Before the end of the week, and possibly as soon as later today, the Senate will vote on a major industrial policy bill that spends $195 billion, with much of it funneled to high-tech manufacturing.
The United States Innovation and Competition Act of 2021 is being widely framed as a bipartisan effort to stand up to China. The New York Times, for example, describes the effort as "powered by rising fears among members of both parties that the United States is losing its edge against China and other authoritarian governments that have invested heavily in developing cutting-edge technologies." Senate Majority Leader Chuck Schumer (D–N.Y), the lead sponsor of the 1,500-page package, ominously tells the Times that "if we don't step up our game right now, we will fall behind the rest of the world."
"That's what this legislation is ultimately about," Schumer adds.
But if you want to know what this legislation is really about, you have to skip down several paragraphs to where the Times notes that the bill's "popularity made it a magnet for industry lobbyists and lawmakers' pet priorities."
Having Congress set industrial policy is good news for businesses with power and influence over federal policymaking, and this proposal is no exception. The bill's 1,500-plus pages—which were reportedly still being finalized even just a day before the package was supposed to go to the Senate floor for a vote—provide ample opportunity for waste and cronyism.
"The bill spends well over $100 billion on special interests and managing the U.S. economy in areas where the private sector has already proven itself effective," writes Walter Lohman, director of the Asian Studies Center at the Heritage Foundation, a conservative think tank.
A huge amount of that spending is flowing to Intel and other microchip-manufacturing firms, despite the fact that there is little indication the industry is in need of $52 billion in government aid. Schumer and the Times are eager to suggest that America is losing its technological lead over China in semiconductor manufacturing, but that's not accurate either. According to the Semiconductor Industry Association, a trade group, American-based firms control 47 percent of the global share of the semiconductor industry—while China controls just 5 percent.
Framing competition with China as a crisis has allows lobbyists to snag some taxpayer cash for their clients, and it also allows Congress to avoid figuring out how to pay for the bill. Instead, the entire package will be financed with public debt.
"The emergency designation for funding the bill is questionable at best," says Maya MacGuineas, executive director of the Committee for a Responsible Federal Budget, which advocates for reducing deficits. "Emergency funding should be for temporary provisions that are necessary, sudden, urgent, and unforeseen—not appropriations that start next fiscal year and will continue five years in the future. Ideally, this funding would be enacted as part of a broader national economic strategy, which should be reflected in a federal budget."
The contradictions here are stunning. Even if it doesn't trigger a debt crisis, nearly record-high levels of debt will likely slow America's future economic growth.
Schumer says the U.S. must "step up our game" or else "fall behind the rest of the world." But the U.S. Innovation and Competition Act is business as usual for a feckless Congress: a lobbyist-crafted proposal that ignores America's increasingly precarious fiscal state to funnel public money to politically connected special interests.