Washington Insider - Tuesday

By DTN's Washington Insider

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

Administration Continues to Promote Benefits of New Trade Agreements

The Obama administration is keeping up its campaign to sell various segments of the U.S. economy on the need to conclude a trade agreement with 11 other Pacific Rim nations and a second one with the European Union. Last week, it was U.S. Trade Representative Michael Froman's turn to take the lead as he touted the benefits of the two prospective trade deals to agricultural producers.

Speaking at an export and investment forum in Iowa, Froman said the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership agreements would deliver significant economic benefits for Iowa farmers, ranchers, businesses, families and workers. Iowa already is the second largest exporter of agricultural products in the United States, shipping $11.3 billion in agricultural exports in 2012, according to a USTR fact sheet.

U.S. farm and commodity groups generally support both agreements, as long as they result in more open markets and provide for lower tariff rates and the removal of particularly onerous non-tariff trade barriers. However, significant opposition to both deals remains among U.S. labor and environmental groups that fear that U.S. jobs will move overseas and that developing nations will not follow prudent conservation and environmental protection practices once they are able to export more products. Congress will need to pass several bills that would facilitate the two trade negotiations, something that stands little chance of being accomplished this year.

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House Likely to Vote on Energy, Jobs Bills in September

Energy legislation –– including approval of the Keystone XL pipeline –– likely will move to the House floor when Congress returns from its summer recess in September, according to House Majority Leader Kevin McCarthy, R-Calif. In a memo last week to the House Republican conference, McCarthy said the bill also would block environmental regulations and open federal lands to energy extraction.

McCarthy also said he plans next month to bring to the floor a jobs bill that will comprise key sections of 40 jobs measures that previously passed the House. Many of those are tax bills that if passed, Republicans say, would result in the creation of more U.S. jobs.

The bills are viewed as vehicles that will allow House Republicans to draw distinctions between themselves and their Democratic opponents in the November elections, rather than as measures that stand any chance of becoming law during this session of Congress.

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Washington Insider: Financing Infrastructure

One of the general areas of agreement in Congress is the need for more money for transportation infrastructure — highways, waterways, bridges and many, many other costly items that compete for increasingly scarce federal funding.

As a measure of the urgency, a coalition of 62 transportation industry groups recently wrote to Congress to push for modestly longer term highway program funding. They wanted Congress to pass a short-term extension for the highway bill through December 2015, rather than just through May as the House plans to do, along with a pledge to complete a long-term bill relatively soon.

In the end, the House Republican shorter-term relief plan passed overwhelmingly in the lower chamber and, after a week of back and forth, cleared the Senate, as well.

This performance is seen as casting doubt that lawmakers will pass a long-term bill before the 2016 presidential election, more than two years away. And, experts think it raises questions about the power of the transportation lobby and its ability, as a community, to drive policy in the future. In particular, it raises questions about the group's capacity to deal with the need for unpopular taxes, especially for an increase in gasoline taxes, which have not been changed in more than two decades.

Although almost every transportation group has publicly endorsed a gas-tax increase, including the U.S. Chamber of Commerce, this may be the first time those groups have had to carry the tax torch alone. When past gas-tax increases were passed, they had support from the president and/or congressional leadership, and in some cases, a portion of the revenue was set aside for deficit reduction.

The difference now, apparently, is that the power shift in Congress over the last several years means that the days of earmarks and chairmanships with power-wielding gavels are now gone, replaced instead by a more centralized power dynamic, particularly in the House.

The transportation lobby is a bipartisan coalition that in the past was able to work with people in both parties on the House Transportation and Infrastructure Committee. Now, the committee now has "either less influence or less willingness" to buck leadership, said Rep. Tom Petri, R-Wis., a longtime member of the committee and current chairman of its highways subcommittee.

In late May, House Republican leadership put out a memo detailing its plan to use savings from postal reform to fund the Highway Trust Fund through May 2015, but that plan eventually was dropped due to lack of support from within the caucus. Petri said he personally thought it was a good idea to do an extension until December and then have a fight to get a new bill through and pay for it. "But some people are thinking maybe if the Republicans are taking control of both houses, they would want to make a push to do something different," he said

As a result, observers note, transportation advocates, lobbyists and committee chairmen now are struggling to provide bare minimum funding for highway and transit programs and fight hard to get bills that even keep program funding at current levels — nothing like the earmark-heavy funding boosts that highway and transit bills had in earlier times.

Including the latest extension, Congress will have transferred more than $65 billion into the Highway Trust Fund since 2008 just to maintain solvency. The last highway and transit bill, a two-year measure that passed in 2012, maintained current funding. That's what lawmakers were looking to do earlier this year when a long-term bill was still within the realm of possibility, acknowledging that any legislation with higher funding levels was unrealistic.

"Now they're struggling because it's much easier to get a bill if ... you have a growing pie. You can accommodate regional and state differences without taking money away from someone else," Petri said. "If you have a zero-sum game [where adding to a project in one region takes money away from another], it's very bloody and very hard to pass a bill."

Critics charge that the transportation funding crunch is a measure of the dysfunction of today's Congress, and that it undercuts national investment efforts that are widely supported by industry and the public — and, that this sharply reduces U.S. competitiveness in global markets. Certainly, infrastructure investments are critical to agricultural producers and declining gas tax revenues emphasize the need for hurry-up federal programs, in many cases.

These projects are expensive now, and will become more expensive the longer they are delayed. So the infrastructure funding battles should be watched closely by producers as they proceed, Washington Insider believes.

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