To compete with China, the Senate passes a $280 billion industrial policy bill

Source: AUN News

Summary:

In Washington, the Senate approves a massive 280 billion industrial policy bill to strengthen America’s manufacturing and technological edge to compete with China. This is the most significant government intervention in industrial policy in decades. It was approved by an overwhelming bipartisan vote of 64 to 33, with backing from 17 Republicans. The legislation has eluded simple description and was known in Washington by a rotating carousel of lofty-sounding terms. With more than 1,000 pages, it serves as a bill for research and development, manufacturing, semiconductors, and short- and long-term jobs.

Chip makers pushed hard, and sometimes shamelessly, for the subsidies. They threatened to spend their money on factories in Singapore or Germany if Congress didn’t act. The bill is anticipated to open the door for developing industries around the U.S., creating tens of thousands of jobs. The bill’s passage came after a last-minute push by Sen. Young to persuade Republicans to reinstate key semiconductor subsidies.

In a resoundingly bipartisan vote in Washington, the Senate approved a massive $280 billion plan to strengthen America’s manufacturing and technological edge to compete with China. This is the most significant government intervention in industrial policy in decades.

The legislation was the result of an extraordinary and uncommon consensus in an otherwise polarised Congress in favor of developing a long-term strategy to deal with the country’s escalating geopolitical rivalry with Beijing, one that is centered on allocating federal funds to cutting-edge technologies and innovations to strengthen the country’s industrial, technological, and military strength.

It was approved by an overwhelming bipartisan vote of 64 to 33, with backing from 17 Republicans. The margin demonstrated how long-standing party orthodoxies have dramatically changed due to commercial and military competition with Beijing and the promise of thousands of new American jobs. Republicans who once opposed government intervention in the markets and Democrats who opposed showering large corporations with federal largesse agreed.

The majority leader of the Senate and a Democrat from New York, Senator Chuck Schumer, said in an interview that “no country’s government, even a strong country like ours, cannot afford to sit on the sidelines.” “I believe it to be a permanent sea change.”

The House will take up the bill next, and it is anticipated that several Republicans would support its passage there. The statement might be signed into law as early as this week, thanks to President Biden, who has kept it for more than a year.

The package, which combines economic and national security policies, would give $52 billion in tax breaks and subsidies to businesses that make chips in the US. Additionally, it would invest $200 billion in new scientific research, particularly in fields like robotics, quantum computing, and artificial intelligence.

According to Mr. Schumer, the campaign that led to its passage spanned years and began in the Senate gym in 2019 when he pitched the concept to Indiana Senator Todd Young, a Republican. Mr. Young, a fellow China hawk, has previously worked on foreign policy with Democrats.

It was ultimately only made possible by an unlikely confluence of factors, including a pandemic that exposed the costs of a global semiconductor shortage, intense lobbying from the chip industry, Mr. Young’s persistence in pleading with his colleagues to defy party convention and support the bill, and Mr. Schumer’s election to the Senate’s top position.

When the country has dangerously become dependent on foreign nations, especially a vulnerable Taiwan, for advanced chips, many senators, including Republicans, saw the Act as a crucial move to strengthen America’s semiconductor manufacturing capabilities.

From H.R. McMaster to Mike Pompeo, a phalanx of former President Donald J. Trump’s national security advisors came out in favor of the proposal, assisting Republican senators in claiming that supporting the measure would be sufficiently hawkish.

Democrats tend to be less opposed to government expenditure, so Mr. Schumer claimed it had not been too difficult to win over their support. But to their credit, McConnell and 17 other Republicans arrived and said, “This is one expenditure we should do.”

The legislation has eluded simple description and was known in Washington by a rotating carousel of lofty-sounding terms. With more than 1,000 pages, it serves as a bill for research and development, manufacturing, semiconductors, and short- and long-term jobs.

The Endless Frontier Act was its original name, coined by Mr. Schumer and Mr. Young. It was a reference to the critical 1945 report that President Franklin D. Roosevelt had commissioned to examine how the federal government should support scientific advancement and human resources.

In a letter at the time, Mr. Roosevelt stated that “new frontiers of the mind are before us, and if they are pioneered with the same vision, courage, and determination with which we have conducted this war, we can build a fuller and more rewarding employment and a fuller and more fruitful life.”

The legislation’s passage is seen as a crucial step in bolstering America’s semiconductor capabilities at a time when the country’s share of global manufacturing capacity has fallen to only 12%. As a result, the government has become more dependent on foreign nations, and a chip shortage has rocked the global supply chain.

The manufacturers promised to establish new facilities or expand existing ones in Ohio, Texas, Arizona, Idaho, and New York, and it was anticipated that the incentives for chip companies would instantly result in tens of thousands of jobs.

Long-term job creation is another goal of the plan, which includes provisions to fill worker pipelines in once-thriving industrial hubs that have been depleted by corporate outsourcing through workforce development subsidies and other programs.

In an interview, Mr. Young explained the proposal as an effort to provide American employees disadvantaged by globalization with jobs in cutting-edge industries that would also aid in reducing the country’s reliance on China.

Mr. Young states, “These technologies are essential to national security.” “We’re giving rank-and-file Americans an opportunity, say in chip manufacturing, to play a vital part, not only in supporting their families but also in harnessing our creativity, talents, and hard work to win the 21st century,”

The bill is anticipated to open the door for developing industries around the nation, creating tens of thousands of jobs in the process.

Chip makers pushed hard—and sometimes shamelessly—for the subsidies, threatening recently to spend their money on setting up factories in Singapore or Germany if Congress didn’t act swiftly to provide them federal funding to stay in the United States.

Most senators, particularly those who represented states that chip companies were interested in, saw these initiatives as justification for promptly passing the law. Senator Bernie Sanders, an independent from Vermont, was particularly enraged by them. He repeatedly and frankly accused the wealthy leaders of such firms of bribing Congress.

These businesses stole government funds and utilized them to export well-paying jobs to increase their profits, Mr. Sanders claimed. These same corporations are now set to get a sizable taxpayer handout to repair the harm they caused as payment for their poor behavior.

Several times during the bill’s existence, it seemed destined to fail or be significantly reduced, with only the most urgent commercial and political provision—the $52 billion in subsidies for chip companies—remaining after the long-term strategic policy components had been eliminated.

Late last month, the package appeared to be in jeopardy after Senate Majority Leader and Kentucky Republican Senator Mitch McConnell said he would block its advancement if Senate Democrats continued to promote their social policy and tax proposal, the cornerstone of Vice President Biden’s domestic agenda.

Mr. Young requested Mr. McConnell to think it over privately.

Mr. Young said that Senator McConnell “recognized the near-term value proposition and, quite frankly, the criticality of getting the chips legislation funded.”

However, Mr. Schumer sought last week to compel a swift vote on the semiconductor subsidies, leaving open the chance that the larger plan would be shelved given Mr. McConnell’s ambiguous stance and other Republicans’ refusal to commit to supporting the measure.

As a result, Mr. Young made a last-minute push to win over enough Republicans — at least 15, as Mr. Schumer had advised him — to reinstate the crucial investments in manufacturing and technology. Days were spent on the phone by Mr. Young and his allies trying to persuade Republicans to support the bill by highlighting its significance for national security and the opportunities it might present for their states.

At a private party lunch on Tuesday, Mr. Schumer made a case to his members before the final passage vote.

Mr. Schumer told Democratic senators, “This law will have one of the greatest and most far-reaching effects on America that we’ve ever done.” Because of your vote, many of your grandchildren will have well-paying jobs.

Analysis by: Advocacy Unified Network