Biden expected to sign $280 billion CHIPS Act, critics fear it will worsen debt and inflation

Bill is meant to incentivize American manufacturers to produce semiconductor chips in the U.S.

Updated: July 30, 2022 - 11:31pm

President Joe Biden is expected to sign the CHIPS Act, a $280 billion spending bill meant to incentivize American manufacturers to produce semiconductor chips in the U.S.

Critics say the measure contains no accountability requirements for companies that receive the taxpayer dollars, will increase the national debt and 40-year-high inflation, and won’t strengthen national security.

The bill passed the U.S. Senate by a vote of 64-33 with 17 Republicans joining Democrats in approving it. It passed in the House by a vote of 243 to 187, with 24 Republicans joining 219 Democrats despite Republican leadership opposing the bill.

Biden expressed his support, tweeting, “Semiconductor chips are the building blocks of the modern economy – they power our smartphones and cars. And for years, manufacturing was sent overseas. For the sake of American jobs and our economy, we must make these at home. The CHIPS for America Act will get that done.”

Democrat Senate Majority Leader Chuck Schumer said the bill will “take aim at the national semiconductor chip shortage, lower costs for American consumers, and boost scientific innovation and jobs.”

Key provisions of the bill include $52.7 billion in taxpayer funded subsidies for chip manufacturing in the U.S., a 25% tax credit for semiconductor manufacturing, $1.5 billion earmarked for technology development for U.S. firms that claim to be dependent on foreign telecommunications, $10 billion appropriated to the Department of Commerce to develop 20 regional technology hubs, and directives to grow the federal government by expanding federal agencies.

The Congressional Budget Office says the bill appropriates “about $200 billion over the 2022-2031 period, primarily for research activities.”

One section of the bill directs the U.S. Department of Energy to finance research facilities and infrastructure that will cost $5.9 billion. CBO estimates this will increase direct spending by $3.1 billion over the 2022-2031 period.

Another section authorizes the National Aeronautics and Space Administration to enter into enhanced-use lease agreements through 2032, which will increase direct spending by $80 million over the 2022-2031 period, CBO says.

Texas Republican Sen. John Cornyn, who joined Democrats in voting for the measure, said it would “help kick start domestic production of these semiconductors in a way that will prevent a vulnerability of our supply chain since 90 percent of those advanced semiconductors currently come from Asia.”

He also said “it could create roughly 185,000 jobs every year as these new facilities are constructed. Long-term, it could bring another 280,000 jobs online. Once these foundries are operational, they will supply made-in-America semiconductors that can be used on everything from smartphones, to cars, to airplanes, to missile defense systems.”

The bill also will enable the U.S. to “compete with,” “beat,” and “out-innovate” China, he said.

Texas Gov. Greg Abbott also praised the bill’s passage, saying it will help expand production in Texas, which he says is “a beacon of innovation and has remained the nation's leading exporter of semiconductors and other electronic components for eleven years in a row.”

But Florida Sen. Rick Scott, who urged his colleagues in the Senate and House to vote against the bill, argues it’s a “pro-China” bill that “will weaken America’s standing on the world stage.”

With the U.S. now $30 trillion in debt, “spending another $280 billion that we don’t have,” he said, “sets a dangerous precedent for massive, taxpayer-funded corporate welfare to the world’s most profitable corporations without any accountability or guarantee of return on investment for the American people.

“Even worse, the bill lacks basic safeguards and would allow corporations to use American tax dollars to build factories in Communist China and expand their share of the Chinese semiconductor market.”

There’s no requirement in the bill for manufacturers to build a certain number of plants in the U.S., he added, or require them to not outsource American jobs overseas. The bill includes no chip quota production requirements for manufacturers and instead “works like a blank check with virtually no accountability measures to protect the massive taxpayer spending it authorizes and no ROI requirements.”

It doesn’t improve U.S. national security and instead is a “huge spending bill funded with Americans’ tax dollars that gives corporations and Communist China everything they want while leaving American workers and American families with little in return,” he said.

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