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An Inside Look at the CHIPS Act with John Dearie

Season 3: Episode 8


Business, CEO, Investors, policy

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Today, we’re getting a unique perspective on entrepreneurship.

John Dearie joins us from the Center for American Entrepreneurship, a research, policy, and advocacy organization that works with policymakers in Washington and across the country to achieve a policy environment that promotes new business formation, survival, and growth.

John Belizaire, CEO of Soluna Computing and host of Clean Integration, became familiar with John Dearie and the Center for American Entrepreneurship in the fall of 2019 through his friend Bettina Heins (also a member of the board) and he joined the Board of Directors for CAE in May 2020. So, it’s a personal pleasure for John to sit with him today.

They discussed the work they do at the Center, how to build a more diverse, more vibrant future for entrepreneurs in the U.S., and the role that the Center for American Entrepreneurship had in passing the seminal CHIPS Act earlier this year.

(This transcript has been edited and condensed for print.)

[01:25]: How’d you start CAE? Tell us more about your background in general. You’ve got some big milestones along the way too, we’d love to hear those.

John Dearie: I’m comparatively new to the field of innovation and entrepreneurship, the vast majority of my career was spent in banking and financial policy. I was a government and economics major in college and got a master’s degree in political economy. I spent the first 10 years of my career at the Federal Reserve Bank of New York, which from an operational standpoint is the central bank of the United States. Then, spent 17 years at a financial and banking policy organization called the Financial Services Forum, which was comprised of the CEOs of the 20 largest financial institutions. It wasn’t a trade group, it was a policy group. But it became very exciting at the Forum during the financial crisis because the institutions that comprised the membership were the institutions affected in on the verge of failure during the financial crisis. So, I had a ringside seat to that crisis and got very involved by way of some relationships I had on Capitol Hill in the policy response that became Dodd-Frank.

So my background is in banking and financial policy, but how I found my way to entrepreneurship was coming out of the Great Recession that notwithstanding the herculean policy response by Congress and by the Federal Reserve to get the economy going and growing and creating jobs faster, it wasn’t going very well. About two years into the so-called recovery, you might recall references to the “jobless recovery.” The economy was only growing at about 2% and by the spring of 2011, so two years into the recovery, unemployment was still north of 9%, which is astonishing to think about when you look at it from where we are now.

So I started to look for ways to come up with some new ideas for policymakers about how to accelerate economic growth and job creation and followed my way through the research on both of those topics. Where does economic growth come from? What drives economic growth and job creation? I found my way to a bunch of research that was new at the time, pointing to startups and entrepreneurship, not just in terms of their importance to innovation, economic growth, and job creation, but also pointing to this very intriguing problem that the research was showing that entrepreneurship or new business formation had been in decline for four decades. Which, first of all, was shocking to hear, and frankly, I wasn’t sure I believed it. How could that be true in the country that has Silicon Valley and Shark Tank on TV and is so identified with entrepreneurship?

But the research made it clear, and I wanted to know why that was happening. Because if in fact, startups and entrepreneurship were key to economic growth, job creation, and opportunity expansion, and it was in decline, that might explain why the policy efforts in Washington to accelerate the recovery from the Great Recession were failing. Another colleague and I decided to travel the country to do round tables with entrepreneurs around the United States, asking them, what’s in your way? What’s causing this decline? That experience was so intriguing. We gathered so many remarkable insights that I knew that nobody in Washington knew that I decided to write a book about it that was published in 2014.

As I was finishing that book, it occurred to me there’s no organization in Washington DC that is focused specifically on the importance of startups, entrepreneurship to innovation, economic growth, job creation, and opportunity expansion. No one was working with policymakers to educate them about that and to work on a policy agenda to turn that decline in entrepreneurship around. So after a lot of thought and convincing my wife to allow me to do it, I decided to leave the Financial Services Forum and start that organization and that’s the Center for American Entrepreneurship.

[11:45]: Take us in the car with you as you’re making your way across the country, talking to entrepreneurs. What’s that experience like? What types of companies were you meeting with? What were some of the challenges they were facing?

John Dearie: The mood at the time was very suspicious about who we were. I mean, it reminded me of the famous line by Ronald Reagan that the nine most terrifying words in the English language are, “I’m from Washington DC and I’m here to help.” So we would show up, and we would partner with various entrepreneurship centers on the ground in various places around the country where we wanted to go.

And at first, the issues all seemed pretty different, but we got about halfway through and my colleague and I had repaired to a bar after the round table and over our glasses of wine started to talk about what we were hearing. And we realized that though the issues were talked about with different regional emphasis, is the way I would put it, ultimately, at the end of the day, if you sort of step back and you looked at the issues they were really talking about at virtually all the round tables, the same five or six issues were coming up. This, if you think about it, is not surprising because the needs of entrepreneurs are pretty straightforward and pretty simple. And in fact, the way that CAE, the way that we decided to structure our issue agenda basically corresponds to the categories of issues that entrepreneurs raised with us at those original round tables.

If you think about what entrepreneurs need to thrive, they need great new ideas. They need the talent and the capital to pursue those ideas with as few unnecessary or stupid distractions as possible…

There are lots of reasons why the pipeline, the transition between research and innovative ideas, and the transition of great ideas and great innovation into commercialization ideas, there are a lot of problems therein. Then there are lots of problems in terms of access to skilled talent. There are issues pertaining to workforce development and readiness issues pertaining to domestic education. Are we producing enough of the right kind of people with the right skills? Immigration is a major talent-related issue. I mean literally pound the table how stupid our immigration policies were and how they couldn’t keep our best talent in the country or they couldn’t get somebody they knew who happened to be foreign-born into the country.

There are lots of access to capital issues. Access to bank capital, lines of credit, angel capital, venture capital, alternative sources of capital, and all kinds of issues. Then in the unnecessary or stupid distractions, categories are regulatory issues, regulatory complexity, uncertainty, burden, just the general burden, the overlaying of local, state, and federal regulations, and the distraction that takes the entrepreneur’s eye off the ball. Then tax issues, which as a number of entrepreneurs explain to us, when you really think about tax policy, it’s an access-to-capital issue because it’s about keeping the capital that you’ve made.

So, that’s the way that we divide our agenda now. It’s new ideas or innovation, R&D, tech transfer, commercialization, and access to skilled talent, including immigration reform, access to capital, regulatory policy, and tax policy.

[19:58]: I want to talk about the increasing awareness of sustainability and climate impact on the policy front, there’s just been incredible, I’d say, seminal series of bills that have gone through and become law recently. The Inflation Reduction Act might be a good place to start. What are its implications from your perspective on entrepreneurship and American innovation at large?

John Dearie: Well, the Inflation Reduction Act is an enormously significant piece of legislation. There are several pieces of legislation starting with the American Rescue Plan earlier in the year, specifically, the state small business credit initiative aspect of that, which is a $10 billion program intended to assist new and small businesses as they continue to recover from the pandemic. Then, of course, the CHIPS and Science Act, which I’m sure we’ll get to, was signed into law on August 9th. Then about a week after that bill was signed, the Inflation Reduction Act was signed by the president on August 16th. All of these bills are very big and complex.

The Inflation Reduction Act does a number of things. It creates a 15% corporate minimum tax rate. There’s a prescription drug reform, there’s $80 billion to enhance the IRS’s efforts with regard to tax compliance. And then there’s an extension of the Affordable Care subsidies.

But most significantly, from the standpoint of clean tech and climate change, the bill authorizes $370 billion, that is a lot of money, $370 billion in incentives for energy and climate-related programs, including things like tax credits and rebates to lower energy costs for households, tax credits, research loans, and grants to increase domestic manufacturing of wind turbines, solar panels, batteries, and other essential components of clean energy production and storage. Credits to reduce carbon emissions, and then other programs to help address and reduce the impact of both natural and man-made climate-related disasters.

So, it’s a very broad aperture with an enormous amount of money behind it. It is the most aggressive or the most significant investment in addressing climate change that the country has ever made. It’s absolutely unprecedented. It’s going to have real implications globally because the United States is such an important player in the climate change space that it’s going to provide capacity and enable other countries to respond and participate in some of our efforts. So it’s a great leap forward in terms of the world’s effort to address climate change and of course, opens up an enormous space for climate-related and energy-related entrepreneurship and innovation.

John Belizaire: So if you’re an entrepreneur listening to this podcast right now, I mean, this law can really change the landscape for opportunities to start something new that can help this fight. So, if you’re in the US right now, a lot of the headlines that are not focused on what’s happening in the stock market and interest rates going up when we’re recording, you’re going to see some big fabrication plants planned to be developed all around the country. Micron Technologies announced they’re going to build a big chip factory in New York State.

[23:15] We’ve seen big companies like Samsung planning to move some of their chip development back to the US. It’s almost like a massive sea wave of reassuring of chip manufacturing, and that is driven by a law that most people may not know. It’s called the CHIPS Act which was passed recently, and CAE was foundational in getting that act passed. John, can you explain to anyone who might not know the significance of this law? What’s it about? I think I had a different name prior, right?

John Dearie: It did have a different name, it started out focused not on chips, but on research and development. It started out entitled The Endless Frontier Act, the problem that original act, and the two co-sponsors of that act and the ultimate two co-sponsors of CHIPS and Science, were Senators, Chuck Schumer on the Democratic side, Todd Young from Indiana on the Republican side. The principal problem that began to be focused on is the country’s commitment to R&D, research, and development. Of course, government-funded R&D is incredibly important, especially for basic science. Corporations conduct lots of R&D, but it tends to be focused on applied research and development, applied science, not basic. And the reason for that is that research into basic science is very open-ended, there’s not a specific commercial payoff, tends to be very expensive. So corporations are not well-suited and not well-positioned or motivated to do that kind of research. The problem is basic research is really the foundation, it’s the context for applied research. So, the government has a real role to play.

The high watermark for government research and development was in 1964 after John Kennedy said, we’re going to the moon. And at that time, R&D spending by the government accounted for two-thirds of all R&D conducted in the United States, and it was an amount greater than the R&D spending of the rest of the world’s governments combined. So we were the undisputed heavyweight champion of research and development and therefore innovation. The problem was that in recent decades, or basically ever since, that commitment to R&D began to dwindle such that by the time we got to the mid-’90s, federal R&D investment had fallen below 1% of GDP where it stayed until 2020.

In 2020, Goldman Sachs in fact put out a report ringing the gong on this, pointing out that US government-funded R&D had fallen to only 0.6% of the US GDP. That was the lowest level in 60 years. And that our commitment to GDP at that time ranked 10th in the world behind economic competitors like Japan, South Korea, Taiwan, and of course especially China. So that was the original intent of the Endless Frontier Act was we need to redouble our commitment, and triple and quadruple our commitment to research development. We are falling behind the world, we’re losing our competitive advantage. China is going to not only overtake us but run us over. That’s where the Endless Frontier Act started.

We were strong proponents of that piece of legislation. I wrote a number of op-eds in support of it, and we also, by way of Orin Herskowitz, who is a member of CAE’s board and presides over tech transfer and commercialization at Columbia in New York, actually put Orin and his counterparts at 10 or 12 other research universities around the country on a conference call with Senator Schumer’s staff to really talk through various elements of the Endless Frontier Act to make sure that the of the legislation was properly focused and was drafted in a way that would really make a difference.

What ended up happening over time is that the original piece of legislation got combined with the need to, and this is because of the pandemic and all of the sudden understanding of how vulnerable the country was because so much of our chip production had moved overseas, only about 10% of the chips that we needed to run our economy were actually produced in the United States. So re-shoring of the manufacturing of advanced chips became a major national imperative that got put together with what was Endless Frontier and became the CHIPS and Science Act. And so one part of the legislation is about incentivizing by way there’s $52 billion over five years to fund grants and loans and loan guarantees and other programs to incentivize semiconductor manufacturing in the United States. The legislation also created a 25% tax credit for companies that invest in semiconductor manufacturing equipment and construction and manufacturing, sort of like a semiconductor-specific R&D tax credit, very similar.

There’s also $11 billion conferred to the Commerce Department over five years to help spur semiconductor research and development and to invest in workforce training opportunities. Because to fully implement CHIPS and Science, we don’t have the workforce right now that we need to fill these new plants. As a matter of fact, there was a great article in the Washington Post in late October talking about how the CEOs of Micron and Intel and other chip-producing companies are traveling the country and going to universities and basically pounding the tables screaming, we need engineers. The article pointed out that over the next five years, the United States needs 50,000 semiconductor engineers just to fill these new semiconductor plants. We don’t have them. So that is a major problem. The real challenge now in terms of implementing CHIPS and Science is a workforce.

The other aspect of CHIPS and Science is a major recommitment augmentation to government-funded R&D. It authorizes $170 billion in research development spread over a number of governmental agencies over five years, principally the Commerce Department, Department of Energy, the National Science Foundation, the National Institutes for Standards and Technology. That is an $82.5 billion increase over the current baseline commitment in the budget and therefore it amounts to the largest five-year investment in government-funded R&D in the nation’s history.

And then, of course, a lot of your listeners have probably heard that the Commerce Department is also funded and authorized to create about 20 what’s called regional innovation and technology centers around the country. They are all going to be focused on a particular aspect of technology and innovation, things like artificial intelligence and advanced communications, robotics, quantum computing, data storage and management energy of course, and advanced material sciences. And so dedicated centers around the country to really dive deeply into these major aspects of future technology that are going to define the future economy and that is really the battleground now between the United States and China as to who’s going to win the innovation and technology battle of the 21st century.

So it is probably, I mean, I think it is the most significant piece of innovation and entrepreneurship science-related legislation to come down the pike, certainly in my lifetime. And that piece of legislation combined with the Inflation Reduction Act combined with the American Rescue Plan, as we discussed, as you’ll recall at our recent board meeting, there is a once-in-a-generation or once in our lifetimes, it’s not going to happen again in our professional lifetimes, a tidal wave of money coming out of the federal government going into the innovation sector. It’s very exciting to be sure, but the real challenge now is for the innovation and entrepreneurship sector, working with policymakers implementing all of these pieces of legislation to make sure that the money goes to move the right needles in the right way so that we take full advantage of this commitment to innovation, science, and entrepreneurship over the next 30 or 40 years.

John Belizaire: Thanks for that summary. It’s comprehensive. I mean, it’s a massive, hundreds of billions of dollars being spent on research and innovation that’s going really catapult the country going forward.

John Dearie: That’s the idea.

John Belizaire: It’s funny because when I started my career, I started at Intel. Intel at the time was still building its own fabrication plants, a couple of billion dollars here and there, just to create the research version, and then they would move them to Phoenix or something like that and scale them up. And then there was a turn where people felt that the core competency of companies like that was in the chip design and the manufacturing of it and scaling of it can move offshore, and that’s why Taiwan has become such a major footprint for that. And so there’s no surprise that the skillset, that expertise that would be in those facilities that when I started it was in Oregon, and most of Oregon even today, is still heavily driven by Intel business.

Now you’re going to see lots of parts of the country go through a wave of maturity where you’re going to get massive increases in spending, more people focused on engineering jobs, and these new facilities coming online. It’s going to be fascinating to see over the next few years. And you’re right, government expenditure in R&D has led to incredible waves of innovation in the country, and the internet was a result of some of that spending.

So, it’ll be interesting to see what happens in the next decade and what innovations come about across all of these different sectors. It’s a great piece of legislation that’s been passed that’s going to create waves of change, certainly in the marketplace.

[35:12] Out of curiosity though, you hit on a bunch of different places money’s going to be spent. What excited you the most, what excited you the most about money being spent on or investment being made from an innovation perspective?

John Dearie: Well, first of all, in general, CAE has been calling for a recommitment to the kind of investment in research and development that the country had been committed to in the ’50s and ’60s essentially starting after the successful launch of Sputnik. That really scared US policymakers to death. And for a couple of decades, we were heavily into government-funded R&D, which led to and helped drive the golden era of American innovation and entrepreneurship, as you just pointed out. So in general, I’m just thrilled that after three or four decades of neglect for whatever reason, of course, it’s all about other alternatives and other things the policymakers want to spend money on, we are back to understanding again because of a competitive threat, this time from China instead of Russia, that we’re back on our game. And I’m very eager to see what happens.

I think the aspect of the bill, John, that I’m most excited about because it’s going to lead to a diversification of the nation’s innovation effort, both geographically, racially, and otherwise, are these regional innovation and technology hubs. They are going to bring together all aspects of the innovation ecosystem. The hubs are intended to be public, and private consortiums that are made up of universities, economic development organizations, industry, rural communities, state and local governments, non-profit organizations, and startups.

So, a lot of money has been directed toward essentially developing innovation and entrepreneurship ecosystems in 20 places around the country. I can’t wait to see what that leads to. It’s my expectation that if done properly, it’s going to be an enormous economic growth and opportunity around the country.

[37:28] You talked earlier about some of the issues that you learned about on your tour around the country, the issues that you focus on at CAE, and one of those obviously was access to capital, you got great ideas and you want to make sure you have the right people and capital to make them a reality. Certainly, that’s a pertinent challenge for many of the entrepreneurs you work with. But how does this vary across demographics? How do you work to even the playing field across the demographics as it relates to entrepreneurs?

John Dearie: Well as you know, the access to capital and particularly equity capital, by that I mean angel capital and venture capital, the racial distribution of access to that kind of capital, there’s no other word for it’s atrocious. It’s also atrocious if you look at it from the standpoint of women founders versus male founders. I mentioned earlier that we helped establish the Senate and House entrepreneurship caucuses. The very first event that we did was a round table of women entrepreneurs that we flew in from all over the country in September 2019. It was an absolutely fabulous event. A lot of that dwelt on access to capital and the difficulties that women have. We intended to do one immediately after that focused on entrepreneurs of color, but the pandemic intervened and pushed that off for two years. And so we just did that round table, as I mentioned on September 20th. It was equally fascinating.

A couple of things came out of that round table with regard to access to capital. One, because equity capital is so hard to get for entrepreneurs of color, bank capital or relationships between entrepreneurs and banks in the context of entrepreneurs of color become incredibly important. And there were all kinds of stories told at the table about how difficult it is for Black and Hispanic entrepreneurs to secure bank capital on the same terms and with the same relative ease if you will. It’s how the standards are different if the entrepreneur is Black or Hispanic or male as opposed to female. So there’s a lot of work to be done with banks and the banking sector to make access to capital or access to bank capital easier.

So the challenge, challenge for those of us who are trying to improve circumstances and improve access to capital by diversifying the investment base, we have to somehow convince members of Congress that this is the right thing to do, that this is the safe thing to do. And the way we do that is we’re partnering with other groups like the Congressional Black Caucus, like the Urban League, like the Black Innovation Alliance, and other places around the country of that sort to try to educate them so that they can be brought into the conversation and convince, help us convince Democrats broadly and members of Congress specifically that this is the right thing to do.

[43:36]: Predictions for 2023. What would you love to see come true?

John Dearie: On the CAE front, a couple of things I would love to see come true. I do think for the same reason why Republicans got on board with the CHIPS and Science Act, which in essence is industrial policy. I mean it’s the government identifying and setting certain strategic economic goals and objectives, that’s industrial policy. And it’s amazing that that bill passed with strong bipartisan support and a number of very prominent Republicans are now very enthusiastic supporters of CHIPS and Science and industrial policy to address or to respond to the competitive threat from China.

I’m hoping that for the same reason because of the competitive threat from China and because of the workforce-related needs associated with implementing chips and science, I’m hoping that an opportunity is opening up in 2023 where we can finally make progress on immigration policy with both Democrats and Republicans. Because our message to Republicans is going to be, we’re thrilled that you supported CHIPS and Science, but in order to really fully implement that and meet the competitive threat from China, we need a workforce that we currently don’t have, which means that we need to get serious about immigration policy. We don’t want the best talent going to China, we want the best talent coming here. So I’m hopeful that that will happen.

And then I’m also hopeful that we can make progress on further diversifying American entrepreneurship, both the expanding American Entrepreneurship Act I just described. And then the other piece of legislation or policy issue that is so important, especially for women entrepreneurs and entrepreneurs of color is the national childcare policy. We are one of the very few countries, industrial countries in the world, that has no commitment to a national childcare policy. And because childcare is so expensive, many, many people who either want to become entrepreneurs can’t and it’s complicating the efforts of women entrepreneurs to be successful. So I’m hoping that we can diversify American entrepreneurship in meaningful ways.

Where can people learn more about CAE?

John Dearie: They can go to our website, which is There’s lots and lots of information about our agenda, our activities, our op-eds, et cetera, on the website. Follow us on Twitter @startupsUSAorg or on LinkedIn and Facebook and reach out. I’ll give you my email, We love to hear from people, especially with ideas for things that we ought to be focused on so don’t hesitate to reach out.

John Belizaire: Thanks so much for being on the show, my friend. It was a pleasure.

John Dearie: Thanks for being an important part of CAE, John. I appreciate the invitation to be here.


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