Why Congress Must Pass the Bipartisan Innovation Bill

The House and Senate’s economic competitiveness bills may have gone through more name changes than P. Diddy, but that doesn’t make them any less critical for the country. For decades, federal support for manufacturing has lagged. Outside of a few superstar cities, many places have failed to feel the economic benefits of the tech boom. And most recently, supply chain disruptions continue to drive up prices, cause delays throughout the economy, and hurt the pockets of American families.

The most recent versions of the competitiveness bills—United States Innovation and Competition Act (USICA) in the Senate and America Creating Opportunities for Manufacturing, Pre-Eminence in Technology, and Economic Strength (COMPETES) Act in the House—tackle these issues and more. With thousands of pages of provisions currently being hashed out in conference committee, it’s important to take a step back and remember the three big things these bills do: 1) strengthen supply chains and help fight inflation, 2) revitalize American manufacturing, and 3) bring opportunity and innovation to more places across the country. In this, we highlight the most notable aspects in each.

1. Strengthen Supply Chains and Help Fight Inflation

Supply chain challenges continue to put pressure on economic recovery by contributing to rising prices and making it harder to find goods. As Third Way previously explored, these disruptions are caused by many factors, including trucking challenges, pandemic-induced shutdowns, supply and demand volatility, and shifts in consumer activity.

Over the last few months, the federal government has worked alongside the private sector to try and ease the worst of the short-term impacts of supply chain disruptions. Policymakers have also been focused on crafting solutions that will combat these challenges in the future.¹

The House and Senate competitiveness bills contain several key initiatives focused on strengthening the long-term health of our supply chains:

Semiconductors

The second big investment USICA, as well as COMPETES, makes in shoring up supply chains is through $52 billion emergency appropriations for the Creating Helpful Incentives to Produce Semiconductors (CHIPS) Act. These funds will be allocated via a Department of Commerce-run program that will provide financial assistance to help build, expand, or modernize commercial semiconductor fabrication as well as research and development facilities in the United States.²

Semiconductors, while small, are an essential component in a variety of everyday products such as cars, electronics, and home appliances. The demand for semiconductors is expected to only increase.³ Yet, at the same time, the share of global semiconductor capacity located in the United States has dropped—from 37% in 1990 to just 12% today.⁴ The Administration has been working alongside the private sector to help reverse this trend, with the announcement of several large semiconductor plants set to break ground in the United States, including a Samsung factory in Texas and an Intel plant in Ohio.⁵ The incentives in the bipartisan bill for semiconductor manufacturing will help further reignite the industry and secure domestic capacity for a vital piece of many supply chains.

Supply chain resilience

First, USICA creates a supply chain resiliency program at the Department of Commerce.⁶ The program would work with the private sector and non-federal entities to address supply chain vulnerabilities with a focus on ensuring access to essential goods during supply chain shocks, such as weather events, conflicts, and pandemic threats.⁷

The COMPETES Act goes a bit further by authorizing $45 billion over five years to provide grants and loans in support of these efforts to build the resilience, strength, and security of supply chains.⁸ Funds would particularly target activities that support the manufacturing or acquisition of critical goods, enhance manufacturing facilities, or create surge capacity.⁹ COMPETES also includes directives to create a national supply chain database. The database would aim to provide a national view of the supply chain and help provide more real-time insight into US manufacturing capabilities across critical industries.¹⁰

2. Revitalize American Manufacturing

For decades, the US manufacturing sector has been shedding millions of well-paying jobs. In 2019, manufacturing employees made up just 9% of the non-farm workforce—down from 22% in 1979.¹¹ Manufacturing jobs have been a historic driver of the American middle class, allowing many families to build wealth and helping local and regional economies thrive.¹² Despite these decades of decline, research finds that investments in key manufacturing sectors, such as semiconductor manufacturing, medical device production, and electronics, have great potential to drive economic growth, create jobs, and rebuild innovation and competitiveness.¹³

Both USICA and COMPETES prioritize a revitalization of American manufacturing. USICA would quadruple the overall funding for the Manufacturing Extension Partnership (MEP) program, which provides assistance to local small- and medium-sized manufacturers to help them grow.¹⁴ The legislation would also create an expansion awards program for MEP centers to fund public good activities including cybersecurity, workforce training, and supply chain resiliency.¹⁵

USICA also looks to authorize funding to expand the existing network of Manufacturing USA institutes. These manufacturing institutes are public-private partnerships that have their own distinct technological focus and work together toward securing the future of US manufacturing.¹⁶ The legislation would additionally create a preference for institutes that increase the geographical diversity of the program and are located in more economically distressed areas. It also requires the integration of more minority-serving institutions, HBCUs, Tribal colleges or universities, and minority business enterprises as members of the institutes.¹⁷

3. Bring Opportunity and Innovation to More Places

Bolstering supply chains and reigniting manufacturing efforts here at home are critical drivers of economic growth. But also essential is ensuring the economic benefits of these investments are shared by all communities.

The growth of the high-tech innovation sector over the last two decades has been a key contributor to employment and economic growth in the United States. But these benefits have been concentrated in only a handful of cities, with just five top metro areas accounting for more than 90% of the nation’s innovation sector growth between 2005 and 2017.¹⁸ This geographic concentration of innovation means that fewer people have access to the economic opportunity the sector provides.

Both competitiveness bills feature a new program that would invest in the creation of regional innovative hubs across the country. These hubs would be focused on advancing research, commercialization, and competitiveness initiatives, all while expanding the geographic diversity of innovation.¹⁹ USICA authorizes nearly $10 billion to designate no fewer than 20 regional technology hubs in areas selected by the Department of Commerce as places that have the potential to become new centers for innovation and development.²⁰ Commerce would have to designate at least three hubs in each of the Economic Development Administration’s (EDA) six regions.²¹ These hubs would be comprised of a variety of partners, including state and local governments, higher education institutions, private sector companies, and non-profit organizations. Activities to be funded include workforce education, entrepreneur development, and technological resource development.²² COMPETES’ program is slightly different in that it authorizes $7 billion for the creation of at least 10 hubs, and there is no requirement that the regional hubs focus on a key technology focus area, which is something USICA stipulates.²³

Conclusion

Congress is negotiating the final form of economic competitiveness legislation right now. More than anything, they need to get it done soon. These types of policies are essential for America at this moment in time. They will help tackle inflation, create good-paying jobs, and improve our global competitiveness in this time of great uncertainty. Let’s take the best parts of both bills and send this to President Biden quickly.