Congress might be nearing the finish line on the bill supposed to safeguard the nation’s technological supremacy — at a crawl rather than the sprint lawmakers and the president alike seem to think is necessary. The package must pass now or never; yet, as important as getting the job done is getting it done right.
Despite some rhetorical cold water thrown by Senate Minority Leader Mitch McConnell (R-Ky.), legislators and administration officials alike are hopeful that the America Competes Act is close to finally passing. The legislation would send billions into technological research from artificial intelligence to quantum computing to nanoscience, as well as to help foreign scientists and engineers stay in the United States. Perhaps most notably, it would funnel a whopping $52 billion into shoring up domestic manufacturing of semiconductors, $39 billion of that subsidizing new factories through $3 billion grants. While this sort of industrial policy has brought dubious benefits in the past, a new argument for the investment arrives every day.
Under the current status quo, 75 percent of production of these critical computer chips takes place in East Asia — rendering this economy all too vulnerable to supply shocks, whether from pandemics, extreme weather events or geopolitical tensions. The last of these risks seems higher than ever as China adopts an increasingly threatening posture toward Taiwan, whose chipmaker TSMC alone makes up 50 percent of the global market. Meanwhile, President Xi Jinping’s regime has announced a $150 billion program to bolster its own domestic semiconductor industry. This fund, combined with similar offers from nations in Europe and elsewhere, might lure even U.S. firms away from home. Already, TSMC, as well as major American manufacturers Intel and GlobalWafers, have warned they might scale back their plans to construct facilities here if the promised incentives remain on hold.
Still, that doesn’t mean Congress should give these firms a handout without doing all it can to ensure the money benefits the nation and its taxpayers rather than merely the manufacturers and their shareholders. Some safeguards are already in place, but there is plenty of room for tightening. Particularly important are protections that screen firms’ outbound investments to ensure they’re not redirecting funds into propping up competitors; so, too, is a robust process to review whether proposed projects will provide a national security benefit to the United States. Limits on stock buybacks by grant recipients would also help ensure this strategic giveaway doesn’t turn into a boondoggle.
The biggest mistake Congress could make now is focusing solely on the tens of billions in factory-building subsidies and letting the rest of the America Competes Act fall by the wayside. These grants alone will not on their own catch the United States up to its East Asian peers. Other changes, some of them included in the bill, will prove even more important — from cultivating and retaining STEM talent here to coordinating with allies to keep enough chip-making capacity outside China. But as long as Congress is set on handing money to manufacturers, legislators should also make sure the manufacturers end up giving something back.
