Momentum Slows for Biden Bills; Focus Shifts to Chip Shortage and Geopolitics

Author: Greg Valliere

April 14, 2021

EVEN PRESIDENT BIDEN'S ALLIES are conceding that momentum has slowed for his huge infrastructure and tax hike packages, as Congress focuses instead on the shortage of semiconductor chips and growing rifts in Washington over geopolitics.

THE BOTTOM LINE ON BIDEN'S BIG THREE:

1. Most members of Congress still believe an infrastructure bill will pass - but perhaps not until late summer, and perhaps costing less than Biden's $2.25 trillion price tag. There's agreement on spending more for roads, highways, bridges, etc. but beyond that there isn't even a consensus over what constitutes 'infrastructure.'

2. Serious roadblocks loom over a massive tax increase. It has generated intense opposition from well-funded business interests, who have mounted an aggressive lobbying and media campaign against tax hikes. And there's growing support for the restoration of state and local tax deferrals, a divisive issue among Democrats because it would benefit the rich and divert billions of dollars in revenues away from social spending.

3. A social safety net bill costing $1 trillion or more has not come into focus yet; details could be months away. With the economy surging, the idea of spending more money - as this year's deficit is poised to exceed $3 trillion - has diminished support for this bill, which almost certainly will be scaled back.

MORE PRESSING ISSUES: Lawmakers returning from the Easter-Passover break seem more determined to focus on two other issues: First, passing a bill soon, perhaps by May, to fund a ramp-up by manufacturers to compete with China to produce more goods in the U.S., especially medical products. The antipathy in Washington toward Beijing is bipartisan.

SECOND, THERE'S GROWING SUPPORT for emergency aid to semiconductor chip manufacturers, even though there's no immediate panacea. Intel CEO Pat Gelsinger told The Washington Post yesterday that the chip shortage - which has dramatically slowed U.S. auto production - could persist for another year or longer.

A CHIP INDUSTRY SUBSIDY and a boost to U.S. manufacturers who are competing with China may be lifted out of Biden's infrastructure proposal and passed separately. But this could encourage more 'cherry picking,' passing the easy stuff quickly while the overall Biden package crawls slowly through summer.

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GEOPOLITICS IN THE SPOTLIGHT: President Biden's decision to end the longest U.S. war generated intense criticism yesterday in Washington from lawmakers who are convinced that Afghanistan will become a Taliban haven shortly after U.S. troops leave in September.

REPUBLICAN HAWKS LIKE LINDSEY GRAHAM AND MARCO RUBIO led a verbal assault, but several Democrats were either silent or critical of the move, which many described as an abdication. Ironically, support for the withdrawal was strongest from odd bedfellows: pro-Trump isolationists and liberal Democrats.

PERHAPS THE BIGGEST CONCERN is the signal this will send to U.S. allies and adversaries, as Russian troops mass near the Ukraine border, China threatens Taiwan, North Korea prepares more missile tests, Israel scrambles U.S.-Iranian peace talks, and Tehran dramatically increases its uranium enrichment program.

BIDEN HAS LONG OPPOSED the U.S. troop presence in Afghanistan, which is still unstable after two decades of enormous American losses. It's a high-stakes gamble for him; if the Taliban and other terrorists regain power - and once again threaten the U.S. - he could be forced to send special forces back to the region within a year.