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(Bloomberg) -- Senate GOP leader Mitch McConnell said he will block bipartisan legislation to boost US competition with China and provide subsidies for domestic semiconductor manufacturing as long as Democrats pursue a go-it-alone economic package.
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McConnell made the threat as Senate Majority Leader Chuck Schumer is negotiating a scaled-back version of President Joe Biden’s economic plan with West Virginia Democratic Senator Joe Manchin. That plan includes prescription drug price cuts, tax hikes on the wealthy and corporations, and energy and climate provisions.
The China bill, which provides more than $50 billion to subsidize US semiconductor chip manufacturing, has been stalled as the House and Senate try to resolve differences in their approaches.
“Let me be perfectly clear: there will be no bipartisan USICA as long as Democrats are pursuing a partisan reconciliation bill,” McConnell said in his tweet, using an acronym for the proposed legislation.
Democrats reacted angrily to McConnell’s threat.
“Senate Republicans are literally choosing to help China out compete the U.S. in order to protect big drug companies,” White House Press Secretary Karine Jean-Pierre said in a statement that echoed those of Democratic congressional leaders. “This takes loyalty to special interests over working Americans to a new and shocking height. We are not going to back down in the face of this outrageous threat.”
McConnell has the power to block the bipartisan competition bill in the 50-50 Senate using the chamber’s filibuster rule, which requires 60 votes to advance most legislation outside the budget process.
Democrats have been striving to pass the economic package, which under special budget rules needs only a simple majority vote, before the scheduled August congressional recess. With their razor-thin majority in peril in the November midterm election, they want to promote the legislation as an inflation-fighting measure.
So far Senate Democrats are in basic agreement on prescription drug provisions in the package that would cap out of pocket costs for seniors and allow Medicare to negotiate drug prices, saving the government hundreds of billions of dollars. Some tax provisions are being pared back to make them ore business friendly.
Schumer and Democrats had hoped to have the China competition bill finished by the end of July. The long-stalled legislation was already at risk of collapsing in Congress, with Republicans growing skeptical of the measure as midterm elections near and Democrats focused on other issues, including the gun safety bill that was signed into law.
The bill would provide billions of dollars to boost research and development with an eye toward creating new technologies to help the US stay ahead of a rising China. A key provision of the bill would provide $52 billion in grants and other incentives for domestic semiconductor manufacturing.
The House and Senate are negotiating to reconcile their differing versions of the legislation but have hung up on key points, including trade provisions and whether to include tax credits for chipmakers.
To thwart McConnell, Democrats could attempt to shoehorn the chips funding and other parts of the China bill into their budget bill, although they would drive up the cost. But under the budget rules they are using regulatory and foreign policy aspects of the China bill would likely not be allowed in.
The delays in passing the bill could have significant economic consequences. Intel Corp. has warned that the timing and size of its planned new facility in Ohio will depend on whether Congress passes the bill with funding soon.
“A robust U.S. semiconductor industry is critical for our national and economic security,” William Moss, a spokesman for Intel, said in an emailed statement Thursday. “The rest of the world is moving fast and Congress should put aside politics and act now to pass this critical legislation and ensure the U.S. is not left behind.”
Schumer had led the bipartisan push for the competition legislation, working last year with Republican Senator Todd Young to pass the Senate’s version.
A Schumer spokesman, Justin Goodman, accused McConnell of “holding American jobs in key US industries hostage to help China and protect his friends in big pharma.”
(Updates with Intel statement)
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