A National Security Briefing Helped Pass the Chips Bill

One month ago, it seemed unlikely that the Senate would pass its sweeping $280 billion “chips-plus” package to subsidize U.S.-made semiconductor chips before the August recess. After Minority Leader Mitch McConnell made threats to kill the bill, Republicans refused to compromise on the issue of subsidizing a private sector.

On Wednesday, however, the Senate passed the CHIPS and Science Act on a 64 to 33 vote. This was supported by several prominent Republicans, including McConnell. On Thursday, it passed the House. The bill’s ultimate success in the upper chamber came about after a pivotal closed-door national security briefing in mid-July and crucial interventions with Republicans by former top Trump officials, according to sources involved in the process.

Commerce Secretary Gina Raimondo, who played a lead role in the Senate passage, tells TIME that the briefing was one of the “turning points” in negotiations, putting pressure on lawmakers to break the year-long impasse on semiconductor legislation. Raimondo crafted a national security argument that highlighted the risk of dependence on China to obtain chips in order to persuade reluctant Senators to increase their spending to manufacture semiconductors at home.

Democratic senators met July 13th. Chuck Schumer of New York and Maria Cantwell of Washington invited all 100 Senators to a meeting in a secure room on the Hill, along with top members of President Joe Biden’s national security apparatus to discuss the bill. A little over 60 Senators were present, with Raimondo as Deputy Defense Secretary Kathleen Hicks (and National Intelligence Director Avril Haines). The meeting lasted almost two hours.

According to Commerce Department officials, the group asked about 30-40 questions regarding national security issues if they relied on chips from Taiwan or China. This was especially relevant for defense applications. Others asked about the timeframe for U.S. capacity building and whether Congress would have to act on it after August recess. Raimondo says Hicks’s main point struck the lawmakers. Raimondo claims that 98% of all chips ordered by the Department of Defense have been tested and packed in Asia. “That briefing really moved members who were on the fence,” Raimondo says.

This is what the Senate passed. This bill provides $52 billion of subsidies for domestic semiconductor companies, $24 billion to set up a tax credit for the construction of new manufacturing facilities and more than $170 million over five years to support U.S. research. The measures were designed to make the U.S. more competitive on the global stage, particularly as China becomes a world leader in semiconductor production—an industry that many in Washington view as key to economic and national security. Haines led the group through scenarios that might arise if America relies on foreign chips. He used geopolitical threats such as Taiwan’s annexation threat by China to illustrate how global supply chain disruptions could occur.

After the briefing, several Republican Senators stated to reporters that they are scared by the potential national security consequences of failing to act. “If access to jets were cut off or restricted we would be up a creek without a paddle,” Republican Sen. John Cornyn of Texas, a key driver in the effort to pass the legislation, said on the Senate floor on July 26. “We couldn’t produce a stockpile of javelin missiles to supply Ukraine or produce the raiders and communication devices that keep our troops and our allies connected.”

McConnell was willing to go back to negotiations after his party had refused to cooperate with chips talks in July. Democrats must pursue a climate policy-focused reconciliation legislation. Less than a week after the national security meeting on chips, Democratic West Virginia Sen. Joe Manchin said he wouldn’t reach a deal with his party on reconciliation, so McConnell signaled he was open to voting yes on the chips bill. “This is about national security,” McConnell said on July 26. “I wish it were inexpensive, but it is not.” (Manchin and Schumer reached a surprise deal on July 27.)

Raimondo decided that, despite the fact that some Republicans were influenced by the national security briefing, he called former Secretary of State Mike Pompeo. Pompeo served as Secretary of State under Trump and had military experience. “I’m not sure there’s many things that he and I would agree on,” Raimondo says of Pompeo. “But I called him and he did it. We need to keep the American people safe, and that won the day with him.” She also enlisted Trump’s former National Security Adviser Robert O’Brien to make calls to Republican lawmakers.

The last-ditch effort to collaborate with the former President’s officials helped convince a number of Republicans in both chambers to vote for the bill—including clinching McConnell. “I was persuaded by our former colleague, Mike Pompeo,” McConnell told Fox Business on July 26, particularly by Pompeo’s argument that American adversaries would be emboldened further if the U.S. lost access to semiconductors, he said.

17 Republicans voted in favor of the bill. 32 Republicans and Senator Bernie Sanders, Vermont, voted against. Many shared concerns that the bill didn’t have enough guardrails to prohibit semiconductor companies from investing in China, according to the senior Commerce Department official. “I understand the national security concerns,” said Republican Sen. Chuck Grassley of Iowa, who voted no. “But to simply mention the words national security isn’t the end of the discussion. Proponents must show how these subsidies will accomplish their objectives.” He said the bill failed to include adequate safeguards “to prevent companies receiving these subsidies from turning around and investing in China.”

With the support of 24 Republicans on Thursday, the House passed the bill. It will now be sent to Biden for signature.

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