Washington Insider -- Monday

Politics of Big Infrastructure Deal Questioned

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

Lawmakers warn Trump on USMCA with steel/aluminum duties still in place

Senate Finance Chairman Chuck Grassley, R-Iowa, and five other leading Republican senators went to the White House Thursday to warn President Donald Trump that if he wants the U.S.-Mexico-Canada Agreement (USMCA) to be ratified, steel and aluminum tariffs must be lifted, in addition to cutting a deal with House Democrats. If the metals tariffs remain in place,

Trump will not have the votes to approve the deal in the GOP-controlled Senate, they said. “I do not know how much it matters in the House, but I think it definitely matters for our vote count over here,” said Senate Majority Whip John Thune, R-S.D.

In the House, Speaker Nancy Pelosi, D-Calif., reiterated that Democrats will not consider the USMCA for a vote without addressing her party’s concerns over enforcement, labor and environmental and pharmaceutical provisions in the text of the deal. Pelosi stressed that strengthening the agreement’s text to bolster enforcement remains the “overarching” issue.

House Minority Leader Kevin McCarthy, R-Calif., said Pelosi should bring USMCA up for a vote. Asked whether it should be done before the Trump administration lifts tariffs on steel and aluminum from Mexico and Canada, he said: “Yes... I believe you would have a large number of votes from the Republicans, and the Democrats would only need a few to bring it across.” Our contacts view that assessment as too optimistic.

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Farm Bureau Adds To Push For Reviving And Extending Biodiesel Tax Credit

Citing benefits to rural America, the American Farm Bureau Federation (AFBF) has added their voice to those calling for the biodiesel tax credit to be revived for 2018 and extended for 2019.

"Extending tax credits for biodiesel and renewable diesel will support domestic production and preserve the economic benefits that pass through to the country’s soybean, canola and livestock farmers," Farm Bureau said in a letter to House lawmakers this week.

They called for House members to cosponsor and support the Biodiesel Tax Credit Extension Act of 2019 (HR 2089), also mentioning a companion bill in the Senate, the Tax Extender and Disaster Relief Act of 2019 (S 617). The bills would extend tax incentives for biodiesel and renewable diesel retroactively for 2018 and extend them for 2019. Those tax credits expired at the end of December 2017.

Extending the credits will bolster the rural economy, Farm Bureau President Zippy Duvall emphasized in the letter. "In many rural areas of the country, production facilities are a driving force in local economies that provide employment opportunities and broaden the local tax base." he said. "In addition, all citizens, including farmers who are large fuel consumers, benefit when our nation reduces its dependence on unpredictable international oil markets."


Washington Insider: Politics of Big Infrastructure Deal Questioned

The Washington Post and others are watching last week’s new $2 trillion infrastructure deal closely, and are reporting that it is already losing momentum. The first sign was the negative comment by the president’s highly influential acting chief of staff who “is telling people inside and outside the administration that the effort is too expensive and unlikely to succeed.”

The tentative accord to repair the nation’s roads, revitalize mass transit and expand broadband systems that came out of at a private White House meeting Tuesday between Trump and Democratic leaders in Congress caused a ripple of surprised by many observers.

But the initiative ran into immediate opposition from Republicans who balk at the hefty price tag and is leading conservative allies to push lawmakers to block it. Those opposed to the deal include Mick Mulvaney and Senate Majority Leader Mitch McConnell, R-Ky., among others, the Post says.

Mulvaney said in an interview Friday that he did not disagree with the president on the need for an infrastructure initiative and was seeking to identify at least $1 trillion for the purpose.

“Is it difficult to pass any infrastructure bill in this environment, let alone a $2 trillion one, in this environment? Absolutely,” Mulvaney said.

In a Saturday tweet, the president responded: “There is nothing easy about a USA Infrastructure Plan, especially when our great Country has spent an astounding 7 trillion dollars in the Middle East over the last 19 years, but I am looking hard at a bipartisan plan of 1 to 2 trillion dollars. Badly needed!”

The pushback came quickly, the Post said as Senior Republican lawmakers began “actively downplaying any prospects for an infrastructure deal of that scale this year — though Trump himself proposed the $2 trillion figure--and has seemed eager to pursue that objective with Congress.”

“I think we need to figure out what we need, and then we can figure out how much it costs to build it,” said Sen. John Cornyn, R-Texas. “It seems backward to me to talk about how much we want to spend without talking about what we need and what the priorities should be.”

Senate Majority Whip John Thune, R-S.D., the party’s main vote-counter in the Senate, called the $2 trillion number “incredibly ambitious” and said he was “still chewing on” the size of the package that Trump is seeking. “We’ll see,” he said.

The resistance from Trump’s own party illustrates how quickly the bipartisan idea has been imperiled in Washington as the president “heads into his reelection campaign with no significant legislative agenda and besieged by congressional investigations.”

Senate Majority Leader Mitch McConnell recently said reopening negotiations on tax cuts would be a “nonstarter” in infrastructure talks.

The president also grew frustrated when the idea of “Infrastructure Week” became a running joke symbolizing the disorganization of his White House, current and former aides said. Trump actually wanted to embark on such an effort, seeing it as a populist idea key to his reelection chances, they said, and thought the government could make money from toll roads.

The original White House plan was to leverage $200 billion in federal funding with larger private expenditures, but Trump always wanted to spend more. Gary Cohn, when he was the president’s national economic adviser, would argue for such public-private partnerships, but the president’s New York real estate friends—including investor Steven Roth, who was an economic adviser to the Trump campaign—told Trump it was a harebrained idea. Trump disparaged the concept in the meeting with Democrats last week.

“Two challenges: It’s an extremely large number, and there is a complete lack of definition in what value would be generated if we made that investment,” said D.J. Gribbin, who was the Trump administration’s infrastructure policy expert until last year. “I find it unusual how much the conversation is, How much we are going to spend? instead of, “What are we going to accomplish?”

According to a December analysis from the Congressional Budget Office, raising fuel tax rates by 35 cents and pegging them to rise with inflation would generate only about a quarter of the necessary revenue over 10 years.

Getting the remaining $1.5 trillion would involve much more significant tax increases, and Democrats have not been shy about eyeing the recent Republican tax cuts. But even fully reversing the corporate income tax cut would not close the gap, and many Democrats are unwilling to go that far.

Though Democrats said Trump did not rule out tax increases in their meeting this week, multiple GOP leaders have made clear they do not support rolling back their marquee 2017 tax law in any way. And, many GOP figures are simply calling the task impossible.

Right now, the deal looks likely to be scaled back, or “long time” delayed. Clearly, the need for something like this proposal seems to be real, but the politics may not provide support – so this crucially important fight for producers and should be watched closely as it unfolds, Washington Insider believes.


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