Senate approves $280 billion industrial policy to counter China

WASHINGTON — The Senate on Wednesday passed a sizable $280 billion bill aimed at building America’s manufacturing and technology edge to counter China, and in an overwhelming bipartisan vote embraces the most significant government intervention in industrial policy in decades.

The legislation reflected a remarkable and rare consensus in a polarized congress in favor of forging a long-term strategy to tackle the country’s growing geopolitical rivalry with Beijing. The plan aims to invest federal money in advanced technologies and innovations to bolster the country’s industrial, technological and military strength.

The measure went 64 to 33, with 17 Republicans voting in favour. The bipartisan support illustrated how commercial and military competition with Beijing — as well as the promise of thousands of new American jobs — has drastically changed longstanding party orthodoxy, leading to a consensus between Republicans who had once avoided government intervention in the markets and Democrats who had opposed showering big corporations with federal generosity.

“No government — even a strong country like ours — can afford to sit on the sidelines,” New York Senator Chuck Schumer, a New York Democrat and the majority leader who helped lead the measure, said in a statement. interview. “I think it’s a sea change that will stay.”

The legislation will then be considered by the House, where it is expected to pass with some Republican support. President Biden, who has supported the package for more than a year, could sign it as early as this week.

The bill, a convergence of economic and national security policies, would provide $52 billion in subsidies and additional tax credits for companies that manufacture chips in the United States. It would also add $200 billion for scientific research, particularly in artificial intelligence, robotics, quantum computing and a variety of other technologies.

The bill calls for a $10 billion deposit into the Department of Commerce — which would also distribute the chips subsidies to companies that apply — to create 20 “regional technology hubs” across the country. The brainchild of Indiana Republican Senator Todd Young and Mr. Schumer, the hubs would aim to connect research universities with private industry in an effort to create Silicon Valley-esque centers for technological innovation in areas eroded by globalization.

The legislation would send billions to the Department of Energy and the National Science Foundation to advance basic research as well as research and development into advanced semiconductor manufacturing, as well as workforce development programs, in an effort to build a labor pipeline for a slew of emerging industries.

The effort marked an industrial policy foray that has had little precedent in recent U.S. history, and raises numerous questions about how the Biden administration and Congress would implement and oversee an important initiative involving hundreds of billions of taxpayer dollars. .

The passing of the legislation was the culmination of years of effort that, according to Mr. Schumer, began at the Senate gym in 2019 when he approached Mr. Young with the idea. Mr. Young, a fellow Chinese hawk, had previously worked with Democrats on foreign policy.

In the end, Senate support was made possible only by an unlikely clash of factors: a pandemic that exposed the costs of a global semiconductor shortage, heavy lobbying from the chip industry, Mr. Young’s persistence in urging his colleagues to party to break orthodoxy and support the bill, and Mr. Schumer’s ascent to the top job in the Senate.

Many senators, including Republicans, saw the legislation as a critical step to bolster U.S. semiconductor manufacturing capabilities as the nation has become dangerously dependent on foreign countries for advanced chips — especially an increasingly vulnerable Taiwan.

Mr. Schumer said it was not too difficult to gather votes from Democrats, who are generally less averse to government spending. But he also nodded in support of Republicans, including Senator Mitch McConnell of Kentucky, the minority leader: “It’s creditable that 17 Republicans, including McConnell, came in and said, ‘This is a release we should be doing. ‘”

The legislation, known in Washington for an ever-changing carousel of lofty-sounding names, has defied easy definition. At over 1,000 pages, it is simultaneously a research and development account, a short-term and long-term jobs account, a manufacturing account, and a semiconductor account.

The first draft, written by Mr. Schumer and Mr. Young, was known as the Endless Frontier Act, a reference to the landmark 1945 report commissioned by President Franklin D. Roosevelt asking how the federal government could improve scientific progress and manpower. promote.

“New frontiers of the mind lie before us, and if they are pioneered with the same vision, daring and zeal with which we waged this war,” wrote Mr. Roosevelt at the time, “we can have a fuller and more fruitful work and a fuller and more fruitful life. .”

The enactment of the legislation is considered a critical step to bolster U.S. semiconductor capabilities as the share of modern manufacturing capacity in the United States has fallen to 12 percent. That has left the nation increasingly dependent on foreign countries amid a chip shortage that has sent shockwaves through the global supply chain.

The subsidies for chip companies were expected to create tens of thousands of jobs in the near term, with manufacturers pledging to build new factories or expand existing ones in Ohio, Texas, Arizona, Idaho and New York. While chip companies won’t receive the federal money immediately, several of them had said they would make business decisions in the coming weeks based on whether they were given guarantees that the money would come soon.

The bill also aims to create long-term jobs for research, development and manufacturing. It contains provisions aimed at building pipelines of workers — through labor development grants and other programs — concentrated in once-thriving industrial hubs eroded by corporate offshoring.

In an interview, Mr. Young described the legislation as an attempt to equip American workers hurt by globalization with jobs in advanced sectors that would also help reduce the country’s dependence on China.

“These technologies are key to our national security,” said Mr. young. “We give ordinary Americans the opportunity, for example when it comes to chip production, to play a meaningful role not only in supporting their families, but also in leveraging our creativity, talents and hard work, to win the 21st century.”

The bill is expected to pave the way for the construction of factories across the country, creating an estimated tens of thousands of jobs.

Chip makers have lobbied heavily and often blatantly for the subsidies in recent months, threatening to pour their resources into building factories abroad like Germany or Singapore if Congress didn’t quickly agree to shower them with federal money to enter the United States. States to stay. States.

The legislation also prohibits chip manufacturers receiving the federal funds and tax subsidies provided by the legislation to expand existing factories or build new ones in countries such as China and Russia in an effort to curtail advanced chip manufacturing in countries that pose a national security risk. to shape .

The Commerce Department would reclaim funds provided by the bill if companies do not adhere to those restrictions, senators said.

Most senators, especially those representing states watched by chip companies, saw those efforts as a reason to pass the legislation quickly. But they especially infuriated Senator Bernie Sanders, the Vermont independent, who bluntly and often accused the wealthy executives of such companies of bringing down Congress.

“To make more profit, these companies took government money and used it to ship high-paying jobs abroad,” said Mr. Sanders. “As a reward for that bad behavior, the same companies are now lining up to receive a huge taxpayer to undo the damage they’ve done.”

Several times in the bill’s lifespan, it seemed doomed to collapse or be drastically downsized. In its narrower form, it could have avoided long-term strategic policy decisions, leaving only the most commercially and politically urgent measure, the $52 billion in subsidies for chip companies.

The bill appeared in jeopardy late last month after McConnell announced he would not let it pass if Senate Democrats continued to advance their social policy and tax plan, the centerpiece of Mr Biden’s domestic agenda.

In a private conversation, Mr. Young asked Mr. McConnell to reconsider.

mr. McConnell “saw the short-term value proposition, and quite frankly, how critical it is to get the chips legislation funded,” recalled Mr. Young.

But with McConnell’s position uncertain and other Republicans refusing to support the move, Schumer decided last week to force a quick vote on semiconductor subsidies, leaving open the possibility of sidelining the broader bill.

That led to a last-minute effort by Mr. Young to gain the support of enough Republicans — at least 15, Mr. Schumer had told him — to restore critical investments in manufacturing and technology. For days, Mr. Young and his allies worked on the phones trying to win over Republicans, stressing the law’s importance to national security and the opportunities it could bring to their states.

During a private party lunch on Tuesday, Mr. Schumer gave his members their own pitch.

“This bill will have one of the biggest and most far-reaching implications for America we’ve ever had,” Schumer told Democratic senators. “Many of your grandchildren will have high paying jobs because of the vote you are taking.”

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