McConnell ultimatum endangers China competition bill

The fate of bipartisan legislation to boost U.S. competitiveness with China could be imperiled by political battles. 

Senate Majority Leader Charles Schumer (D-N.Y.) aims to pass a party-line economic package to lower drug prices and raise taxes on high earners despite Senate Minority Leader Mitch McConnell’s (R-Ky.) threat to block the China-centric measure if Democrats move forward with a reconciliation bill. 

The push and pull between Senate leaders could undermine legislation that would provide $52 billion in subsidies to restore domestic semiconductor manufacturing, along with other measures aimed at shoring up the nation’s supply chains and reducing U.S. dependence on China.  

That funding was at one time viewed as almost inevitable — several chipmakers unveiled plans to build multibillion-dollar facilities in the U.S. contingent on federal dollars — but recent developments have thrown its future into question.  

“I think people’s outlook was a little bit too rosy earlier in the year, knowing that there’s no action-forcing event like a statutory deadline to make people come to the table,” said Stewart Verdery, CEO of Monument Advocacy and a former Senate GOP aide.  

“There’s this constant tug of war between Schumer and McConnell on every issue, and this has somewhat gotten caught in the crossfire.” 

The Senate passed the U.S. Innovation and Competition Act (USICA) last year with bipartisan support, including McConnell’s vote. The House passed its own version of the bill that includes more aggressive trade measures in February. Lawmakers have been negotiating a final bill in a conference committee, but talks slowed down following McConnell’s ultimatum.  

“Let me be perfectly clear: there will be no bipartisan USICA as long as Democrats are pursuing a partisan reconciliation bill,” McConnell said in a tweet last month, which drew backlash from President Biden and other Democrats. 

Lobbyists for chip manufacturers and others in the semiconductor supply chain, eager to scoop up billions in new subsidies, have inundated lawmakers with meetings, calls and letters pressuring them to pass the bill.  

They’re warning that the U.S. could lose out on chipmaking facilities if lawmakers don’t pass the legislation before the August recess, when Congress is expected to go into campaign mode ahead of November’s elections. 

While some senators view those warnings as a bluff, other officials have taken them seriously. Commerce Secretary Gina Raimondo said last month that Taiwan-based semiconductor manufacturer GlobalWafers will only build a massive new factory in Texas if it knows funding is on the way, and the company must make its decision soon.   

“It has to be done before they go to August recess. I don’t know how to say it any more plainly. This deal … will go away, I think, if Congress doesn’t act,” Raimondo said in an interview on CNBC’s “Mad Money.”  

Intel announced a $20 billion chipmaking facility in Ohio in January but cautioned that it was contingent on federal funding. Intel CEO Pat Gelsinger recently warned that if Congress doesn’t pass the bill, the company could instead expand its facilities in Europe, where lawmakers have authorized $46 billion to spur semiconductor production.  

“The rest of the world is not waiting for the U.S. to act. Our global competitors are investing in their industry, their workers, and their economies, and it is imperative that Congress act to enhance U.S. competitiveness,” a group of 100 top executives at major companies, including Google, Amazon, Dell and Microsoft, wrote in a recent letter to congressional leaders.  

Some business groups have appeared to take McConnell’s side in fighting the reconciliation bill, which includes a measure that would dent drugmakers’ profits by allowing Medicare to negotiate prices. 

The National Association of Manufacturers on Monday sent a letter to top lawmakers to prioritize the chips bill while also urging Senate Democrats to abandon their reconciliation package. 

“The Chamber’s legislative priorities remain unchanged since the beginning of the year: defeat the tax and spend reconciliation bill and enact legislation very similar to the Senate-passed Bipartisan Innovation bill,” said U.S. Chamber of Commerce chief policy officer Neil Bradley. 

It’s not clear that lawmakers could reach a deal before the August recess, even if McConnell dropped his threat or Schumer’s reconciliation talks with Sen. Joe Manchin (D-W.Va.) fell apart. 

Senate Democrats have a packed July calendar that includes year-end spending legislation, the annual defense package, judicial nominations and potentially a bill to crack down on tech giants in addition to negotiations over what kind of measures will make it into reconciliation.  

Lawmakers must also work out vast differences between the Senate and House China competition bills before creating a final product that could pass the House and win 60 Senate votes. 

Numerous points of contention surrounding trade, immigration and subsidies still haven’t been resolved. Those include a measure that would create a broad exclusion process within the Office of the U.S. Trade Representative (USTR) to allow companies to dodge China tariffs, which has drawn scorn from Democrats and a small number of Republicans. 

“This provision would be a boon to Washington lobbyists and special interests who could nearly guarantee an exclusion for any client by so overwhelming USTR with exclusion requests, that it would be impossible for the agency to conduct a thorough review within the 90-day statutory window,” Sens. Marco Rubio (R-Fla.) and Mike Braun (R-Ind.) wrote in a letter to conference committee members last week. 

Senate aides have suggested that the House could simply pass the USICA to bypass McConnell’s blockade and send the bill to Biden’s desk. But that’s seen as a last resort, as Democratic leaders in the House don’t see sufficient support for the Senate-passed bill in their caucus.  

Complicating things further, Schumer on Sunday announced that he tested positive for COVID-19, while Sen. Richard Blumenthal (D-Conn.) revealed a positive test on Monday, likely pushing back Democrats’ legislative agenda if they’re forced to postpone votes. 

While unlikely, it’s possible that lawmakers could pass the bill after returning from the August recess, but that might not come until after the midterm elections.  

“House Democrats would have to give up on some of the add-ons that they put into their process, and they’ve been reluctant to do that publicly just yet,” said Monument’s Verdery. “But I can see that happening in September, or a lame-duck session when both sides are at the 5-yard line.”