Senate Republicans on Tuesday offered some alternatives for moving a package of domestic semiconductor manufacturing incentives outside of a conference committee that’s halted work on melding rival bills due to GOP objections over Democrats’ partisan budget reconciliation negotiations.

“The conference is stuck,” Senate Minority Leader Mitch McConnell told reporters. “And so it seems to me there are a couple of ways out of this, potentially.” 

The alternatives the Kentucky Republican floated include having the House pass the Senate version of the competition bill without amendments, which would send the measure directly to President Joe Biden’s desk. Another option is pulling out the $52 billion in funding for semiconductor manufacturing subsidies and moving that separately.

Democrats, however, are not ready to give up on the conference process for the broader bipartisan competition bill or negotiations on the slimmed-down version of a reconciliation package that Senate Majority Leader Charles E. Schumer and Sen. Joe Manchin III, D-W.Va., are negotiating. 

“I’m working on getting a bipartisan bill … and a bipartisan effort in the conference,” said Senate Finance Chair Ron Wyden, D-Ore.

On reconciliation, Wyden expressed optimism about having a package that the Senate can vote on before the August recess. “We’re doing all the work that’s necessary to get it done,” he said.  

Some top House Democrats are already throwing cold water on the GOP pitches. 

House Majority Leader Steny H. Hoyer, D-Md., said late Tuesday that McConnell in their first conversation about the competition bills urged the House to just pass the Senate version, so his Tuesday suggestion wasn’t a surprise.

“It’s an unreasonable legislative position to take that the House of Representatives has no business suggesting constructive changes that will make the bill stronger,” Hoyer said, while declining to say there’s no scenario in which the House just passes the Senate version.

Hoyer also dismissed McConnell’s suggestion of moving the semiconductor subsidies as a stand-alone bill. “There’s so much good stuff in there, we want to pass a broader bill than just a chips bill,” he said.

Several Republican conferees on the China bill, including Finance ranking member Michael D. Crapo of Idaho, Rob Portman of Ohio and Patrick J. Toomey of Pennsylvania, said Tuesday that negotiations have largely stopped since McConnell’s June 30 announcement.

Crapo and Toomey said they back McConnell’s stance, but Portman is eager to see the bill move given the high stakes for his state, which is slated to be a home for $20 billion worth of Intel Corp. manufacturing facilities if Congress approves the subsidies. 

“I’d rather us get it done,” Portman said. 

Push for Senate version

Two other GOP conferees, Sens. Todd Young of Indiana and John Cornyn of Texas, said they think the best and easiest path forward is for the House to pass the Senate version of the competition bill, known as the United States Innovation and Competition Act, or USICA.

“Frankly, that’s a major bipartisan victory to be realized,” Young said.

Cornyn also mentioned pulling the semiconductor manufacturing subsidies out into a stand-alone bill since, he said, that’s what everyone agrees is most urgently needed to convince companies to build plants in the U.S.

“If we don’t do it between now and August, then they’ll go make a decision to move elsewhere,” he said. “If [Schumer] just pulled the chips part out of it, then the USICA conference would continue to go on.”

Democrats discussed potential alternatives during their own caucus lunch, including pulling the semiconductor manufacturing subsidies out as a stand-alone. But they weren’t ready to say the conference committee can’t produce a result before the August break. 

“There’s been discussion about working to get it done in a more expedited way, so we have had discussions” about a subsidies stand-alone, said Sen. Benjamin L. Cardin, D-Md. “I don’t think we’re there yet.”

As for the idea to have the House just pass the Senate version of the broader bill, Cardin said: “I don’t know if that’s possible.” 

Some progressives view the manufacturing subsidies as a corporate giveaway with no guardrails against things like stock buybacks or outsourcing jobs. 

“For all of my friends who talk about the deficit and how we can’t fund the needs of our children or the elderly, $53 billion going to some of the most profitable corporations in America without any taxpayer protection is an absolute outrage,” Vermont Sen. Bernie Sanders, an independent who caucuses with the Democrats, said on the Senate floor in May.

Party leaders were able keep their caucuses mostly unified in both chambers, in part due to other provisions in the expansive competition package. A stand-alone measure with just the $52 billion in financial incentives, or trying to pass the Senate version, could cost more House Democratic votes in that chamber since it does not include some trade measures or other provisions their party favored.

For instance, Michigan Democratic Rep. Dan Kildee, a member of the House-Senate conference committee, said Tuesday night that House Democrats still want to include trade adjustment assistance for workers who lose jobs to foreign trade in any legislation.

Reconciliation optimism

Although the path forward for the innovation bill is unclear, Democrats are not letting that dissuade them from pursuing a reconciliation bill that is broadly focused on lowering prescription drug costs, raising taxes on wealthy individuals and corporations and transitioning to clean energy.

Schumer reiterated during the Democratic Caucus lunch that his goal is to put a reconciliation bill on the floor before the August recess, but he didn’t provide details on his negotiations with Manchin, Cardin said. Manchin has been noncommittal on completing negotiations before the August recess, saying the only real deadline is Sept. 30, when the reconciliation vehicle will expire. 

Cardin, who chairs the Small Business Committee, said he doesn’t know yet whether his panel will get a title in the reconciliation bill but that he plans to have discussions with Schumer and Manchin or their staffs about that this week. 

“The original was about $25 billion that included a lot of issues. We shrunk that considerably. So we’re seeing whether that’s still viable,” he said. 

Cardin also said he’ll push to get some money for pandemic restaurant grants after a stand-alone effort didn’t get enough bipartisan support, but he doesn’t want to provide any “misimpressions” that he’ll be able to get that in. 

Wyden said that while “there are still issues that have to be worked out” on the climate portion of the bill, he expects it will follow his committee’s previous work in ensuring energy tax credits are technology-neutral and will reward companies for reducing carbon emissions.

“I believe those two fundamental reforms in the Finance Committee bill are still intact,” he said. 

But Wyden acknowledged that some things he’s pushed for in the bill, like electric vehicle tax credits that incentivize domestic production and “direct pay” credits that would allow companies to receive incentives that exceed their tax burden, are still up for debate.

“I’m pushing as hard as I can for the kind of bill that got out of the Finance Committee,” he said. 

GOP attacks

Republicans have begun attacking one piece of the reconciliation measure that Democrats have largely finalized, saying their decision to expand a 3.8 percent investment income tax to the profits of active business owners would raise taxes on small, closely held businesses known as pass-throughs. Democrats agreed to use the approximately $200 billion in revenue that provision would raise to extend Medicare’s solvency by three years. 

“It appears as if they want to target businesses they don’t really understand, which are pass-throughs,” McConnell said. “In Georgia, Nevada and Arizona, just to pick a few states, 58 percent of the private sector workers are actually employed by pass-throughs. In New Hampshire … 61 percent. And in West Virginia … a whopping 95 percent.”

McConnell said he was picking those states “out of the blue,” but Georgia, Nevada, Arizona and New Hampshire are all states where Republicans are hoping to unseat Senate Democrats in the November midterms. Arizona is also home to Sen. Kyrsten Sinema, a Democrat up for reelection in two years who’s worked to whittle down the tax increases in the partisan budget bill. And West Virginia was an obvious nod to Manchin.

More than 190 business groups launched their own objection this week to expanding the tax to income earned through pass-through businesses such as partnerships, S corporations and family farms. They said in a letter to party leaders that the tax would fall on small, individually owned and family-owned businesses and is the wrong approach as businesses face a potential recession, high inflation, supply chain challenges and labor shortages.  

Organizations signing the letter include the Arizona Farm Bureau Federation, Georgia Cattlemen’s Association and West Virginia Cattlemen’s Association.

Wyden seemed unfazed by the outside pushback.

“Last time I looked, the people who have election certificates make the decisions,” he said. “And I’m telling you that people who have election certificates in the Senate Democratic Caucus think everybody ought to pay their fair share.”