You Ain’t Seen Nothing Yet

By Steve Kopperud, Policy Directions, Inc.

By the time you read this and if the stars align just right and adult behavior prevails, we should know if Washington has survived the political chaos of the last half of 2013. We will know the full or partial fate of several major legislative issues, and we’ll be translating the signals of what lies ahead in 2014 – an election year.

It’s hoped we’ll know if the bandages put on the Affordable Care Act (ACA) by the White House are enough to heal what appears to be a seriously crippled program launch, or if Congress will step in to “fix” it. If Congress reopens the law, all bets are off.

We’ll know if there’s a budget agreement. If there is, we’ll know a little about how Americans’ tax dollars will be spent next year because a spending plan for fiscal year 2014 will actually be enacted, with or without a rewrite or elimination of mandatory sequestration spending cuts. That deal could carry some tax reform measures that may affect taxpayers’ ability to spend and do their part to goose the economy. We should know pretty much how high the federal debt ceiling – the United States Treasury’s credit card limit – will go.

We’ll know if there’s a five-year farm bill awaiting a presidential signature. We’ll know, or have a decent idea, if Congress will try to do something with immigration reform, though the odds are not good, and we might see at least an attempt to “fix” the Renewable Fuel Standard (RFS).

Action or inaction on all of the above will signal how each party will approach the midterm elections as America enters 2014.

If I had to predict which of these issues will be 100 percent behind us by those first days of 2014, I’d pick the farm bill for no other reason than the market and political chaos resulting from not finishing in 2013 what was supposed to be done in 2012 would be monumental. As I write this, the farm bill conference committee has been eerily silent; very few press “opportunities” and very little substantive news. This generally means progress is being made and no one wants the blame for derailing the compromise train. There are rumors of a deal to cut the federal food stamp program, and there’s talk that middle ground may have been found on how best to replace federal direct payments. If those two issues can be resolved, the president will most likely see a farm bill on his desk sometime in December, and perhaps the last farm bill written for a decade.

The fiscal fiasco that was and is Washington, DC, will not be 100 percent behind us any time soon. These entangled economic issues – appropriations, debt ceiling, and sequestration – are pretty much annual events. A best guess is the men and women currently sitting in the conference committee to reconcile the House fiscal year 2014 budget resolution and its counterpart in the Senate – the first that chamber passed in nearly 10 years – will not emerge with the “grand bargain” many hope for. That grand bargain would include an agreement on how much money the federal government can spend on a discretionary basis – distinct from mandatory funding – as well as a decision on whether sequestration will continue or die. The big deal would also include extensive tax reform and spending limits, including reductions in entitlement spending through greater efficiencies and the elimination of waste and fraud.

The outcome will likely be a hard number on discretionary spending, somewhere in the neighborhood of $985 billion per year. If there are tax code changes, they’ll be minor. If there are targeted spending cuts, they’ll be relatively small and won’t include entitlement programs. The wild card here is the ultra-right fiscal conservatives. If they don’t feel the spending reduction pain is great enough, the conference package, no matter how lean, may not pass.

Immigration reform is dead for this year. The Senate gets serious points for having passed its omnibus immigration reform package, a bipartisan bill aired extensively in numerous hearings, marked up in a two-week Judiciary Committee marathon, amended both in committee and on the floor, and then passed by a healthy bipartisan majority. However, the House refuses to go along, at least in 2013. On the day this is being typed, House Speaker John Boehner (R-OH) declared he will not go to conference on the Senate bill – yet. His plan is to pass a series of immigration bills, roll them together on the floor into a single package, and only then sit down with the Senate to reconcile the two approaches.

The biggest political motivator for punting immigration reform into 2014 is that every poll, study, and election post-mortem following the 2012 general election told the Republicans the same thing: You can’t elect a president by only appealing to angry old white men who vote. The House GOP is hoping its immigration reform package will appeal to the millions of Hispanic, Asian, and other immigrant voters – along with a fair number of young and female voters – who feel no love from the Republican Party.

Energy policy, generally, and the RFS, specifically, will get little congressional attention until 2014, if even then. As this is being written, both renewable fuel makers and those who oppose the RFS for creating an arbitrary and market-distorting demand for biofuels, particularly corn ethanol, are awaiting the Environmental Protection Agency’s (EPA’s) decision on how much biofuel gasoline and diesel refiners must blend in 2014. (EPA subsequently released a proposed rule. See “Biofuels Bulletin” in this issue of Render.) The RFS haters want a significant reduction; the RFS lovers want EPA to at least hold the line at 2013 levels. Any political fix won’t be seriously contemplated until after those numbers have been digested by both sides of the issue.

All of this prognostication relies heavily on congressional will, and its ability to relearn the art of multi-tasking. At this point in time, all of the air on Capitol Hill is being consumed by the problems wracking the ACA. The critics are out with knives drawn, screaming, “We told you so.” ACA supporters feel their ardor waning as they’re bombarded by constituent testimonials of cancelled insurance policies and skyrocketing rates. Unfortunately, Congress has become a one-crisis organization, and other priority issues are ignored.

If one views the first session of the 113th Congress as partisan, less than productive, and just plain noisy, trust me, you ain’t seen nothing yet. Each party organization is currently doing its political calculus on which issues are the most troublesome, if not embarrassing, to its opposition. These are the issues each party will try to punt into 2014 precisely because it is an election year. The position, mishandling, or disregard of an issue by an opponent will be exploited to the nth degree.

December 2013 RENDER | back