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