Infrastructure Summer: Chuck Schumer, China, and Build Back Better

How does the Senate majority leader’s own $200 billion China bill fit into the equation?

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After several days of cliff-hanging negotiations, House Speaker Nancy Pelosi last week pulled off a compromise with corporate Democrats led by Josh Gottheimer of New Jersey that allowed them to claim a tactical victory while conceding nothing of substance. House Democrats, including Gottheimer’s Gang of Ten, then voted unanimously for the House rule allowing consideration of the full $3.5 trillion budget resolution, also known as Build Back Better. In exchange, the leadership guarantees a vote on the smaller bipartisan infrastructure bill by September 27.

On all the substantive spending issues, the deal kicks the can down the road. How much of the maximum $3.5 trillion allowed in the rule will actually get the support of more conservative Democrats in the House and Senate? What will the Congressional Progressive Caucus do if the proposed cuts are too deep? All that will be the subject of negotiations over the next month.

But there is another important pending bill that partly overlaps with the infrastructure measures. That is Chuck Schumer’s omnibus China and U.S. manufacturing bill, now titled the U.S. Innovation and Competition Act (USICA).

Thanks to Schumer’s intense deal making, taking advantage of Republican hawkishness on China as an economic and national-security threat, USICA passed the Senate by a formidable vote of 68-32 on June 8. In many respects, this was a far more impressive bipartisan achievement than the modest bipartisan infrastructure bill, which includes about $60 billion of new money per year over ten years, much of it traditional and noncontroversial.

USICA includes the earlier CHIPS Act, which allocates $52 billion under the National Defense Authorization Act, to create incentive programs for increased semiconductor production in the United States. The bill also includes more funds for broadband, and increased funding for R&D under a new Directorate for Technology and Innovation within the National Science Foundation, as well as support for rebuilding supply chains in other critical industries and technologies.

Schumer’s bill also contains several trade provisions aimed at strengthening domestic production and containing Chinese mercantilism. It would codify in statute the strengthened provisions of President Biden’s Buy American executive order of last February and would strengthen requirements that federally aided infrastructure projects must use only iron, steel, and construction materials made in USA.

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Schumer’s bill also includes shrewd and salutary elements of what used to be called pork barrel. The bill underwrites new regional technology centers. And $10 billion in funds for domestic semiconductor production is to be allocated by the states.

Since USICA mandates trade policy changes but also spends a lot of money, you might think that Schumer, given his leverage as majority leader, would put as much of it as possible into the reconciliation process. And in a memorandum Schumer sent to committee chairs, he did offer the National Science Foundation directorate for potential inclusion in reconciliation. But a wider-scale inclusion of all of the spending measures in USICA is evidently not Schumer’s plan.

According to my sources, Schumer is committed to getting a freestanding vote on USICA in the House by the end of the year. He is reportedly wary that if too much of USICA spending is included in Build Back Better, that would kill it as a freestanding bill, which includes a lot more than spending. Reconciliation items, generally spending, must be related to budgetary actions.

Given that a very large train—reconciliation—will be leaving the station in October, you might say this is crazy; or it could be crazy like a fox.

After all, Schumer did manage to secure Senate passage of his bill by a filibuster-proof margin of better than two-thirds. That far exceeds the 51 votes that Democrats (with no small amount of luck and horse trading) hope to get in the Senate passage of the Build Back Better budget resolution.

There are, however, some glitches. First, the House is not yet on board. Schumer’s Senate legislation was cobbled together by making deals with key Democratic and Republican senators, who first made deals with each other. Different titles of the bill came out of different committees. Other amendments were added on the floor.

The plus is that Schumer got buy-in from lots of key senators. A minus is that the bill is legislation unique to the Senate.

On the House side, jurisdiction is fragmented. A key player is Rep. Eddie Bernice Johnson of Texas, chair of the House Committee on Science, Space and Technology. She does not have a close working relationship with Schumer.

Schumer is committed to getting a freestanding vote on USICA in the House by the end of the year.

The timing of reconciliation, slated for completion in the next month, forces Schumer to judge USICA’s potential House outcome months in advance. It’s possible that the House could eventually pass the Schumer bill. More likely is that some but not all elements of USICA will be approved by the House, piecemeal.

That leaves it to Schumer to determine what spending-related pieces could get a stand-alone House vote, and what could be fitted into reconciliation. But presumably, every provision placed in reconciliation could sap momentum for a broader USICA bill.

A second problem is that in the various grand bargains made by Schumer to assemble a broad Senate coalition, some really bad stuff got into USICA. The worst single provision was the work of Democratic Sen. Ron Wyden of Oregon and Republican Sen. Mike Crapo of Idaho. It suspends the tariffs imposed on China through the end of 2022, and requires the government to reimburse importers for duties paid. This provision runs counter to the rest of the bill and is a gift to Beijing.

One other area is conspicuous by its absence. A shameful aspect about the U.S. indulgence of Chinese mercantilism is the open access that Chinese state-owned industries have to U.S. capital markets, enriching middlemen such as Goldman Sachs. Some Republicans, such as Marco Rubio, have proposed limits. Rubio made such a proposal in this magazine.

With all of the far-flung bipartisan provisions in the USICA, most of them exemplary, there was no room for a Rubio amendment. In his work as a loyal and astute floor leader for Joe Biden’s progressive program, even adding some progressive elements of his own, Chuck Schumer has come a long way. He hasn’t come that far from Wall Street.

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