What to Know in Washington: Subsidy Wars Heat Up

President Joe Biden’s sweeping new industrial policy in the US is changing the calculus and upending the plans of governments and businesses across the world. How it plays out may determine not just Biden’s electoral fate but that of political leaders around the globe.

Locked in a fight with China for global dominance, the White House is pouring subsidies into local manufacturing via landmark measures including last year’s Inflation Reduction Act. The goal is to entrench US leadership in industries of the future like clean energy and semiconductors, and create well-paying jobs at home. The effect has been to kickstart a global contest that’s straining alliances and channeling unprecedented amounts of public cash into private industry.

The US defense of its new policy direction is clear-cut: If there’s a subsidy war under way then China started it, and America’s allies should all share an interest in pushing back against Beijing. The Biden administration is working “to harmonize these clean energy incentives with partners around the world,” the White House said in a July report.

In Canada, a standoff over subsidies left automaker Stellantis threatening to build its plant in the US instead. The company, which owns Chrysler and Jeep, said it needed a “level playing field” to bring down the cost of EVs and compete with other automakers getting IRA-sized money. And it was potentially eligible for US tax credits worth almost 20 times what Canada was offering.

But losing the factory would have been disastrous for Prime Minister Justin Trudeau’s government, which saw the project as crucial for Canada to keep its share of the North American auto industry — not to mention thousands of jobs, including at suppliers of materials and parts.
After initially balking at the fiscal cost, Ottawa relented and agreed to an additional package worth up to C$15 billion, the largest in national history for a single factory. Trudeau’s ministers were left to wonder how many more such deals the country could afford — a question that’s been top of mind ever since the US legislation passed last August. At one budget update, a top official called the IRA a “black hole sucking investment into the United States.” Read more from Brian Platt.

BIDEN’S AGENDA

• There are no public events on Biden’s schedule.
• Press Secretary Karine Jean-Pierre will deliver a briefing at 1 p.m.

CONGRESS’ SCHEDULE

• The House is back at noon to take up it’s first spending bill of the year on the floor.
• The Senate returns at 10 a.m. to resume debate on the defense policy bill.

More Happening on the Hill

Senate Votes to Target China Investments Via Defense Bill

The Senate attached a measure to the annual defense policy bill that would subject some US investments in China to new requirements, complementing restrictions being weighed by the Biden administration amid increased concern in Washington over China’s development of advanced technology.

• Continuing the pressure on China, a bipartisan group of lawmakers introduced legislation Tuesday calling on the US to use its influence at a key development bank for Latin America to reduce China’s sway in the region. Read more.
• Italian Prime Minister Giorgia Meloni is looking to build up a relationship with Biden by pledging to break with China and plans to brief him in person Thursday on the delicate choreography of that split. Read more.

Anthropic CEO Warns Senators of AI-Powered Bio-weapons

Anthropic CEO Dario Amodei warned senators Tuesday that AI is much closer than anticipated to overtaking human intelligence and even helping to produce weapons of mass destruction.

Manchin Urges Faster Power Line Approval

Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.) will push to speed the approval process for high-voltage power lines during a hearing today as he takes another run at pushing a broad permitting reform plan through Congress.

• Language in last year’s historic Democratic climate law linking clean energy and fossil fuel development on public lands would be repealed under legislation being unveiled today by Reps. Alexandria Ocasio-Cortez (D-N.Y.) — the top Democrat on the House Natural Resources energy and minerals panel — Deborah Ross (D-N.C.), and Sydney Kamlager-Dove (D-Calif.). The bills seek to eliminate provisions in the Inflation Reduction Act secured by Manchin. Read more.

Congress Ignoring Environmental Policy Ideas Worth Billions

Congressional inaction is preventing the nation from reaping billions of dollars in financial and social benefits across a broad spectrum of issues, including dozens of dormant environmental and energy policy ideas, the Government Accountability Office said on Tuesday.

Health Plans Cited by Biden Report Over Mental Health Coverage

A Biden administration report to Congress for the first time names health insurance plans it says are failing to meet the requirements of a landmark mental health law, but it also includes examples of how plans have corrected deficiencies.

What Else We’re Reading

Biden Administration Appeals After Judge Rejects Asylum Rule

The Biden administration is challenging a federal court’s decision on Tuesday to vacate its asylum rule, which tried to curb unlawful entries into the US by presuming certain groups of unauthorized migrants ineligible for asylum.

Democrats Ready to Rush to Court When Swing State’s Power Shifts

Democrats are putting the finishing touches on a legal challenge crafted to exploit a change of political viewpoints on Wisconsin’s highest court. If they succeed, they’ll gain a fighting shot at two more congressional seats and perhaps pull a key swing state from the brink of a Republican legislative super-majority.

Tentative UPS, Teamsters Deal Earns Biden’s Support

UPS reached a tentative agreement to renew a five-year labor contract with the Teamsters union, staving off a possible strike as soon as next week that could have paralyzed shipments throughout the US and beyond. The tentative pact garnered support from Biden, who said it “moves us closer to a better deal for workers that will also add to our economic momentum.”

To contact the reporter on this story: Brandon Lee in Washington at blee@bgov.com

To contact the editor responsible for this story: Kayla Sharpe at ksharpe@bloombergindustry.com