Senate Passes $280 Billion Industrial Policy Bill to Counter China

WASHINGTON — The Senate on Wednesday passed a sweeping $280 billion bill designed to build America’s manufacturing and technological superiority to counter China, passing an overwhelming bipartisan majority in favor of the most significant government intervention in industrial policy in decades.

The bill reflected a remarkable and rare consensus in a polarized Congress in favor of a long-term strategy to solve the nation’s problems. increased geopolitical rivalry with Beijing. The plan focuses on investing federal money in advanced technology and innovation to bolster the nation’s industrial, technological, and military strength.

The measure passed by 64 votes to 33, with 17 Republicans voting in favor of it. The bipartisan support demonstrated how commercial and military competition with Beijing, and the promise of thousands of new jobs in America, dramatically shifted long-standing party orthodoxies, engendering a consensus between Republicans who once shunned government intervention in markets and Democrats who resisted showering. large companies with federal largesse.

“The government of no country — not even one as strong as ours — can afford to sit on the sidelines,” Sen. Chuck Schumer, a New York Democrat and Majority Leader who helped initiate the measure, said in an interview. “I think these are the sea change that will remain.”

The bill will then be considered by the House of Representatives, where it is expected to pass with some Republican support. President Biden, who has backed the package for over a year, could sign it as early as this week.

The bill, which is a convergence of economic and national security policies, will provide $52 billion in subsidies and additional tax credits to chip companies in the United States. It will also add $200 billion for scientific research, especially in artificial intelligence, robotics, quantum computing, and a host of other technologies.

The bill would inject $10 billion into the Department of Commerce, which would also distribute chip subsidies to companies applying to set up 20 “regional technology hubs” across the country. The brainchild of Indiana Republican Sen. Todd Young and Mr. Schumer, the centers will aim to link research universities with private business to create centers of technological innovation like Silicon Valley in areas devastated by globalization.

The legislation will send billions to the Department of Energy and the National Science Foundation to promote both basic research and research and development in advanced semiconductor manufacturing, as well as workforce development programs to create a flow of labor for many new developing countries. industries.

This effort marked a foray into industrial policy that has no precedent in recent American history, raising many questions about how the Biden administration and Congress will implement and oversee a massive initiative involving hundreds of billions of taxpayer dollars.

The passage of the law was the culmination of years of Mr. efforts. Schumer’s story began in the Senate gym in 2019, when he approached Mr. Young with an idea. mr. Yang, a fellow chinese hawkpreviously collaborated with Democrats on foreign policy issues.

In the end, Senate support was only made possible by an unlikely clash of factors: a pandemic that laid bare the costs of a global semiconductor shortage, active lobbying by the chip industry, Mr. K said. support the bill, and Mr. Schumer’s ascent to the highest office in the Senate.

Many senators, including Republicans, saw the legislation as an important step to bolster America’s semiconductor manufacturing capability as the country became dangerously dependent on foreign countries, especially increasingly vulnerable Taiwan – for advanced chips.

mr. Schumer said it was easy to garner Democratic votes, which tend to be less opposed to government spending. But he also nodded in support of Republicans, including Senator Mitch McConnell of Kentucky, the minority leader: “To their credit, 17 Republicans, including McConnell, showed up and said, ‘This is one of the expenses we need to make.’

Legislation, known in Washington for its ever-changing carousel of grandiloquent names, defies easy definition. At over 1,000 pages, it is simultaneously a research and development bill, a short-term and long-term jobs bill, a manufacturing bill, and a semiconductor bill.

Its original version, written by Mr. Schumer and Mr. Young, was known as the Law of Infinite Frontiers. landmark report in 1945 commissioned by President Franklin D. Roosevelt with the question of how the federal government can promote scientific progress and the workforce.

“New horizons of reason are opening up before us, and if they are explored with the same vision, courage and drive with which we fought this war,” said Mr. Roosevelt wrote at the time: “We can create fuller and more fruitful employment and a fuller and more fruitful life.”

The passage of the law is seen as a major step towards strengthening America’s semiconductor capabilities, with the share of modern manufacturing capacity in the United States falling to 12 percent. This has left the country increasingly dependent on foreign countries amid a chip shortage that has shaken the global supply chain.

Subsidies for chip companies were expected to create tens of thousands of jobs in the short term, with manufacturers pledging to build new or expand existing factories in Ohio, Texas, Arizona, Idaho and New York. While the chip companies won’t receive the federal money immediately, some have said they will make business decisions in the coming weeks depending on whether they get assurances that the money will arrive soon.

The bill also aims to create jobs in research, development and manufacturing in the long term. It includes provisions to build a talent pool — through workforce development grants and other programs — concentrated in once-thriving industrial centers devastated by corporate offshoring.

In an interview, Mr. Yang described the legislation as an attempt to provide American workers who have been affected by globalization with jobs in cutting-edge fields that will also help reduce the country’s dependence on China.

“These technologies are the key to our national security,” he said. Yang said. “We are truly empowering ordinary Americans, for example in the area of ​​chip manufacturing, to play a meaningful role not only in supporting their families, but also in using our creativity, talents and hard work. to win in the 21st century.”

The bill is expected to pave the way for the construction of factories across the country and, along with it, the creation of tens of thousands of jobs.

Chip manufacturers actively lobbiedand often shamelessly, for subsidies, threatening in recent months to pour their resources into building factories in foreign countries like Germany or Singapore unless Congress agrees to quickly shower them with federal money to keep them in the United States.

The legislation also provides that chipmakers receiving federal funds and tax subsidies provided by the legislation cannot expand existing factories or build new ones in countries, including China and Russia, in order to reduce advanced chip production in countries that pose a threat to national security. .

The Commerce Department will return the funds provided by the bill if companies do not comply with the restrictions, the senators said.

Most senators, especially those representing states monitored by chip makers, saw these efforts as a reason to pass legislation quickly. But they especially angered Senator Bernie Sanders, an independent from Vermont, who directly and often accused the successful leaders of such companies of undermining Congress.

“To make more profit, these companies took government money and used it to send high-paying jobs abroad,” he said. Sanders said. “Now, as a reward for this misbehavior, these same companies should receive a huge handout from the taxpayers to make up for the damage they have caused.”

Several times during the existence of the bill, it seemed that it was doomed either to failure or to a sharp reduction. In its narrower form, it could drop the long-term strategic policy provisions, leaving only the most urgent measure from a commercial and political point of view – subsidizing chip companies in the amount of 52 billion dollars.

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

In a private conversation, Mr. Young asked Mr. McConnell to change his mind.

mr. McConnell “saw the short-term value proposition and, frankly, the importance of funding chip legislation,” Mr. McConnell said. Yang recalled.

Still, with Mr. McConnell’s position uncertain, and other Republicans refusing to support the measure, Mr. K said. Last week, Schumer launched a fast vote on semiconductor subsidies, leaving open the possibility that the broader bill would be defeated. .

This spurred Mr. Young’s efforts to gain the support of enough Republicans — at least 15, Mr. Schumer told him — to revive critical investments in manufacturing and technology. For several days, Mr. Young and his allies worked on the phone trying to win Republicans over to their cause, emphasizing the bill’s national security importance and the opportunities it could open for their states.

On Tuesday at a private party Mr. Schumer gave his members his own introduction.

“This bill will have one of the most significant and far-reaching impacts on America that we have ever had,” he said. Schumer said he told Democratic senators about it. “Many of your grandchildren will get well-paid jobs thanks to your vote.”