Nancy Pelosi says this $350 billion bill will help the U.S. beat China in the 21st-century economy. Republicans say the legislation includes typical Democratic priorities, under the guise of maintaining an advantage over Chinese leader Xi Jinping. So what's really in the bill? Plus, Joe Biden celebrates the recent job numbers as free Covid-19 tests begin to arrive at homes.
This transcript was prepared by a transcription service. This version may not be in its final form and may be updated.
Announcer: From the opinion pages of the Wall Street Journal, this is Potomac Watch.
Kyle Peterson: The House passes a 2,900 page bill that Democrats say will help the US compete with China, as President Biden celebrates a positive jobs report. Welcome, I'm Kyle Peterson with the Wall Street Journal. We're joined today by my colleagues, editorial board member, Allysia Finley. Hi, Allysia.
Allysia Finley: Hi, Kyle.
Kyle Peterson: And columnist Kim Strassel. Happy Friday, Kim.
Kimberly Strassel: Happy Friday, Kyle. Hello, Allysia.
Kyle Peterson: On Friday, the House passed a $350 billion bill called the America Competes Act, which speaker Nancy Pelosi is saying is needed to help the US win in the 21st century economy. Here's a clip of Pelosi on Friday.
Nancy Pelosi: Leading on the world stage we're positioning US interest and values to win in the world arena, including holding the People's Republic of China accountable for genocide and using slave labor. This is not just a values issue in terms of human rights, this is a competition issue, making our workers and our country compete with slave labor.
Kyle Peterson: And as a counterpoint, here's Republican Congressman Jim Banks opposing the bill earlier this week.
Jim Banks: There's nothing in this bill that equips America to fight back, hold China accountable, and compete with China economically and militarily. It's just not there. The proof is in the pudding. It mentions equity more than it mentions Chinese Communist Party. So this is all part of the bait and switch strategy of the Democrats. We're all awakened to it.
Kyle Peterson: So Allysia, you heard the two sides there and to the extent that it's possible to summarize a 2,900 page bill, what is in this?
Allysia Finley: Gosh. Again, this is even bigger than the Build Back Better plan, which was only around 2,500 pages. So this is just a smorgasbord … supposedly anti-China provisions, but it's stuffed in with some other trade labor provisions. So let's start to … there's about $52 billion in here for semiconductors, which was already authorized in a Defense bill a year and a half ago. My take on this is it's not needed. And Biden has already said that the industry has committed to spending $80 billion through 2025 building semiconductor … they're called fabricators, or fabs, in the US. There's also about $45 billion for the Commerce Department to quote-unquote, "strengthen the supply chain." So it would declare some kind of product … and again, it doesn't define what a critical good is. But it would designate critical goods and allow the Commerce Department to give loan guarantees, loans, grants, or even take equity in companies to support the manufacturing of this product. So you can just see the potential for abuse there. There's a large section on trade adjustment assistance, which is essentially welfare for unions of laid off workers who do due trade … quote-unquote, "do due trade", would receive cash benefits as well as healthcare benefits and $2,000 child allowances. This would even include public employees, public agency employees for the first time. It's not clear exactly how government employees would lose their jobs or get their jobs outsourced. So you can just, again, imagine the potential for abuse. And there's just so much more. Democrats tried to stuff in a lot of other priorities, climate priorities. $8 billion for the UN Green Climate Fund, $3 billion for solar manufacturing. There's a huge section on seafood, which is both protectionist and to try to promote environmentally sustainable seafood. I mean, I could go on and on.
Kyle Peterson: Well, let me dig in a little bit on the semiconductors. I understand the concern about the supply chains and semiconductors, but I wonder if it isn't overstated. So the White House is talking about how the US manufactures only 12% of the world's chips, but as the Journal's editorial on this bill today explains, the US is still the leader in chip design, in chip making equipment. And Kim, what I would add is that as companies have awakened to the growing threat that China faces, some of these supply chains have already started to move. TSMC is building a big chip plant in Arizona. Here's the beginning of a Wall Street Journal article from January. "Intel set plans to invest at least 20 billion in a new chip making capacity in Ohio." And so, Kim, it seems to me that I'll lot of the supply chain movements that this bill is intended to encourage, are already taking place on their own.
Kimberly Strassel: Yeah. It's really interesting that you should mention TSMC, because as you just heard Nancy Pelosi saying in that opening statement, Democrats want to position this as a bill that is supposed to make the United States better able to compete with China. But if you look at the biggest chunk of it, which Allysia was talking about, all the dollars that are going to go to chip makers, China isn't our biggest rival when it comes to that. The biggest semiconductor maker and the country that produces most overall is Taiwan, a punitive ally of ours. TSMC is one of the biggest makers. And as noted, they're actually going to start building a plant in Arizona. So the entire idea behind this bill is a bit misguided. It almost seems a pretext, in that Joe Biden seems very determined, and Democrats, to want to look tough on China. This just seems to be, like I said, a pretext to be able to throw a lot of money at a lot of their priorities while saying they're getting tough on China and not addressing some of the real concerns.
Kyle Peterson: And some of the other opponents of this bill, including the US Chamber of Commerce are opposed to the provisions that interfere with trade. So a couple I'll mention that are brought up in the Chamber's letter. "First, this House bill would establish" … I'm reading here from the Chamber. "Establish an ill-defined new bureaucracy to review certain outbound investments, which would complicate efforts by US businesses to compete, grow, and expand in global markets." Allysia, there's also changes to this de minimis threshold. Things that get imported to the US that are under $800 in value, generally don't have to pay duties or fees. And there are some exclusions here for countries like China in this bill. The Chamber worries that that's going to add to supply chain bottlenecks, problems at ports as millions of things that are coming in duty free right now have to go through the duty system, the import system, instead of just coming in under this de minimis threshold. And so Allysia, I mean, the argument on the right side of the aisle seems to be that it's more interference in the private economy and these private transactions, imports and exports.
Allysia Finley: I think that's right. And in addition, there are also a bunch of labor provisions that got stuffed in. Just for instance, there's Davis-Bacon prevailing wage mandates for the semiconductor. So if you want money from the federal government to build your semiconductor fab, you have to agree to pay the union prevailing wages. There's also some provisions regarding card check, which means that workers essentially have to sign or refuse to sign worker cards in front of organizers and coworkers. What this basically means is that unions can bully workers into joining the unions. It would eliminate secret ballot from employers, again, who want to get access to some of these federal funds. There's some provisions regarding to neutrality agreements, other provisions that are essentially poison pills. This is never going to end up passing. I do not see these provisions getting support amongst Senate Republicans, who will have to sign on to actually get it to the president's desk.
Kyle Peterson: The other thing, Kim, that I like to with these 2,900 page bills is just go through and read the table of contents. And here are some things I'll pull out. Broadening participation in science. Collection of data on demographics of faculty. Study on marine mammal mortality. Establishment of the United States coral reef task force. And then there's a long list of fine products under a heading, temporary duty suspensions and reductions, including for licorice extract and silica gel, cat litter. And so, Kim, I don't see what this has to do with competing with China in the 21st century, just other than, the lobbyists for big cat litter win again.
Kimberly Strassel: Yeah. And those are just the things, by the way, that they have actually enumerated in the bill. The stuff that really scares me is when you end up with, for instance, $54 billion that's simply going to be handed to the Commerce Department, which will then get to make its own decision about who it gives it to. And you've already heard Democrats talking about how their big ambition with this is to replace some of the funding that was supposed to go for climate provisions in Build Back Better. Instead, you give it to the Commerce Department here and it can hand it out to different green goods, to the solar manufacturers, or this kind of company that they think will do more to create clean energy for the country. So we don't even really have a baseline about where all this money is going to go. Those provisions you mentioned are bad enough. One more example. The Senate bill had, I think something close to like 120 billion reserved to go out to advanced tech, including to the National Science Foundation, its budget would get doubled. And again, it'd be one thing if we knew that that money at the NSF was going to go into really basic research of the type that you don't always get out in the private sector. But you know that instead the temptation is going to be to send it more to what we call applied research, which is stuff that the private industry does anyway. And so it's just wasteful. We don't have in any … I sense this is just another blank check to the federal government. To then give its dollars to whatever little hobby horse that has at the moment.
Kyle Peterson: So Allysia, if we're skeptical of this kind of industrial policy, then what do you think a better bill to counter China would look like? And one thought I would throw out is, President Trump was skeptical of the Trans-Pacific Partnership, which was a group of other countries in Asia getting together with the United States to set some trade rules. And so far, I don't understand why President Biden doesn't seem more favorable toward that approach.
Allysia Finley: Well, I think that's right. I think Biden's trade policy has just been a mess and nobody can clearly figure out what its strategy is, with regards to China or trade in general. This bill would actually, in a way kill any new trade deals for the next seven years, because the way trade deals are usually are passed is with trade promotion authority, which allows the administration to pass trade deals with only an up or down vote. But this is usually tied to trade adjustment assistance. Here, the bill would only provide the quote-unquote, "trade adjustment assistance" for seven years, leaving out the TPA authority. Which means that you're unlikely to get the Democratic votes for a TPA in the next few years. Again, trade would be one way to help counter China, getting back into the TPP, which includes 11 countries in the Indo-Pacific region, along with Mexico, Canada. Another way …and I actually support this. Is increased visas for high tech or high skilled workers. The bill includes some provisions on this, exempting doctoral recipients from US universities from the H1B cap. It also provides some special visas for our entrepreneurs, but there's no question that we need more immigration. We're not going to have enough workers to even run these fabricators unless we bring in more high skilled workers and improve the education on public schools. I mean, it's a problem when you have only 22% of 12th graders or seniors in high school proficient in science. So we need to do something about the public schools, whether … that's not really a federal government responsibility. But promoting school choice, I think would be helpful.
Kyle Peterson: So, Kim, what are the prospects for this proposal? Last June, the Senate passed a similar bill. That one, I think is about $250 billion versus the House's $350 billion, but there was a good chunk of Republicans in the Senate who voted for that. So what do you think the odds are here that the Senate in the House can come to an agreement on a final package?
Kimberly Strassel: Yeah. Well, here's a wild fact. For the first time in I can't even remember how long, the current plan is for the Senate and House to do this thing that they used to do all the time in Congress called conferencing bills. That hasn't happened in a while. What usually happens is either the House takes the lead under Democrats or the Senate. They come up with a proposal, they pre-conference it on both sides. And then one side rubber stamps the other. In this case, as you mentioned, we have a Senate bill, we have a House bill, and they're going to have representatives from each chamber come and sit down and try to hash out something in the middle. Now, here are the dynamics. Since that Senate bill was passed … and yes, it did have Republican support. You've had the collapse of Build Back Better and more naked ambition by Democrats to throw in pieces of that bill into this to use it as a substitute, as it were. Republicans have also, even though this all sounded good in the beginning … hey, we're being tough on China. It's become more clear to everyone, the market problems with this, the distortionary aspects, and the fact that this is really the United States just mimicking China in terms of straight up government controlled industrial policy. So Republicans have backed off a little bit. I still think that there's a chance that Democrats just jam it through, but it likely wouldn't happen with much bipartisan support.
Kyle Peterson: Hang tight, we'll be right back. You're listening to Potomac Watch from the Wall Street Journal.
Announcer: From the opinion pages of the Wall Street Journal, this is Potomac Watch.
Kyle Peterson: Welcome back. Friday's jobs report was better than expected. I'm looking at the Journal's news story on this. The US economy in January added a net 467,000 jobs. And also notable is that the labor participation rate went up to the highest level since the pandemic began in early 2020. Here's a clip of Joe Biden on Friday to take credit.
President Joe Biden: Our economy created 6.6 million jobs. 6.6 million jobs. You can't remember another year when so many people went to work in this country. There's a reason, it never happened. Take a look at the chart. You're can look at the last … all the way back to President Reagan. Look how many jobs we've created on average per month. This is it's never happened before. And look, history's been made here.
Kyle Peterson: So Allysia, every president, of course, takes credit for any economic good news that happens on their watch, whether they're responsible for it or not. But this does look to me like a pretty good jobs report, and I wonder what you make of it?
Allysia Finley: Right. So I mean, politicians take credit for when the sun rises. There were some expectations there would be job losses because of Omicron. I didn't think so because you haven't really been seeing employers laying off workers during this Omicron surge. Some workers have gotten sick or have had to stay home because they've been exposed. But for the most part, employers are hanging on to workers for their dear life, right? The quits rate is at a all time high, employers don't want to lose workers. The other good thing about this report, what it shows is there was actually … it increased the revisions for November and December by almost a million, which is pretty huge. And then some of this is part due to seasonal adjustments and end of year revisions and how they calculate job gains or job losses. But I think what you're also seeing is now that the enhanced unemployment benefits and other transfer payment are starting to roll off … the enhanced unemployment benefits ended in September, and some other transfer payments. I recall the eviction moratorium also ended in September. You're starting to see now people now have more of an incentive to go back to work. The child tax credit, the monthly payments also paused or stopped in January. So people are now … have used up their savings, which have been kind of at an all time high during the pandemic. And as savings rates return to normal, people are starting to say, hey, I guess I need to go back to work. I'm not sure how much we can prognosticate about the labor market going forward based on this jobs report. I think, naturally, employers are desperate for workers still. How many more workers are going to come back to the labor force, now, as I mentioned, as savings fall? That's really, it's an interesting question. I think it's something to watch.
Kyle Peterson: But the best news for the economy is that the Omicron variant cases of COVID-19 seem to be really crashing down. And we haven't seen a big new variant arise to replace it, knock on wood. And so even places that have been pretty hawkish about COVID, Kim, look to me like they're beginning to move on. And here's just an anecdote, for months at my local doctor's office, they had a check-in table. You'd walk in, they'd ask you if you had any COVID symptoms, if you'd been in contact with anyone who had COVID symptoms. Here's the hand sanitizer, here's the sticker proving that you checked in. And I was at the doctor's office this week and the whole operation was just gone. Nowhere to be found. I walked in like it was the old west, no rules, no regulations. And Kim, I grant that there are, I'm sure a lot of listeners in other parts of the country saying, what took you so long? But be that as it may, it is a real change in my neck of the woods.
Kimberly Strassel: Yeah. I couldn't agree more. First of all, I think what Allysia said is really, really important, in that workers have more incentive to return to the labor market now. Not just at the end of transfer payments and a rundown in some of their savings, but also, look, the reality is, is that there's a prospect of a bigger paycheck too, because wages have been going up as too many jobs seek too few employees. But I think that an equally huge issue is what you just mentioned, which is that while nobody really wants to say it, we are beginning to see the normalization of the economy, or at least the mindsets surrounding COVID. One of the biggest examples of that, if you dig into these labor numbers and jobs report this week is that the leisure and hospitality sectors have really had a hard time getting back on a stable footing. And yet, they as a sector, fared pretty good this time around. And that suggests that people are beginning to internally absorb the notion that we're going to live with this. And they're beginning to go out and do the things they did before. Eating out, going to hotels, going on trips, staying places, seeing people, going to bars. And that's having an effect on the market too.
Kyle Peterson: And so the question that I asked a couple weeks ago when Biden began rolling out more COVID protocols, like this website to get free tests, was whether this is going to be too late to catch the Omicron variant. And in my case, I think the answer is yes. I put in an order for these free tests on January 18th and got a confirmation email, and two and a half weeks later, I have still heard nothing about that. I have heard anecdotally from other people that they have received their tests. So I don't know what I did to anger the post office, Allysia, but it looks like a lot of these things that Biden was putting forth after Christmas are going to be too late to catch at least the Omicron wave.
Allysia Finley: I think that's right. I mean, I think it's still probably maybe peaking in certain states. I think it's already peaked in the Northeast. The problem was that the Biden administration didn't prepare. It thought the vaccines would take care of everything. Then it got slammed with the Delta wave and you would've thought that that would've been a warning, right? That it needed to stock up on tests. It should have probably been paying these manufacturers to increase their manufacturing capacity. Order these tests going back in the summer, when it saw that the vaccines weren't bullet proof, but it didn't. And they even say, it's not because of lack of money. Congress appropriated plenty of money in the March spending package for testing. It was just a lack of strategy. And in fact, there were a lot of liberal groups urging it to focus more on testing and expand testing. At this point, I think the country is tired of testing, we're exhausted. And so maybe there's actually been, to some extent, over testing. Especially for asymptomatic people at workforces who are just as likely to spread it as are unvaccinated workers, because a lot of employers require now unvaccinated workers get tested. But they're just as likely to transmit it as vaccinated workers who are asymptomatic. So I do think that has actually contributed at the margins to the testing shortage. But again, the Biden administration is to blame for not preparing for this.
Kyle Peterson: Well, on the point about over testing, I was really struck by an op-ed we had in the Journal. And the headline is, The High Cost of Free COVID Testing. And it's written by an economist in Los Angeles. He says, "My four year old daughter's preschool requires weekly COVID testing. We were told not to worry about the costs, the tests are free." He goes on to say, "A few days ago, I received a routine letter from my insurance company summarizing what it paid, $1,140 a month for my daughter's weekly PCR test." And so, Kim, I guess the first point is that this is the problem of the American healthcare system, where the people who are paying the bill are not the people who are incurring the charges. It's all filtered through these opaque systems, these opaque rules, and that's a huge problem driving up costs. But the second point I would make is, that seems unsustainable to me, that that kind of testing can be going on for asymptomatic people who are not at risk as we get further are into March, April. And to my eye, it seems like we are still waiting for President Biden to pivot on COVID and lead the charge out of the pandemic. And Kim, we'll give you the last word.
Kimberly Strassel: Right. At a certain point here, we have to think about allocation of resources, because they aren't infinite. This is always a reality in a market. And if we are dealing with a variant now, in which we know that it is far less deadly than prior ones, in which we're trying to move back to a level of normality, we have to ask ourselves, do we really want to be throwing those levels of money? Because just take that one example you gave, magnify it out by millions of people who are doing these daily or weekly tests. Is that what we want to be spending our money on? Or do we want to be dealing with all of the overhang that we have created throughout this pandemic in terms of other health issues? I mean, we just had that Johns Hopkins study come out talking about the many problems we created during lockdowns in terms of healthcare. Whether that's people who had delayed treatments for things like cancer or heart disease, whether it's procedures that needed to get done, whether it's the mental health consequences for our kids. Dollars aren't infinite. It seems it would be really important for Joe Biden to do what some UK politicians have done. Come out, declare an end to this, and then allow the country to begin thinking about how we dig out from this, from a dollar perspective and health perspective.
Kyle Peterson: Thank you, Kim and Allysia. Thank you all for listening. You can email us [email protected]. If you like the show, please hit that subscribe button on your favorite podcast app. We'll be back next week with another edition of Potomac Watch.
Paul Gigot is the editorial page editor and vice president of The Wall Street Journal, a position he has held since 2001. He is responsible for the newspaper’s editorials, op-ed articles and Leisure & Arts criticism and directs the editorial pages of the Journal’s Asian and European editions and the OpinionJournal.com Web site. He is also the host of the weekly half-hour news program, the Journal Editorial Report, on the Fox News Channel.
Mr. Gigot joined the Journal in 1980 as a reporter in Chicago, and in 1982 he became the Journal’s Asia correspondent, based in Hong Kong. He won an Overseas Press Club award for his reporting on the Philippines. In 1984, he was named the first editorial page editor of The Asian Wall Street Journal, based in Hong Kong. In 1987, he was assigned to Washington, where he contributed editorials and a weekly column on politics, "Potomac Watch," which won the 2000 Pulitzer Prize for commentary.
Mr. Gigot is a summa cum laude graduate of Dartmouth College, where he was chairman of the daily student newspaper.
