Senate passes $280 billion industrial policy bill to counter China

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WASHINGTON — The Senate on Wednesday passed a sweeping $280 billion bill aimed at bolstering America’s manufacturing and technological advantage to counter China, passing in a bipartisan vote overwhelming the most significant government intervention in politics industry for decades.

The legislation reflected a remarkable and rare consensus in a polarized Congress in favor of crafting a long-term strategy to deal with the country’s escalating geopolitical rivalry with Beijing. The plan centers on investing federal funds in cutting-edge technologies and innovations to build the country’s industrial, technological and military strength.

The measure passed by a vote of 64 to 33, with 17 Republicans voting in favor. The bipartisan support illustrated how trade and military competition with Beijing — along with the promise of thousands of new American jobs — has radically changed long-held party orthodoxies, generating agreement among Republicans who had once shunned the intervention of the government. government on the markets and Democrats who had resisted showering big business with federal largesse.

“No country government – even a strong country like ours – can afford to sit on the sidelines,” said Sen. Chuck Schumer, a New York Democrat and Majority Leader who helped lead the measure, in an interview. “I think it’s a radical change that will stick.”

The bill will then go through the House, where it is expected to pass with some Republican support. President Biden, who has backed the package for more than a year, could sign it into law as soon as this week.

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

The bill calls for $10 billion to be given to the Department of Commerce — which would also distribute the chip subsidies to companies that apply — to create 20 “regional tech hubs” across the country. Dreamed up by Senator Todd Young, Republican of Indiana, and Mr. Schumer, the clusters would aim to connect research universities with private industry with the aim of creating Silicon Valley-type centers of technological innovation in areas hollowed out by globalization.

The legislation would direct 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. with the aim of creating a pool of labor for a large number of emerging companies. Industries.

The effort marked a foray into industrial policy that has had little precedent in recent American history, raising myriad questions about how the Biden administration and Congress would implement and oversee a major initiative involving hundreds of billions of taxpayer dollars.

Passing the legislation was the culmination of years of effort that Mr. Schumer says began in the Senate gymnasium in 2019, when he approached Mr. Young with the idea. Mr. Young, a fellow falcon of chinahad previously collaborated with Democrats on foreign policy.

In the end, the Senate’s support was only made possible by an unlikely collision of factors: a pandemic that laid bare the costs of a global semiconductor shortage, intense lobbying by the chips, Mr. Young’s persistence in urging his colleagues to break with party orthodoxy and support the bill, and Mr. Schumer’s rise to the highest office in the Senate.

Many senators, including Republicans, saw the legislation as a crucial step in bolstering America’s semiconductor manufacturing capabilities, as the country has become dangerously dependent on foreign countries – particularly an increasingly Taiwan. more vulnerable – for advanced chips.

Schumer said it hadn’t been too difficult to rally votes from Democrats, who 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, came in and said, ‘That’s an expense what we should do.”

The legislation, which was known in Washington by an ever-changing carousel of lofty names, defied easy definition. At over 1,000 pages, it is both a research and development bill, a short-term and long-term employment bill, a on manufacturing and a bill on semiconductors.

Its initial version, written by Mr. Schumer and Mr. Young, was known as the Endless Frontier Act, a reference to the historical report of 1945 commissioned by President Franklin D. Roosevelt asking how the federal government could promote scientific progress and the workforce.

“New frontiers of the mind lie before us, and if they are launched with the same vision, the same boldness and the same dynamism with which we fought this war,” Mr. Roosevelt wrote at the time, “we can creating a fuller, more successful world, a fuller, more successful job and life.

The enactment of the legislation is seen as a crucial step in bolstering US semiconductor capabilities as the share of modern manufacturing capacity in the US has fallen to 12%. This has left the nation increasingly dependent on foreign countries amid a shortage of chips that has sent shockwaves through the global supply chain.

Subsidies to chip companies were expected to create, in the short term, tens of thousands of jobs, with manufacturers pledging to build new factories or expand existing ones in Ohio, Texas, Arizona, the United Kingdom. ‘Idaho and New York. Although the chip companies won’t immediately receive the federal money, several of them said they will make business decisions in the coming weeks based on whether or not they receive assurances that the money will arrive. soon.

The bill also aims to create jobs in research and development and in manufacturing over the long term. It includes provisions to build pipelines of workers — through workforce development grants and other programs — concentrated in once booming industrial hubs hollowed out by the relocation of companies.

In an interview, Mr. Young described the legislation as an effort to equip American workers affected by globalization with jobs in cutting-edge fields that would also help reduce the country’s dependence on China.

“These technologies are critical to our national security,” Young said. “We are actually giving grassroots Americans an opportunity, when it comes to chip manufacturing, for example, to play a meaningful role, not only supporting their families, but also harnessing 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 and, along with that, tens of thousands of jobs.

Chipmakers have lobbied hard, and often unabashedly, for the subsidies, threatening in recent months to pour their resources into building factories in foreign countries like Germany or Singapore if Congress doesn’t agree. quickly to flood them with federal money to stay in the United States. States.

The legislation also states that chipmakers who take federal funds and tax subsidies provided by the legislation cannot expand existing factories or build new ones in countries like China and Russia, in an attempt to reduce the manufacture of advanced chips in countries that present a national security problem. .

The Commerce Department would claw back funds under the bill if companies fail to comply with these restrictions, the senators said.

Most senators, especially those representing states targeted by chip companies, saw these efforts as a reason to quickly pass the legislation. But they particularly infuriated Sen. Bernie Sanders, the Vermont Independent, who has bluntly and frequently accused the successful executives of these companies of undermining Congress.

“To make more profits, these companies took government money and used it to ship high-paying jobs overseas,” Sanders said. “Now, as a reward for this bad behavior, these same companies are in line to receive massive taxpayer assistance to undo the damage they have caused.”

Several times in the life of the bill, it has seemed doomed to collapse or to be significantly lightened. In its narrower form, it could have avoided the long-term strategic policy provisions, leaving only the most commercially and politically urgent measure, the $52 billion in subsidies to chip companies.

The bill appeared in jeopardy late last month after Mr McConnell announced he would not let it go ahead if Senate Democrats continued to push through 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 his decision.

Mr. McConnell “saw the short-term value proposition and, frankly, the importance of getting the chip legislation funded,” Mr. Young recalled.

Still, with Mr. McConnell’s position uncertain and other Republicans unwilling to commit to backing the measure, Mr. Schumer decided last week to force a quick vote on semiconductor subsidies, leaving open the possibility that the larger bill be set aside.

That spurred a last-minute effort by Mr. Young to win 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 phone trying to win over Republicans, stressing the bill’s importance to national security and the opportunities it could bring to their states.

At a private celebratory lunch on Tuesday, Mr. Schumer gave his members his own pitch.

“This bill is going to have one of the largest and most profound effects we’ve ever had on America,” Schumer told Democratic senators. “A lot of your grandkids will have good paying jobs because of the vote you take.”

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