Washington Insider - Thursday

War Over Tax Proposal Details

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

Trump Administration Self-Initiates Aluminum Investigations

The Trump administration launched a pair of investigations that could lead to import duties of aluminum sheet valued at more than $600 million, the first time in at least 25 years a U.S. administration has "self-initiated" an antidumping or countervailing duty case.

While working with the aluminum industry to develop the case, Ross said Commerce is initiating the investigations, which could take up to a year. Then, the U.S. International Trade Commission will have to determine if U.S. producers have been materially injured or threatened with material injury by the imports.

"In this case, available evidence indicates that Chinese producers are selling aluminum sheet in the United States at prices that are less than fair value and that the Chinese government is providing unfair subsidies to producers of aluminum sheet," Commerce Secretary Wilbur Ross said. The efforts announced Tuesday are in addition to two other investigations – one on aluminum imports from China and a broader Section 232 probe.

Canada Heads to WTO over Softwood Lumber Import Duties Proposed By US

Canada has requested consultation at the WTO with the U.S. over import duties imposed by the U.S. on softwood lumber from Canada.

"We are reviewing the consultations request," U.S. Trade Representative spokeswoman Amelia Breinig said in a statement. "We are confident that the Department of Commerce's determinations fully comply with WTO rules." She noted the action by Canada is "premature" since the duties are not in place yet and are awaiting a final injury determination by the U.S. International Trade Commission December 18.

The proposed anti-subsidy duties range from 3.2% to 8.89%, and countervailing duties range from 3.34% to 18.19%.

Washington Insider: War Over Tax Proposal Details

The fog of the political budget war continues to thicken, the Washington Post reported Wednesday. It said that “outside groups on the right are furiously mobilizing against an agreement that Republican leaders made with Bob Corker, R-Tenn., yesterday to get the tax bill through the Senate Budget Committee.”

Apparently, Corker negotiated a deal in September that the tax cuts “cannot increase the national debt by more than $1.5 trillion over the next 10 years.” But, now he’s concerned about various gimmicks and overly rosy assumptions in the bill “that would almost certainly mean the true impact on the debt is far greater than that.”

So, the retiring senator has been pushing in recent days to include a “trigger” that would automatically increase taxes down the road if the bill fails to generate the level of economic growth that Republicans leaders keep publicly predicting. This, it seems, has led to all sorts of angst.

In addition, the Post says “it’s not clear what exactly GOP leaders promised Corker, who declined to share specifics with reporters.” He said the amendment will be included in an updated version of the bill that is likely to be released publicly on Thursday.

This has led to something of a political explosion. The constellation of groups funded by the billionaire industrialist Koch brothers – including Americans for Prosperity and Freedom Partners – came out strongly against any trigger Wednesday last night, and were joined by Grover Norquist from Americans for Tax Reform, the Wall Street Journal editorial board and the U.S. Chamber of Commerce.

These groups argue that such a trigger would likely increase taxes during an economic downturn—with strong negative impacts, and which they fear would cause stagnation. They also complain that it would inject even more uncertainty into the tax system, which would make it harder for businesses to plan their long-term investments.

Corker asked President Trump about a trigger during a private lunch Wednesday for Senate Republicans—and, the president replied that he does not like the idea “but will accept it if that’s the only way a bill can pass,” the Post said. “There’s agreement in principle, very strong agreement, with Sen. McConnell, R-Ky., with the Finance Committee — and of course the White House has been in the midst of all this, too — but the agreement was made with McConnell and the Finance Committee leadership,” Corker said later in the day.

In addition to Corker, the compromise is being crafted to win over other on-the-fence Republicans like Sens. James Lankford of Oklahoma, Jeff Flake of Arizona and Jerry Moran Kansas.

With no Democrat planning to vote for the measure, Republicans can only afford two defections when they bring the bill up later this week for a vote on the floor.

This new flash point in the delicate negotiations draws attention to the deeper identity crisis for the GOP in the Age of Trump, The Post says. For example, the President, who has declared bankruptcy several times, has made clear that he’s not a fiscal conservative. And Congressional Republicans, when they last had unified control of the federal government under George W. Bush, spent heavily, as vice president, Dick Cheney reportedly declared that Ronald “Reagan proved deficits don’t matter.”

The tea party movement that emerged after Republicans lost power during the 2008 financial crisis put a heavy emphasis on tackling the debt, and conservatives running for office chastised the establishment GOP for its lack of fiscal restraint. Many current members of Congress got elected promising they wouldn’t repeat those same mistakes.

But once they got power over the purse strings, especially after President Trump took over their party, the tone of most elected Republicans changed once again, The Post says. Meanwhile, the national debt exceeded $20 trillion for the first time ever this fall.

Despite this rift, The Post says, the sense in the Capitol now is that there is real momentum toward getting this done. Sen. Susan Collins R-Maine, appeared ready to fall in line after a private meeting with the President yesterday.

Still, a challenge remains for Senate GOP leaders, who have two holdout members who want to make the tax cuts more generous, but another half dozen or so Republicans who are still uneasy about potential additions to the debt. These contradictory demands complicate negotiations and will force Senator McConnell to decide who he needs to placate most.

It’s not clear for example that he’ll be able to win over Sen. Ron Johnson, R-Wis., who wants to give “pass-through” businesses the same benefits as large corporations—which would increase the cost of the bill by more than $100 billion. Sen. Steve Daines, R-Mont., also wants this change, but he may agree to vote for the bill with a compromise that costs less.

So, we will see. Everybody hates taxes and loves tax breaks, but some also really, really hate debt. This will mean still more hard, complicated choices that should be watched closely as the debate proceeds, Washington Insider believes.

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