Washington Insider - Tuesday

Tax Reform Battle Continues Behind Closed Doors

Here’s a quick monitor of Washington farm and trade policy issues from DTN’s well-placed observer.

Updated Negotiating Objectives for NAFTA

The update includes some of the provisions that Mexico and Canada have both balked at or come out in opposition to, according to the release from the Office of the U.S. Trade Representative (USTR). One is a five-year “sunset review” mechanism that would automatically terminate the agreement unless all three countries decide to renew it.

Of note, the updated negotiating objectives feature a reference to the idea. Trump's revised objectives mention a major goal of opening Canada’s market for dairy, poultry and eggs. The U.S. also included a provision related to cross-border trucking, with USTR adding a line calling for the ability to “retain flexibility for U.S. non-conforming measures," including for maritime and long-haul trucking services.

Ag Cuts Proposed As Offset for Hurricane Aid

The third disaster request from the Trump administration for hurricane aid totaled $44 billion and this time included suggested budget offsets. Some $3 billion in cuts for agriculture spending were offered as part of $59.23 billion in cuts to domestic programs to help pay for the aid.

Most of the programs were already singled out for cuts in the Trump administration’s fiscal 2018 budget proposal including rural business loans, upgrades to federal research facilities, $3.9 billion from the Pell Grant surplus, $212 million from the Agricultural Research Service's building and facilities account, $800 million from the Special Supplemental Nutrition Program for Women, Infants and Children $204 million in emergency conservation funds, $1.4 billion in unobligated balances for mandatory conservation programs, which includes money set aside for future agreements under the Regional Conservation Partnership Program. However, lawmakers are not expected to go along with the proposed reductions.

Washington Insider: Tax Reform Battle Continues Behind Closed Doors

Bloomberg is reporting this week that the Republican tax-overhaul effort is in for a marathon debate on the Senate floor at the end of this month, with dozens of doomed Democratic amendments. But, it thinks that “the real action will be elsewhere, behind closed doors."

Two parallel and largely private negotiations will determine the content of the bill that’s due for a full Senate vote as early as Nov. 30: One is aimed at getting about a half-dozen wavering GOP senators on board. The other will attempt to smooth the path for a final House-Senate compromise in December.

Neither will be easy, Bloomberg says. GOP leaders must write a bill that can pass under the Senate’s strict budget rules while cobbling together 50 Senate votes without alienating the House GOP’s coalition of conservatives and moderates from high-tax districts. They’ll also have to avoid political land mines such as the divisive health-care debate that has divided Republicans for much of this year.

House and Senate staff members are already working on ways to avoid a drawn-out process for reconciling their different legislation, said Neil Bradley, chief policy officer for the U.S. Chamber of Commerce. He said he’s bullish on the prospects for a compromise next month. “The fact that they have hit all of their marks so far, it is now more likely,” he said. Key questions include how to tax partnerships and other so-called pass-through entities and how to rewrite international tax laws to limit corporate tax avoidance, he said.

Bill Hoagland, a former GOP Senate staff member who helped shepherd former President George W. Bush’s 2003 tax cuts through Congress, said he’s “totally convinced” lawmakers will try to fast-track the formal methods for resolving House-Senate differences -- like a “conference committee” in which members work out differences in a deliberative process. “A true conference committee would drag out into next year,” said Hoagland, now a senior vice president at Washington’s Bipartisan Policy Center, an independent research group.

At the same time, Sen. Susan Collins, R-Maine, said this weekend that the Senate plan “needs work.”

“I want to see changes in that bill, and I think there will be changes,” she said. Asked directly whether she can vote for the measure as written, Collins said, “I haven’t reached that conclusion yet.”

If no Democrats vote for the Senate bill, Republicans can afford to lose only two votes and still pass it under Senate rules. Sen. Ron Johnson, R-Wis., has already said he can’t back the bill as written. And President Donald Trump yesterday warned on Twitter that Sen. Jeff Flake, R-Ariz., who is not seeking re-election, will "be a NO on tax cuts because his political career anyway is ‘toast’.”

Collins said it was a “problem” for her if the provision to remove the individual mandate of the Affordable Care Act is repealed as part of the effort to overhaul U.S. tax law. “I don’t think that provision should be in the bill. I hope the Senate will follow the lead of the House and strike it.”

However, that may be in the cards. Also on Sunday, Mick Mulvaney, director of the Office of Management and Budget, said that the White House would be OK removing the mandate if it is an “impediment” to passage of the Senate bill, although White House legislative director Marc Short said “we like the fact that the Senate has included it.”

Well, time is winding down for the reforms, it seems—but the administration’s health concessions could mean progress. Still, this is incredibly complex legislation with broad implications for agriculture which produces should watch closely as it proceeds, Washington Insider believes.

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