Bumps, bipartisanship in long battle over semiconductor bill


WASHINGTON (AP) — Five weeks ago, top Biden administration aides gathered for their regular meeting Thursday morning about passing a bill to revive the U.S. computer chip industry, worried it could be in jeopardy.

After 18 months, a bipartisan effort to secure $52 billion for semiconductors was nearing completion. But they were concerned that Senate Republican Leader Mitch McConnell might block it.

This wasn’t just another expected nice bill. Many at the meeting had gone through multiple briefings in the Situation Room about frightening scenarios if the deal was delayed. They had believed in the very trajectory of the economy and national security was threatened.

The billions for computer chips and researchthey argue, it can help reduce inflation, create new factory jobs, protect the US and its allies, and maintain an edge against an ambitious and aggressive China.

More than 90% of modern chips come from Taiwan. If Taiwan were to be invaded or the shipping channels closed, the US and much of the world would face a cascading economic crisis and find the weapons systems designed to protect their citizens impossible to maintain and update.

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

Brian Dease, director of the White House National Economic Council, recalled the mood emerging from the meeting: “There is too much progress, too much confidence and too much at stake” to see the effort stop now. “We’re going to keep our heads down and drive forward.”

Just hours later, McConnell vowed on Twitter that the semiconductor bill would be dead if Democratic senators tried to push a separate budget and domestic spending package through a party-line vote.

But the Kentucky senator’s gambit would ultimately fail.

President Joe Biden will soon sign the $280 billion CHIPS and Science Act — which also includes significant funds for research. The event was postponed due to Biden’s renewed case of COVID-19. This insight into how the bill came together is based on interviews with 11 Biden administration and congressional officials, most of whom spoke on condition of anonymity to discuss private conversations.

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

McConnell threatened to block investment in semiconductors, though he supported the idea, hoping to prevent separate Democratic legislation. Biden’s team has taken the unusual step of bringing in former members of the Trump administration — a group usually vilified by Democrats — to find Republican votes. There were GOP lawmakers like Oklahoma Rep. Frank Lucas who helped craft the bill but ultimately felt compelled to vote against it, unhappy with the Democratic tax increases and spending that could soon follow.

“House Republicans have worked in good faith all this time to come up with consensus legislation that can be passed by both chambers,” Lucas said in a speech to the House last week. “But we have been thwarted time and time again as the Democratic Party leadership has moved the rafters, shut down the process and chosen their divisive, partisan politics.”

For much of the process, the technical nature of computer chips and scientific research meant that conversations could take place above the din of partisan bickering. Both sides knew that government-funded research after World War II eventually led to the Internet, MRIs, coronavirus vaccines, and other innovations that shape today’s world. It was only towards the end, when success was imminent, that the policy was publicly extended.

As administration officials see it, the bill was approved by Congress last week because of a deep coalition and relentless persistence. But as many Republicans interpret events, they provided key support, then were cheated.

McConnell’s two-week blockade is over after West Virginia Sen. Joe Manchin said on July 14 that he largely opposes the spending and tax plans of his fellow Democrats. Assuming Biden’s broader agenda is on hold, Senate Republicans could confidently vote for the computer chip bill.

But four hours after the chip bill passed the Senate on July 27, Manchin announced a big deal with Senate Democratic Leader Chuck Schumer. There was $369 billion to fight climate change, a 15 percent corporate tax floor, lower prescription drug prices and about $300 billion in deficit reduction — the kind of package McConnell wanted to stop. It also called into question the support of Republicans in the House of Representatives.

In the end, however, Democrats still got help passing the bill from 24 Republicans, some of whom said it was vital to protecting national security.

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

“I’m 100 percent for that, but we have to do more than that,” Biden told them, believing that supply chains also need to be strengthened.

The issue remained largely on the back burner as the president pushed a $1.9 trillion coronavirus relief package through Congress in March 2021, then turned his attention to bipartisan infrastructure talks and a sweeping domestic agenda that the White House called Building Better.

But the risks of computer chip shortages became clearer in the spring and summer of 2021 as inflation continued to rise. A Commerce Department survey from September 2021 showed that manufacturers were down to just five days of chip supplies on average, 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 key differences that had to be reconciled by a joint conference committee.

Hoping to keep up the pressure this year, Biden used his State of the Union speech in March to highlight Intel’s announcement of a $20 billion investment for what could be eight semiconductor plants outside of Columbus, Ohio — a commitment that depends on 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.”

Deese and Commerce Secretary Gina Raimondo stepped up their contacts after the speech. Internal White House records show 85 meetings and events involving companies and stakeholders since the start of this year, with an emphasis on chip end users and equipment manufacturers and vendors. Starting in March, senior aides — including White House chief of staff Ron Klein, legislative affairs director Luisa Terrell, Dease, Raimondo and sometimes national security adviser Jake Sullivan — began their Thursday morning strategy meetings on the initiative.

Biden’s team also enlisted the help of veterans of the Trump administration. They included Robert Lighthizer, the US trade representative under Trump, and former national security advisers H.R. McMaster and Robert O’Brien.

The commerce secretary decided to call Mike Pompeo, Trump’s former secretary of state, who openly criticized Biden in a speech in February, promising that “we’re making sure he doesn’t own any branch of the government.”

“I’m always happy to help a fellow Italian,” Raimondo recalled Pompeo saying after she asked for his assistance. Representatives for Pompeo did not respond to inquiries about that exchange.

By Raimondo’s count, she has had 250 meetings with businesses and outside groups and roughly 300 meetings or conversations with lawmakers on the bill in 18 months.

Meanwhile, Russia’s invasion of Ukraine exacerbated inflationary pressures around the world as energy and food prices soared, a reminder of the chaos that would ensue if access to semiconductors were further disrupted.

Biden felt the push for more domestic manufacturing as he toured 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 dome of the US Capitol, their interiors are clean and futuristic.

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

But Intel then announced in late June that it would delay breaking ground on its Ohio plant because the bill did not pass. McConnell then decided to shut down negotiations with a tweet on the last day of June. A few 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 pit in his stomach after learning of McConnell’s tweet, but continued to work the phones this weekend with Republicans.

“There has to be a way,” she said. “Should we make the bill smaller? Would you prefer just chips? You know, just constant commitment.”

The Senate ultimately passed the bill when the separate Democratic agenda package proved to be going nowhere. But after Manchin revived it with his Schumer deal last week, House Republicans mounted a last-minute push to stop the chip bill. White House officials continued to call lawmakers, and it came off as a bipartisan victory.

“I feel great in America today,” Raimondo said after the vote. “It’s taking a little longer than it should, a lot more drama than you’d like, but it’s happening.”

Some Republicans were outraged. Texas Sen. Cornyn warned of a recession if the U.S. lost access to modern computer chips and was a driving force behind the bill, but believed Manchin had undermined the ability to negotiate in good faith.

“That trust has been gutted,” he said in his speech.

Biden received a memo that the House had passed the bill while he was meeting with executives. He announced the news to applause and then, with a lot of extra work to do on the economy, continued the conversation.

“Sorry for the interruption,” he said.

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