Industry Lobbying Effort Muscles Bipartisan Support for CHIPS
The CHIPS Act, strongly supported by US semiconductors manufacturers, cleared the Senate today as part of a $280 billion package designed to bolster US technology and manufacturing to counter China.
A bipartisan 64 to 32 Senate vote will unlock billions of dollars to support domestic investment in computer chip manufacturing as well as research into artificial intelligence, robotics, quantum computing and other technologies viewed as critical for economic competitiveness and national security.
Passage of the measure culminates a multi-year effort that Senate Majority Leader Chuck Schumer began with a conversation in 2019 in the Senate gym when he approached Indiana GOP Senator Todd Young. Delays on CHIPS Act approval led Intel to put a hold on its plan to build eight computer chip plants in Ohio.
Seventeen Senate Republicans voted to advance the CHIPS Act to a floor vote, even though GOP congressional members generally oppose industrial policies designed to help specific industries. There is a bipartisan consensus the United States needs a strong domestic computer chip manufacturing base for national security reasons. Industry data shows US production, which has grown, now represents only 12 percent of global production. The US share was 37 percent as recently as 1990.
The legislation also authorizes substantial investment in semiconductor research and development, along with artificial intelligence, biotechnology, robotics, quantum computing and battery technology, which are all deemed critical to future US competitiveness. China has instituted a comparable Made in China 2025 effort aimed at making it independent of advanced technologies from the West.
It took a broad-based industry lobby effort to push the CHIPS Act over the goal line. Oregon Governor Kate Brown, among others, sent letters to Congress in support of passage. President Biden weighed in, too, saying the legislation is critical to keeping America “economically competitive”. He has promised to sign it as soon as it arrives on his desk.
Senator Bernie Sanders was the only member of the Democratic caucus to oppose moving ahead on the CHIPS Act. He called the industry lobbying effort “extortion” and said, “Industrial policy, to me, means cooperation between the government and the private sector. It does not mean the government providing massive amounts of corporate welfare to profitable corporations without getting anything in return.”
The CHIPS Act faltered and was only revived with an unusual bicameral negotiation involving 107 congressional members assigned to look at and agree on 1,001 independent elements contained in the original bill and the suite of measures approved separately by the House.
There is a bipartisan consensus the United States needs a strong domestic computer chip manufacturing base for national security reasons.
Negotiations were overseen by Senate Majority Leader Chuck Schumer and Republican Senator Todd Young of Indiana. Schumer and Young shared an interest in using R&D investments to kickstart economic revivals in communities that saw their industrial facilities close and be replaced by overseas factories.
Spending and Tax Legislation
The Democratic budget reconciliation bill will likely focus on lowering health care costs and not address climate change. However, there is a possibility of bipartisan tax legislation before the end of the year that includes clean energy incentives.
Popular expiring tax incentives could motivate a bipartisan, year-end compromise. Possibilities include investment incentives for wind power installations, biodiesel, biofuel, home energy efficiency, electric motorcycles and alternative fuels such as hydrogen power.
Idaho Senator Michael Crapo, the ranking Republican on Senate Finance, has introduced legislation to create tax credits for power-producing sites that use emerging energy technology; carbon capture equipment, which can block emissions from burning oil and coal; energy storage technology; and electricity made from clean hydrogen. Iowa GOP Senator Charles Grassley supports wind energy tax credits and incentives for ethanol airplane fuel. Democrats are pushing to expand tax credits for electric vehicles to more than 200,000 per manufacturer annually.
Expiration of the Research and Development tax credit also will motivate bipartisan support for a year-end tax bill. It was extended in 2017, but corporations were required to deduct their spending over five years. There is a push to return the R&D credit to full same-year expensing.
To ensure Democratic support, the year-end tax bill may include strengthening the child tax credit and child and dependent care tax credit. Maryland Democratic Senator Benjamin Cardin wants funding to upgrade Internal Revenue Service technology.
A Tax Measure with Trade and Miscellaneous Provisions
A year-end tax bill compromise could contain reauthorization and expansion of Trade Adjustment Assistance for American works left jobless because of global competition or offshoring. TAA provisions were dropped from an earlier reconciliation measure to lower its total cost.
Other trade issues are up in the air, too, such as renewal of duty-free treatment of products from developing countries and a mix of temporary tariffs.
Tax measures act like magnets for all kinds of proposals such as pandemic relief for small businesses, incentives for retirement savings and tax breaks for companies that invest in new equipment.