariff-based cost increases” and tried to stock lower-priced items “to help my customers keep within their family budgets.” She’s brought in more American-made yarns, but “those are luxury yarns without the tariffs, so they’re a higher priced option.”

    Exclusively stocking U.S.-produced materials isn’t an option for most craft stores. “Tariffs impact American-made yarns as well,” pointed out Fibre Space, a yarn store in Alexandria, Virginia. That’s because “American-made goods still rely on materials made in other countries.” Yarn “is an agricultural product,” observes Chadwell, “so certain crops and certain livestock produce the best fiber in very specific climates that aren’t necessarily” found in the United States. Meanwhile, “needles, notions, doodads, [and] bags…can only be produced at much higher prices” here.

    Joann craft store, long the first stop for budget-conscious crafters or people hoping to try out a new hobby, closed its doors in May. Many craft shops “have started to try to bring in products at a more affordable price point to serve” those customers, says Abby Glassenberg, co-founder and president of the Craft Industry Alliance, a trade association for craft businesses. “But with the tariffs, that becomes also more difficult, because a lot of those more budget-friendly supplies are made overseas.”

    Once the de minimis exemption expires on Friday, even small orders of goods will be subject to country-specific tariffs. “According to U.S. Customs and Border Protection data, 1.36 billion packages that qualified for the exemption arrived during 2024,” reported Reason‘s Eric Boehm. Several European shippers, including DHL, Britain’s Royal Mail, and France’s La Poste, have announced that they will temporarily pause shipments to the U.S., “citing ambiguous policies and the need to establish brand-new logistics systems,” reported NPR. Danish, Swedish, Italian, and Austrian postal companies have also halted U.S.-bound shipments.

    Even before those decisions would have prevented European vendors from selling their products to American crafters, several companies cut off orders to the United States. The popular Danish yarn brand Knitting for Olive announced that it would only ship to American yarn stores—not direct to individual crafters—as a result of U.S. trade policies. The British craft store Wool Warehouse suspended all shipments to the U.S. on August 21. “Clearly this is not something we want to do,” explained the shop, calling U.S. sales “a significant part of our business.” But “the likely average extra charges will be in the region of 50%” per order. The shop anticipated that few customers would be willing to pay that charge upon receipt, leading “to HUGE amounts of undelivered packages being returned to us.”

    The “vast majority” of businesses in America’s crafts industry are small businesses, says Glassenberg. Many rely on the de minimis exemption to place small wholesale orders to afford the component parts that go into craft kits and handmade products. “The reality is the supply chain in the U.S. is just not robust enough at this time to be able to provide those items,” she continues.

    Some crafters will find ways to adapt. Glassenberg sees increased interest in mending workshops and creative reuse centers, which are secondhand craft supply stores. In online forums about tariffs, knitters and crocheters predict that they’ll weather the trade war by working through their yarn stashes or unraveling previous projects and thrifted sweaters to reuse the material.

    Still, those tactics leave out many casual crafters who just want to buy a cheap crochet hook and a skein of acrylic yarn. That might sound like a small thing, but tariffs prevent all sorts of voluntary transactions that shape lives and culture in big—and often inconspicuous—ways. That means shops that won’t be started, gifts that won’t be made by hand, and hobbies that won’t be taken up. And more immediately, tariffs are punishing business owners who want to help Americans fill their lives with more creativity.

    “Those of us who are running our shops as a profitable business are deeply concerned but also very frustrated because we feel like we have no control over our fates,” says Chadwell. “There is a point at which tariffs will simply put us all out of business no matter how well we manage our shops.”

    Fiona Harrigan

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  • Trump says he ‘paid zero’ for $11 billion federal stake in Intel. Here’s the downside.

    President Donald Trump negotiated a deal last week for the U.S. government to take a substantial ownership stake in an American company. Despite his assurances, Trump’s socialistic transaction is a terrible deal not only for the parties involved, but for the entire U.S. economy.

    “It is my Great Honor to report that the United States of America now fully owns and controls 10% of INTEL, a Great American Company that has an even more incredible future,” Trump posted Friday on Truth Social. “The United States paid nothing for these Shares, and the Shares are now valued at approximately $11 Billion Dollars. This is a great Deal for America and, also, a great Deal for INTEL. Building leading edge Semiconductors and Chips, which is what INTEL does, is fundamental to the future of our Nation.”

    “I PAID ZERO FOR INTEL, IT IS WORTH APPROXIMATELY 11 BILLION DOLLARS,” Trump added on Monday. “All goes to the USA. Why are ‘stupid’ people unhappy with that?”

    As of this writing, Intel’s market cap is around $110 billion, so a 10 percent stake would indeed be worth $11 billion. But despite what Trump says, this was not a freebie.

    “Under terms of the agreement, the United States government will make an $8.9 billion investment in Intel common stock,” the company announced. “The government’s equity stake will be funded by the remaining $5.7 billion in grants previously awarded, but not yet paid, to Intel under the U.S. CHIPS and Science Act and $3.2 billion awarded to the company as part of the Secure Enclave program….The $8.9 billion investment is in addition to the $2.2 billion in CHIPS grants Intel has received to date, making for a total investment of $11.1 billion.”

    Intel added that “under the terms of today’s announcement, the government agrees to purchase 433.3 million primary shares of Intel common stock at a price of $20.47 per share, equivalent to a 9.9 percent stake in the company.” According to the Financial Times, that was “below Friday’s closing price of $24.80, but about the level where they traded early in August. Intel’s board had approved the deal, which does not need shareholder approval.”

    The Financial Times added that under the agreement, “the US will also receive a five-year warrant, which allows it to purchase an additional 5 per cent of the group at $20 a share,” but only “if Intel jettisons majority ownership of its foundry business, which makes chips for other companies.” Trump may be expanding state ownership of private industry, but at least he seems to have no interest in seizing the means of production.

    The CHIPS Act grants were approved under Trump’s predecessor, President Joe Biden. Before leaving office, Biden’s administration rushed to finalize many such grants, even as Intel was the worst-performing tech stock in 2024; the government actually agreed to less than initially allocated when the company failed to hit certain milestones.

    Instead of rescinding those grants, as Trump reportedly threatened to do, he instead demanded a tenth of the business, as a result making the U.S. government Intel’s largest shareholder.

    Every part of this transaction flies in the face of any sincere interpretation of free markets, including the Biden administration’s original sin to approve billions of dollars for a struggling company. It is perhaps telling that as Reason‘s Eric Boehm noted last week, the idea that the U.S. government should take a piece of Intel in exchange for CHIPS Act funding was first floated by Sen. Bernie Sanders (I–Vt.). Trump and his allies are now issuing talking points that could have come from the socialist senator himself.

    If the U.S. government insists upon dishing out taxpayer money to private companies, is there any reason it shouldn’t, as U.S. Secretary of Commerce Howard Lutnick put it to CNBC, get “a piece of the action”?

    There are many reasons, in fact. “The most immediate risk is that Intel’s decisions will increasingly be driven by political rather than commercial considerations,” Scott Lincicome of the Cato Institute wrote Sunday in The Washington Post. “With the U.S. government as its largest shareholder, Intel will face constant pressure to align corporate decisions with the goals of whatever political party is in power.”

    Not only that, Lincicome writes, but “Intel’s U.S.-based competitors…might find themselves at a disadvantage when vying for government contracts or subsidies, winning trade or tax relief, or complying with federal regulations. Private capital might in turn flow to Intel (and away from innovation leaders in the semiconductor ecosystem) not for economic reasons but because Uncle Sam now has a thumb on the scale.”

    Such market distortions may seem abstract, but they can have devastating consequences for the American industrial economy. “Will investors and entrepreneurs stay away from critical industries that might also see the U.S. government eager to get more involved?” Lincicome wonders. “Will future presidents, Republican or Democrat, use this noncrisis precedent to carry out their own adventures into corporate ownership with their own economic and social priorities attached?”

    Indeed, White House National Economic Council director Kevin Hassett told CNBC on Monday that he’s “sure at some point there’ll be more transactions, if not in this industry, [then] in other industries.”

    Trump has made several such deals just since reentering office in January. He leaned on Intel competitors Nvidia and AMD to give 15 percent of proceeds from Chinese sales to the government; he demanded veto power over U.S. Steel as part of its sale to the Japanese company Nippon Steel; and MP Minerals, which operates a rare earth mineral mine in the U.S., got a $400 billion government investment that made the Department of Defense its largest shareholder.

    In his Monday morning Truth Social post defending the Intel agreement, Trump said, “I will make deals like that for our Country all day long.”

    But as Lincicome notes, Republicans likely won’t be in power forever; in time, a Democratic president would have the same influence on Intel—and beyond.

    “This is a product of both parties forgetting a cardinal rule of politics: don’t give yourself powers you don’t want your opponents to have,” writes Ryan Young, an economist at the Competitive Enterprise Institute. “The Democrats who passed the CHIPS Act likely did not foresee Republicans using it to essentially nationalize Intel. Similarly, Republicans cheering government takeovers of chipmakers will somehow be surprised if Democrats invoke similar powers in the health insurance, energy, and other industries when they are in power again.”

    Joe Lancaster

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  • Cracker Barrel didn’t ‘go woke.’ It just went broke.

    Growing up in the South, Cracker Barrel felt a bit like a theme park attraction. Its down-home frills, Old Country Store merch, and cartoonishly indulgent comfort food embody a storybook spectacle of Southern life that doesn’t really exist anymore in popular culture. Which helps explain why the company’s decision to neuter its logo—axing the overalls-clad “Old Timer” leaning against the eponymous barrel—did not garner glowing reviews from some of the more vocal participants in the discourse.

    The criticism, from a slew of politicians and public figures, coalesced around a core theme: that the restaurant had fallen prey to the wokeness bug and would soon become another one of its casualties. Go woke, go broke, as the saying goes.

    There are a few reasons why that critique misses the mark. For one, it isn’t obvious how Cracker Barrel blandifying its logo is an apt example of wokeness, which is typically understood to mean an obsessive fixation with social justice and grievance mining. There’s an irony here: Central to the opposition to woke ideology is the notion that progressives tend to brand every societal ill as the product of an ism or a phobia: racism, classism, sexism, homophobia, transphobia, and on. But just as not everything progressives dislike is “racist,” not everything that irks conservatives is “woke.” Words have meaning.

    More importantly, though, the outrage misunderstands the order of operations here. Cracker Barrel’s logo change did not come out of left field, despite that some just noticed. It’s part of a sustained makeover effort to lift the company out of a fairly dire financial slump. That doesn’t mean the strategy will work—that the logo alteration sent the stock tumbling may very well be an indicator it won’t (although the jury is still out on its long-term effects). But Cracker Barrel didn’t need to “go woke” to go broke. Because it was, colloquially speaking, already broke.

    The company’s troubles—with or without the Old Timer—are reflected in its valuation. In April 2021, Cracker Barrel stock was selling for $175.09 a share, according to its market trajectory on TradingView. Earlier this month, prior to any logo drama, it was selling for $57.27—a plunge of more than two-thirds, which, by any standard, is pretty grim. That didn’t happen overnight, nor is it even Cracker Barrel’s nadir. The company has steadily sagged over the last several years, its value dipping as low as $37.33 per share last September.

    The chain is not alone. In February, Denny’s announced that it would close up to 178 locations by the end of 2025. Not long before, TGI Fridays and Red Lobster filed for bankruptcy. All of these restaurants can be classified under the same general umbrella as Cracker Barrel, with the exception that people cannot fault a misplaced controversy over wokeness for their failures. The biscuits could not even save Red Lobster. The business landscape is changing. It’s rough out there.

    Cracker Barrel, for its part, appears to be aware of this, and has been trying to adapt for a while. The logo is just the latest change. It has also updated its decor, for example, to give off a more modern vibe, and made changes to its menu. The effort, it seems, is tailored in part to attracting a younger demographic, who have never exactly been Cracker Barrel’s target market. (In one of its more seismic shifts, the company also began selling alcohol about five years ago.)

    The changes, at least at the moment, look to be fairly fruitless. Older customers—Cracker Barrel’s bread and butter—have been slow to return en masse post-pandemic. And the business likely always faced an uphill battle in trying to rebrand for a new audience, because the company’s appeal is so squarely married to its specific old-time charm. There is something to blame here, but it’s not wokeness. It’s the market, and its effects are understandably disappointing for those nostalgic for childhood Cracker Barrel visits (relatable) where it may have felt like stepping into a little Southern wonderland. Which makes you wonder: Have they been back recently?

    Billy Binion

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