Washington Insider-- Wednesday

By DTN's Washington Insider

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

Senate Republicans Vow to Rein in EPA

New Senate Majority Leader Mitch McConnell, R-Ky., says his caucus will go after the administration's proposed Clean Water Act jurisdiction rule this year, making that effort just the latest in a long list of rulemakings Republicans plan to stop or slow now that they control the Senate.

McConnell was referring to a rule proposed jointly by the Environmental Protection Agency and the Army Corps of Engineers that would clarify the scope of the Clean Water Act's jurisdiction over the nation's waters and wetlands. Republicans and some Democrats have called the proposal a radical expansion of the agency's authority and warned it could cripple agricultural, ranching and other industries.

The question for McConnell on this issue –– as it will be for a significant number of other potential votes in the coming year ––is how many Democrats he can convince to join Republicans. The GOP has a 54-44 majority in the Senate (with two independents who generally vote with Democrats). That being the case, the new majority leader is likely to find himself this year facing the same filibuster threats that his predecessor, Sen. Harry Reid, D-Nev., faced for the past several years because he lacked the 60 votes necessary to bring legislation to the floor for a final vote.

***

Federal Mediation Service to Enter West Coast Ports Labor Talks

There is a ray of hope shining on the labor slow-down at West Coast ports in the form of a statement that the two sides have asked the Federal Mediation and Conciliation Service to join the contract negotiations.

The talks between the Retailers and the Pacific Maritime Association, which represents shippers, and the International Longshore & Warehouse Union, which represents dockworkers, began last May but have resulted in little progress toward a new labor contract. Since then, cargoes going into and out of the ports have slowed significantly, with each side claiming that actions by the other are to blame for the slowdowns.

Federal mediators have not indicated when their first meetings with the two parties would take place, but there is optimism that their presence will help to find a resolution of the contract dispute that remains centered on wages, pensions and work rules.

***

Washington Insider: Dynamic Scoring Fight

An insiders' fight over congressional procedures is underway now and could be extremely important in how proposed tax legislation is crafted, experts say. The new Republican leadership is pushing hard to change the ways of the Congressional Budget Office, both by appointing a new director and by changing the rules to require "dynamic scoring" for proposed tax legislation.

This means specific consideration of macroeconomic variables and is seen by many as a high-stakes political calculation by GOP lawmakers since it could imperil any near-term prospects for a comprehensive rewrite of the tax code. That logic rests on the belief by both Republicans and Democrats that the first major tax overhaul in nearly three decades will need to be bipartisan if it is to include extensive and detailed changes, especially those that require tough choices.

However, Democrats already think the Republicans are attempting to "rig the system" and that their proposed new scoring system would sharply lower the odds of cooperation down the road. A group of Senate Democrats recently warned Republican leaders of this possibility in a sharply-worded letter.

At the same time, some analysts are suggesting that Republicans already believe that tax overhaul is unlikely in in the remaining two years the Obama administration — and that the use of dynamic scoring could eventually lead to more GOP-friendly tax policy changes.

As a result, few are surprised that the push for a change in bill scoring is underway, even though evidence suggests any economic growth spurred by tax changes likely would be small. Still, it would give Republicans a tool they have long sought.

One of the main arguments for overhauling the tax code in the first place is to spur economic growth, and Republicans have long argued that Congress needs a way to measure the ways different legislation can affect the economy.

As the plan stands, however, dynamic scoring is seen as highly divisive. Democrats, for instance, argue that stimulus spending also leads to economic growth, but that the new leadership is unlikely to admit that effect. For example, House Ways and Means Chairman Paul Ryan, R-Wis., has told the press that only three pieces of legislation in 2014 would have qualified for dynamic scores under the proposed new rule.

However, the Joint Committee on Taxation did factor economic growth into its analysis of former Michigan Republican Dave Camp's tax overhaul plan last year after a "decades-long" effort by Republicans and business advocates, according to George Callas, then Ways and Means tax counsel.

House Rule 13 has required the Joint Committee on Taxation to calculate the macroeconomic effects of legislation amending the Internal Revenue Service code since 2003 and a Senate budget resolution in the last Congress required CBO to include a similar supplemental estimate for legislation with a revenue effect of at least $5 billion. But neither office uses the dynamic analysis as part of its official score.

To produce its macroeconomic analysis of Camp's plan, the JCT used two different economic models: one that generally assumes people do not look very far ahead when making economic decisions and an "overlapping generations" lifecycle model, which assumes people have more foresight about policy changes. The committee then produced eight projections with different assumptions about monetary policy, capital responses and other variables.

Proponents of dynamic scoring acknowledge that economic modeling is imprecise, but argue that including some kind of economic effect in a score is better than none at all and that static scoring is "wrong" and "underestimates the economic impact because it doesn't count economic impact." Opponents say that it opens the door for political considerations to dominate the debate.

The final JCT analysis of the Camp plan estimated that it would increase GDP by 0.1% to 1.6% over a decade, a relatively small amount. Still, those additional revenues would have allowed Camp to cut rates without including some of the money-raising offsets in his plan, such as a surtax on financial institutions, that doomed it politically.

Realists know that any kind of economic scoring that considers future spending and other considerations is highly risky, and can both undercut the credibility of the system and risk increasingly toxic confrontations rather than cooperation. Thus, this early debate has very important implications for the future performance of the new Congress and should be watched carefully by producers as it proceeds, Washington Insider believes.

---

Want to keep up with events in Washington and elsewhere throughout the day? See DTN Top Stories, our frequently updated summary of news developments of interest to producers. You can find DTN Top Stories in DTN Ag News, which is on the Main Menu on classic DTN products and on the News and Analysis Menu of DTN's Professional and Producer products. DTN Top Stories is also on the home page and news home page of online.dtn.com. Subscribers of MyDTN.com should check out the U.S. Ag Policy, U.S. Farm Bill and DTN Ag News sections on their News Homepage.

If you have questions for DTN Washington Insider, please email edit@telventdtn.com

(GH/CZ)

Copyright 2015 DTN/The Progressive Farmer. All rights reserved.