How Bernie Sanders and conservatives united against US semiconductor bill

<span>Photograph: Kevin Dietsch/Getty Images</span>
Photograph: Kevin Dietsch/Getty Images
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When it comes to alliances in Washington, few are as unlikely as the common ground the democratic socialist senator Bernie Sanders briefly found with the Heritage Foundation and Americans for Prosperity, two architects of conservative policies across the United States.

Yet that is what happened this week when Sanders, a Vermont independent who caucuses with the Democrats, made a lonely and unsuccessful stand against a $280bn bill funding scientific research and, controversially, giving computer chip manufacturers financial incentives to build more production in the United States – one that rightwing groups also encouraged lawmakers to make.

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“The question we should be asking is this: should American taxpayers provide the microchip industry with a blank check of over $76bn at a time when semiconductor companies are making tens of billions of dollars in profits and paying their executives exorbitant compensation packages? I think the answer to that question should be a resounding no,” Sanders said during a Monday speech on the Senate floor.

The senator’s objections ultimately amounted to naught. The bill passed Congress on Thursday, and Joe Biden is expected to soon sign it.

But the episode underscores the tensions that arise when Washington moves to help an industry facing tough times. In this case, the stricken businesses were semiconductor makers who are struggling to keep up with demand and fearful of the threat from ascendant Chinese industry.

“The left in this country has generally sort of failed to recognize the importance of capital investment. At the same time, they’re sort of complaining about companies not investing in America, they haven’t actually supported the companies that do invest in America,” said Michael Mandel, chief economist and vice-president of the Progressive Policy Institute thinktank.

“My personal view is that capital investment is absolutely essential, and anything we can do to get more investment in this country is a plus for workers and a plus for consumers.”

Dubbed the Chips and Science Act, the measure represents Washington’s response to the shortage of semiconductors that began during the pandemic and has snarled the assembly lines of US industries while helping drive up inflation. The bill would offer computer chip manufacturers $52.7bn in incentives to build factories in the United States, as well as $24.3bn in tax breaks.

The proposal has taken a tortuous path to passage, with the Senate first approving a version of it last year, before the idea was caught up in the legislative logjam that struck Biden’s agenda in the closing months of 2021.

But, unlike some of what the Democratic president hoped to get out of Congress, many Republicans supported the concept of helping the semiconductor industry, particularly because it was seen as an effort to counter China, which has heavily invested in its own microchip industry.

Nancy Pelosi holds up the Chips Act after its passage through Congress.
Nancy Pelosi holds up the Chips Act after its passage through Congress. Photograph: Drew Angerer/Getty Images

And while the US ally Taiwan is one of the biggest manufacturers of computer chips globally, another motivation for Chips is concern about what would happen to its supply if Beijing moves against the island. In July, the commerce secretary, Gina Raimondo, and defense secretary, Lloyd Austin, wrote a letter to the Democratic and Republican leaders in Congress, saying that the measure was “critical for our national security”.

Mike Pompeo, a former secretary of state under the Republican president Donald Trump, made an unlikely contribution to calls for its passage. “Congress must pass the Chips Act for both our national and economic security. We have to become less dependent on China for critical technologies – and this is how we do it,” he tweeted as the House of Representatives was considering it.

But some of the most influential conservative groups in Washington didn’t buy in.

“The answer to the [Chinese Communist party’s] malevolent ambitions is not spending billions of dollars to help Fortune 500 companies, with no guarantee those dollars won’t end up supporting these companies’ business operations in China,” the Heritage Foundation president, Kevin Roberts, said in a statement.

“Additionally, the act’s $250bn price tag will contribute to record inflation and increase the already historic cost of living for working- and middle-class Americans.”

Americans for Prosperity, which was funded by the conservative industrialists Charles Koch and his late brother David, who are well known for their work promoting climate change denialism, sees the bill as “corporate welfare”.

“The United States didn’t become the strongest and most prosperous society in the history of mankind by emulating the Chinese government’s central planning, and we shouldn’t start now,” the group’s vice-president of government affairs, Akash Chougule, said. “If we want to see more American investment, the US government needs to stay out of the way.”

The effort ultimately failed, with 24 Republicans voting for Chips in the House and 17 Republicans in the Senate, along with almost all Democrats. While Sanders voted against it, none of his usual allies in that chamber or the House joined him in opposition.

It wasn’t just the Biden administration that lawmakers were hearing from. Semiconductor firms invested heavily in lobbying to make the bill become law, with Bloomberg reporting major manufacturers spent $19.6m in just the first half of this year, after $15.8m in the same period of 2021.

Particularly vocal was Intel, which has announced a $20bn investment in two new semiconductor factories in Ohio. But amid the Chips Act delay in June, the company announced those plans could be pushed back or curtailed without the funding.

“My message to our congressional leaders is: hey, if I’m not done with the job, I don’t get to go home. Neither should you. Do not go home for August recess until you have passed the Chips Act, because I and others in the industries will make investment decisions. Do you want those investments in the US?” Intel’s chief executive, Pat Gelsinger, said in an interview on CNBC. “Get the job done.”

Ro Khanna, a California Democrat who sponsored a bill that was a precursor to Chips, denied that the legislation was corporate welfare, saying there were guardrails in its text to stop corporations from using the funds for their own enrichment. Instead, he likened it to a return of 1940s-era industrial policy, in which the government makes investments in industries deemed strategically important.

“I think there’s understandable concern about corporate welfare, but corporate welfare is different than the FDR model of mobilizing for production,” he said, referring to the Democratic president Franklin Delano Roosevelt, who led the country through most of the second world war.

He envisioned Chips as a template for future efforts that could boost green technologies such as electric vehicles, and solar and wind energy.

“I think it’s a first step for how we continue to industrialize America, how we bring our production back, how we reduce our trade deficits. I absolutely think this should be a model,” Khanna said. “And the commerce department should enforce this so none of the money is going to stock buybacks, that it is going to building factories.”

• This article was amended on 1 August 2022. The Intel chief executive interviewed on CNBC was Pat Gelsinger, not Ryan Scott as stated in an earlier version.