Making the U.S. economy more equitable and competitive both domestically and internationally has been a key focus of the Biden Administration. To date, the Biden Administration has begun to transform the American economy by signing into law the American Rescue Plan which saved millions of small businesses and families during a global pandemic, by championing a desperately needed infrastructure package – the Bipartisan Infrastructure Deal – which will invest more than $150 billion in upgrading internet access, transportation, and power grids. Finally, through a set executive orders, including one to spur open competition and innovation with all businesses, were intended to carry out this mission and have been successful.
But, the job isn’t done. America’s long term economic competitiveness and national security is front and center. While Congress and the President continue to negotiate several ongoing initiatives including a bill to reduce prescription drug prices and reduce the deficit, the next key initiative is the Bipartisan Innovation Act. Also known as the CHIPS bill, the legislation has momentum but is still currently being debated in Congress. With general strong bipartisan agreement and strong support from private sector actors like Intel, this legislation will boost domestic semiconductor production, create thousands of jobs, and strengthen our national security by reducing our reliance on other countries for a product that is so vital to our everyday life.
Guiding the Biden Administration’s efforts to rebuild manufacturing at home and make sure America is competitive around the world is the National Economic Council (NEC), led by Brian Deese. As Director of the NEC, he leads domestic and international economic policymaking decisions across the Biden Administration and advises the president on economic policy. Brian and I recently sat down to discuss the current state of the economy, what the Bipartisan Innovation Act will mean for businesses and national security, and additional issues like prescription drugs and workforce. I am grateful to him for taking the time and below is a summary of our discussion.
Rhett Buttle: In general, how is The White House thinking about the economy right now and how should the private sector be thinking about it?
Brian Deese: We are navigating through a set of significant, global economic challenges, but what’s most notable about the economy right now is the resilience that we have seen through multiple shocks. This includes the waves of the pandemic and the war in Ukraine and through it the economy and the American business and consumer have proven resilient. We’ve seen remarkable and historic progress in areas with the labor market, where we’re seeing the strongest job growth of any recovery on record. Notwithstanding some of the commentary around the Great Resignation, we’ve seen the fastest rebound in prime age labor force participation of any modern recovery. Because of the strength of the labor markets, we’ve also seen household balance sheets remain strong as well. So, what that all nets out to is an American economy that is better positioned than virtually any other country in the world to take on the global challenge of inflation. And I think that that’s where we find ourselves today.
Rhett Buttle: A lot is happening on the Hill right now as it relates to the Bipartisan Innovation Act or CHIPS legislation. What does the business community need to know?
Brian Deese: I think this legislation is best understood in the context of what President Biden has tried to put forward as an industrial strategy for the country. What that means is an explicit and deliberate effort to try to build U.S. economic capacity and U.S. economic strength in critical sectors of our economy. That was an important theory behind the Bipartisan Infrastructure Bill that passed last fall and that is providing a foundation of public investment off of which businesses in sectors across the economy are benefiting. This legislation is designed to meet the compelling economic and national security needs to have more domestic semiconductor production capacity and more investment in research and development of innovation in the American economy in an environment where we risk falling behind other countries and being held back by some of the more aggressive actions of countries around the world, including China. Ultimately, what I think the private sector should takeaway is that this legislative approach to investing in America again is part of a strategy to make the United States a more attractive place for investment, the leader globally in key industries of the future, whether that be semiconductors or clean energy technologies, and to help build the momentum behind the emerging manufacturing recovery in the United States that has already led to the largest increase in manufacturing jobs in three decades. If you’re operating a business out there in the country, I think it’s important to understand the context of what we’re trying to get done here, even as we get into the details of the legislative process and the funding.
Rhett Buttle: What are the real implications of this legislation/effort on American competitiveness and national security from your perspective?
Brian Deese: This is a place where our economic and national security imperatives are inextricably intertwined and a place where the United States has fallen behind. Decades ago, we produced about 40% of the semiconductors in the world. Now we produce 12%. During that period, China, in particular, has gone from producing 2% of the world’s semiconductors to 16% and they have a very explicit intention to grow that. If you look at the leading-edge chips – those most innovative versions of semiconductors – Taiwan alone produces over 90% of those chips for the world. If there’s one thing we’ve learned from the pandemic and the gyrations in global supply chains that we’ve all been living through, it’s that this kind of dependence presents acute economic and national-security risks. So, what’s behind the broader push for competitiveness is a more focused effort with respect to semiconductors to increase U.S. capacity to produce chips and build more resilience in global semiconductor supply chains so that we do not find ourselves one year, two years, or five years in the future as reliant and dependent on foreign sources as we are today.
Rhett Buttle: What provisions in the Bipartisan Innovation Act are you most excited about and what would you say it means for small business and entrepreneurs?
Brian Deese: One of the unique lifebloods of American innovation has been the willingness of the public sector to lay the foundation by investing in research and development of that research so that you can create ecosystems with innovation around which small businesses and innovators can thrive. That has been the story of success and innovation in the United States in the past and at the core, this bill is designed to create that kind of innovative capacity and importantly, to do so all across America. One of the important parts of this legislation is not only that it would make historic levels of public investment in building semiconductor capability here in the United States, but also that it would invest in research all across the country. There are also explicit requirements for large companies that are receiving government support. For example, to build a semiconductor fabrication facility, a company must make commitments to source inputs from small businesses and suppliers in their communities and build an innovation workforce around the kind of research and supplies they will need in a way that is equitable.
Rhett Buttle: Recently, the Administration rolled out a workforce announcement and the President has expressed his support for the prescription drug legislation — how do these items fit into the broader economic agenda with the Bipartisan Innovation Act as the Administration that has stated its commitment to lowering costs for working families and small businesses?
Brian Deese: If you look at what we’re prioritizing in terms of working with Congress to try to get done and share the common theme of trying to lower costs that consumers are facing while increasing the productive capacity of our economy, the first is incredibly important because we need to provide some immediate relief to consumers. The second is equally important because building more supply and capacity in our economy is going to help ease price pressures over the long term and make us more innovative. The CHIPS Bill fits squarely into that category, but so does allowing or requiring Medicare to negotiate better prices for prescription drugs because when we do that, we not only reduce the costs to consumers for whom prescription drugs can make up a significant portion of their monthly budget, but we also reduce the cost to the federal government. By reducing federal spending, we’re reducing the deficit as well. While the issues of prescription drugs and semiconductors are very distinct, they share that common theme of “What can we do today to lower costs for consumers, and increase the productive capacity of our economy?”
Rhett Buttle: Is there anything else that you would like to add?
Brian Deese: Even for businesses that are not directly affected because they’re not producers or consumers of semiconductors, I think that it’s important that they recognize the significance of this legislation. By passing this legislation, what we will demonstrate is that as a country, we are actually capable of taking on a big national challenge of rebuilding our own domestic resilience in an area of acute economic and national security. That will send a broader signal about the U.S. investment climate because we are in a moment where the question of whether democracies can actually deliver for their citizens, an issue that the president has raised consistently, has an impact on investment decisions for firms around the world. One of the most hopeful things that we’re seeing in the economy today is that because President Biden has prioritized having an industrial strategy for the country, we’re seeing record amounts of inbound investment in the United States to build, manufacture, and employ. I think that this legislation will have a more significant impact on sending a signal about where America intends to lead on innovation, even beyond the increased supply of semiconductors and the impact that will have on our economy and our competitiveness in price.