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Bumps, bipartisanship in long fight for semiconductor bill

Five weeks ago, senior Biden administration aides gathered for their regular Thursday morning meeting about passing a bill to revive the United States’ computer chip sector, worried that it could be in peril.

After 18 months, the bipartisan effort to provide US$52 billion for semiconductors was getting close to the finish line. But they knew Senate Republican Leader Mitch McConnell might block it.

This was not just another would-be-nice bill. Many in the meeting had sat through multiple briefings about frightening scenarios if the deal stalled. They were convinced the very trajectory of the economy and national security was at stake.

The billions for computer chips and scientific research, they argued, could help to cut inflation, create jobs, defend the US and allies, and preserve an edge over China.

More than 90 per cent of advanced chips come from Taiwan. Should Taiwan be invaded or shipping channels closed, much of the world would face a cascading economic crisis and become unable to maintain chips-dependent weapons systems.

The Biden team resolved to ignore any McConnell threats and keep working with Republican senators who had backed the bill.

Brian Deese, director of the White House National Economic Council, recalled the sentiment coming out of the meeting: “There’s been too much progress, too much trust, and there’s too much at stake” to see failure now.

Just hours later, McConnell vowed that the semiconductor bill would be dead if Democratic senators tried to push through a separate spending package on a party-line vote. His gambit would ultimately fail.

President Joe Biden will soon sign into law the US$280-billion CHIPS and Science Act. This account of how the bill came together draws from interviews with 11 Biden administration and congressional officials, most speaking on condition of anonymity to discuss private conversations.

The back story reveals the complexities of bipartisanship, even when all sides agree on the goal.

McConnell threatened to block the bill even though he supported the idea, hoping to head off separate Democratic legislation. Biden’s team took the unusual step of enlisting Trump administration veterans to help find Republican votes.

For much of the time, the technical nature of the subject meant the talks could occur beyond the din of partisan squabbling. Both sides knew government-funded research eventually led to the internet, MRIs, coronavirus vaccines and other innovations that shape today’s world. It was only towards the end that the politics flared.

Administration officials say the bill cleared Congress last week because of a deep coalition and persistence. But many Republicans believe they provided key support, only to be double-crossed.

McConnell’s two-week blockade ended after West Virginia Senator Joe Manchin said on July 14 that he largely opposed his fellow Democrats’ spending and tax plans. Assuming Biden’s broader agenda was on ice, Senate Republicans could confidently vote for the computer chips bill.

But four hours after the bill passed the Senate on July 27, Manchin announced a deal with Senate Democratic Leader Chuck Schumer to support the kind of broad package McConnell had wanted to stop. The package commits hundreds of billions to fight climate change, lower prescription drug prices, and would raise some corporate taxes.

That endangered the chip bill in the House. But 24 Republicans joined Democrats in passing it there.

It had all begun in an Oval Office meeting with lawmakers a month into Biden’s presidency. Existing law approved investing in semiconductor development, but Congress still had to appropriate the money.

The issue stayed largely in the background as the president pushed a coronavirus relief package through Congress in March 2021, then turned his attention to infrastructure and an expansive domestic agenda.

But the risks from computer chip shortages became clearer as inflation kept rising last year. A federal survey from September showed that manufacturers were down on average to just a five-day supply of chips, compared with 40 days pre-pandemic.

On June 8, 2021, the Senate passed its version of the semiconductor bill and the House followed suit eight months later. But key differences in the bills would have to be reconciled, and that’s where things often get sticky.

Biden used his State of the Union address in March to highlight an announcement by Intel to invest in what could be eight semiconductor plants in Ohio – a commitment that was contingent on final passage of the bill.

Deese and Commerce Secretary Gina Raimondo intensified their outreach after the speech, and more top aides got involved. Internal White House records show 85 meetings and events involving companies and stakeholders since the start of this year.

Biden’s team also enlisted help from Trump administration veterans, among them two former national security advisers. The commerce secretary cold-called Mike Pompeo, Trump’s former secretary of state, who had been critical of Biden in a February speech.

“I’m always happy to help a fellow Italian,” Raimondo recalled Pompeo saying after she asked for his assistance.

By Raimondo’s count, she had 250 meetings with businesses and outside groups, and roughly 300 meetings or calls with lawmakers on the bill.

Meanwhile, Russia’s invasion of Ukraine had driven up energy and fuel costs, a reminder of the havoc that would occur if access to semiconductors were further disrupted.

In June, Intel announced it would postpone its first Ohio plant because the bill had not passed. Then McConnell decided to halt negotiations. Days later, France announced a new semiconductor plant made possible by the European Union’s own investment.

Raimondo felt a pit in her stomach after learning of McConnell’s decision, but kept calling Republicans. “Just constant engagement,” she recalled.

The Senate ultimately passed the bill when it appeared the separate Democratic agenda package was going nowhere. But after Manchin revived it with his Schumer deal, House Republicans mounted a last-minute push to stop the chips bill. Still, it passed as a bipartisan win.

Some Republicans felt betrayed. Texas Senator Cornyn had been a driving force behind the chips bill, yet said Manchin had undermined the ability to negotiate in good faith. “That trust was eviscerated,” he said.

Raimondo sized up the achievement this way: “It takes a little bit longer than it should, a lot more drama than you would like, but it happens.”


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