It makes me laugh that this Axios piece frames the likely outcome of the standoff over the bill, a.k.a. USICA, as a looming victory for Democrats rather than for McConnell.

I bet it makes him laugh harder.

In case you missed last week’s post, here’s the tweet that started it all:

Let me be perfectly clear: there will be no bipartisan USICA as long as Democrats are pursuing a partisan reconciliation bill.

— Leader McConnell (@LeaderMcConnell) June 30, 2022

USICA is aimed at reducing China’s economic leverage by infusing certain American industries with cash, most notably the semiconductor industry. Semiconductors make the world go ’round and China, a hostile power, is responsible for an increasingly large share of global production — and will be responsible for even more if and when they conquer Taiwan. High time for Uncle Sam to build out our own domestic capacity, then. There’s $52 billion in the bill for semiconductor manufacturing, with companies like Intel standing by to open new factories. All that needs to happen is for the legislation to pass. Or rather, for compromise legislation to pass: The House and Senate each passed their own versions of USICA and have spent the past few months trying to reconcile them, albeit with only “modest” progress.

But there was McConnell last week, suddenly insisting that no compromise will get 60 votes in the Senate unless Democrats ditch the new “Build Back Manchin” reconciliation bill they’re working on to try to lower prescription drug costs.

Which is risky. Ideally Dems would blink and cancel the reconciliation package, opting to pass USICA with Republican help instead, but if they caved that shamelessly their base would give them hell. Plus, lowering prescription drug costs is popular. Why would they abandon a popular bill that had earned the coveted Joe Manchin seal of approval when they could pass it, take the credit, and blame McConnell and the GOP for tanking *another* popular bill instead?

McConnell is no fool, though. He recognized that taking USICA as a “hostage” would have upsides for Republicans no matter what Democrats ended up doing. Three options:

1. Dems could try to pass USICA themselves by folding it into the reconciliation bill, but (a) that might not pass procedural muster with the Senate parliamentarian and (b) it would screw up the delicate revenue/expenditure balance that reconciliation requires of legislation.

2. They could pass reconciliation and give up on USICA, leaving Republicans free to write their own version of the legislation next year when they’re likely to have majorities on both chambers.

3. They could give up on the House version of USICA and pass the Senate version of the bill — which has Republican support — instead.

No matter which door Dems choose, it’s likely that the eventual USICA bill ends up reflecting Senate Republicans’ preferences more so than those of Nancy Pelosi and House Democrats.

According to Axios, House Dems are looking at door number three, which would mean giving up on their own bill and passing the one supported by the Senate GOP. “Some key House Democrats think they’ve found a clever way to break Senate Republican Leader Mitch McConnell’s stranglehold on a popular bill to massively fund the U.S. chip industry at the expense of China,” the piece begins. If lefties think throwing McConnell into the briar patch that way is “clever,” I’d hate to see what they consider stupid. If they end up adopting the Senate version of USICA, it’ll amount to McConnell having taken the House version hostage — and then watching as Dems shot that hostage.

The potential countermove is to bring the Senate-passed China bill to the House floor for an up-or-down vote and deprive McConnell of his hostage.

The downside is the Senate would get its own legislation to the president’s desk without the provisions House Democrats are fighting for…

But not all have embraced the strategy: “The original Senate USICA bill simply has too many fundamental problems to get to 218 votes in the House,” a House Democratic leadership aide told Axios.

House Dems could simply refuse to pass the Senate version and hope that voters will blame McConnell for the failure of the legislation, but I don’t see many votes are changing this fall based on USICA — particularly once Republicans start vowing to pass a much more aggressively anti-China version of the bill next year if only voters will empower them to do so. In a better electoral environment for Dems, they might be willing to call the GOP’s bluff. But in the current environment, it’s a mortal lock that Republicans really will soon have more leverage over the legislation than they do now.

Which means, for Dems, the choice is effectively between a version of the bill that was supported by Senate Democrats and a version that’ll be written by Republicans six months from now. Not so “clever.”

The White House is insisting that it won’t treat Build Back Manchin and USICA as an either/or, no matter how much McConnell insists upon it, but unless they can figure out a way to shoehorn both bills into reconciliation they have few options. Chuck Schumer’s leverage on getting USICA through is so thin that he’s reportedly planning to try to guilt-trip Republicans into supporting a compromise bill, McConnell’s threats notwithstanding:

According to a spokesperson, Schumer has “requested an all-Senators classified briefing from the administration on the global innovation and technology race” and USICA. The briefing is scheduled for next Wednesday.

“If we don’t pass USICA right this instant, China’s competitive edge will become a permanent national security crisis.” That’s the message Dems are going for. To which Republicans will respond, “We’ll pass it in six months.” What do Biden and Schumer say in response?

There may be another option on the table, a “skinny” version of USICA that addresses the semiconductor issue but jettisons other provisions. Which also sounds like a win for Republicans if it happens:

If you talk to lawmakers close to the process, they privately acknowledge that the odds are pretty steep that a compromise can be found on a broader USICA bill. Party leaders have made only modest progress during the last two months. And we emphasize modest.

So what can they get done? Inside the Biden administration and on Capitol Hill, some Democrats and Republicans tell us that they’d settle for $52 billion in financial support for U.S. semiconductor manufacturers as a base package, stripping away other provisions such as boosting the National Science Foundation or responding to trade and climate change concerns. But can Congress pass an expensive package to benefit profitable semiconductor companies just before an election? There’s opposition from the right and left to any new government subsidies.

I don’t know about the left, but I suspect the populist-nationalist right is okay with subsidies designed to ignite American manufacturing, particularly within an essential industry that would reduce Chinese leverage over U.S. supply chains. Maybe McConnell and the Senate GOP will agree to that money, not wanting to make things too easy politically for Democrats who’ll otherwise accuse them of “siding with China” by refusing to agree to any version of USICA. After all, if there’s other stuff Republicans want in the bill, they can just write their own legislation next year.