BOSTON — The Healey administration is pumping an additional $250 million into the state-subsidized health care system to help offset the impact of now expired federal tax credits, which have driven up premiums for many people insured through the federal health care exchange.
On Thursday, Gov. Maura Healey and other state officials said they are moving ahead with plans to increase spending on the ConnectorCare program by $250 million, for a total of $600 million this fiscal year.
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WASHINGTON — Four House Republicans broke with party leadership on Wednesday to join Democrats in overriding the GOP majority and forcing a vote on extending healthcare tax credits — a defection that underscores the party’s growing vulnerability on economic issues ahead of next year’s midterm elections.
The healthcare tax credits, which were central to the fight that led to the longest government shutdown in U.S. history, are set to expire at the end of the year unless Congress takes action.
Democrats, and a small but increasingly vocal group of Republicans, warned that allowing the tax credits to lapse would lead to sharp healthcare premium increases for millions of Americans, which could prove a politically perilous outcome in competitive districts.
House Republicans, including Speaker Mike Johnson (R-La.), have resisted extending the tax credits, arguing instead for an alternative approach to lowering healthcare costs. But that stance on Wednesday showed that they were at odds with members who say the issue would hurt constituents.
“I’m pissed for the American people,” Rep. Mike Lawler (R-N.Y.) told reporters.
His remarks came after he joined Republican Reps. Brian Fitzpatrick, Robert Bresnahan and Ryan Mackenzie, all from Pennsylvania, in signing a Democrat-led petition that needed 218 signatures to force a floor vote on a bill to extend the healthcare subsidies for three years. The four Republicans were the final votes needed.
California Rep. Kevin Kiley (R-Rocklin), who represents a swing district, was not among the Republicans to sign the petition, but he told reporters it is important for leadership to take up the matter sooner than later. Otherwise, he said, it would be a “failure of leadership.”
“We have members on both sides who believe this is an urgent issue and it is for all of our members in terms of what their constituents are going to have to deal with at the end of the year,” Kiley said. “So, what is wrong with having a vote?”
Californians are bracing for monthly premiums on the Covered California exchange — a state portal for Obamacare coverage — to soar by 97% on average for 2026. Open enrollment for the coming year runs until Jan. 31.
Even if the subsidies remained intact, premiums for plans offered by Covered California were set to rise by roughly 10% for 2026, due to spikes in drug prices and other medical services, experts said. But a failure to address the lapsing credits is expected to result in sticker shock across the state and the country. Nearly six in 10 Americans who use the ACA marketplace live in Republican districts.
A vote on the House measure is expected in January, after the subsidies have already expired. Even if the House effort succeeds, its prospects remain dim in the Senate, where Republicans last week blocked a three-year extension.
Senate Majority Leader John Thune (R-S.D.) has argued against the Democratic extension as “an attempt to disguise the real impact of Obamacare’s spiraling healthcare costs.”
On Wednesday, after the petition gained enough votes in the House, Thune told reporters the chamber will “cross that bridge when it comes to it.”
The push in the House underscored a breakdown in Johnson’s control of the chamber as well as the deep divisions among GOP lawmakers on how to address healthcare costs, which polling consistently ranks as a top concern among voters.
The small rebellion against Johnson came after tensions emerged on healthcare talks in the chamber.
Johnson had discussed allowing more politically vulnerable GOP lawmakers a chance to vote on bills that would temporarily extend the subsidies while also adding changes such as income caps for beneficiaries.
But after days of discussions, the leadership sided with the more conservative wing of the party’s conference, which has assailed the subsidies as propping up a failed marketplace through the ACA, which is widely known as Obamacare.
House Republicans pushed forward Wednesday a 100-plus-page healthcare package without the subsidies, instead focusing on long-sought GOP proposals designed to expand insurance coverage options for small businesses and the self-employed.
Fitzpatrick and Lawler tried to add a temporary extension of the subsidies to the bill, but were denied.
“Our only request was a floor vote on this compromise, so that the American People’s voice could be heard on this issue. That request was rejected. Then, at the request of House leadership I, along with my colleagues, filed multiple amendments, and testified at length to those amendments,” Fitzpatrick said. “House leadership then decided to reject every single one of these amendments.”
After the four Republicans broke with him on Wednesday, Johnson pushed back against the notion that the episode shows he is losing influence over the chamber.
“I have not lost control of the House,” Johnson said. He instead pointed to a “razor thin margin” in the chamber, which he says allows a few defectors to circumvent leadership.
“These are not normal times,” he added.
This article includes reporting from the Associated Press.
TAHLEQUAH – The president announced on Dec. 8, that the U.S. Department of Agriculture will make $12 billion available to farmers in a one-time bridge payment to farmers, to be released by Feb. 28, 2026.
President Donald J. Trump, along with U.S. Secretary of Agriculture Brooke L. Rollins, announced the payments in response to temporary trade market disruptions and increased production costs.
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TAHLEQUAH – The president announced on Dec. 8, that the U.S. Department of Agriculture will make $12 billion available to farmers in a one-time bridge payment to farmers, to be released by Feb. 28, 2026.
President Donald J. Trump, along with U.S. Secretary of Agriculture Brooke L. Rollins, announced the payments in response to temporary trade market disruptions and increased production costs.
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TAHLEQUAH – The president announced on Dec. 8, that the U.S. Department of Agriculture will make $12 billion available to farmers in a one-time bridge payment to farmers, to be released by Feb. 28, 2026.
President Donald J. Trump, along with U.S. Secretary of Agriculture Brooke L. Rollins, announced the payments in response to temporary trade market disruptions and increased production costs.
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President Donald Trump signed a government funding bill Wednesday night, ending a record 43-day shutdown that caused financial stress for federal workers who went without paychecks, stranded scores of travelers at airports and generated long lines at some food banks.The shutdown magnified partisan divisions in Washington as Trump took unprecedented unilateral actions — including canceling projects and trying to fire federal workers — to pressure Democrats into relenting on their demands.The Republican president blamed the situation on Democrats and suggested voters shouldn’t reward the party during next year’s midterm elections.“So I just want to tell the American people, you should not forget this,” Trump said. “When we come up to midterms and other things, don’t forget what they’ve done to our country.”The signing ceremony came just hours after the House passed the measure on a mostly party-line vote of 222-209. The Senate had already passed the measure Monday.Democrats wanted to extend an enhanced tax credit expiring at the end of the year that lowers the cost of health coverage obtained through Affordable Care Act marketplaces. They refused to go along with a short-term spending bill that did not include that priority. But Republicans said that was a separate policy fight to be held at another time.“We told you 43 days ago from bitter experience that government shutdowns don’t work,” said Rep. Tom Cole, the Republican chairman of the House Appropriations Committee. “They never achieve the objective that you announce. And guess what? You haven’t achieved that objective yet, and you’re not going to.”The frustration and pressures generated by the shutdown were reflected when lawmakers debated the spending measure on the House floor.Republicans said Democrats sought to use the pain generated by the shutdown to prevail in a policy dispute.”They knew it would cause pain and they did it anyway,” House Speaker Mike Johnson said.Democrats said Republicans raced to pass tax breaks earlier this year that they say mostly will benefit the wealthy. But the bill before the House Wednesday “leaves families twisting in the wind with zero guarantee there will ever, ever be a vote to extend tax credits to help everyday people pay for their health care,” said Rep. Jim McGovern, D-Mass.Democratic leader Hakeem Jeffries said Democrats would not give up on the subsidy extension even if the vote did not go their way.”This fight is not over,” Jeffries said. “We’re just getting started.”The House had not been in legislative session since Sept. 19, when it passed a short-term measure to keep the government open when the new budget year began in October. Johnson sent lawmakers home after that vote and put the onus on the Senate to act, saying House Republicans had done their job.What’s in the bill to end the shutdownThe legislation is the result of a deal reached by eight senators who broke ranks with the Democrats after reaching the conclusion that Republicans would not bend on using a government funding to bill to extend the health care tax credits.The compromise funds three annual spending bills and extends the rest of government funding through Jan. 30. Republicans promised to hold a vote by mid-December to extend the health care subsidies, but there is no guarantee of success.The bill includes a reversal of the firing of federal workers by the Trump administration since the shutdown began. It also protects federal workers against further layoffs through January and guarantees they are paid once the shutdown is over. The bill for the Agriculture Department means people who rely on key food assistance programs will see those benefits funded without threat of interruption through the rest of the budget year.The package includes $203.5 million to boost security for lawmakers and an additional $28 million for the security of Supreme Court justices.Democrats also decried language in the bill that would give senators the opportunity to sue when a federal agency or employee searches their electronic records without notifying them, allowing for up to $500,000 in potential damages for each violation.The language seems aimed at helping Republican senators pursue damages if their phone records were analyzed by the FBI as part of an investigation into Trump’s efforts to overturn his 2020 election loss. The provisions drew criticism from Republicans as well. Johnson said he was “very angry about it.””That was dropped in at the last minute, and I did not appreciate that, nor did most of the House members,” Johnson said, promising a vote on the matter as early as next week.The biggest point of contention, though, was the fate of the expiring enhanced tax credit that makes health insurance more affordable through Affordable Care Act marketplaces.”It’s a subsidy on top of a subsidy. Our friends added it during COVID,” Cole said. “COVID is over. They set a date certain that the subsidies would run out. They chose the date.”Rep. Nancy Pelosi, D-Calif., said the enhanced tax credit was designed to give more people access to health care and no Republican voted for it.”All they have done is try to eliminate access to health care in our country. The country is catching on to them,” Pelosi said.Without the enhanced tax credit, premiums on average will more than double for millions of Americans. More than 2 million people would lose health insurance coverage altogether next year, the Congressional Budget Office projected.Health care debate aheadIt’s unclear whether the parties will find any common ground on health care before the December vote in the Senate. Johnson has said he will not commit to bringing it up in his chamber.Some Republicans have said they are open to extending the COVID-19 pandemic-era tax credits as premiums will soar for millions of people, but they also want new limits on who can receive the subsidies. Some argue that the tax dollars for the plans should be routed through individuals rather than go directly to insurance companies.Sen. Susan Collins, R-Maine, chair of the Senate Appropriations Committee, said Monday that she was supportive of extending the tax credits with changes, such as new income caps. Some Democrats have signaled they could be open to that idea.House Democrats expressed great skepticism that the Senate effort would lead to a breakthrough.Rep. Rosa DeLauro of Connecticut, the top Democrat on the House Appropriations Committee, said Republicans have wanted to repeal the health overhaul for the past 15 years. “That’s where they’re trying to go,” she said.When could things return to normal?While the shutdown will end tonight, the return to pre-shutdown status will not be immediate. Air travel is expected to experience lingering impacts, as the transportation secretary noted that the speed of recovery will depend on how quickly air traffic controllers return to work, with many having retired during the shutdown. The FAA administrator stated that air traffic controllers will receive their full back pay within a week, but it remains unclear how quickly other federal workers will be compensated. In previous shutdowns, it took up to eight weeks for some workers to receive back pay.Regarding SNAP benefits, the American Public Human Services Association anticipates that most states will issue full benefits within three days after the shutdown ends, though some states may take about a week due to complications from issuing partial benefits during the shutdown. The Small Business Administration has indicated that once the government reopens, it will immediately begin processing and approving loans for small businesses. ___Associated Press writer Mary Clare Jalonick contributed to this report.
WASHINGTON —
President Donald Trump signed a government funding bill Wednesday night, ending a record 43-day shutdown that caused financial stress for federal workers who went without paychecks, stranded scores of travelers at airports and generated long lines at some food banks.
The shutdown magnified partisan divisions in Washington as Trump took unprecedented unilateral actions — including canceling projects and trying to fire federal workers — to pressure Democrats into relenting on their demands.
The Republican president blamed the situation on Democrats and suggested voters shouldn’t reward the party during next year’s midterm elections.
“So I just want to tell the American people, you should not forget this,” Trump said. “When we come up to midterms and other things, don’t forget what they’ve done to our country.”
The signing ceremony came just hours after the House passed the measure on a mostly party-line vote of 222-209. The Senate had already passed the measure Monday.
Democrats wanted to extend an enhanced tax credit expiring at the end of the year that lowers the cost of health coverage obtained through Affordable Care Act marketplaces. They refused to go along with a short-term spending bill that did not include that priority. But Republicans said that was a separate policy fight to be held at another time.
“We told you 43 days ago from bitter experience that government shutdowns don’t work,” said Rep. Tom Cole, the Republican chairman of the House Appropriations Committee. “They never achieve the objective that you announce. And guess what? You haven’t achieved that objective yet, and you’re not going to.”
The frustration and pressures generated by the shutdown were reflected when lawmakers debated the spending measure on the House floor.
Republicans said Democrats sought to use the pain generated by the shutdown to prevail in a policy dispute.
“They knew it would cause pain and they did it anyway,” House Speaker Mike Johnson said.
Democrats said Republicans raced to pass tax breaks earlier this year that they say mostly will benefit the wealthy. But the bill before the House Wednesday “leaves families twisting in the wind with zero guarantee there will ever, ever be a vote to extend tax credits to help everyday people pay for their health care,” said Rep. Jim McGovern, D-Mass.
Democratic leader Hakeem Jeffries said Democrats would not give up on the subsidy extension even if the vote did not go their way.
“This fight is not over,” Jeffries said. “We’re just getting started.”
The House had not been in legislative session since Sept. 19, when it passed a short-term measure to keep the government open when the new budget year began in October. Johnson sent lawmakers home after that vote and put the onus on the Senate to act, saying House Republicans had done their job.
What’s in the bill to end the shutdown
The legislation is the result of a deal reached by eight senators who broke ranks with the Democrats after reaching the conclusion that Republicans would not bend on using a government funding to bill to extend the health care tax credits.
The compromise funds three annual spending bills and extends the rest of government funding through Jan. 30. Republicans promised to hold a vote by mid-December to extend the health care subsidies, but there is no guarantee of success.
The bill includes a reversal of the firing of federal workers by the Trump administration since the shutdown began. It also protects federal workers against further layoffs through January and guarantees they are paid once the shutdown is over. The bill for the Agriculture Department means people who rely on key food assistance programs will see those benefits funded without threat of interruption through the rest of the budget year.
The package includes $203.5 million to boost security for lawmakers and an additional $28 million for the security of Supreme Court justices.
Democrats also decried language in the bill that would give senators the opportunity to sue when a federal agency or employee searches their electronic records without notifying them, allowing for up to $500,000 in potential damages for each violation.
The language seems aimed at helping Republican senators pursue damages if their phone records were analyzed by the FBI as part of an investigation into Trump’s efforts to overturn his 2020 election loss. The provisions drew criticism from Republicans as well. Johnson said he was “very angry about it.”
“That was dropped in at the last minute, and I did not appreciate that, nor did most of the House members,” Johnson said, promising a vote on the matter as early as next week.
The biggest point of contention, though, was the fate of the expiring enhanced tax credit that makes health insurance more affordable through Affordable Care Act marketplaces.
“It’s a subsidy on top of a subsidy. Our friends added it during COVID,” Cole said. “COVID is over. They set a date certain that the subsidies would run out. They chose the date.”
Rep. Nancy Pelosi, D-Calif., said the enhanced tax credit was designed to give more people access to health care and no Republican voted for it.
“All they have done is try to eliminate access to health care in our country. The country is catching on to them,” Pelosi said.
Without the enhanced tax credit, premiums on average will more than double for millions of Americans. More than 2 million people would lose health insurance coverage altogether next year, the Congressional Budget Office projected.
Health care debate ahead
It’s unclear whether the parties will find any common ground on health care before the December vote in the Senate. Johnson has said he will not commit to bringing it up in his chamber.
Some Republicans have said they are open to extending the COVID-19 pandemic-era tax credits as premiums will soar for millions of people, but they also want new limits on who can receive the subsidies. Some argue that the tax dollars for the plans should be routed through individuals rather than go directly to insurance companies.
Sen. Susan Collins, R-Maine, chair of the Senate Appropriations Committee, said Monday that she was supportive of extending the tax credits with changes, such as new income caps. Some Democrats have signaled they could be open to that idea.
House Democrats expressed great skepticism that the Senate effort would lead to a breakthrough.
Rep. Rosa DeLauro of Connecticut, the top Democrat on the House Appropriations Committee, said Republicans have wanted to repeal the health overhaul for the past 15 years. “That’s where they’re trying to go,” she said.
The FAA administrator stated that air traffic controllers will receive their full back pay within a week, but it remains unclear how quickly other federal workers will be compensated. In previous shutdowns, it took up to eight weeks for some workers to receive back pay.
Regarding SNAP benefits, the American Public Human Services Association anticipates that most states will issue full benefits within three days after the shutdown ends, though some states may take about a week due to complications from issuing partial benefits during the shutdown.
The Small Business Administration has indicated that once the government reopens, it will immediately begin processing and approving loans for small businesses.
___
Associated Press writer Mary Clare Jalonick contributed to this report.
The expanded Affordable Care Act (ACA) subsidies, initially passed by Democrats in 2021 as part of pandemic relief legislation, are set to expire at the end of this year, potentially increasing health insurance costs for many Americans.FactCheck.org has looked into competing claims of who benefits from the subsidies. Democrats first passed the expanded ACA subsidies in 2021 as part of pandemic relief legislation, with the enhanced subsidies initially set to last for two years. They were later extended through the end of this year via additional legislation passed by Democrats. Under the ACA, subsidies are available for people who buy their own insurance on the marketplace and if they earn up to 400% above the federal poverty level. Those eligible for coverage also can’t be enrolled in Medicare or have employer-sponsored health care. For an individual, this threshold is $62,000 annually, $84,000 for a couple, and $128,000 for a family of four, according to FactCheck.org. When the ACA subsidies expanded in 2021, it increased the financial help enrollees could get and eliminated the 400% income cap. If the subsidies expire, there would be no tax credit anymore for people who make more than 400% of the federal poverty level.Health policy research organization KFF looked at the changes families could see with the expiring ACA subsidies. According to FactCheck.org, premiums are based on income, and currently, people are paying up to 8.5% of their income for health insurance. If the subsidies expire, people would pay more for their premiums, from 2% to 10% of their income.For example, an individual who makes $35,000 is currently paying 3% of their income towards their health premium. If the subsidies expire, they would pay 7.5% of their income towards insurance, which would be a $1,500 increase. For a family of four earning $90,000 a year, they currently pay 5.2% of their income towards their health premium. If the subsidies expire, it would jump to 9.4%, resulting in a $3,700 increase. Prices could vary depending on age, income, family size, and location.Enrollment for health insurance through ACA has more than doubled since 2020, according to FactCheck.org. About 7% of the U.S. population, around 24 million people, enrolled this year, and the vast majority received subsidies. The Congressional Budget Office estimated 4.2 million people will not have health insurance in 2034 if the enhancement expires. They also estimate a permanent extension of these subsidies would cost nearly $350 billion over 10 years.See more coverage of top California stories here | Download our app | Subscribe to our morning newsletter | Find us on YouTube here and subscribe to our channel
The expanded Affordable Care Act (ACA) subsidies, initially passed by Democrats in 2021 as part of pandemic relief legislation, are set to expire at the end of this year, potentially increasing health insurance costs for many Americans.
Democrats first passed the expanded ACA subsidies in 2021 as part of pandemic relief legislation, with the enhanced subsidies initially set to last for two years.
They were later extended through the end of this year via additional legislation passed by Democrats.
Under the ACA, subsidies are available for people who buy their own insurance on the marketplace and if they earn up to 400% above the federal poverty level. Those eligible for coverage also can’t be enrolled in Medicare or have employer-sponsored health care.
For an individual, this threshold is $62,000 annually, $84,000 for a couple, and $128,000 for a family of four, according to FactCheck.org.
When the ACA subsidies expanded in 2021, it increased the financial help enrollees could get and eliminated the 400% income cap. If the subsidies expire, there would be no tax credit anymore for people who make more than 400% of the federal poverty level.
According to FactCheck.org, premiums are based on income, and currently, people are paying up to 8.5% of their income for health insurance. If the subsidies expire, people would pay more for their premiums, from 2% to 10% of their income.
For example, an individual who makes $35,000 is currently paying 3% of their income towards their health premium. If the subsidies expire, they would pay 7.5% of their income towards insurance, which would be a $1,500 increase. For a family of four earning $90,000 a year, they currently pay 5.2% of their income towards their health premium. If the subsidies expire, it would jump to 9.4%, resulting in a $3,700 increase. Prices could vary depending on age, income, family size, and location.
Enrollment for health insurance through ACA has more than doubled since 2020, according to FactCheck.org.
About 7% of the U.S. population, around 24 million people, enrolled this year, and the vast majority received subsidies.
The Congressional Budget Office estimated 4.2 million people will not have health insurance in 2034 if the enhancement expires.
They also estimate a permanent extension of these subsidies would cost nearly $350 billion over 10 years.
The so-called resistance party has given up the shutdown fight, ensuring that millions of Americans will face Republican-created skyrocketing healthcare costs, and millions more will bury any hope that the minority party will find the substance and leadership to run a viable defense against President Trump.
Sunday night, eight turncoat Democrats sold out every American who pays for their own health insurance through the affordable marketplaces set up by President Obama.
As has been thoroughly reported in past weeks, Republicans are dead set on making sure that insurance is entirely out of financial reach for many Americans by refusing to help them pay for the premiums with subsidies that are part of current law, offered to both low- and middle-income families.
Republicans — for reasons hard to fathom other than they hate Obama, and apparently basics such as flu shots — have long desired to kill the Affordable Care Act and now are on the brink of doing so, in spirit if not actuality, thanks to Democrats.
Trump must be doing his old-man jig in the Oval Office.
The pain this craven cave-in will cause is already evident. Rates for 2026 without the government subsidies have been announced, and premiums have doubled on average, according to nonpartisan health policy researcher KFF. Doubled.
Insurance companies are planning on raising their rates by about 18%, already devastating and symptomatic of the need for a total overhaul of our messed-up system. That increase, coupled with the loss of the subsidies beginning at the start of next year, means a 114% jump in costs for the folks dependent on this insurance. Premiums that cost on average $888 in 2025 will jump to $1,904 in 2026, according to KFF.
But it’s the middle-income people who will really be hit.
“On average, a 60-year-old couple making $85,000 … would see yearly premium payments rise by over $22,600 in 2026,” KFF warns, meaning that instead of paying 8.5% of their income toward health insurance, it will now jump to about 25%.
Merry Christmas, America.
Although the eight Democrats who broke from their party to allow this to happen are directly responsible (thankfully our California senators are not among them), Democratic leadership should also be held accountable.
A party that can’t keep itself together on the really big votes isn’t a party. It’s a bunch of people who occasionally have lunch together. Literally, they had one job: Stick together.
The failure of Democratic leadership to make sure its Senate votes didn’t shatter in this intense moment isn’t just shameful, it’s depressing. For all of the condemnation of the Republican members of Congress for failing to uphold their duty to be a check on the power of the presidency, here’s the opposition party rolling over belly up on the pivotal issue of healthcare.
As Rep. Ro Khanna (D-Fremont) put it on social media, “Senator Schumer is no longer effective and should be replaced. If you can’t lead the fight to stop healthcare premiums from skyrocketing for Americans, what will you fight for?”
If the recent elections had any lessons in them, it’s that Democrats — and voters in general — want courage. Love or hate Zohran Mamdani, his win as New York City mayor was due in no small part to his daring to forge his own path. Ditto on Gov. Gavin Newsom and Proposition 50.
Mamdani put that sentiment best in his victory speech, promising an age when people can “expect from their leaders a bold vision of what we will achieve, rather than a list of excuses for what we are too timid to attempt.”
Before you start angry-emailing me, yes, I do understand how much pain the shutdown in causing, especially for furloughed workers and people facing disruptions in their SNAP benefits. I feel for every person who doesn’t know how they will pay their bills.
But here are the facts that we can’t forget. Republicans have purposefully made that pain intense in order to break Democrats. Trump has found ways to pay his deportation agents, while simultaneously not paying critical workers such as airport screeners and air traffic controllers, where the chaos created by their absence is both visible and disruptive. He has also threatened to not give back pay to some of those folks when this does end.
And on the give-in-or-don’t-eat front, he’s actually been ordered by courts to pay those Supplemental Nutrition Assistance Program benefits and is fighting it. Republicans could easily band together and demand that money goes out while the rest is hashed out, but they don’t want to. They want people to go hungry so that Democrats will break, and it worked.
But at what cost?
About 24 million people will be hit by these premium increases, leaving up to 4 million unable to keep their insurance. Unable to go to the doctor for routine care. Unable to pay for cancer treatments. Unable to have that lump, that pain, the broken bone looked at. Unable to get their kid a flu shot.
In many ways, this isn’t a California problem. The majority of these folks are in Southern, Republican states that refused to expand Medicaid when they had the chance. About 6 in 10 subsidy recipients are represented by Republicans, according to KFF, led by those living in Florida, Georgia and Mississippi. But Americans have been clear that we want access to care for all of us, as a right, not an expensive privilege.
Which makes it all the more mystifying that Democrats are so eager to give up, on an issue that unites voters across parties, across demographics, across our seemingly endless divides.
The government shutdown has reached its 36th day, the longest in U.S. history, as President Donald Trump pressures Republicans to end the Senate filibuster in order to reopen the government.”It’s time for Republicans to do what they have to do, and that’s terminate the filibuster. It’s the only way you can do it,” Trump told senators Wednesday at the White House.The filibuster is a Senate rule that requires 60 votes to advance most legislation. Ending the filibuster would allow Republicans to pass a bill with a simple majority, but several Republicans warn that when Democrats are in power, they’d be able to do the same thing. Senate Majority Leader John Thune said after breakfast at the White House, “It’s just not happening.”The president also said the shutdown was a “big factor, negative” in Tuesday’s election results.”Countless public servants are now not being paid and the air traffic control system is under increasing strain. We must get the government back open soon and really immediately,” Trump said.The shutdown is hitting home for many Americans, with lines stretching at food banks across the country as SNAP benefits are delayed and reduced for more than 40 million Americans. After-school programs that depend on federal dollars are closing. The Transportation Secretary said, starting Friday, there will be a 10% reduction in flights at 40 airports across the country.Republicans have pushed to reopen the government with a short-term spending bill. Democrats have rejected those bills, arguing that Republicans are leaving out a key provision: restoring expiring Affordable Care Act subsidies that help millions of Americans lower their health-insurance costs. Democrats say passing a short-term bill without those subsidies would leave families facing sudden premium spikes.”The election results ought to send a much needed bolt of lightning to Donald Trump that he should meet with us to end this crisis,” said Senate Democratic leader Chuck Schumer of New York. “The American people have spoken last night. End the shutdown, end the healthcare crisis, sit down and talk with us.”Republicans have said they’re willing to negotiate ACA subsidies, but only after the shutdown is over.See more government shutdown coverage from the Washington News Bureau:
WASHINGTON —
The government shutdown has reached its 36th day, the longest in U.S. history, as President Donald Trump pressures Republicans to end the Senate filibuster in order to reopen the government.
The filibuster is a Senate rule that requires 60 votes to advance most legislation. Ending the filibuster would allow Republicans to pass a bill with a simple majority, but several Republicans warn that when Democrats are in power, they’d be able to do the same thing.
Senate Majority Leader John Thune said after breakfast at the White House, “It’s just not happening.”
“Countless public servants are now not being paid and the air traffic control system is under increasing strain. We must get the government back open soon and really immediately,” Trump said.
The shutdown is hitting home for many Americans, with lines stretching at food banks across the country as SNAP benefits are delayed and reduced for more than 40 million Americans. After-school programs that depend on federal dollars are closing.
Republicans have pushed to reopen the government with a short-term spending bill. Democrats have rejected those bills, arguing that Republicans are leaving out a key provision: restoring expiring Affordable Care Act subsidies that help millions of Americans lower their health-insurance costs. Democrats say passing a short-term bill without those subsidies would leave families facing sudden premium spikes.
“The election results ought to send a much needed bolt of lightning to Donald Trump that he should meet with us to end this crisis,” said Senate Democratic leader Chuck Schumer of New York. “The American people have spoken last night. End the shutdown, end the healthcare crisis, sit down and talk with us.”
Republicans have said they’re willing to negotiate ACA subsidies, but only after the shutdown is over.
See more government shutdown coverage from the Washington News Bureau:
BOSTON — Massachusetts cities and towns are facing a “historic fiscal crisis” amid rising operating costs, lackluster state aid and restraints on property tax increases, according to a new report.
The “Perfect Storm” report, released by the Massachusetts Municipal Association, found that while state government spending has increased by an average of 2.8% per year since 2010 to meet its needs, restraints on local revenue sources – including Proposition 2 1⁄2 – have held city and town spending to just 0.6% per year.
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The United States must end “crazy” oil and gas subsidies to achieve its climate goals, but a stalled Congress is preventing President Joe Biden from taking action, U.S. climate envoy John Kerry told POLITICO.
“The subsidies are crazy, and we have them still in the United States,” Kerry said in an interview with POLITICO’s Power Play podcast. “President Biden has said we’ve gotta get rid of these subsidies. But again … you have to legislate to do that and we’ve been pretty gridlocked in our country for a period of time.”
As the U.S. heads into a presidential election year, Kerry said he hopes people will put aside “party labels” and “come together around good, common-sense solutions” to fight climate change. The U.S. diplomat, who is currently in Dubai for the COP28 summit, is preparing to welcome the U.S. Republican congressional delegation, slated to arrive in the United Arab Emirates later this week.
Donald Trump, the American conservatives’ standard bearer and front-runner to win the Republican presidential nomination in 2024, has been notoriously skeptical on climate issues, even pulling the U.S. out of the Paris climate deal during his time in the White House.
“I really look forward to meeting with the congressional delegation,” Kerry told POLITICO. “They have legitimate points of view about some ways to try to come at this problem. Not everybody has to attack it the same way.”
Kerry also shrugged off COP28 President Sultan al-Jaber’s controversial remarks that there is “no science” behind demands for a fossil fuel phaseout. The comments, published by the Guardian, struck a chord with al-Jaber’s critics, who have long questioned whether the COP28 chief can credibly lead the climate talks given his other role as CEO of the UAE’s state-owned oil company, Adnoc.
Al-Jaber’s comments may require “clarification,” Kerry told POLITICO, but he made it clear he is not withdrawing his long-standing support for the COP28 chief.
“Look, he’s gotta decide how he wants to phrase it, but the bottom line is this COP needs to be committed to phasing out all unabated fossil fuel,” Kerry said. “That means we cannot allow the emissions to be going up for sure.”
“I think he was saying that the science doesn’t dictate the methodology that you have to use,” he added. “You have to choose between many different ways of doing it.”
As the COP28 host country, the UAE has also been under scrutiny for its role as a large oil producer and exporter, especially after leaked documents indicated the country planned to use the summit to push fossil fuel deals.
Kerry agreed the UAE must “cut [oil and gas production], and everybody needs to be reducing supply and demand.”
“We all have to be part of hitting this goal of keeping the earth’s temperature limit to 1.5 degrees,” he said.
BRUSSELS — The chips industry faces a different kind of summer heat: Chinese and Western governments meddling with its supply chains.
From Tuesday, China is putting the brakes on the export of two critical metals for making chips — gallium and germanium — in retaliation for the United States, the Netherlands and Japan curbing exports of some advanced chip printers. The Dutch restrictions, published before summer, will apply from September 1.
This tit-for-tat trade war is unfolding against the backdrop of a global subsidies race to re-shore and secure microchip production. What began in a time of pandemic-era shortages is now a race to avoid supply chokepoints in case conflict breaks out in Taiwan, a major chips hub.
Despite China’s stranglehold on raw materials — with, for example, 95 percent of the world’s supply of primary gallium — chips companies have stayed relatively quiet about the incoming restrictions in their recent quarterly earnings reports.
Europe’s leading chip makers, like NXP Semiconductors, rarely mention China’s upcoming raw materials restrictions in their earnings releases or follow-up calls with analysts.
There was equal indifference to the Western restrictions that provoked the Chinese counter-move. ASML, the Dutch chip equipment supplier that is the main target of the Dutch export controls, said the measures would not have a “material impact” on the firm’s 2023 outlook, nor on longer-term scenarios.
But that doesn’t mean there won’t be any consequences.
Because Chinese gallium and germanium producers will have to seek export permits, much will depend on how rigorous the permitting procedure is, analysts from research firm Wood Mackenzie wrote in a report in early July with the ominous title, “Chips wars: a sign of things to come?”
“If the permitting process restricts the supply of raw materials to chip manufacturers outside China, this will impact downstream end-use markets, including electric vehicles,” the report reads. That brings back memories of the chips shortages in 2020 and 2021, which increased waiting times for car deliveries.
Particularly vulnerable countries in Europe: Germany — the second-largest importer of gallium after Japan — and the Netherlands.
Ramping up
A bigger concern, however, is that the current restrictions are only the start of a larger escalating trade war. “The concern is that this protectionism could escalate to other critical materials end sectors,” according to the Wood Mackenzie report.
ASML CEO Peter Wennink was already forced to comment during the company’s quarterly earnings presentation on media reports that more chip export controls out of the U.S. are coming: “Of course, we will and cannot respond to speculation.” But more in general, he had to admit during the same earnings call that there’s “significant uncertainty” in the market, citing “the geopolitical environment, including export controls” as one of the reasons.
The message: The industry is waking up to the fact that governments consider semiconductors to be strategically important and no longer hesitate to intervene to secure their national security interests.
Both the U.S. and the EU have rolled out multibillions’ worth of subsidy programs — the EU’s Chips Act (€43 billion) and the U.S.’s CHIPS and Science Act ($52 billion) — to lure private investments from U.S.-based Intel, South Korea’s Samsung or Taiwan’s TSMC.
If that’s the carrot tack, some experts point out that governments are also increasingly using the stick approach of export controls — and the current pace of restrictions between the West and China would have been unthinkable a few years ago.
Chris Miller, an associate professor of international history at Tufts University and author of the book “Chip War,” said last week at an event in Washington that he was “surprised by the success” of the U.S.-led effort to build a coalition on export controls.
“Zoom back five years ago, in 2018, ask anyone in this room: Would it have been possible to have established an export control regime bringing together countries from Europe and Asia? Most people would have bet against it,” Miller said.
It’s a new reality for the companies involved — and one that could have unintended consequences.
Intel CEO Pat Gelsinger summed it up at the Aspen Security Forum earlier in July: “Right now, China represents 25 to 30 percent of semiconductor exports. If I have 25 or 30 percent less market, I need to build [fewer] factories.”
That comment got a rebuke from U.S. Commerce Secretary Gina Raimondo, who said that she didn’t see “any inconsistency” between the export controls to China and the U.S.’s multibillion-dollar plan to re-shore chips capacity.
Brendan Bordelon contributed reporting from Washington.
LONDON — As nations around the world scramble to secure crucial semiconductor supply chains over fears about relations with China, the U.K. is falling behind.
The COVID-19 pandemic exposed the world’s heavy reliance on Taiwan and China for the most advanced chips, which power everything from iPhones to advanced weapons. For the past two years, and amid mounting fears China could kick off a new global security crisis by invading Taiwan, Britain’s government has been readying a plan to diversify supply chains for key components and boost domestic production.
Yet according to people close to the strategy, the U.K.’s still-unseen plan — which missed its publication deadline last fall — has suffered from internal disconnect and government disarray, setting the country behind its global allies in a crucial race to become more self-reliant.
A lack of experience and joined-up policy-making in Whitehall, a period of intense political upheaval in Downing Street, and new U.S. controls on the export of advanced chips to China, have collectively stymied the U.K.’s efforts to develop its own coherent plan.
The way the strategy has been developed so far “is a mistake,” said a former senior Downing Street official.
Falling behind
During the pandemic, demand for semiconductors outstripped supply as consumers flocked to sort their home working setups. That led to major chip shortages — soon compounded by China’s tough “zero-COVID” policy.
Since a semiconductor fabrication plant is so technologically complex — a single laser in a chip lithography system of German firm Trumpf has 457,000 component parts — concentrating manufacturing in a few companies helped the industry innovate in the past.
But everything changed when COVID-19 struck.
“Governments suddenly woke up to the fact that — ‘hang on a second, these semiconductor things are quite important, and they all seem to be concentrated in a small number of places,’” said a senior British semiconductor industry executive.
Beijing’s launch of a hypersonic missile in 2021 also sent shivers through the Pentagon over China’s increasing ability to develop advanced AI-powered weapons. And Russia’s invasion of Ukraine added to geopolitical uncertainty, upping the pressure on governments to onshore manufacturers and reduce reliance on potential conflict hotspots like Taiwan.
Against this backdrop, many of the U.K.’s allies are investing billions in domestic manufacturing.
The Biden administration’s CHIPS Act, passed last summer, offers $52 billion in subsidies for semiconductor manufacturing in the U.S. The EU has its own €43 billion plan to subsidize production — although its own stance is not without critics. Emerging producers like India, Vietnam, Singapore and Japan are also making headway in their own multi-billion-dollar efforts to foster domestic manufacturing.
US President Joe Biden | Samuel Corum/Getty Images
Now the U.K. government is under mounting pressure to show its own hand. In a letter to Prime Minister Rishi Sunak first reported by the Times and also obtained by POLITICO, Britain’s semiconductor sector said its “confidence in the government’s ability to address the vital importance of the industry is steadily declining with each month of inaction.”
That followed the leak of an early copy of the U.K.’s semiconductor strategy, reported on by Bloomberg, warning that Britain’s over-dependence on Taiwan for its semiconductor foundries makes it vulnerable to any invasion of the island nation by China.
Taiwan, which Beijing considers part of its territory, makes more than 90 percent of the world’s advanced chips, with its Taiwan Semiconductor Manufacturing Company (TSMC) vital to the manufacture of British-designed semiconductors.
U.S. and EU action has already tempted TSMC to begin building new plants and foundries in Arizona and Germany.
“We critically depend on companies like TSMC,” said the industry executive quoted above. “It would be catastrophic for Western economies if they couldn’t get access to the leading-edge semiconductors any more.”
Whitehall at war
Yet there are concerns both inside and outside the British government that key Whitehall departments whose input on the strategy could be crucial are being left out in the cold.
The Department for Digital, Culture, Media and Sport (DCMS) is preparing the U.K.’s plan and, according to observers, has fiercely maintained ownership of the project. DCMS is one of the smallest departments in Whitehall, and is nicknamed the ‘Ministry of Fun’ due to its oversight of sports and leisure, as well as issues related to tech.
“In other countries, semiconductor policies are the product of multiple players,” said Paul Triolo, a senior vice president at U.S.-based strategy firm ASG. This includes “legislative support for funding major subsidies packages, commercial and trade departments, R&D agencies, and high-level strategic policy bodies tasked with things like improving supply chain resilience,” he said.
“You need all elements of the U.K.’s capabilities. You need the diplomatic services, the security services. You need everyone working together on this,” said the former Downing Street official quoted above. “There are huge national security aspects to this.”
The same person said that relying on “a few [lower] grade officials in DCMS — officials that don’t see the wider picture, or who don’t have either capability or knowledge,” is a mistake.
For its part, DCMS rejected the suggestion it is too closely guarding the plan, with a spokesperson saying the ministry is “working closely with industry experts and other government departments … so we can protect and grow our domestic sector and ensure greater supply chain resilience.”
The spokesperson said the strategy “will be published as soon as possible.”
But businesses keen for sight of the plan remain unconvinced the U.K. has the right team in place for the job.
Key Whitehall personnel who had been involved in project have now changed, the executive cited earlier said, and few of those writing the strategy “have much of a background in the industry, or much first-hand experience.”
Progress was also sidetracked last year by lengthy deliberations over whether the U.K. should block the sale of Newport Wafer Fab, Britain’s biggest semiconductor plant, to Chinese-owned Nexperia on national security grounds, according to two people directly involved in the strategy. The government eventually announced it would block the sale in November.
And while a draft of the plan existed last year, it never progressed to the all-important ministerial “write-around” process — which gives departments across Whitehall the chance to scrutinize and comment upon proposals.
Waiting for budget day
Two people familiar with current discussions about the strategy said ministers are now aiming to make their plan public in the run-up to, or around, Chancellor Jeremy Hunt’s March 15 budget statement, although they stressed that timing could still change.
Leaked details of the strategy indicate the government will set aside £1 billion to support chip makers. Further leaks indicate this will be used as seed money for startups, and for boosting existing firms and delivering new incentives for investors.
U.K. Chancellor Jeremy Hunt | Leon Neal/Getty Images
There is wrangling with the Treasury and other departments over the size of these subsidies. Experts also say it is unlikely to be ‘new’ money but diverted from other departments’ budgets.
“We’ll just have to wait for something more substantial,” said a spokesperson from one semiconductor firm commenting on the pre-strategy leaks.
But as the U.K. procrastinates, key British-linked firms are already being hit by the United States’ own fast-evolving semiconductor strategy. U.S. rules brought in last October — and beefed up in recent days by an agreement with the Netherlands — are preventing some firms from selling the most advanced chip designs and manufacturing equipment to China.
British-headquartered, Japanese-owned firm ARM — the crown jewel of Britain’s semiconductor industry, which sells some designs to smartphone manufacturers in China — is already seeing limits on what it can export. Other British firms like Graphcore, which develops chips for AI and machine learning, are feeling the pinch too.
“The U.K. needs to — at pace — understand what it wants its role to be in the industries that will define the future economy,” said Andy Burwell, director for international trade at business lobbying group the CBI.
Where do we go from here?
There are serious doubts both inside and outside government about whether Britain’s long-awaited plan can really get to the heart of what is a complex global challenge — and opinion is divided on whether aping the U.S. and EU’s subsidy packages is either possible or even desirable for the U.K.
A former senior government figure who worked on semiconductor policy said that while the U.K. definitely needs a “more coherent worked-out plan,” publishing a formal strategy may actually just reveal how “complicated, messy and beyond our control” the issue really is.
“It’s not that it is problematic that we don’t have a strategy,” they said. “It’s problematic that whatever strategy we have is not going to be revolutionary.” They described the idea of a “boosterish” multi-billion-pound investment in Britain’s own fabricator industry as “pie in the sky.”
The former Downing Street official said Britain should instead be seeking to work “in collaboration” with EU and U.S. partners, and must be “careful to avoid” a subsidy war with allies.
The opposition Labour Party, hot favorites to form the next government after an expected 2024 election, takes a similar view. “It’s not the case that the U.K. can do this on its own,” Shadow Foreign Secretary David Lammy said recently, urging ministers to team up with the EU to secure its supply of semiconductors.
One area where some experts believe the U.K. may be able to carve out a competitive advantage, however, is in the design of advanced semiconductors.
“The U.K. would probably be best placed to pursue support for start-up semiconductor design firms such as Graphcore,” said ASG’s Triolo, “and provide support for expansion of capacity at the existing small number of companies manufacturing at more mature nodes” such as Nexperia’s Newport Wafer Fab.
Ministers launched a research project in December aimed at tapping into the U.K. semiconductor sector’s existing strength in design. The government has so far poured £800 million into compound semiconductor research through universities, according to a recent report by the House of Commons business committee.
But the same group of MPs wants more action to support advanced chip design. Burwell at the CBI business group said the U.K. government must start “working alongside industry, rather than the government basically developing a strategy and then coming to industry afterwards.”
Right now the government is “out there a bit struggling to see what levers they have to pull,” said the senior semiconductor executive quoted earlier.
Under World Trade Organization rules, governments are allowed to subsidize their semiconductor manufacturing capabilities, the executive pointed out. “The U.S. is doing it. Europe’s doing it. Taiwan does it. We should do it too.”
This story has been updated. Cristina Gallardo contributed reporting.
Thierry Breton is winning the war of ideas in Brussels.
The ex-CEO is a political whirlwind with a gigantic portfolio as internal market chief, the backing of French President Emmanuel Macron and lots of proposals. He’s been touring European Union capitals to win support for plans to shield Europe’s industry from crippling energy prices, American subsidies and “naive” EU free traders.
France’s decades-long push for more state intervention is finally findingsome echo in Berlin and the 13th floor of the Berlaymont building, occupied by European Commission President Ursula von der Leyen, who largely owes her job to Macron.
Omnipresent and ebullient, Breton is playing a key role in marshaling industry and political support for sweeping but so far vague plans to boost clean tech, secure key raw materials and overhaul EU checks on government support that he blasts as too slow to help companies.
“Of course there is resistance; my job is precisely to manage and align everyone,” he told French TV this week of his January meetings with Spanish, Polish and Belgian leaders to flog a forthcoming industrial policy push that could be a turning point in how far European governments will finance companies.
Time is short. Von der Leyen wants to line up proposals for a February summit. European industry is complaining that it can’t swallow far higher energy prices and tighter regulation for much longer, with at least one announcing a European shutdown and an Asian expansion.
Breton said governments don’t need convincing on the need for rapid action. But he’s running up against one of Europe’s sacred cows — EU state aid rules run by Executive Vice President Margrethe Vestager that curb government support with lengthy checks to make sure companies don’t get unfair help. She’s also under intense pressure to preserve a “level playing field” as smaller countries worry about German and French financial firepower.
The French internal market commissioner’s bullish style often sees him act as if he’s got a role in subsidies. In the fall, he sent a letter to EU countries asking them to send views on emergency state aid rules to the internal market department, which is under his supervision, two EU officials recalled.
In a meeting with European diplomats, a Commission representative had to correct it, the EU officials said, asking capitals to make sure the input goes instead to the competition department overseen by Vestager.
Europe First
While Breton doesn’t like to be called a protectionist, his latest mission has been to protect Europe from its transatlantic friend.
As early as September, one Commission official said, the Frenchman was mandated by Europe’s industry to speak out against U.S. President Joe Biden’s Inflation Reduction Act, which provides tax credits for U.S.-made electric cars and support to American battery supply chains.
U.S President Joe Biden gives remarks during an event celebrating the passage of the Inflation Reduction Act on September 13, 2022 | Anna Moneymaker/Getty Images
His Paris-backed campaign charged ahead while EU officials and diplomats tiptoed around the subject. Some within the Commission headquarters found his bad cop routine helpful in keeping pressure on the U.S.
“He’s been constructive, though clearly disruptive,” said Tyson Barker, head of the technology and global affairs program at the German Council of Foreign Relations.
The Frenchmanhas even pitched himself as the bloc’s “sheriff” against Silicon Valleygiants, warning billionaire Elon Musk that an overhaul of the Twitter social network can only go so far since “in Europe, the bird will fly by our rules.”
“Big Tech companies only understand balances of power,” said Cédric O, a former French digital minister who worked with Breton during the French EU Council presidency. “When [Breton and Musk] see each other, it necessarily remains cordial, but Breton shows his teeth and rightly so. It’s his job.”
Breton can even surprise his own services, according to two EU officials. In May, the Commission’s department responsible for digital policy — DG CONNECT — was caught off guard when Breton announced in the press that he would unveil plans by year-end to make sure that technology giants forked out for telecoms networks.
In so doing, Breton — who was CEO of France Télécom in the early 2000s — resurrected a long-dormant and fractious policy debate that had been put to rest almost a decade ago, when erstwhile Digital Commissioner Neelie Kroes ordered Europe’s telecoms operators to “adapt or die” rather than seek money from content providers.
After Breton’s commitments, the Commission’s services were soon scrambling to develop some sort of a coherent policy program to deliver on the Frenchman’s comments. A consultation is scheduled for early this year.
Carte blanche
Breton is a rare creature in the halls of the Berlaymont, where policy is hatched slowly after extensive consultation. To a former CEO with a broad remit — his portfolio runs from the expanse of space to the tiniest of microchips — rapid reaction matters more than treading on toes or singing from the hymn sheet. This often sees him floating ideas and then pulling back.
Last year he alarmed environmentalists by raising the prospect of a U-turn on the EU’s polluting car ban. He wagged his finger at German Chancellor Olaf Scholz for a solo trip to China. He called for nuclear energy to be considered green. He has pushed out grand projects — such as industrial alliances on batteries and cloud, or a cyber shield — that he doesn’t always follow up on.
He’s even pushed forward a multibillion-euro EU communication satellite program dubbed Iris², a favorite of French aerospace companies, that will see the bloc build a rival to Musk’s space-based Starlink broadband constellation.
“It’s clear that he’s been given more free rein than others,” said one EU official. “He has von der Leyen’s ear,” the official added, noting that Breton enjoys “privileged access” to the Commission president — who may be mindful that she’ll need French support for a second term.
According to an official, Breton “has von der Leyen’s ear” and enjoys “privileged access” to the Commission president | Valeria Mongeli/AFP via Getty Images
Indeed, Breton’s massive role was partly designed as a counterweight to a German president.
“There is a criticism of von der Leyen for being too German,” explained Sébastien Maillard, director of the Jacques Delors Institute think tank. “There may inevitably be a division of roles between them — [where Breton is] a counterbalance.”
He’s been called an “unguided missile,” but more often than not, the Frenchman has Paris’ backing when going off script. His October op-ed with Italian colleague Paolo Gentiloni, which called for greater European financial solidarity, was part of France’s agenda, according to one high-ranking Commission official.
“When he went out in the press with Gentiloni against Scholz’s €200 billion, he was clearly doing the job for Macron,” the official said.
His November call for a rethink on the 2035 car engine ban came just after a week after critical green legislation had been finalized by Commission Executive Vice President Frans Timmermans and jarred with the EU’s own position at the COP 27 climate summit in Indonesia. But it aped the position of French auto industry captains, such as Stellantis CEO Carlos Tavares and Renault’s Luca de Meo, who wanted Brussels to slam the brakes on the climate drive.
Breton had not coordinated his car comments with colleagues in advance, according to two Commission officials.
Less than 10 days later, French Prime Minister Elisabeth Borne echoed caution about the “extremely ambitious” engine ban and warned that pivoting to electric car manufacturing was daunting.
Going A-list
Breton acknowledged himself that he wasn’t Macron’s first choice for the critical EU post, telling POLITICO at a live event that he was a “plan B commissioner.”
Asked if he was targeting an A-list job for the new Commission mandate in 2024, he said he “may be able to consider a new plan B assignment — if it is a plan B.”
“He is thinking about the future,” said one EU official. “Look at his LinkedIn posts. He is thinking past the next European elections. He definitely wants to convince Macron to get an expanded portfolio.”
Grabbing the Commission’s top job may be tricky, relying on how EU leaders will line up, according to multiple EU and French officials.
There are other jobs, including overturning the unwritten law that no French or German candidate can hold the economically powerful competition portfolio. Another option could be becoming Europe’s official digital czar, combining the enforcement powers of the Digital Services Act and the Digital Markets Act into a supranational digital enforcement agency, one EU official said.
Breton has shrugged off speculation on his long-term plans.
“All my life, I have been informed of my next potential job 15 minutes before,” he said last month.
Jakob Hanke Vela, Stuart Lau, Barbara Moens, Camille Gijs and Mark Scott contributed reporting.
The “Qatargate” corruption scandal rocking the European Parliament is “dramatic and damaging for the credibility of the European Union” and makes it harder for Brussels to deal with multiple competing crises, European Council President Charles Michel told POLITICO in an exclusive interview.
Speaking in his offices in the Europa building in Brussels, Michel said he was very concerned over the charges of criminal enterprise, money laundering and corruption brought by the Belgian police against current and former members of the European Parliament in recent days.
“We first need to learn lessons from this and come up with a package of measures to avoid such things — to prevent corruption in the future,” said Michel, a former Belgian prime minister who is now in his second term as president of the European Council, the body that convenes the leaders of the EU’s 27 member countries.
But the scandal is “making it even more difficult for us to focus on the economic and energy crises that impact the lives of European citizens right now,” he said.
Belgian police have arrested multiple people, including Greek MEP Eva Kaili and her Italian partner, Francesco Giorgi, as well as Italian former MEP Pier Antonio Panzeri and Niccolo Figa-Talamanca, secretary-general of a rule-of-law campaign group.
The police have also sealed multiple offices in the Parliament and seized at least €1.5 million in cash following what they say was a year-long, Europe-wide investigation into alleged corruption and money laundering.
Coming just as the football World Cup reached its crescendo in Qatar, the affair has confirmed the image of the petro-kingdom as a malign meddling power and the EU as a murky playground for corrupt, entitled, sanctimonious Eurocrats.
“The EU has only made global headlines a handful of times in the last year — for example when we banned the internal combustion engine and now with this corruption scandal,” Valérie Hayer, a French MEP from President Emmanuel Macron’s party, lamented to POLITICO.
Michel acknowledged that the average European was unlikely to differentiate between the three big branches of the EU — the European Parliament, the European Council he leads and the European Commission, which serves as the executive branch and proposes legislation.
The taint of scandal will make his job far harder as he seeks to “renew the wedding vows of the EU” in the new year and tries to tackle a series of issues he described as “existential for the European project.”
Those include negotiations with the United States over the Inflation Reduction Act subsidy program that has panicked European leaders who worry about their relative economic competitiveness.
If Europe cannot come up with an adequate answer in the coming weeks, then it risks the “fragmentation of the single market,” Michel said. He said the other big problem facing Europe was “overdependency on China and the pressure being applied on us by China.”
LONDON — Three years after leaving the EU to chart its own course, Britain finds itself caught between two economic behemoths in a brewing transatlantic trade war.
In one corner sits the United States, whose Congress in August passed the Biden administration’s much-vaunted $369 billion program of green subsidies, part of the Inflation Reduction Act (IRA).
In the opposing corner is the European Union, which fears Washington’s subsidy splurge will pull investment — particularly in electric vehicles — away from Europe, hitting carmakers hard.
The EU is preparing its own retaliatory package of subsidies; Washington shows little sign of changing course. Fears of a trade war are growing fast.
Now sitting squarely outside the ring, the U.K. can only look on with horror, and quietly ask Washington to soften the blow. But there are few signs the softly-softly approach is bearing fruit. Britain now risks being clobbered by both sides.
“It’s not in the U.K.’s interest for the U.S. and EU to go down this route,” said Sam Lowe, a partner at Flint Global and expert in U.K. and EU trade policy. “Given the U.K.’s current economic position, it can’t really afford to engage in a subsidy war with both.” The British government has just unleashed a round of fiscal belt-tightening after a market rout, following months of political turmoil.
For iconic British motor brands, the row over the Biden administration’s IRA comes with real costs.
The U.S. is the second-largest destination for British-made vehicles after the EU, and the automotive sector is one of Britain’s top goods exporters.
Manufacturers like Jaguar Land Rover have warned publicly about the “very serious challenges” posed by the new U.S. law and its plan for electric vehicle tax credits aimed at boosting American industry.
Kemi on the case
U.K. Trade Secretary Kemi Badenoch has for months been privately urging top U.S. officials to soften the impact of the electric vehicle subsidies on Britain by carving out exemptions, U.K. officials said.
When Commerce Secretary Gina Raimondo visited London in early October, Badenoch pushed her to rethink the strategy. The U.K. trade chief brought that same message to Washington in a series of private meetings earlier this month, including at a sit-down with Deputy Treasury Secretary Wally Adeyemo.
Badenoch has “raised this issue on many levels,” an official from the U.K.’s Department for International Trade said, citing conversations with U.S. Ambassador to Britain Jane Hartley, with Secretary Raimondo, “and with members of the Biden administration and senior representatives of both parties.”
The Cabinet minister has also spoken out in public, telling the pro-free market Cato Institute in Washington earlier this month that “the substantial new tax credits for electric cars not only bar vehicles made in the U.K. from the U.S. market, but also affect vehicles made in the U.S. by U.K. manufacturers.”
U.S. Secretary of Commerce Gina Raimondo | Mandel Ngan/AFP via Getty Images
Badenoch’s comments echo concerns raised by both British automotive lobby group the Society of Motor Manufacturers and Traders (SMMT), and by Jaguar Land Rover, in comments filed with the U.S. Treasury Department.
The SMMT warned that Biden’s green vehicle package has several “elements of concern that risk creating an uneven competitive environment, with U.K.-based manufacturers and suppliers potentially penalised.” The lobby group is taking aim at the credit scheme’s requirement for green vehicles to be built in North America, with significant subsidies available only if critical minerals are sourced from the U.S. or a U.S. ally.
In response to Washington’s plans, the EU is preparing what could amount to billions in subsidies for its own industries hit by the U.S. law, which also offers tax breaks to boost American green businesses such as solar panel manufacturers. Britain faces being squeezed in both markets, while lacking any say in whatever response Brussels decides.
Protectionism that impacts like-minded allies “isn’t the answer to the geopolitical challenges we face,” the British trade department official warned, adding “there is a serious risk” the law disrupts “vital” global supply chains of batteries and electric vehicles.
The conversations Badenoch had this month in Washington were “reassuring,” the official added. “But it’s for them to address and find solutions.”
‘Ton of work to do’
Yet others believe Badenoch will have a hard time getting her colleagues in the U.S. — now cooling on a much-touted bilateral trade deal — to take action. “The U.S. is minimally focused on how any of their policies are going to impact the U.K.,” admitted a U.S.-based representative of a major business group.
While Britain and the U.S. are “very close allies”, they added, those in Washington “just don’t really view the U.K. as an interesting trade partner and market right now.” The U.S. is more focused, they noted, on pushing back against China, meaning Badenoch has “a ton of work to do” getting the administration to soften the IRA.
Nevertheless the U.S. is still working out how its law will actually be implemented, the business figure said, and is assembling a working group on how the IRA impacts trade allies. This has the potential, they added, to “alleviate a lot of the concerns coming out of the U.K.”
Late Tuesday evening, the SMMT called on the British government to provide greater domestic support for the sector as it prepares to ramp up its own electric vehicle production. The group wants an extension past April on domestic support for firms’ energy costs; a boost to government investment in green energy sources; and a speedier national rollout of charging infrastructure and staff training.
In the meantime, Britain’s options appear limited.
Newly manufactured Land Rover and Range Rover vehicles parked and waiting to be loaded for export | Paul Ellis/AFP via Getty Images
The U.K. “could consider legal action” and haul the U.S. before the World Trade Organization or challenge the EU through provisions in the post-Brexit Trade and Cooperation Agreement, said Lowe of consultancy Flint. “But — to be blunt — neither of them care what we have to say.”
Anna Jerzewska, a trade advisor and associate fellow at the UK Trade Policy Observatory, suggested pressing ahead “with your own domestic policy and efforts to support strategic industries is perhaps more important” than complaining about foreign subsidy schemes. But she noted that after a “chaotic” political period, Britain is “likely to take longer to respond to external changes and challenges.”
And in truth, Britain “can’t afford to out-subsidize the U.S. and EU,” said David Henig, a trade expert with the European Centre For International Political Economy think tank.
Outside the EU, Britain could work to rally allies such as Japan and South Korea who are also unhappy with the Biden administration’s protectionist measures, he noted. “But I don’t think we’re in that position,” Henig said, as it would take a concerted diplomatic effort, and the U.K.’s automotive sector would “have to be well positioned” in the first place, not struggling as it is. He predicted London’s lobbying in Washington and Brussels is “not going to get anywhere.”
Nine months after invading Ukraine, Vladimir Putin is beginning to fracture the West.
Top European officials are furious with Joe Biden’s administration and now accuse the Americans of making a fortune from the war, while EU countries suffer.
“The fact is, if you look at it soberly, the country that is most profiting from this war is the U.S. because they are selling more gas and at higher prices, and because they are selling more weapons,” one senior official told POLITICO.
The explosive comments — backed in public and private by officials, diplomats and ministers elsewhere — follow mounting anger in Europe over American subsidies that threaten to wreck European industry. The Kremlin is likely to welcome the poisoning of the atmosphere among Western allies.
“We are really at a historic juncture,” the senior EU official said, arguing that the double hit of trade disruption from U.S. subsidies and high energy prices risks turning public opinion against both the war effort and the transatlantic alliance. “America needs to realize that public opinion is shifting in many EU countries.”
The EU’s chief diplomat Josep Borrell called on Washington to respond to European concerns. “Americans — our friends — take decisions which have an economic impact on us,” he said in an interview with POLITICO.
The biggest point of tension in recent weeks has been Biden’s green subsidies and taxes that Brussels says unfairly tilt trade away from the EU and threaten to destroy European industries. Despite formal objections from Europe, Washington has so far shown no sign of backing down.
At the same time, the disruption caused by Putin’s invasion of Ukraine is tipping European economies into recession, with inflation rocketing and a devastating squeeze on energy supplies threatening blackouts and rationing this winter.
As they attempt to reduce their reliance on Russian energy, EU countries are turning to gas from the U.S. instead — but the price Europeans pay is almost four times as high as the same fuel costs in America. Then there’s the likely surge in orders for American-made military kit as European armies run short after sending weapons to Ukraine.
It’s all got too much for top officials in Brussels and other EU capitals. French President Emmanuel Macron said high U.S. gas prices were not “friendly” and Germany’s economy minister has called on Washington to show more “solidarity” and help reduce energy costs.
Ministers and diplomats based elsewhere in the bloc voiced frustration at the way Biden’s government simply ignores the impact of its domestic economic policies on European allies.
When EU leaders tackled Biden over high U.S. gas prices at the G20 meeting in Bali last week, the American president simply seemed unaware of the issue, according to the senior official quoted above. Other EU officials and diplomats agreed that American ignorance about the consequences for Europe was a major problem.
“The Europeans are discernibly frustrated about the lack of prior information and consultation,” said David Kleimann of the Bruegel think tank.
Officials on both sides of the Atlantic recognize the risks that the increasingly toxic atmosphere will have for the Western alliance. The bickering is exactly what Putin would wish for, EU and U.S. diplomats agreed.
The growing dispute over Biden’s Inflation Reduction Act (IRA) — a huge tax, climate and health care package — has put fears over a transatlantic trade war high on the political agenda again. EU trade ministers are due to discuss their response on Friday as officials in Brussels draw up plans for an emergency war chest of subsidies to save European industries from collapse.
“The Inflation Reduction Act is very worrying,” said Dutch Trade Minister Liesje Schreinemacher. “The potential impact on the European economy is very big.”
“The U.S. is following a domestic agenda, which is regrettably protectionist and discriminates against U.S. allies,” said Tonino Picula, the European Parliament’s lead person on the transatlantic relationship.
An American official stressed the price setting for European buyers of gas reflects private market decisions and is not the result of any U.S. government policy or action. “U.S. companies have been transparent and reliable suppliers of natural gas to Europe,” the official said. Exporting capacity has also been limited by an accident in June that forced a key facility to shut down.
In most cases, the official added, the difference between the export and import prices doesn’t go to U.S. LNG exporters, but to companies reselling the gas within the EU. The largest European holder of long-term U.S. gas contracts is France’s TotalEnergies for example.
It’s not a new argument from the American side but it doesn’t seem to be convincing the Europeans. “The United States sells us its gas with a multiplier effect of four when it crosses the Atlantic,” European Commissioner for the Internal Market Thierry Breton said on French TV on Wednesday. “Of course the Americans are our allies … but when something goes wrong it is necessary also between allies to say it.”
Cheaper energy has quickly become a huge competitive advantage for American companies, too. Businesses are planning new investments in the U.S. or even relocating their existing businesses away from Europe to American factories. Just this week, chemical multinational Solvay announced it is choosing the U.S. over Europe for new investments, in the latest of a series of similar announcements from key EU industrial giants.
Allies or not?
Despite the energy disagreements, it wasn’t until Washington announced a $369 billion industrial subsidy scheme to support green industries under the Inflation Reduction Act that Brussels went into full-blown panic mode.
“The Inflation Reduction Act has changed everything,” one EU diplomat said. “Is Washington still our ally or not?”
For Biden, the legislation is a historic climate achievement. “This is not a zero-sum game,” the U.S. official said. “The IRA will grow the pie for clean energy investments, not split it.”
But the EU sees that differently. An official from France’s foreign affairs ministry said the diagnosis is clear: These are “discriminatory subsidies that will distort competition.” French Economy Minister Bruno Le Maire this week even accused the U.S. of going down China’s path of economic isolationism, urging Brussels to replicate such an approach. “Europe must not be the last of the Mohicans,” he said.
The EU is preparing its responses, such as a big subsidy push to prevent European industry from being wiped out by American rivals. “We are experiencing a creeping crisis of trust on trade issues in this relationship,” said German MEP Reinhard Bütikofer.
“At some point, you have to assert yourself,” said French MEP Marie-Pierre Vedrenne. “We are in a world of power struggles. When you arm-wrestle, if you are not muscular, if you are not prepared both physically and mentally, you lose.”
Behind the scenes, there is also growing irritation about the money flowing into the American defense sector.
The U.S. has by far been the largest provider of military aid to Ukraine, supplying more than $15.2 billion in weapons and equipment since the start of the war. The EU has so far provided about €8 billion of military equipment to Ukraine, according to Borrell.
According to one senior official from a European capital, restocking of some sophisticated weapons may take “years” because of problems in the supply chain and the production of chips. This has fueled fears that the U.S. defense industry can profit even more from the war.
The Pentagon is already developing a roadmap to speed up arms sales, as the pressure from allies to respond to greater demands for weapons and equipment grows.
Another EU diplomat argued that “the money they are making on weapons” could help Americans understand that making “all this cash on gas” might be “a bit too much.”
The diplomat argued that a discount on gas prices could help us to “keep united our public opinions” and to negotiate with third countries on gas supplies. “It’s not good, in terms of optics, to give the impression that your best ally is actually making huge profits out of your troubles,” the diplomat said.
Giorgio Leali, Stuart Lau, Camille Gijs, Sarah Anne Aarup and Gloria Gonzalez contributed reporting.
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Barbara Moens, Jakob Hanke Vela and Jacopo Barigazzi
BERLIN — With only six weeks to avoid a transatlantic trade showdown over green industries, the Germans are frustrated that Washington isn’t offering a peace deal and are increasingly considering a taboo-breaking response: European subsidies.
Europe’s fears hinge on America’s $369 billion package of subsidies and tax breaks to bolster U.S. green businesses, which comes into force on January 1. The bugbear for the Europeans is that Washington’s scheme will encourage companies to shift investments from Europe and incentivize customers to “Buy American” when it comes to purchasing an electric vehicle — something that infuriates the big EU carmaking nations like France and Germany.
The timing of this protectionist measure could hardly be worse as Germany is in open panic that several of its top companies — partly spurred by energy cost spikes after Russia’s invasion of Ukraine — are shuttering domestic operations to invest elsewhere. The last thing Berlin needs is even more encouragement for businesses to quit Europe, and the EU wants the U.S. to cut a deal in which its companies can enjoy the American perks.
A truce seems unlikely, however. If this spat now spirals out of control, it will lead to a trade war, something that terrifies the beleaguered Europeans. While the first step would be a largely symbolic protest at the World Trade Organization (WTO), the clash could easily slide precipitously back toward the tit-for-tat tariff battles of the era of former U.S. President Donald Trump.
This means that momentum is growing in Berlin for a radical Plan B. Instead of open tariff war with America, the increasingly discussed option is to rip up the classic free-trade rulebook and to play Washington at its own game by funneling state funds into European industry to rear homegrown green champions in sectors such as solar panels, batteries and hydrogen.
France has long been the leading advocate of strengthening European industry with state largesse but, up until now, the more economically liberal Germans have not wanted to launch a subsidy race against America. The sands are now shifting, however. Senior officials in Berlin say they are increasingly leaning toward the French thinking, should the talks with the U.S. not lead to an unexpected last-minute solution.
Berlin is the 27-nation bloc’s economic powerhouse, so it will be a decisive moment if Berlin ultimately decides to throw its might behind the state-led subsidy approach to an industrial race with the U.S.
Running out of time
The clock is ticking for a truce with Biden that looks increasingly unlikely.
Recent attempts by a special EU-U.S. task force to address EU concerns have met little enthusiasm on the American side to amend the controversial legislation, the European Commission told EU countries this week.
“There are only a few weeks left,” warned Bernd Lange, the chair of the European Parliament’s trade committee, adding that “once the act is implemented, it will be too late for us to achieve any changes.”
Lange said that the failure to reach a deal would likely trigger a WTO lawsuit by the EU against the U.S., and Brussels could also strike back against what it sees as the discriminatory U.S. subsidies by imposing punitive tariffs. Warnings of a trade war are already overshadowing the runup to a high-level EU-U.S. meeting in Washington on December 5.
MEP Bernd Lange Lange said that the failure to reach a deal would likely trigger a WTO lawsuit by the EU against the U.S. | Philippe Buissin/European Union
It’s precisely the kind of spat that the German government wants to avoid, as Chancellor Olaf Scholz hopes to forge unity among like-minded democracies amid Russia’s war and the the increasing challenges posed by China. Earlier this month, Scholz’s government made an overture to Washington by suggesting that a new EU-U.S. trade deal could be negotiated to resolve differences, but that proposal was quickly rejected.
There are sympathizers for the subsidies approach in Brussels, with officials at the EU’s executive saying powerful Internal Market Commissioner Thierry Breton is a leading proponent. Breton is already advocating for a “European Solidarity Fund” to help “mobilizing the necessary funding” to strengthen European autonomy in key sectors like batteries, semiconductors or hydrogen. Support from Germany could help Breton win the upper hand in internal EU strategy discussions over the more cautious Trade Commissioner Valdis Dombrovskis.
Breton will travel to Berlin on November 29 to discuss the consequences of the Inflation Reduction Act as well as industrial policy and energy measures with Scholz’s government.
The German considerations even echo calls from top officials of the Biden administration, including U.S. Trade Representative Katherine Tai, who are urging the EU to not engage in a transatlantic trade dispute and instead roll out their own industrial subsidies; a strategy that Washington also sees as way to reduce dependence on China.
Plan B
Scholz first indicated late last month that the EU might have to respond to the U.S. law with its own tax cuts and state support if the negotiations with Washington fail to reach a solution, lending support to similar plans articulated by French President Emmanuel Macron, who will meet Biden on December 1 in Washington.
Although Scholz does not endorse Macron’s framing of the initiative as a “Buy European Act” (which sounds too protectionist for the Germans), the chancellor agrees that the EU cannot stand by idly if it faces unfair competition or lost investments, people familiar with his thinking said late last month.
Negative economic news, such as carmaker Tesla putting plans for a new battery factory in Germany on hold and instead investing in the U.S., or steelmaker ArcelorMittal partly closing operations in Germany, have increased calls in Berlin to consider more state support to counter a negative trend caused by both the U.S. scheme and high energy prices.
Although the official government line remains that Berlin is still holding out hope for a negotiated solution with Washington, officials in Berlin say that it could be possible to increase incentives for industries to locate the production of green technologies in Europe.
A spokesperson for the German Economy Ministry said that faced with the challenges stemming from the Inflation Reduction Act, “we will have to come up with our own European response that puts our strengths first … The aim is to competitively relocate green value creation in Europe and strengthen our own production capacities.”
The spokesperson warned, however, that both the U.S. and EU “must be careful that there is no subsidy race that prevents the best ideas from prevailing in the market,” and added: “Green technologies in particular thrive best in fair competition; protectionism cripples innovation.”
One important condition that could help Germany and the EU to safeguard said fair competition and to avoid the global free trade system descending into protectionist tendencies would be to ensure that any EU state subsidies remain in line with WTO rules. That means, in contrast to the U.S. law, that those subsidies would not discriminate between local and foreign producers.
German Chancellor Olaf Scholz first indicated late last month that the EU might have to respond to the U.S. law with its own tax cuts and state support | Sean Gallup/Getty Images
Crucially, support is also coming from German industry.
“In the area of industrial policy and subsidies, we could look at measures that are compatible with WTO rules — as the EU is already doing in the chip sector,” said Volker Treier, the head of foreign trade at the German Chamber of Commerce.
Treier also stressed that “there must be no discrimination” against foreign investors, but added: “This explicitly does not rule out the possibility of settlement bonuses, which in turn should be available to investors from all countries who would be interested in such investment commitments in Europe.”
In Brussels, the Commission’s competition department has also made clear that it’s looking with an open mind at upcoming proposals.
“There are no instruments excluded a priori” when it comes to the EU’s response to the U.S. subsidies, the department’s state aid Deputy Director General Ben Smulders said Thursday.
Barbara Moens, Suzanne Lynch and Pietro Lombardi in Brussels and Laura Kayali and Clea Caulcutt in Paris contributed reporting.
