KEY VOTE: Senate · Jul 20, 2022

Heritage Action opposes the CHIPS Act (H.R. 4346) and will include it as a key vote on our legislative scorecard.

The Senate will soon vote on the CHIPS Act (H.R. 4346), a $250 billion package that blends corporate welfare with industrial policy. The bill includes $52 billion in financial incentives to the highly profitable semiconductor industry, $80 billion in increased funding to universities through the National Science Foundation (NSF), $10 billion for centrally planned “regional technology hubs,” and nearly $50 billion in funding for research at the Department of Energy. While proponents claim that passing the legislation is necessary to counter the threat posed by China, in reality this package will make the United States less, not more competitive with China.

This bill picks a specific industry to win—the semiconductor industry—over all other businesses, big and small. Generally, all businesses are struggling with higher costs, a shortage of labor, and decreasing demand from consumers, making them less competitive with their Chinese rivals. But they receive no relief because Washington’s solution is to cut a check to one highly profitable industry, which will simply pour gasoline on the inflation fire that is crippling the economy.

To put this bill’s handouts in perspective, for the same amount of money as the semiconductor subsidies, Congress could double the research and development tax credit for all companies, allow for 100 percent immediate expensing, and allow for immediate research and development deductions through 2025, which would encourage private businesses to innovate and grow. This would have put all industries and businesses on an equal playing field, but that’s not what Congress is doing.

Congress’s addiction to “emergency spending” has been a key driver of inflation, and further emergency spending will only increase the cost of living for millions of Americans. If the American people are going to be asked to pay a price, then at the very least, Congress should take measures to guarantee the spending benefits America. And so it is unconscionable that Congress is using the guise of “national security” to increase the burden carried by the American people while the legislation does not bar companies that do business in China from receiving subsidies.

As the Heritage Foundation lays out, because money is fungible, a semiconductor manufacturer can take a subsidy to build a plant in the United States and use that money to bolster their manufacturing operations in China. There should be unanimous opposition to helping China build its industry and infrastructure, yet this legislation may help companies do just that.

While the subsidies to semiconductor manufacturers are the worst portion of the bill, the rest of the package spreads nearly $200 billion in research funding across a variety of government agencies, with insufficient guardrails included to protect that research from Chinese espionage. Nearly $80 billion of this is earmarked for the NSF to create a state-run “technology directorate” that is instructed to focus its research on 10 key technology areas. The federal government should not be picking winners and losers and cannot adequately predict which emerging technologies are most promising. And without strong counter-espionage provisions to combat China’s theft of intellectual property, this bill will fund research the CCP will steal and use against us.

An additional $10 billion is set aside to create “regional technology hubs'' in an attempt to more evenly distribute where technology companies are located, despite the fact that private companies make decisions to locate their business operations based on specific factors, such as the availability of qualified workers, state tax regimes, and proximity to inputs and consumers. Instead of trying to use the clumsy arm of government to centrally plan innovation and economic growth, Congress should pursue aggressive action to build a China-resistant economy by cutting China out of U.S. supply chains in key industries and restricting state-sponsored Chinese media from injecting CCP propaganda into American domestic political debates.

Instead of rushing to send money out the door to satisfy the demands of the semiconductor industry, conservatives in Congress should wait until after the midterms—when Republicans will likely control at least one chamber of Congress—to pass an aggressive legislative package that actually addresses the threats posed by China. The China threat is the most critical and consequential international threat that the U.S. faces, and it involves a competition that spans the full range of national power—economic, military, diplomatic, and informational.

This hodgepodge spending package misses the mark and will only weaken the United States by adding to our crushing national debt and spiraling inflation crisis. And for a bill that is marketed as a way to boost America’s competitiveness with China, it does almost nothing to ensure that China is not a prime beneficiary of this spending.

Heritage Action opposes the CHIPS Act (H.R. 4346) and will include it as a key vote on our legislative scorecard.