with Aaron Schaffer

The Senate yesterday passed a major bill to address U.S. competitiveness with China, which would allocate billions to technology research and the semiconductor industry. 

Lawmakers adopted the U.S. Innovation and Competition Act on a rare bipartisan, 68-to-32 vote that signaled lawmakers from both parties are willing to work together to address China's rising technological prowess, even in a bitterly divided Capitol. The action comes after U.S. tech executives have repeatedly warned lawmakers of the rising competitive threat from China and called for greater federal investment in researching artificial intelligence and other emerging technologies. 

“I have watched China take advantage of us in ways legal and illegal over the years,” Senate Majority Leader Charles E. Schumer (D-N.Y.), the lead author of the bill, told my colleague Tony Romm in an interview before its passage. “The number one thing China was doing to take advantage of us … was investing heavily in research and science. And if we didn’t do something about it, they would become the number one economy in the world.”

The wide-ranging $250 billion package could have significant implications for tech companies. 

Silicon Valley is rapidly transforming amid the pandemic. The proposed funding could help address some of the challenges the industry has faced, and accelerate the spread of tech investment beyond the Bay Area. The legislation would:

  • Invest more than $50 billion in chip manufacturing. Many companies currently source semiconductors from China, and this bill could be a boon to U.S. semiconductor companies. The funding comes as a global chip shortage is vexing U.S. businesses, from automakers to dog washers. The shortage was caused by soaring demand, coupled with disruptions in the supply chain related to the pandemic.
  • Create a new Directorate of Technology and Innovation at the National Science Foundation. The directorate will focus on funding research in artificial intelligence and quantum science. The funding could address long-running concerns in the tech industry about the lack of U.S. government investment in emerging technologies. 
  • Create a regional tech hub program. The legislation authorizes $10 billion in funding to ensure that U.S. tech development and research is disbursed throughout the country, and not just concentrated in a handful of coastal cities. The funding comes as tech companies and workers are grappling with the future of work, and in some instances, considering moving to smaller cities outside major tech hubs like San Francisco and Seattle. 
  • Add $10 billion for a lunar landing program. The bill seeks to boost funding for space exploration, increasingly a focus of China. But some lawmakers raised concerns about the potential for the bill to benefit Blue Origin, the space company founded by Amazon founder Jeff Bezos, who owns The Washington Post. Sen. Bernie Sanders (I-Vt.) sought to remove the funding, calling it a “Bezos bailout.” But the funding was included in the final version of the bill.
  • Update merger filing fees to increase funding for antitrust regulators. In the scramble to pass the massive package, many provisions were added. Among them was Sen. Amy Klobuchar (D-Minn.) and Sen. Charles E. Grassley's (R-Iowa) bill to ensure larger companies are paying more in filing fees amid concerns that federal antitrust enforcers don't have the resources they need to take on large tech companies. Klobuchar praised the Senate vote in a statement, saying “the Federal Trade Commission and Department of Justice’s Antitrust Division are one step closer to having additional resources to conduct rigorous reviews of large mergers.”
Semiconductor companies widely praised the bill's passage. 

Yet some tech groups raised concerns about late amendments to the bill. 

“We are encouraged that the Senate has made U.S. competitiveness and technological innovation a priority with an emphasis on AI and other emerging and critical technologies,” Computer & Communications Industry Association vice president of public policy Arthur D. Sidney said in a statement. “However, late amendments to this critical bill may prove unworkable or counterproductive for U.S. industry.” 

The bill will now move to the House. 

Its future there is uncertain as some Democrats have raised early concerns. President Biden praised the Senate's passage of the bill in a statement, and he said his administration would work with House lawmakers to ensure the legislation quickly comes to his desk. 

“We are in a competition to win the 21st century, and the starting gun has gone off,” Biden said in a statement. “As other countries continue to invest in their own research and development, we cannot risk falling behind.  America must maintain its position as the most innovative and productive nation on Earth.”

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Some tech CEOs have paid relatively little in U.S. income taxes.

Bezos, Tesla CEO Elon Musk and other extremely wealthy Americans have paid little in income taxes to the U.S. government in recent years despite soaring incomes, according to confidential Internal Revenue Service data obtained by ProPublica. The data reveals how the wealthiest Americans have been able to legally reduce their tax burdens, Todd C. Frankel and Douglas MacMillan write.

In 2011, Bezos reported losing money because of bad investments in a tax filing, allowing him to get a $4,000 tax credit for his children, according to ProPublica. Spokespeople for Musk and Bezos did not immediately respond to requests for comment.

Ohio’s attorney general asked a judge to call Google a common carrier and public utility.

The lawsuit from Ohio Republican Attorney General Dave Yost (R) aims to prevent the tech giant from giving its own products and services priority over competing services. It adds to the company's legal troubles, as it's already a target of multiple federal and state antitrust lawsuits. 

“Google uses its dominance of Internet search to steer Ohioans to Google’s own products — that's discriminatory and anti-competitive,” Yost said. “When you own the railroad or the electric company or the cellphone tower, you have to treat everyone the same and give everybody access.

The suit cites Supreme Court Justice Clarence Thomas, who earlier this year called for lawmakers to regulate major technology companies like utilities in a dissenting opinion. 

“Yost's lawsuit would make Google Search results worse and make it harder for small businesses to connect directly with customers,” Google spokesman Peter Schottenfels said. “Ohioans simply don't want the government to run Google like a gas or electric company. This lawsuit has no basis in fact or law and we'll defend ourselves against it in court.”

Criminals worldwide used special smartphones to communicate. The FBI was listening.
U.S. and Australian police created an app used by criminals to read millions of encrypted messages leading to hundreds of arrests, officials said on June 8. (Reuters)

The FBI secretly loaded the phones with software called Anom, which allowed them to see the criminals’ conversations for years, Rachel Pannett and Michael Birnbaum write. Law enforcement officials, some of whom could barely contain their excitement, said more than 800 people were arrested as a result, giving law enforcement agencies an unprecedented look into how criminal networks operate.

The effort was “one of the largest and most sophisticated law enforcement operations to date in the fight against encrypted criminal activities,” Jean-Philippe Lecouffe, the deputy executive director for operations of Europol, said. Despite the messages’ encryption, they were also sent directly to law enforcement agents.

Rant and rave

A massive Internet outage left people to vent on Twitter. Corellium chief operating officer Matt Tait:

Factal editorial development manager David Wyllie:

Writer Shauna Wright:

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Daybook

  • Makan Delrahim and Douglas Melamad, who served as Assistant Attorneys General of the Justice Department’s Antitrust Division, speak at a leadershIP event with former acting FTC chair Maureen Ohlhausen today at noon.
  • Sen. Amy Klobuchar (D-Minn.), who chairs the Senate Judiciary Committee’s antitrust subcommittee, and Sen. Marsha Blackburn (R-Tenn.) speak at an FCBA event today at 4 p.m.
  • Google data governance director Kate Charlet and others debate federal privacy legislation at an R Street Institute event on Thursday at 2 p.m.

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