11.11.2011
Peter Friedmann's View from Washington D.C. - November

As Congress enters the final six weeks of this First Session, and the President ramps up his reelection campaign, we find ourselves at a “tipping point”. Typically, these last few weeks in the year before Presidential elections can be a fertile time for substantive work by both Congress and the Executive Branch to address and resolve major issues. Both Congress and the President often run away from politically sensitive issues during an election year. We only have six weeks until we are in an election year. So it may be “now or never”.

On the positive side, we have seen some real accomplishments in the recent weeks. Free Trade Agreements with Korea, Panama and Colombia, which have been simmering on the back burner for four years, were finally passed. More technical, but still important trade legislation, also passed after long delays. Even the proposed Keystone Pipeline, which would carry oil from tar sands in Alberta down to the US Gulf Coast States, might eventually find the White House and Republican Congressional on the same page, and be approved (despite vehement environmental opposition). A comprehensive transportation infrastructure bill, already two years overdue, is finally inching forward. (What we need now is an injection of courage on the Hill to increase the gas tax – unchanged since the early 1990’s – to pay for highway and transit needs). Congress seems to agree that infrastructure spending is acceptable, and the Dept of Transportation has figured out some very good transport projects to fund under the TIGER program. There is reason to believe that more could get done before the New Year.

As you read this, global financial markets are watching Greece and now Italy, with great concern. The prospect of the break-up of the EU common currency, is putting extraordinary pressure on the Congressional “Super Committee” to find a way to reduce the US deficit by at least $1.3 trillion over the next ten years. It’s still a battle between those on the Super Committee who would protect entitlements from cuts, and those that will oppose tax increases. If they don’t get this done by November 23, it will be a major political failure, discouraging to both Wall Street and “Main Street”; worse, by prior agreement, failure to agree, and for Congress to approve a budget plan,  would automatically trigger significant cuts to both civilian and military programs. It’s not clear how the American public would accept the kind of cuts in Federal spending that would result.

A bright spot is that exports are growing, mostly to Asia, while behind the scenes, the US Government and Pacific Rim countries such as Vietnam, Malaysia, Chile, Korea, etc are working toward a TransPacific Partnership that will reduce tariffs (if the protectionists in Congress will allow it), and thus further stimulate the flow of commerce from US manufacturers and farmers to newly opened Asian markets. Another development is the emergence of massive domestic oil resources in North Dakota; regardless of one’s views of fossil fuels versus renewable energy, reducing US dependence on imported oil will lead to meaningful improvements in our balance of trade, and thousands of new jobs.

So, in these weeks that Congress and the President pursue their last major accomplishments before ramping up their reelection campaigns, the environment here in DC is unsettled. We hold our collective breath as we hope, against the odds, that the 12 Senators and Congressmen on the Super Committee do not miss this historic opportunity to make real and lasting changes to the way we generate tax revenue, and the way we spend it. One thing Congress does very well – wait until the last minute. The deadline for the Super Committee is November 23. Don’t expect to see anything before the wee hours of November 24^th – Thanksgiving!

Regards,
Peter

Peter Friedmann
Of Counsel, Lindsay, Hart, Neil & Weigler, LLP

10.14.2011
Peter Friedman's View From Washington, DC

For 9 months it has seemed that Congress and the President were only interested in one issue – the federal budget. And contentious, partisan battles had become 'the norm'. Battles between Democrats and Republicans, between the House and the White House, were a constant, and not much got done other than the budget and setting spending limits. While those are important, and the deficit remains the elephant in DC, other functions of the government require attention: transportation, infrastructure, trade, tax, etc.  Yet it seemed that all the oxygen was being consumed by the budget and spending battles. All of a sudden that has changed, or, at least we have seen a glimpse of what can be accomplished when the Congress and White House feel they must find a solution.

This past week Congress passed three major trade agreements, opening new markets for US manufacturers, service industry and agriculture, defeated a misguided threat to trade with China, restored an important trade facilitation mechanism, and passed a limited worker training program. These had been languishing for months, in some cases years.

These trade agreements with Korea, Panama and Colombia were vigorously opposed by organized labor and their supporters on Capitol Hill and in the White House, which had refused to send the Agreements to Congress for nearly three years. Finally, as Korea and Colombia were entering into Free Trade Agreements with the European Union, with Canada, with Mexico, leaving US without competitive access to their markets, the White House was pressured into releasing the Agreements to Congress, and majorities were cobbled together in the House and Senate to pass them. What is remarkable is that we have decided we need to remain competitive in the global economy, and we have finally demonstrated the will and capacity to pass the laws which will allow US business to compete.

Keep in mind that the big news is still deficit reduction. The "Super Committee", comprised of 6 Senators and 6 Congressmen (half Democrat and half Republican) continues to meet, striving to find a way to reduce the deficit between $1.2 and $1.5 trillion over the next decade. They must reach an agreement, and present to the Senate and House, by November 23. Then Congress must vote to accept that agreement. Failure to do so would trigger automatic cuts totaling $1.2 trillion, divided equally between defense/homeland security (including Coast Guard) and civilian government programs. And then Congress will be back to battling over raising taxes or not, cutting entitlement (Medicare, Social Security, etc) or not, cutting or eliminating specific programs or even agencies.

The Super Committee is comprised of 12 Congress people with diverse viewpoints, some who have vowed they will not accept any tax increases, and others who have vowed not to accept any cuts in entitlement programs. Frankly, without one or the other, or better yet a combination of both, it will not be possible to reach real deficit reduction. So an agreement will require compromise. It's a tall order. Optimists only give it a 50-50 chance.

And until this work is completed, Congress cannot move forward with a meaningful jobs bill, or a transportation infrastructure (highway and transit) bill, or assign budgets to all the federal agencies, including Customs and Border Protection, the Corps of Engineers, the Defense Department, etc. Thus all Federal programs and their funding are "on the chopping block" through the end of the year.

In the meantime, there will be skirmishes on Capitol Hill as the business community and Republicans, emboldened by success in passing the trade agreements, will seek to derail new regulations being issued by the Administration. For instance, cement dust regulations by EPA, or trucking hours of service Regs by the Federal Highway Safety Administration, both of which are seen as "anti-business". Regulations will be a flashpoint between the House and the White House for the remainder of the year.

It is all very unsettled, and with the economy still in jeopardy, the stakes are high. But passing the trade agreements gives us some reason for hope that when push comes to shove, decisions, the right decisions, are possible.

Regards,
Peter

Peter Friedmann
Of Counsel, Lindsay, Hart, Neil & Weigler, LLP

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