Jul 21, 2022 - Politics & Policy

How the Senate's CHIPS-plus bill ballooned by billions

Illustration of a US flag made of semiconductor chips.

Illustration: Shoshana Gordon/Axios

Once Senate leaders opened the door to moving on a China competitiveness bill over the weekend, a bipartisan group of senators knew exactly what it had to do: use the slimmed-down package as a shell to stuff in as many priorities as possible.

Why it matters: The emerging legislation goes far beyond the narrow $52 billion bill to shore up domestic semiconductor manufacturing that even the Biden administration was willing to settle for this month.

  • After a week of maneuvering from Sens. Kyrsten Sinema (D-Ariz.) and Todd Young (R-Ind.), the new legislation more closely resembles the $250 billion bill the Senate passed last summer.
  • "There were very, very few changes from what they had previously voted on," Sen. Maria Cantwell (D-Wash.), who also was involved, told Axios. "This really is what we passed out of the Senate."

Driving the news: The U.S. Innovation and Competitiveness Act (USICA) was on life support this month after Senate Minority Leader Mitch McConnell (R-Ky.) threatened to tank the bill if Democrats pursued a robust reconciliation package reviving President Biden's Build Back Better agenda.

  • But once Sen. Joe Manchin (D-W.Va.) killed a big reconciliation bill, GOP leaders quietly walked back McConnell's threat.
  • Sinema and Young swung into action and corralled a group of Senate Republicans and Democrats to load billions onto CHIPS-plus — while also managing to keep McConnell on board.

Yes, but: The Senate's latest version still needs sign-off from the House, which had deep reservations about accepting the original USICA.

  • It's unclear if the House will buy the clever USICA rebrand and vote for it just because Washington now calls it "CHIPS-plus."
  • Already, the largest bloc of House conservatives has begun circulating a memo slamming the package as a "fake China bill" and a "zombie" version of USICA.

Between the lines: In the Senate, the nascent deal allows all sides to claim victory.

  • Senate Majority Leader Chuck Schumer (D-N.Y.) has a big, beefy China bill heading for approval, along with a reconciliation package to lower prescription drugs and shore up Obamacare health exchanges. That's two potential August wins before a November election.
  • McConnell can claim he forced Democrats to abandon their spending ambitions on climate while giving the China bill — which the business community desperately wants and which he voted for — a second chance.

The big picture: Several senators told Axios they were spooked after a classified briefing with Commerce Secretary Gina Raimondo and defense and intelligence officials on July 13 that detailed the national security risks of not acting.

  • "Everybody got a glimpse of what was at stake," Cantwell said. The overarching sentiment was that the Senate "should do more than just CHIPS," she added.

Behind the scenes: At 6pm Monday night, Sinema and Young gathered members who care deeply about USICA — in addition to the majority of the 20 senators involved in passing the bipartisan infrastructure and gun safety bills — for a meeting in the Capitol's LBJ room.

  • The provisions getting cut were crucial to national security, they stressed.
  • Cantwell and Roger Wicker (R-Miss.), the top two senators on the Senate Commerce, Science and Transportation Committee, ensured that funding for science and technology programs was made a priority.
  • Young, after meeting alone with Senate Republicans, realized that some GOP senators' votes depended on making the bill bigger, a source with direct knowledge of the meeting told Axios.
  • "I'm not sure they would have had 60 votes for CHIPS only," they said. "There were a number of members who weren't really comfortable just moving forward with that on its own."

Be smart: Schumer ultimately made the decision to put a bigger package that included most, but not all, of the priorities in USICA on the floor for a procedural vote Tuesday night — calling it a test vote.

  • After Sinema and Young aggressively whipped senators to support the bill, the motion to proceed passed 64-34, with 16 Senate Republican votes.

The bottom line: The eleventh-hour meeting is the latest example of how — even in a 50-50 Senate — a rotating stable of bipartisan brokers has found success pushing major legislation over the finish line when a deal has initially seemed impossible.

By the numbers: A new preliminary score from the Congressional Budget Office assessed that the bill will cost roughly $79 billion in direct spending over 10 years.

  • The remainder of spending will be through the authorization of money that's already been appropriated, policy aides working on the bill tell Axios.
  • The CBO is planning to provide a 10-year estimate including the authorizations in the coming days.

Go deeper: Read the full bill text and a five-page summary.

Go deeper