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.

GOP Members of Ways and Means Committee on Board for Tax Reform

Republican members of the House Ways and Means Committee plan to significantly reform the U.S. tax code this year, but observers say their plan faces long odds. The reason is that while there is widespread acknowledgement of the need to trim back the massive, unwieldy federal tax law, there are thousands of groups across the country that benefit from the status quo and will lobby ferociously to retain their part of the current system.

The political reality is that a bill that would bring about comprehensive tax reform would be unlikely to pass either chamber of Congress because different factions would insist on retaining tax breaks, loopholes, credits and benefits for their constituents. Other factions would lobby just has hard to retain their favored sections of the tax law.

As a consequence, it may be that Congress will need to approach tax reform in agonizing, bit-by-bit fashion, gaining approval for reforms already acknowledged as needed by the majority while addressing more controversial reforms one at a time in smaller bills. However, given the size of the U.S. tax code and pace at which Congress has been working over the past half-dozen years, complete reform could take well into this century to accomplish.

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Senate Democrats Set to Play Defense on EPA Issues

Democrats, who now are in the minority in the Senate, say they plan to work with Republicans on funding the Environmental Protection Agency and other agencies when they can, but they also plan to fight anticipated GOP moves to roll back environmental regulations or climate initiatives.

Sen. Tom Udall, D-N.M., the ranking member on the Senate Appropriations Subcommittee on Interior, Environment, and Related Agencies, last week told the press that he wants to return to "regular budgeting and a thoughtful appropriations" bill and said it's an "unwarranted approach" to attach riders to the legislation that only have the support of one political party.

That view appears destined to run headlong into a plan by Senate Majority Leader Mitch McConnell, R-Ky., who has called the appropriations process the Republican's most effective tool for fighting a host of environmental regulations. Top targets currently in the GOP's sights are expected to include carbon emissions limits for new and existing power plants, a jurisdictional rulemaking for the Clean Water Act and revisions to the national ozone standard.

President Obama views those regulations as a key component of his legacy on climate change and has vowed to veto appropriations legislation if it contains unacceptable policy riders. The president's veto threat could give congressional Democrats a small bit of leverage as the fiscal 2016 spending bills move through the legislative process this year.

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Washington Insider: Anti-Trade Politics

In a sense, trade politics brings out the worst in many debaters, and the current effort to renew Trade Promotion Authority for the president and negotiate the Trans-Pacific Partnership free trade agreement certainly offers an example.

For example, recent press reports indicate two main arguments being made against renewal of TPA and the proposed TPP are the "lack of transparency in the negotiations, and the administration's reluctance to force the issue of currency manipulation into trade deals." On Friday, the chair of the Senate Finance Committee told the American Enterprise Institute that, "Addressing currency concerns was key to winning lawmakers' support for a bill to fast-track trade agreements through Congress."

Trade observers suggest that this degree of politicization is something of a threat to the negotiations. For example, ambitious negotiations involve compromises, including some that inevitably accumulate groups of opponents. TPA is a way to force Congress to consider the proposals as a whole, and avoid prolonged fights over individual pieces that tend to undercut the whole process.

Another class of opposition includes efforts to include issues that trade bodies are ill-equipped to face. Trade expert Alan Beattie noted a blog post at The Financial Times last week that the congressional clamor for enforceable rules against currency manipulation in the Trans-Pacific Partnership is aimed at several emerging markets and China — even though China is not negotiating the TPP."

"This is not a happy development," Beattie said. "Currency tariffs and the like were a bad idea when they were widely mooted in Congress during the last go-around on this issue and they are a bad idea now." Apart from the accurate and well-rehearsed objections on grounds of principle and political economy, such rules are likely to be almost impossible to implement. They will place other organizations, notably the IMF, in a ludicrously awkward position," he wrote.

So, while the trade gurus are undertaking the heavy lifting of countering protectionist arguments against the proposals being negotiated, press reports indicate that President Obama, Vice President Joe Biden and a large group of top administration officials have been making a sales pitch to congressional Democrats for fast-track authority.

The president and vice president both made that plea last week at the House Democratic retreat in Philadelphia, which ended Friday. Top White House economic adviser Jeffrey Zients, Treasury Secretary Jack Lew, Commerce Secretary Penny Pritzker and Labor Secretary Tom Perez also have joined the effort to sway House and Senate Democrats, as well as some skeptical Republicans." The administration's hope apparently is to wrap-up 30 to 50 Democratic "yes" votes in the House that might be needed to push a fast track bill over the top.

Still, there is a strange sort of reluctance on the part of the administration to make that push hard, tough and formal. Press reports indicate that the White House is still "only informally counting votes" and that the president was careful to soften the hard sell during a closed-door meeting with lawmakers last Thursday night" An administration official told the press that the White House "will make [a] substantive case" for a trade deal but won't "go after folks" or make the vote a litmus test for Democrats.

If that reckoning is accurate and the administration is deciding to "go soft" on important trade issues in the hope that the Republicans will fill in "as needed" to pass TPA, that call will be spotlighted early on and certainly will weaken chances of an ambitious deal.

It also likely will increase the odds of a fragmented effort that attempts to "build-on" ill-designed social and economic concerns at the expense of central trade issues that concern mainly interventionist policies and protectionist border measures, Washington Insider believes.

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(GH/CZ)

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