Crunch Time: Semiconductors and the Incredible Shrinking Build Back Better Bill

Despite the high priority placed on bipartisan semiconductor legislation and President Biden’s partisan Build Back Better initiative, both pieces of legislation have been side-tracked or stalled. Congressional Democrats are making a renewed effort to clear both before the August recess.

On June 30, 2022, Senate Republican Leader McConnell (R-KY) joined the two bills warning that if congressional Democrats moved a partisan Build Back Better reconciliation bill, he would block semiconductor innovation legislation.

I believe we’re in a posture where we can go forward with the chips funding and other related provisions, and I hope we’ll be able to take action on that in the coming days.

Senator Cornyn (R-TX),
July 18

Getting both bills done before the August break is a tall order, but recent developments suggest that both hold renewed promise. And yet, the sand in the congressional hourglass is quickly running out. The House only has one more week before the August/ September break. The Senate has two weeks left and the Senate, as is usually the case, appears to be the choke point. Both bodies are not scheduled to return for legislative work until September 20, when the primary focus will be enactment of a continuing resolution to avoid a government shutdown on October 1.

SEMICONDUCTOR LEGISLATION

The House and Senate have been in conference to resolve the differences between the Senate bill (The United States Innovation and Competition Act – USICA) and the House bill (the America COMPETES Act) since the beginning of May. The number of titles the various versions of this bill holds (80) is only exceeded by the size of the conference committee (107 House and Senate members) and despite strong bipartisan support, the bill is at an impasse due to lengthy list of unresolved issues.

While Senator McConnell threatened to block the completion of the USICA bill, it appears he was also motivated by his rising concerns with House Democratic conferees’ efforts to insert partisan provisions in a bill the Senate passed with a bipartisan 68-32 vote.

That was an alarming figure to me, higher than anything for 40-plus years …So I said, ‘Oh my goodness, let’s wait now. This is a whole new page.

Senator Manchin (D-WV),
July 15

Senator Majority Leader Schumer (D-NY) has decided to move a narrower bill in the Senate. He is going to start with a “CHIPS” bill that is limited to providing $52 billion in funding and tax credits with a price tag of $24 billion to subsidize domestic development and manufacture of semiconductors and if there is a sufficient support, he will expand the bill to include other items.

On July 19, the Senate voted 64-34 (McConnell voted against it) to begin consideration of the revised bill. As Senators negotiated the text, the “skinny” bill ballooned from 73 to 1,055 pages.

This bill’s path brings to mind the Yogi Berra expression, “Déjà vu all over again.” The Senate has been at work on semiconductor legislation since April 15, 2021, when Senators Schumer and Todd Young (R-IN) initially introduced USICA. Getting a revised bill passed in the Senate in the next two weeks seems ambitious. Even if USICA cannot be completed in August, the Congress could finish it when it returns in September or in a lame duck session after the mid-term elections. With USICA, the primary issue now appears to be when, not whether, the bill becomes law.

The Senate should move forward, pass [CHIPS]…before the August recess, and get it to my desk so I can sign it.

President Joe Biden,
July 15

BUILD BACK BETTER, MANCHIN, & RECONCILIATION

 Senator Manchin (D-WV) has been raising concerns about the threat of inflation for over a year now. The July 13 consumer price index report showed an annualized inflation rate of 9.1%. That convinced Manchin to limit his support for Build Back Better reconciliation legislation to drug pricing reforms and extension of some temporary health care subsidies.

While Democrats are clearly exasperated, with some suggesting that Schumer remove Manchin as Chairman of the Senate Energy and Natural Resources Committee, Schumer and President Biden have focused on getting a smaller bill enacted into law.

Under reconciliation, a deal on Build Back Better cannot be filibustered, but with unified Republican opposition, Schumer needs every Senate Democratic vote. Speaker Pelosi (D-CA) has a four-vote margin in the House. Reconciliation legislation has other limits that pose a challenge for Democratic leaders.

• The Byrd This rule effectively prevents any non-budgetary provision to be included in reconciliation. The rule is interpreted by the Senate Parliamentarian, who was scheduled to review the current draft bill with Democratic and Republican staff on July 21, 2022 to identify any provisions that would need to be dropped from the bill to ensure compliance.
• “Votearama.” While there are strict limits on debate and the content of amendments, there are no limits on the number of amendments that can be The Senate’s past practice has been to vote on all remaining amendments when debate on the bill expires involving a lengthy series of uninterrupted votes that usually run through the night.
• COVID & Other Schumer could not attend the Senate last week due to a positive test. Democrats tend to be tested more frequently, which makes them more vulnerable to a positive test and absence from the Senate. Senator Leahy (D-VT) had a second surgery this week following a fall that broke his hip. Under Senate rules, they must be physically present to vote.
• Sunset of Reconciliation Procedures. Under the Budget Act, reconciliation procedures for Build Back Better legislation will expire in the Senate at the end of this fiscal year (September 30, 2022), which means getting this bill passed before the Senate recesses for August is critical if this legislation is to become law this year.

It appears reconciliation is the more urgent and higher priority for Democrats. Enactment would be a significant accomplishment for Democrats going into the mid-term elections. This narrow bill would reduce drug prices when inflation is the dominant concern for voters and it would also extend subsidies for health care insurance coverage set to expire December 31.

But this bill is far from done. Manchin’s recent decision may have increased Senate passage prospects, but the bill language has not been finalized and there are risks that enough House Democrats oppose the bill to block it. For example, some House Democrats have stated they will not support a reconciliation bill unless it includes a fix for the current limit on the federal tax deductibility of state and local taxes.

The critical hurdle is Senate passage of the reconciliation bill. If that can be done, Speaker Nancy Pelosi (D-CA) is likely to shorten the scheduled August recess, bring members back to Washington, and find the votes necessary to send the bill to the President for signature.