Legislative Outlook
3/11/2015
Steve Kopperud, government affairs consultant
Wednesday, March 11, 2015
by: Steve Kopperud, government affairs consultant

Section: Spring 2015




The president knows to avoid the lame duck mantle, he needs Congress or he goes maverick. It appears President Barack Obama has decided to push the envelope across the issue spectrum.


Instead, he has staked out administration positions on major issues from taxing the rich to supplement the poor and middle class to proposing free two-year community college tuition. Obama avoided several contentious issues, save for saying if bills to block his executive order on immigration, his efforts on climate change or manipulation of the Dodd-Frank financial regulation law reach his desk, “they will earn my veto.” 
 
Congress seems to have taken a page from the White House playbook. The administration extols the virtues of executive action to fill the void of congressional inaction on a given issue, but the irony isn’t hidden when the House sues the president in federal court for exceeding his authority on national health care, and Obama threatens to veto congressional action to approve the Keystone XL pipeline because such review is the official purview of the executive branch. The House Speaker counterpunches by ignoring protocol and the White House—“we gave them a heads-up this morning”—and invites the Israeli Prime Minister to address a joint session of Congress to talk about the threat of Iran in the Middle East. The invitation was proffered just hours after the president threatened to veto a GOP bill increasing economic sanctions on Iran.   
 
Not to be outdone by the executive order pen and the veto power of a sitting president, Congress has come up with the legislative equivalent of the executive order—the “policy rider.” The beta test for the political success of this tactic was the December 2013, FY2015 omnibus spending bill. Attached to that bill were dozens of pure policy, non-spending or unrelated sections because it was the last train leaving the congressional station in the 113th Congress, lawmakers gambling Obama would not veto the appropriations package, shutting down the federal government just days before Christmas. 
 
Senate leader Mitch McConnell (R-Ky.) says he will encourage the use of such policy riders on spending bills during this Congress, relying on the same reasoning, namely, “The president will not shut down an entire department/agency over a parochial policy disagreement.” In the words of one appropriations lobbyist, “Riders are the new earmarks,” that old practice of writing appropriations language so specifically and narrowly, only the lawmaker’s district, state or constituent benefits. Earmarks were banned by both chambers several years ago because of increasing abuse of the system and public outrage. 
 
A good example of how McConnell plans to use policy riders is the GOP plan to “tweak” Dodd-Frank regulations imposed in the wake of the financial meltdown of 2008. While President Obama has said any bill designed to roll back the Dodd-Frank financial market regulation law is dead on arrival if it reaches his desk, McConnell has already proved the effectiveness of the policy rider approach.
 
Using a rider, Congress removed in the FY2015 omnibus spending package, the so-called “push-out” provision of Dodd-Frank, which required banks and financial institutions that trade in the futures market to set up trading desks as independent companies. McConnell has said repeatedly Dodd-Frank will be further rewritten in the Senate through policy riders on spending bills in 2015 and 2016.
 
Where do the president, the House Speaker and the Senate Majority Leader agree? What will be the timing of the big ticket issues and how will the 2016 presidential election play in the political tug-of-war that is Congress and the White House?    
 
Whether action will begin this year or the political parties will try and time “progress” to coincide with the 2016 presidential election, the newest play is federal tax reform, whether minor or comprehensive. The president’s latest play is a proposal to hike taxes on the top one percent of U.S. wage earners—coupled with tax increases for major financial institutions—to fund what he calls “middle class economics.” The president says he’s proposing “practical, not partisan” initiatives on childcare, education, medical research and infrastructure and the details will be revealed in the White House budget proposal due to Capitol Hill Feb. 2. 
 
“Middle-class economics means helping working families feel more secure in a world of constant change. That means helping folks afford childcare, college, health care, a home, retirement—and my budget will address each of these issues, lowering the taxes of working families and putting thousands of dollars back into their pockets each year,” the president said.  
 
Key to the plan is increasing the capital gains tax to 28 percent from its current 23.8 percent, and imposing a new tax on the appreciation of highest-earner capital gains when they die, generating an estimated $320 billion. A chunk of the new money would go to the federal Highway Trust Fund to pay states for highway and commuter system infrastructure repairs and replacement. House Speaker John Boehner (R-Ohio) told “60 Minutes” Jan.25, the proposal is “dead, way dead on arrival.” Senate Finance Chair Orrin Hatch (R-Utah) called the proposal “class warfare,” and Rep. Paul Ryan (R-Wis.) called it a “political ploy.” 
 
Republican leadership in both chambers can see common ground with the White House on closing some tax loopholes and revising corporate and individual tax rates as part of comprehensive tax reform.  They also want to tackle “inversion,” ending a U.S. company’s ability to stash cash overseas to avoid domestic taxes. Hatch says a comprehensive rewrite of the federal tax code is his panel’s highest priority. He’s split his panel into five working groups, each tasked with coming up with ways to modernize and simplify the tax code, and linked aggressive trade development and the tax code rewrite as the two most important ways to energize the economy.  
 
More likely candidates for 2015 action are pending trade treaties. As Hatch says, trade is one-half of the engine needed to accelerate economic recovery and job growth, and the White House agrees. This unlikely partnership illustrates the strangeness of political bedfellows, as the president used his State of the Union to finally and formally request Congress give him trade promotion authority—the ability to negotiate trade pacts without fear Congress will change them during the approval process, nullifying hard-won deals with overseas partners.   
 
Both the Republican-dominated House Ways & Means Committee and the Senate Finance Committee—which originate TPA bills—say they’ll move TPA to the floor now that the president has formally requested it, and announced hearings on trade issues in late January. Business interests—including most of agricultural production and processing—support TPA for the president.  
 
The Trans-Pacific Partnership (TPP) treaty is in the 11th hour of negotiations; Japan has apparently decided it’s best to allow U.S. beef and pork to enter duty free, as long Japanese farmers are protected from any “surge” in those commodities, and Canada appears ready to relent to U.S. pressure to abandon its tariff protections for domestic dairy. Obama has lobbied Asian leaders hard, saying TPP is necessary to help the U.S. get ahead of China’s efforts to “write the rules” on trade in Asia and the Pacific Rim. 
 
The U.S.-European Union Transatlantic Trade & Investment Partnership (T-TIP) continues to slog along, snagging on non-economic issues, but nevertheless, the White House recognizes getting to the finish line on either or both relies heavily on other nation’s trusting U.S. negotiators that what’s agreed to will survive congressional oversight.  
 
The political irony here is that House and Senate democrats want to withhold TPA from Obama because they fear the administration will ignore congressional consultation, sacrificing labor, human rights and environmental protections they believe should be part of any trade treaty. Senate Minority Leader Harry Reid (D-Nev.) said he won’t support TPA unless the president can show it will benefit the “middle class,” particularly U.S. workers who have been displaced by previous trade deals. Rep. Sander Levin (D-Mich.), ranking member of Ways & Means, said he favors a “slower” path to TPA until he’s “confident that the TPP deal is on the right policy path,” and listed all of 10 policy areas he wants to see considered, including worker protection, environment and currency manipulation. 
 
The third leg on the U.S. trade stool is Cuba. In December, the president surprised Congress and the business community by announcing he would normalize diplomatic relations with Cuba, spicing the deal with talk of liberalized trade and easier travel.  
 
The U.S. Agriculture Coalition for Cuba, a coalition of 30-plus major companies and ag trade associations co-chaired by Cargill, Inc., is the major battering ram trying to bring down the U.S. trade embargo imposed on the Caribbean nation in 1963. For agriculture, the American Farm Bureau Federation and the National Farmers Union, again not frequent political allies, jointly said they support the president’s plan. AFBF said such action is necessary because the current trade embargo locks U.S. farmers out of lucrative trade with Cuba, and is a political action “way past its expiration date.”  
 
An end to the trade embargo faces an uphill battle in Congress. The White House can open an embassy and fiddle with trade financing, banking and private citizen travel; only Congress can remove or modify the economic embargo in place since the military takeover of the Cuban government by Fidel Castro. Yet another case of unlikely political bedfellows are Cuban-American Sens. Marco Rubio (R-Fla.), Ted Cruz (R-Texas) and Bob Menendez (D-N.J.)—and four House members with similar heritage—have voted to block any and all congressional efforts to end the trade embargo. Whether that pledge will hold if human rights/immigration concessions are won, is a topic of wide speculation.  
 
Another policy area essentially ignored for the last six years is energy policy as regards energy exploration, climate change and renewable fuels, both because of a lack of consensus and political baggage. The first shot from the republican legislative cannon—S. 1 and HR 1—is legislation to approve the Keystone XL pipeline from the Canadian border through the Midwest to its terminus in Oklahoma. GOP leaders say this is because the administration has not taken action for six years; the White House said it will veto the legislation because it’s an executive branch authority Congress is usurping. Both prospective actions are political pokes in the eye to the other party. The House has approved its Keystone bill; the Senate, at this writing, was about to finish its work. The bills will need to be reconciled as the Senate bill carries amendments not found in the House legislation.   
 
Fresh off extolling thriving domestic energy production during the State of the Union, the president issued another stunning executive action in late January when he announced he was expanding the Alaskan Arctic National Wildlife Refuge to ban oil and gas exploration in that state’s northeast corner and parts of the Arctic Ocean, including the Alaskan coastal plain. The area would get the strongest federal land protection status possible.  
 
Sen. Lisa Murkowski (R-Alaska), chair of the Senate Energy & Natural Resource Committee, called the action “a stunning attack on our sovereignty…they’ve (the administration) decided today was the day they were going to declare war on Alaska. Well, we are ready to engage.” 
 
Another priority target of the GOP Congress for action beginning in 2015 is the plethora of administration regulations and related actions on clean air, water and climate change generally.  For Senate Majority Leader Mitch McConnell (R-Ky.) his priority—one shared by a good number of Senate democrats—is to kill off U.S. Environmental Protection Agency rulemakings on clean air, specifically those that seek to reduce carbon dioxide and other greenhouse gas emissions from existing and new power plants. This is the “war on coal” about which he’s talked for two years, and a likely candidate for one or more of those “policy riders” on an appropriations bill.   
 
Falling to the Senate Committee on Environment & Public Works, chaired by Sen. James Inhofe (R-Okla.)—who’s already held one joint hearing with his House counterparts—and to the Senate Agriculture Committee, chaired by Sen. Pat Roberts (R-Kan.), is coordinated House and Senate action to gut EPA’s colossally unpopular proposal to expand its Clean Water Act authority to cover all “waters of the U.S. (WOTUS),” rather than the current “navigable waters of the U.S.” EPA says it must expand its authority to meet court orders on water protection.  
 
Agriculture broadly, supported by general business and at least one federal agency, strongly opposes the WOTUS rulemaking, including an accompanying “interpretive rule” to protect existing ag exemptions from the new authority. Most ag groups—and a large bipartisan chunk of Congress—have called on EPA to withdraw the rulemaking. In the December 2014, FY2015 omnibus spending bill language was included to halt progress on the WOTUS rule and kill the interpretative rule; the interpretative rule is dead, but the WOTUS language fell short of stopping EPA. 
 
The Renewable Fuels Standard is also prime for a rewrite, repeal being a political step too far for most midwestern congresspersons. Signaling the political difficulty in dismantling the RFS machine was a wholly unsuccessful bipartisan Senate effort to amend the Keystone XL pipeline approval bill with an amendment to remove corn ethanol from the RFS. Any action affecting the RFS was a “maybe” issue for 2015 until the White House walked away from the controversy it created by seeking to lower the overall gasoline blending mandates when setting a final 2014 RFS mandate. Instead of making a final call, EPA opted to roll the 2014 mandate into a decision on 2015 levels.  
 
Critics immediately seized on the inaction as tacit administration admission the RFS is flawed. While the petroleum industry and animal agriculture broadly want to see the RFS repealed—poultry and pig farmers, ranchers and meat processors say the RFS, by arbitrarily creating a corn ethanol market, artificially elevates feed prices—and needs to die. The ethanol and biodiesel industries—including rendering—want the RFS liberalized to reflect fast-growing alternative biofuels industries. Those in the middle concede the 2006-enacted RFS authority needs “fixing.” The White House is formally silent on the future of the RFS, though insiders say EPA’s action last year to dramatically reduce the various biofuel RFS mandates signals a lack of ongoing support for the program.
 
Among other likely 2015 initiatives is growing bipartisan support to increase U.S. energy exports, particularly by lawmakers in states like North Dakota, Texas, Iowa and Illinois. The increase in U.S. oil and gas production—bringing gasoline to less than $2 a gallon—coupled with strong production trends in ethanol and biodiesel are evidence, say refiners, that U.S. producers should exploit international. 
 
Lastly, the on-going battle over immigration reform will continue in 2015, but action won’t ramp up until 2016 given the issue’s key role in presidential politics over attracting Hispanic voters. There is bipartisan, bicameral agreement there may be some legislative nibbling this year around the edges of broad immigration reform, but even that rare example of comity was dealt a blow in late January when a bill to strengthen the southern U.S. border was yanked from the calendar for lack of consensus, even within the GOP caucus. 
 
There could be work done to increase temporary agriculture and technical worker visa numbers, but the key issue is a GOP priority to undo the president’s executive order to defer the deportation of undocumented workers who are related to U.S. citizens.
 
The House moved quickly on the president’s order, when it passed its version of FY2015 Department of Homeland Security spending bill, adding several floor amendments. However, the Senate referred to the House action as “the beginning of the process,” signaling a similar victory may be much tougher on that side of Capitol Hill.  Any floor action first needs 60 votes to proceed, meaning the GOP needs six democrat votes to try and move the DHS bill as approved by the House. McConnell said the House should not expect “a Senate miracle” on immigration action. If the Senate doesn’t go along with the House, and the president makes good on his veto threat, then a DHS spending bill stripped of all immigration language may be the only way to keep the department operating past its Feb. 27 short-term funding deadline, done deliberately as part of the broader FY2015 omnibus spending package approved in December, limiting what DHS can spend to implement the president’s executive order.  
 
The overarching political challenge for 2015-16 is how to deal with 12 million-plus illegal immigrants in the U.S., many of whom hold important jobs Americans will not do. This is where the two political parties part ways almost completely.   
 
For the democrats, it’s all about a “path to citizenship,” adopting a system similar to that included in the bipartisan Senate comprehensive reform package approved in 2013, but ignored by the House. Criminal background checks, tax payments, English proficiency requirements, formal applications and other requirements to even apply for citizenship create a decade-long pathway. As described by House GOP leaders, it’s not “citizenship” to be granted, but “legal status.” The same program and application requirements would be in place, but citizenship per se would be the second journey after legal status is achieved by any undocumented worker in the U.S. and similar to the citizenship journey, would take about 10 years.
 
Steve Kopperud, executive vice president of Policy Directions Inc., is the American Feed Industry Association’s government affairs consultant. Steve can be reached at: (202) 776-0071 or skopperud@poldir.com.
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