In a bid to boost U.S. production of semiconductor chips and increase scientific research domestically, the House passed the Chips and Science Act last Thursday.
The $280 billion package of federal taxpayer money includes more than $52 billion in grants and other incentives to the semiconductor industry, according to the Congressional Budget Office (CBO). The package also includes a 25% tax credit for corporate investments in U.S. chip manufacturers.
President Joe Biden claimed the bill would lower the cost of goods like cars, appliances, and computers. “It will lower the costs…and it will create high-paying manufacturing jobs across the country and strengthen U.S. leadership in the industries of the future at the same time,” said Biden.
However, several Republicans argued against the package, claiming it provided enormous taxpayer-funded subsidies and tax credits “to a specific industry that does not need additional government handouts.”
In total, only 24 Republicans voted for the legislation. The bill passed 243 to 187.
Rep. Guy Reschenthaler (R-PA) argued that picking winners and losers with taxpayer money was not the most effective way to help the semiconductor industry. Reschenthaler instead stated the most effective measures were tax cuts and the easing of federal regulations.
Rep. Joseph Morelle (D-NY) claimed that targeted tax cuts and deregulation of the semiconductor industry were too narrow and would not adequately address the problem.
“This affects every industry in the United States,” Morelle said. “Take, for example, General Motors announcing they have 95,000 automobiles awaiting chips. So, you want to increase the supply of goods to people and help bring down inflation? This is about increasing the supply of goods all over the United States in every single industry.”
While the bill could yield positive results, like increasing the supply of goods and slowing down inflation, it would also increase the federal deficit by approximately $79 billion over the next decade, according to projections from the CBO.
Rep. Kevin McCarthy (R-CA) argued the bill was equivalent to corporate welfare, being handed out to whomever President Biden wants.
By not prioritizing semiconductor capacity domestically, semiconductor chip manufacturers may resort to conducting capital investments in rival countries like China.
Rep. Michael McCaul (R-TX), a top Republican on the House Foreign Affairs Committee, agreed with the notion that significant semiconductor investments in non-U.S. countries pose a national security threat to the United States.
McCaul cited U.S. reliance on Taiwan for most advanced chips, a country under almost constant threat of takeover by China.
“I’ve got a unique insight in this. I get the classified briefing. Not all these members do,” McCaul said. “This is vitally important for our national security.”
Now that the bill has passed the House and has already passed the Senate, the next step is for President Joe Biden to sign it into law.