U.S. Senate passes sweeping $250B bill to address China threat

Chuck Schumer
Senate Majority Leader Schumer called a $250B bill passed in the Senate an attempt to build up the U.S. rather than tear down China. President Biden praised its passage on a bipartisan vote, adding, "We cannot risk falling behind." More than $50B is included to bolster U.S. chip production. (NASA/Bill Ingalls, via Wikimedia Commons)

In a rare bipartisan vote, the U.S. Senate approved a $250 billion bill on Tuesday that includes $52 billion to bolster domestic chipmaking. But it mainly attempts to stave off China’s economic, military and technology prowess in various ways.

The measure, known as the U.S. Innovation and Competition Act (USICA), passed by 68-32 and now heads to the House where passage is expected in some form.  

In addition to $52 billion for chip manufacturing and research, about $190 billion would go for more technology research to compete globally in areas such as AI. Funds are included for a new technology division in the National Science Foundation and $10 billion for the Commerce Department to provide up to 10 new technology hubs around the nation.  

Of the $52 billion for chips, $39 billion is designated for grant incentives for construction or expansion of microchip fabrication plants with $10.5 billion for research and development; $2 billion will support the Department of Defense for research, testing and workforce development with industry and universities and $500 million will go for Department of State and international aid agencies to coordinate with allies to boost supply chains for chips and emerging technologies.*

One provision calls for $1.5 billion for a Public Wireless Innovation Fund and $500 million joint semiconductor and Open RAN multilateral program, both initially authorized in the USA Telecommunications Act. 

The bill has multiple add-ons. They include $10 billion for two lunar lander contracts as many in Washington see a space race with China heating up after a Chinese rover recently landed on Mars. It also bans downloads of Chinese-owned TikTok on all government devices, not only military and Homeland Security phones, and will block purchases of drones made and sold by the Chinese government.

The bipartisan approval was especially unusual given no Republicans voted in favor of President Biden’s $1.9 trillion stimulus plan in March. Also, recent talks between the White House and Republicans on a $2 trillion infrastructure measure have apparently fallen apart.

While Democrats and Republicans have not been able to find common ground on many issues, it appears that concerns over China’s influence are something of a unifier. The bill calls China “the greatest geopolitical and geoeconomics challenge” to U.S. foreign policy.

“I have watched China take advantage of us in ways legal and illegal over the years,” said Senate Majority Leader Chuck Schumer, D-New York, the lead author of the bill, in an interview with the Washington Post. “The number one thing China was doing to take advantage of us…was investing heavily in research and science. If we didn’t do something about it, they would become the number one economy in the world.”

But Schumer also tried to play down worries that the bill is anti-China and is instead an attempt to “build ourselves up rather than tear them down…It is aimed mainly at having America progress economically.”

President Biden praised the bill and urged House passage in a statement.  “We are in a competition to win the 21st century and the starting gun has gone off…We cannot risk falling behind. America must maintain its position as the most innovative and productive nation on Earth.”

Economists generally expect China on its current ascendency to become the top economy globally by 2027, beating out the U.S. for that top position.

Reactions from China and others

In reaction, China’s parliament expressed “strong indignation and resolute opposition” to the bill, and said it shows “paranoid delusion of wanting to be the only winner,” according to a Reuters report from China. “We firmly object to the United States seeing China as an imaginary enemy,” China’s foreign ministry spokesman Wang Wenbin told reporters in Beijing.

U.S. Sen. Bernie Sanders, I-Vermont, voted against the measure, after failing to influence the Senate to prohibit private companies from taking federal aid to subsidize manufacturing. U.S. Sen. Marco Rubio, R-Florida, also voted no after seeking, and failing, to toughen enforcement provisions in the bill to make sure that technology funded by the U.S. government does not land in Chinese hands.

U.S. tech companies have broadly backed the bill, although there are differences on the approach that could change in the House version. The Information Technology and Innovation Foundation think tank called the measure “a desperately needed legislative package to shore up U.S. innovation-based competitiveness and help the federal government more effectively push back against China’s unfair mercantilist policies.”

ITIF President Robert Atkinson said the bill was a product of “a great deal of horse trading,” and said ITIF supports greater funding for R&D that was part of the original Endless Frontier Act.  (The USICA was a substitute for Endless Frontier under Schumer’s guidance.)  “Whether lawmakers [in the House] decide to establish a technology directorate in the National Science Foundation is not as important as they authorize considerably more funding for industry-relevant R&D, manufacturing programs and reshoring key industries such as semiconductors,” Atkinson said in a statement.

Semiconductor Industry Association President John Neuffer called the passage of USICA “a pivotal step toward strengthening U.S. semiconductor production and innovation and an indication of the strong, bipartisan support in Washington for ensuring sustained American leadership in science and technology…Enactment of these investments would help strengthen America’s economy, national security, technology leadership, and global competitiveness for years to come.”

GlobalFoundries CEO Tom Caulfield praised the bill noting, “This investment in semiconductor manufacturing will help pave the way for GlobalFoundries to accelerate our plans to expand in the United States, creating high-paying jobs and increasing capacity.”

* The original version of this story said $53 billion was allocated for chips. 

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