COMPETES Hit an Obstruction Named Mitch

Update 621 — COMPETES to Pass Sans Hitch
Hit an Obstruction Named Mitch; Now What?

Two weeks ago — amid extensive conference committee deliberations — Sen. Mitch McConnell announced his intention to block bipartisan negotiations on a USICA/COMPETES bill, industrial policy legislation aimed to compete with China, if Senate Democrats continued to pursue a “partisan reconciliation bill.”

So House leadership has a choice to make: pass the Senate-passed USICA as-is or scrap the bulk of the competition bill and pass a slimmed-down stand-alone semiconductor bill. House leadership has rejected the current Senate USICA bill, while Senate Republicans vow to block a standalone bill. With no guarantees of a reconciliation deal, Democrats in the House may need to consider the Senate package or face the midterms without a major victory for vulnerable incumbents to run on.

In today’s update we discuss reconciliation, USICA/COMPETES, the tension between the two and the choice Democrats face.

Good weekends all,



Thus far, McConnell has made good on his threat to block the bipartisan USICA/COMPETES bill, effectively stopping the 85-member conference committee in its tracks. Like much big-ticket legislation with broad bipartisan support, the USICA bill had gotten stocked and loaded with (some commendable) Christmas tree ornaments and soon became a slow boat to China. Now Democratic leaders need to decide how to proceed: try to pass a standalone semiconductor bill through regular order, attempt to add semiconductor subsidies to reconciliation, or pass the Senate’s USICA bill in the House without amendments. Speaker Nancy Pelosi and House Majority Leader Steny Hoyer have already publicly rejected the idea of passing the Senate USICA, running the risk of missing the boat entirely on a major legislative priority. 

Despite McConnell’s willingness to move on a stand-alone semiconductor bill, which would make up only a small portion of the original package, Senate Republicans led by Sen. John Cornyn has said that they will not support the standalone bill. In order to salvage USICA/COMPETES/CHIPS, Democrats in the House may need to reverse course and vote for the Senate package or risk having nothing to show for their work come November.

Charlie Brown and the Reconciliation Football

McConnell’s posturing may not have killed reconciliation, but Senator Joe Manchin has sounded the final bell on all but two Democratic priorities. After a full week of reconciliation-related disagreements over the SALT cap, climate compromises, and potential tax increases, news broke late on Thursday that Manchin was no longer open to negotiating on climate or tax provisions, citing inflationary concerns after Wednesday’s CPI report. Manchin has since disputed this, claiming that he simply wants to see the July inflation numbers before making a decision on climate and tax. For now, this leaves only prescription drugs and two years’ worth of ACA subsidies.

Senate Democrats submitted language on prescription drug pricing to the parliamentarian’s office last week — it would allow Medicare to negotiate prescription drug prices and cap out-of-pocket expenses on prescriptions for Medicare beneficiaries. It would cut costs for families and reduce deficits by $288 billion over the next decade. Language on extending ACA subsidies for an additional two years has not yet been submitted to the parliamentarian, but the extension would prevent massive premium increases for 13 million covered enrollees.

While a prescription drugs and ACA subsidy-only reconciliation bill would be a disappointment to progressives who had hoped to see other priorities included, it would still be a legislative victory for Democrats in a time where the party seems poised to have few to run on in November. If anything, a slim reconciliation bill puts additional pressure on leadership to overcome Republican roadblocks and make quick progress on USICA.

USICA – The Lesser of Two Evils

When the House passed its COMPETES bill at the end of March, many of the objectives they had laid out were closely aligned with the Senate’s USICA package paving the road for a more competitive US economy to rival China’s by means of increased federal industrial policies geared towards improving international competitiveness. Heading into next week, House Democrats have two options to heavily consider if any progress on the expansive China competitiveness bill is to be made. Since the possibility of a bipartisan, bicameral compromise before August recess is dwindling by the day, tensions between both the two parties and the two chambers may result in the disposal of a year’s worth of work dedicated toward a stronger and more internationally ambitious economy. 

House Democrats find themselves likely, or compelled, to proceed with the lesser of two evils: either pass the Senate’s USICA bill as is and with no amendments or pass a stand alone bill containing only the $52 billion in funding for semiconductor manufacturing subsidies. The first path would potentially generate blowback from progressives and is seen as undesirable by the House, while the second option is still subject to Republican obstruction.

Passing the stand-alone semiconductor bill seems to be the option preferred by House leadership and the Biden administration. Speaker Pelosi said on Thursday that the House would move forward on a “CHIPS-plus” bill as early as next week. But, several members worry that this pathway would completely invalidate the legislative work conducted over the last year. Some, like Sen. Bernie Sanders believes the bill should not offer subsidies to manufacturers without provisions to prevent stock buybacks or help working Americans. 

McConnell offered up the “chips-funding only” approach in efforts to mobilize a bipartisan package before the August deadline and maintain the interest of semiconductor manufacturers who have the ability to take their work elsewhere. Although Democratic leaders seem to be ready to take the CHIPS only path, Senator John Cornyn announced that he and other Senate Republicans would not proceed on the CHIPS bill. This potentially removes the stand-alone bill as an option within the Senate. Unlike USICA, a CHIPS-plus bill passed by the House would have to make its way through the Senate before hitting the president’s desk.

If the House passes USICA as is, it will be able to avoid dealing with Senate Republicans, and give up a number of the chamber’s top legislative priorities that were included in their original proposal under COMPETES. This includes, but is not limited to, immigration reform, trade adjustment assistance programs, and even a couple of key climate provisions. Subsequently, passing USICA would be an incredibly tough pill for House Democrats to swallow, and thus far, it seems they are unwilling. House Majority Leader Hoyer described the pressure to pass the Senate bill “an arrogant and unreasonable demand,” citing the move as yet another Senate-lead “take it or leave it” instance the House is all too familiar with. 

Today, Leader Hoyer gave life to rumors that $52 billion for CHIPS may be included in reconciliation. This could add another viable path to securing CHIPS funding, although it remains to be seen whether Manchin or progressives will be open to adding CHIPS to reconciliation. Given the tenuous nature of reconciliation negotiations, time will tell whether or not this remains an option.

The Least Worst Path Forward

With Biden’s approval at 39 percent and inflation hitting 9.1 percent year-over-year in June, Democrats badly need a major legislative victory, though the remaining options here are not ideal. Reconciliation, even a less progressive version, could prevent catastrophic premium increases at the end of the year, provide some relief for skyrocketing prescription drug costs, and offer the only path towards significant climate investments in this Congress. USICA, although lacking a number of desirable provisions from the House-passed COMPETES, would be an important step towards keeping American industry competitive.

After failing to deliver on Build Back Better last year, Democrats cannot afford to fail to deliver on its two major priorities this year. House leadership refusing to capitulate to Mitch McConnell and the Senate may be satisfying, but it is not delivering. Passing USICA may cause blowback from some constituencies and again leave the House in the position of rubber stamping the Senate’s demands. Keep facts on the ground in mind: Intel is already threatening to scale back its planned plant in Ohio as CHIPS funding has yet to pass. Democrats cannot afford to be seen as responsible for letting America lose its competitiveness in the semiconductor industry. 

If the House doesn’t pass USICA, it won’t be McConnell that voters blame. It will be the party that controls Congress and the White House. Walking into the midterms without something to show for all of the work that went into USICA/COMPETES would be disastrous in an already difficult election year. Bear in mind the September 30 reconciliation deadline — Congressional Democrats will need a reconciliation package to pair with USICA that offers some relief from rising prices, even if it is a fraction of what progressives would have wanted. In terms of both politics and policy, Democrats’ best option is to take the wins that they can get.