Don't Hold Your Breath for an Activist Congress

By Steve Kopperud, Policy Directions, Inc.

For those expecting big things from Congress this year, meaning action on energy policy, tax reform, and the burden of overregulation, this will be the summer of your discontent. Why the impending disappointment? November 6, 2012, is Election Day for about two-thirds of Congress and the sitting president, and in a rare display of unity, Republicans and Democrats agree it’s best to do nothing than to rile the voters by doing something decisive and/or stupid.

The thought bouncing around in the back of the heads of those running hard for reelection is this: “I/We can dodge this issue. We’ll do it during lame duck.” Once the election winners and losers are announced November 7, and party control is known, everybody talks lame duck session – “memorial” legislation for losers and retirees, votes for which no explanation need be given – and it’s Katie-bar-the-door on the mischief to be wrought in a two- or three-week period running up to Christmas. Everyone assumes voters won’t remember come the next election two years hence.

So, let’s take a look at what likely won’t get done in regular session, and then we’ll toss in a couple of issues with which Congress may actually deal, and we’ll take a scientific wild-ass guess at what may happen in lame duck.

First, is there a snowball’s chance we’ll see any action on energy? Senator Jeff Bingaman (D-NM), chairman of the Senate Energy and Natural Resources Committee, continues to hope against hope he can inspire his colleagues to take some kind of action that would set Congress on the road toward a national energy policy providing incentives and credits for utilities to generate clean energy, doesn’t involve cap-and-trade schemes, and helps wean the United States off imported fossil fuels. He’s introduced legislation to that effect, but on the day he introduced the bill, he acknowledged to reporters, “the partisan environment in Congress” makes progress on this bill all but impossible.

If Congress doesn’t do anything about energy challenges, what does that mean for the expired blender’s tax credit for biodiesel and renewable diesel, not to mention the alternative fuel mixture tax credit?

Congress doesn’t file the blender’s tax credit under energy, but rather under “taxes, miscellaneous” as it goes about figuring out extensions and renewals. And in this Congress, the wild card now being played has everything to do with the future of the Renewable Fuels Standard (RFS) and little to do with long-term energy policy.

For the biodiesel credits per se, it’s 2010 all over again. You’ll recall the credits, which first expired at the end of 2009, were not renewed until the third quarter of 2010, retroactive to January 1 of that year all because every time Congress came up with an offset to pay for the costs of the tax credits, that offset would be used to pay for some other program. The same scenario is playing out this year; both chambers have agreed to an extension of these credits – length of extension to be determined – but neither chamber has come up with a legislative train on which these extenders can ride.

However, if any bill carrying even a whiff of tax reform moves, the extenders package will be there – retroactive to January 1, at least the congressional tax writers’ pledge. The challenge in this arena continues to be how to handle tax rate reform – both corporate and personal. While the GOP vows to preserve the President George W. Bush tax cuts, President Barack Obama continues to want to increase the personal tax rate on “those most fortunate among us,” translating into an increased tax rate on those annually making $200,000 or more individually or $250,000 or more jointly. There is at least philosophical agreement on reducing the corporate tax rate to 28 percent, but there are oceans of difference in how to get there. This could actually happen during lame duck when no one has to go home and explain – or take blame for – what was actually achieved.

The future of the RFS is another matter, though an issue likely not to be tackled by this Congress during regular session or in lame duck. National livestock, poultry, and meat processing groups – those that led the charge in killing off corn-based ethanol tax supports – have now turned their sights on the RFS. They call it market distorting because it arbitrarily creates markets for alternative fuels, thereby creating arbitrary, but price manipulative demand for corn, soybeans, and other feed/food crop feedstocks. These groups want hearings on whether the RFS is necessary, and they want a government study on how it needs to be changed so as to not distort feed prices and, by extension, consumer food prices.

Confident the meat industry will not prevail, the National Biodiesel Board (NBB) convinced 60 members of Congress from both chambers and both sides of the aisle to send a letter in March to Obama asking him to approve a 28 percent increase in the RFS for biodiesel, from one billion gallons in 2012, to 1.28 billion next year. NBB conjures the image of an industry that will die overnight – or at the very least never attain its full potential – if the administration does not grant “this modest increase.” The NBB says, “The skyrocketing gas prices we’re seeing should remind us all why Congress – with overwhelming bipartisan support – started the RFS in the first place.” Farm state members of Congress jumped on board. Given biodiesel is the only federally defined advanced biofuel, this request will likely be granted.

Switching gears, will there be a 2012 farm bill and an energy title therein? The answer to both is yes, if only a one-year extension of the 2008 omnibus farm program package, and an extension of the various biofuel research and promotion programs now in place. Both House and Senate Agriculture Committees are in the hearing process as this is being written, which will evolve into the mark-up process by April. The goal is to have a bill marked up and ready for the floor by Memorial Day, which is highly unlikely on either side of the Hill.

The main challenge is getting a bill that will cost north of $350 billion when you add in the mandatory spending programs – food stamps, nutrition programs, forestry obligations – through partisan floor action in an election year when your colleagues see the underlying bill not as a farmer/rancher “income safety net,” but as a pot of money that can be raided to pay for other parochial programs slated for budget cuts.

Senate ag panel chair Debbie Stabenow (D-MI) is proceeding with her plans to produce a multi-year 2012 bill; House ag committee chair Frank Lucas (R-OK) publicly hedges his bets by paying lip service to the multi-year conventional farm bill rewrite, but admits he’s got a one-year extension bill – with some tweaks – in his back pocket. Lucas faces far weightier budget/spending challenges than does Stabenow, mainly in the form of whatever fiscal year (FY) 2013 House budget resolution is produced by Budget Committee Chairman Paul Ryan (R-WI).

While Stabenow and Lucas agreed during the great super committee deficit reduction debacle on how to cut $23 billion out of ag programs over 10 years, Lucas, in FY 2012, came up with a bill that demanded $32 billion in cuts, and this year’s Obama FY 2013 budget recommendation sets the ag contribution to overall spending reductions at $30 billion. If the amount of money spent by a Senate bill is too far out of line with that available for a House bill, then the multi-year approach is dead because the two bills can’t be reconciled by the September 30th drop-dead date. A farm bill won’t fare any better during a lame duck session, so I foresee both committees going for broke on a five-year bill.

As to other issues Congress could take up this year, here’s how they’ll likely play out:

• Appropriations: Likely some form of omnibus spending bill will pass in the last hours of the last week of September, just before Congress adjourns for home-stretch campaigning. However, this could be punted into the lame duck or even into the new Congress through a continuing resolution.

• Full-blown tax reform: This is wholly contingent upon the will of Congress to park their political differences and seriously tackle the issue of modernizing the federal tax code. There may be limited revisions pre-election in a play to the voters, but this is just a nice way of saying it won’t happen this year.

• Food and Drug Administration (FDA) user fees: The administration wants industry to pay user fees to register for greater regulation under the Food Safety Modernization Act (FSMA). Ag killed these fees during final congressional action on FSMA. Congress will not give FDA authority to charge these fees during regular session or during the lame duck.

• Immigration reform: No action, no way, either in regular session or lame duck.

• Regulatory relief: Thousands of trees and billions of electrons have been expended by the collective business community in trying to convince Congress of the over-reaching administration regulatory machine. How can companies take advantage of the nascent economic recovery when they don’t know the regulatory hurdles they’ll have to overcome as part of expansion or new product development, they ask. The Environmental Protection Agency has been the poster child for this overzealousness for the past three years, and the House has passed any number of bills to rein in the agency’s rulemaking. The Senate has passed none of them.

April 2012 RENDER | back