Wed. Aug 10th, 2022

WASHINGTON – Five weeks ago, senior aides from the Biden administration gathered for their regular Thursday morning meeting on passing a bill to revive the U.S. computer chip industry, worried it might be in jeopardy. . After 18 months, the bipartisan effort to provide $ 52 billion for semiconductors was nearing the finish line. But they were worried that Republican Senate leader Mitch McConnell might block it.

This was not just another matter. Many in the meeting had attended multiple Situation Room briefings on scary scenarios if the deal stalled. They had come to believe that the very trajectory of the economy and national security was at stake.

Billions for computer chips and scientific research, they said, could help reduce inflation, create new factory jobs, defend the United States and its allies, and preserve an advantage against an ambitious and aggressive China.

More than 90% of the advanced chips come from Taiwan. If Taiwan is invaded or shipping channels closed, the United States and much of the world would have to face a cascading economic crisis and find weapon systems designed to defend their citizens impossible to maintain and upgrade.

Biden’s team decided to ignore any possible McConnell threats by calling it a “false choice” and to continue working with Republican senators who supported the bill, such as John Cornyn of Texas, Todd Young of Indiana and Roger Wicker of Mississippi.

Brian Deese, director of the White House National Economic Council, recalled the sentiment that emerged from the meeting: “There has been too much progress, too much confidence and too much at stake” to see the effort stall now. “Let’s go to keep our heads down and move on”.

A few hours later, McConnell promised on Twitter that the semiconductor bill would die if Democratic senators tried to push through a separate “inflation reduction” budget and a domestic spending package on a line vote. match.

But the Kentucky senator’s move would ultimately fail.

President Joe Biden will soon sign the $ 280 billion CHIPS and Science Act, which also includes substantial funding for scientific research. The event was delayed by the Biden rebound case of COVID-19. This account of how the bill came together draws from interviews with 11 officials from the Biden administration and Congress, most of whom spoke on condition of anonymity to discuss private conversations.

The background reveals the complexities of bipartisanship, even when all parties agree on the need for action.

Double crossed?

McConnell threatened to block semiconductor investment even though he supported the idea, hoping to avert separate Democratic legislation. Biden’s team took the unusual step of enlisting former members of the Trump administration – a group generally insulted by Democrats – to find Republican votes. There were GOP lawmakers like Oklahoma Representative Frank Lucas who helped draft the bill but ultimately felt compelled to vote against, unhappy with the democratic tax and spending hikes that might soon follow.

“House Republicans have been working in good faith all this time to come up with consensus legislation that can be passed by both houses,” Lucas said in a House speech last week. “But over and over again, we were hindered when the Democratic leadership shifted the stakes, stopped the process and chose their divisive and partisan policies.”

For most of the process, the technical nature of computer chips and scientific research meant that the talks could take place beyond the din of partisan squabbling. Both sides knew that government-funded research after World War II ultimately led to the Internet, MRIs, coronavirus vaccines, and other innovations shaping today’s world. It was only towards the end, as success approached, that the policy was publicly amplified.

According to administration officials, the bill cleared Congress last week due to a deep coalition and relentless persistence. But because many Republicans interpret the events, they provided key support, then they were duped.

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

But four hours after the potato chips bill passed in the Senate on July 27, Manchin announced a major deal with Democratic Senate leader Chuck Schumer. There was $ 369 billion to fight climate change, a minimum corporation tax of 15%, lower prescription drug prices, and about $ 300 billion in deficit reduction – the kind of package McConnell wanted. stop. He also questioned Republican support for the House.

Eventually, however, the Democrats still received help getting the bill passed from 24 Republicans, some of whom said it was vital to protect national security.

18 months of work

The process had begun 18 months earlier at an Oval Office meeting with lawmakers on February 25 last year, just a month into Biden’s presidency. The National Defense Authorization Act had approved investments in semiconductor development, but Congress still had to grab the money to make it, and a bipartisan group was urging the president to help.

“I am 100% in favor, but we need to do more,” Biden told them, believing that supply chains also need to be strengthened.

The issue largely fell into the background when the president pushed a $ 1.9 trillion coronavirus aid package to Congress in March 2021, then turned his attention to bipartisan infrastructure talks and a broad internal agenda that the White House has called “Build Back Better”.

But the risks of computer chip shortages became clearer in the spring and summer of 2021 as inflation continued to rise. A September 2021 Commerce Department survey showed manufacturers had on average dropped to just five days of chip supply, compared to 40 days before the pandemic.

On June 8, 2021, the Senate passed its version of the semiconductor bill, and the House followed suit eight months later. But there were fundamental differences that should have been reconciled by a joint conference committee.

Hoping to maintain the pressure this year, Biden used his State of the Union address in March to highlight an announcement by Intel to invest $ 20 billion in what could be eight semiconductor plants outside Columbus, Ohio, a commitment. which was subject to the final passage of the bill. Biden called Intel’s planned 1,000-acre (400-hectare) site a “field of dreams” on which “America’s future will be built.”

After the speech, Deese and Commerce Secretary Gina Raimondo intensified their awareness. Internal White House records show 85 meetings and events involving companies and stakeholders since the beginning of this year, with a focus on end users of chip and equipment manufacturers and resellers. Beginning in March, high-level aides – including White House Chief of Staff Ron Klain, Director of Legislative Affairs Louisa Terrell, Deese, Raimondo, and occasionally National Security Advisor Jake Sullivan – began their strategic meetings on Thursday morning on the initiative.

Biden’s team also asked Trump administration veterans for help. Among them were Robert Lighthizer, US trade representative under Trump, and former national security advisers HR McMaster and Robert O’Brien.

The Secretary of Commerce decided to cold call Mike Pompeo, Trump’s former secretary of state, who had been openly critical of Biden in a February speech, vowing that “we’re making sure he doesn’t own a single branch of the government”.

“I am always happy to help an Italian colleague”, recalled Raimondo, saying Pompeo after asking for his help. Pompeo’s representatives did not respond to inquiries about this exchange.

According to Raimondo, in 18 months he had 250 meetings with companies and external groups and about 300 meetings or phone calls with legislators.

“We have to build it in America”

Meanwhile, the Russian invasion of Ukraine exacerbated inflationary pressures around the world with rising energy and food costs, a reminder of the chaos that would have occurred if access to semiconductors were further cut off.

Biden felt the pressure to have more domestic production as he shot the world’s largest semiconductor facility in May: a Samsung campus in South Korea with buildings decorated in the geometric colors of Dutch painter Piet Mondrian and almost as tall as the Capitol dome. of the United States, their clean and futuristic interiors.

“We have to do it in America,” Biden told Raimondo. “We have to build it in America.”

But then at the end of June, Intel announced that it would postpone the opening of its Ohio plant because the bill was not approved. So McConnell decided to end the negotiations with a tweet on the last day of June. Several days later, France announced a new semiconductor plant made possible by the European Union’s $ 43.8 billion investment in chip manufacturing.

Raimondo felt a hole in his stomach after learning about McConnell’s tweet, but he continued working on phones that weekend with the Republicans.

“There has to be a way,” he said. “Should we cut the bill? Would it just go for fries? You know, just constant commitment.

“Gutted” trust.

The Senate eventually passed the bill when it appeared that the separate Democratic agenda package was going nowhere. But after Manchin raised it with his Schumer deal last week, House Republicans launched a last-minute push to stop the chip account. White House officials continued to call in lawmakers and it passed as a bipartisan victory.

“I feel great for America today,” Raimondo said after the vote. “It takes a little longer than it should, a lot more drama than you would like, but it happens.”

Some Republicans were embittered. Texas Senator Cornyn had warned of a recession if the United States lost access to advanced computer chips and was a driving force behind the bill, however he felt that Manchin had undermined the ability to negotiate in good faith.

“That confidence has been gutted,” he said in a speech on the ground.

Biden received a note that the House had approved the bill while he was in a meeting with CEOs. He announced the news to applause and then, with a lot of additional work to do on the economy, carried on the conversation.

“Sorry for the interruption,” he said.

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