After we published an article exposing the federal government’s decision to hand Nevada public land to a Texas investment fund for an AI data center, Washington gave us another example of what I have started calling MAGA socialism.
This time, there is no need to argue over definitions or dig through a public-land permit to understand what is happening. The federal government is giving hundreds of millions of taxpayer dollars to private technology companies and demanding ownership stakes in those companies in return.
On July 29, the Department of Commerce announced letters of intent covering $874 million in federal incentives for seven semiconductor companies working on technology for artificial intelligence and advanced computing. As a condition of receiving the money, Commerce says the federal government will receive a minority ownership stake in every company. The stakes will supposedly be “non-controlling,” which is the kind of reassuring government language people repeat right before the definition of controlling quietly changes.
This is not free-market capitalism. The federal government is selecting companies, handing them public money, becoming a shareholder, regulating their industry, buying their products, controlling their export licenses, and deciding which competitors are allowed to survive.
If Barack Obama or Joe Biden announced this exact arrangement, every conservative television host in America would be screaming about nationalization, socialism, government takeover, and the destruction of the free market.
They would be right.
But because this is happening under Donald Trump, millions of supposed conservatives have suddenly decided government ownership of private companies is brilliant economic policy. The same people who spent years warning that Democrats wanted Washington to control American business are now cheering while Washington quietly builds a stock portfolio.
That is not conservatism. It is not capitalism. It is a personality cult abandoning every principle it claimed to believe in because the man signing the paperwork happens to wear the right-colored hat.
What the Commerce Department Just Announced
The largest proposed award is $300 million for GlobalFoundries, which is supposed to accelerate the development of technology that connects optical components directly to AI processors. Kepler is in line for as much as $245 million to develop a new form of high-performance AI memory. Multibeam Corporation could receive $140 million for advanced chip-packaging technology.
Another $75 million would go to Extropic, $50 million to Thintronics, $34 million to OBSIDIA Semiconductors, and $30 million to Aeluma. The projects cover AI memory, chip stacking, photonics, counterfeit-component detection, advanced materials, and other parts of the computing infrastructure Washington now considers strategically important.
The agreements have not yet become final awards. Commerce says there will be additional diligence and approval before the money goes out. But the important part has already been stated plainly: every final deal will require the company to surrender part of its ownership to the federal government.
The official excuse is that the ownership stakes will “enhance the return for the U.S. taxpayer.” That sounds reasonable for approximately thirty seconds. If taxpayers are putting up the money, why shouldn’t they receive some of the profit?
Because the federal government is not a venture-capital firm, and taxpayers are not voluntarily investing in a technology fund. Nobody asked whether you wanted part of your paycheck invested in experimental computer hardware. Nobody showed you the financial statements, explained the risk, offered competing funds, or gave you the ability to sell your share.
Politicians took your money, selected the companies, negotiated the terms behind closed doors, and then declared that you are now an investor.
That is not an investment. It is government-directed industrial policy with a public-relations department.
The Government Is Now the Referee, Investor and Customer
The federal government already has enormous power over these companies. It writes the regulations they must follow, controls many of the permits they need, decides which foreign customers they may sell to, awards defense contracts, investigates mergers, enforces antitrust laws, collects their taxes, and can destroy them with a single regulatory decision.
Now the same government will also profit when certain companies succeed.
Think about how insane that relationship becomes. Imagine an NFL referee owning shares in one of the teams on the field. The referee may promise that the investment is passive and non-controlling, but nobody with a functioning brain would consider the arrangement neutral.
When a government-owned company faces a competitor, will regulators treat both companies equally? When an agency is deciding which technology should become the industry standard, will it ignore the value of the government’s investment? When a company starts failing, will officials allow it to collapse and publicly admit that they wasted taxpayer money, or will they shovel another billion dollars into it to protect the original investment?
We already know how Washington handles failure. It does not admit mistakes. It changes the program’s name, blames insufficient funding, and demands more money.
Once the government becomes a shareholder, every bad investment becomes a potential bailout. Officials will claim that allowing the company to fail would damage national security, weaken the domestic supply chain, surrender technological leadership to China, cost American jobs, and erase the taxpayer’s original investment.
The first subsidy becomes the justification for the second subsidy. The second subsidy becomes the excuse for a loan guarantee. The loan guarantee becomes the reason the company cannot be allowed to enter bankruptcy. Eventually, the supposedly private company exists because the government cannot politically afford to let it die.
That is how temporary assistance becomes permanent control.
This Is Not an Isolated Deal
The $874 million semiconductor announcement is only the newest addition to a much larger federal investment portfolio.
In May, the Commerce Department announced more than $2 billion in proposed incentives for nine quantum-computing companies. IBM was offered $1 billion, GlobalFoundries $375 million, and seven other quantum companies were offered amounts ranging from $38 million to $100 million. Once again, the federal government required minority ownership stakes as a condition of receiving the money.
The Trump administration previously converted billions of dollars in CHIPS Act support for Intel into an ownership position of roughly 10 percent. That made the federal government one of the chipmaker’s largest shareholders. The shares may not carry normal voting rights, but the idea that Intel will ignore the wishes of a federal government capable of regulating, subsidizing, taxing, investigating, and rescuing it is ridiculous.
The administration has also pursued ownership stakes, warrants, loans, and special government rights involving rare-earth companies, defense contractors, steel production, quantum computing and other industries labeled essential to national security. The Cato Institute reported in June that the administration had taken or announced equity stakes, warrants or a special “golden share” involving more than twenty private companies.
This is no longer an emergency intervention involving one struggling company. It is becoming a governing philosophy.
Washington identifies a politically fashionable industry, declares it strategically important, chooses favored companies, gives them taxpayer money, takes an ownership position and then uses the power of the federal government to protect the investment.
There is a name for an economy in which the government directs capital toward favored industries, selects national champions, blends political power with corporate ownership and uses private companies to carry out state priorities.
It sure as hell is not free enterprise.
Political Access Is Becoming a Business Asset
Once Washington becomes an investor, companies stop competing only for customers. They begin competing for political approval.
The most valuable employee in the company may no longer be the engineer who develops the best product. It may be the lobbyist who knows the right person at the Commerce Department, the political consultant who can arrange a meeting at the White House, or the investor whose family connections make government officials return a phone call.
Companies that receive federal backing gain more than money. They receive the implied support of the United States government. Private investors see that political blessing and may decide the company is safer because Washington has already chosen it as a national champion.
Competitors are placed at an immediate disadvantage. They must compete against a company with federal money, federal ownership, federal contracts and an implied government guarantee. A smaller company may have better technology, lower costs and smarter management, but none of that matters if Washington has already picked its horse.
Cato has raised exactly this concern while examining the administration’s growing collection of corporate stakes. Once the government becomes a possible shareholder and protector, the question inside the market shifts from who has the best product to who has the best access.
That is how capitalism turns into cronyism. The outward appearance of private ownership remains, but survival increasingly depends on satisfying the political class.
The corporation needs Washington’s money. Washington wants the corporation’s technology, jobs, production, political support and obedience. Both sides benefit from the relationship, while taxpayers and independent competitors are expected to shut up and pay for it.
The MAGA Cult Has Abandoned Its Own Principles
I am not talking about every person who voted for Trump. Plenty of people voted against open borders, endless foreign wars, censorship, federal overreach, cultural insanity and an establishment that clearly hates them. Those concerns did not magically become illegitimate because Trump turned out to be another politician willing to expand government power.
I am talking about the people who will defend literally anything after Trump does it.
Trump could announce a federal ownership stake in every grocery store in America and these morons would explain that it is actually a genius form of patriotic capitalism. He could create a Department of Government Food Production, put his name on the building and half the conservative media would spend a week explaining why centralized agriculture is necessary to defeat China.
That is what a cult does. It does not begin with principles and judge the leader against them. It begins with the leader and rewrites the principles whenever he changes direction.
Government ownership was socialism when Obama took stakes in General Motors and Chrysler. Corporate subsidies were crony capitalism when the Obama administration handed money to politically connected green-energy companies. Industrial policy was central planning when Democrats proposed it. Federal interference in private business was tyranny when Biden did it.
Now the same basic machinery has been painted red, white and blue, branded as America First and placed under the control of a Republican administration. Suddenly, the people who warned us about government ownership cannot find anything wrong with it.
That is why I call it MAGA socialism. It is not traditional left-wing socialism with labor unions, red flags and speeches about the proletariat. It is a nationalist version in which the government partners with politically favored corporations, directs investment toward chosen industries, owns pieces of private companies and tells the public the arrangement is necessary for national greatness.
The branding is different. The concentration of power is the same.
The Next Democratic Administration Gets All of This Power
This is the part the cult refuses to think about.
Donald Trump will not remain president forever. Howard Lutnick will not remain secretary of Commerce forever. Every ownership stake, special government right, investment structure and legal precedent being created today will eventually fall into the hands of another administration.
Senator Bernie Sanders has already proposed creating an American AI sovereign wealth fund that would force large artificial-intelligence companies to surrender stock to the federal government. Unlike the supposedly passive stakes being collected by the Trump administration, Sanders has openly discussed using government ownership and board representation to influence corporate decisions.
Republicans will undoubtedly call that socialism. The problem is that Trump has already conceded the underlying principle. He has accepted that Washington may take ownership of private companies whenever politicians decide an industry is sufficiently important.
Once that principle is accepted, the argument is no longer about whether the government should own private business. The argument becomes how much it should own, which industries it should control and which political faction gets to decide how the power is used.
A future Democratic administration will not limit government ownership to semiconductors, quantum computers and rare-earth magnets. It could declare artificial intelligence, pharmaceuticals, banking, housing, food production, health insurance, social media, energy, transportation and communications to be strategically essential industries.
Every one of those industries can be connected to national security if government lawyers are given enough paper and enough time.
Democrats will point directly at the Trump precedents. They will say Republicans accepted government ownership when it benefited chipmakers, mining companies and defense contractors. They will argue that taking stakes in pharmaceutical companies to lower drug prices or energy companies to fight climate change is no different.
What exactly will the MAGA crowd say then?
That government ownership is suddenly unconstitutional because the wrong political party is doing it?
This Is the Slippery Slope
Our previous MAGA socialism article dealt with public land being steered toward a politically favored AI project while the public absorbed the infrastructure, water and electrical costs. The new Commerce Department announcement shows the same philosophy expanding beyond land and subsidies into direct government ownership.
First, the government subsidizes the company. Then it becomes a lender. Then it becomes a customer. Then it becomes a shareholder. When the company struggles, the government becomes its rescuer. When competitors threaten it, the government becomes its protector.
At every stage, officials insist that the arrangement is temporary, limited, non-controlling and absolutely necessary because of some emergency. But emergencies never end in Washington. The definition of national security keeps expanding, the portfolio keeps growing, and every new deal becomes the precedent used to justify the next one.
A country filled with companies dependent on government money is not economically independent. It is no more self-reliant than a household that cannot survive without a monthly government check.
That should matter to people who claim to believe in preparedness, self-reliance, limited government and freedom. A nation cannot call itself free when its major industries survive by negotiating ownership deals with federal officials.
The most dangerous part of MAGA socialism is not the $874 million announced this week. In a federal government wasting trillions of dollars, that amount barely registers.
The danger is the principle being established while millions of people blindly cheer.
The federal government may now choose private companies, finance them, own them, regulate them and protect them. As long as the program carries an American flag and Trump’s name, the cult will defend it.
Someday, a president they despise will inherit the same machinery.
By then, the argument will no longer be about whether Washington should control the economy. That decision will have already been made.
The only question left will be who gets to operate the controls.
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