Presidential Election Overshadows Efforts of the White House and Congress

Estimated reading time: 4 minutes

While the national political news is focused almost solely on who will be in the White House come January 20, 2017, it’s easy to forget our current President and the Members of Congress still have priorities they are working on right now. The annual Congressional August Recess has come to an end, and lawmakers return to Washington, D.C. with a laundry list of items they either want to pass, or must pass before the clock strikes midnight on December 31.  All members of the House and a third of the Senate are also on the ballot on November 8, so they’ll be working under a tight schedule while worrying about their own electoral consequences.

Foreign Trade is the lifeblood of most SEMI Americas members, with the average member exporting over 70 percent of what they make in the U.S. to other countries. With this in mind, SEMI puts a high priority on lowering barriers to trade for all of its members around the globe.  The U.S. Congress took a big step in facilitating future trade agreements with it passed Trade Promotion Authority in May 2015, in order to set up a vote on the TransPacific Partnership (TPP).  This 12-member nation agreement represents 40 percent of the world’s GDP and will create a strong Pacific Rim based trade alliance that sets new, higher standards for the protection of intellectual property in addition to reducing tariffs and non-tariff barriers.

TPP has been a priority of the Obama Administration and as his time winds down, President Obama has been stepping up on calling for action on the agreement by the end of the year.  Unfortunately, both Hillary Clinton and Donald Trump have said that they oppose the deal, which means that passage of the act prior to a new administration becomes all the more important. While some Congressional leaders have recently said that the agreement won’t be considered before the end of the year, this may be a case of election year theatrics that are resolved after November 8, leaving a small window for action before the end of the year.  As such SEMI is working with other industry partners to meet with Members of Congress in the coming days to push for consideration of the agreement as soon as possible.

The issue of corporate taxes is high on the list of many SEMI member companies’ priorities.  The remainder of the calendar year won’t allow for any action on major tax reform, but there is a narrow window through which some smaller reform may happen. Congress took a major step in supporting U.S. manufacturing and innovation on December 18, 2015 by voting to make the federal Research and Development (R&D) tax credit permanent. However, in doing so they supported an inequity in the rates between the more complicated “regular” calculation, and the Alternative Simplified Credit (ASC).  While both methods allowed for the tax credit for certain R&D expenses, they are calculated at different rates; 20 percent for the regular credit and 14 percent for the ASC.

To fix this, SEMI is now working to bring parity to this law by supporting H.R. 5871, the Research and Experimentation Advances Competitiveness at Home (REACH) Act. The REACH Act would bring the ASC up to the same 20 percent level as the regular credit. There is optimism in Washington that another year-end tax deal can be struck before the end of 2016.  This presents a great opportunity to amend the previously agreed to permanent R&D tax credit and bring the ASC up to the same level as the regular R&D tax credit. SEMI will continue to work with its members and other like-minded industries to push for such an outcome before the year’s end.

Meanwhile, the federal government’s fiscal year ends on September 30, 2016 and so the absolutely must-pass bills in the coming month are the annual appropriations bills.  Because of the short time frame left to consider those bills prior to the elections, the most likely scenario is a short term “continuing resolution” that will flat fund the government until after the November 8 elections, and possibly into 2017 for the next Congress to consider.  As it pertains to the government funding streams for basic research that most concerns SEMI members, the National Science Foundation (NSF) and the National Institutes of Standards & Technology (NIST), flat funding may be the lesser of two evils as the House of Representatives has proposed cutting both of the accounts by 0.8 percent and 9.1 percent, respectively.  These agencies fare slightly better with increases in bills proposed by the Senate with a 0.6 percent increase at NSF and 2.7 percent at NIST.

In addition, SEMI supports federal funding for the National Network for Manufacturing Innovation (NNMI) which works to bridge the gap between basic research and commercialization with institutes like NextFlex, the Flexible Hybrid Electronics institute, in Silicon Valley. The program works to bring together public-private partnerships in a precompetitive environment to overcome common challenges to innovation in certain technologies. While the program is authorized to get $300 million over five years, it is woefully underfunded in both the House and Senate funding bills at $5 million and $25 million respectively. SEMI is working with key partners to ensure there is adequate funding for the centers that have already been stood up, and for future centers to be proposed.

So, while Donald and Hillary plan for the next four years, SEMI is working in Washington on the more immediate needs of our members.   Many of these issues won’t be resolved before the end of the year, and will take continued advocacy on the part of SEMI and its members as a new Congress starts in January, closely followed by the inauguration of a new President.  With both institutions starting anew, they’ll be new issues to consider and much education about our industry to be done.