New Congress, New Optimism?
The 114th Congress officially convened on January 6, 2014 with Republicans in control of both chambers of Congress for the first time in eight years, and with the largest House majority since President Harry Truman was in office.
While their gains are significant, Republicans are six seats shy of a filibuster-proof majority in the Senate and much further from veto-proof numbers in the House (290 needed) and Senate (67 needed). In other words, Republicans will have to work with Democrats if they intend to pass significant legislation.
The Republicans’ best chance for progress may come on key economic policy issues where the policy goals of the Republican leadership closely parallel those of the Obama Administration, especially in regards to foreign trade and corporate tax reform. The key question, of course, is to what extent House and Senate Democrats will support the efforts of the White House and Republican leadership in finding agreement on those two key economic issues.
In remarks on the Senate floor last week, Senate Majority Leader Mitch McConnell (R-KY) indicated willingness to compromise. He outlined the Republican agenda for the coming months that includes reforming the tax system, opening more markets abroad to U.S. goods and services, and moving forward with bipartisan infrastructure projects. His comments echo past efforts by the Obama Administration on tax reform and Trade Promotion Authority (TPA), otherwise referred to as “fast-track authorization”, which is a procedure used to expedite trade agreements through Congress. The White House is currently involved in two large-scale trade negotiations in the Pacific and in Europe, with the Trans-Pacific Partnership (TPP) negotiations nearing the finish line. Giving Obama fast-track authority prior to finalizing any trade deal would go a long way to assuring the 11 other nations involved in the TPP negotiations that the U.S. will not renege on its commitments. That’s because agreements negotiated under TPA can’t be amended or blocked by filibuster. Congress can merely vote for or against it.
U.S. trade policy has operated without TPA since its expiration in 2007. During the 113th Congress, President Obama pushed Congress to renew the authority, but was stymied by political gridlock and opposition from elements within the Democratic and Republican parties. House and Senate bills introduced roughly a year ago fell victim to opposition from liberal groups, including trade unions, and constitutional concerns voiced by the conservative and liberal wings of both parties.
The insurmountable odds the White House faced previously now seem surmountable, with Republican leadership, backed by majorities in both chambers, publicly declaring trade legislation a top priority.
Back in 2002, the House passed legislation renewing TPA until 2007 by a mere three votes, with the Senate agreeing to the bill by a larger vote margin. In this Congress, House Speaker John Boehner (R-OH) can afford to lose a few Republicans in opposition to any trade bill due to the significant number of Republicans in the House, but Senate Majority Leader Mitch McConnell (R-KY) cannot afford to do so given Republicans slim majority in the Senate and will need to placate Democrats in order to move legislation. As such, a bipartisan bill out of the House stands a far greater chance of passage in the Senate and will make it easier for McConnell to avoid a potential filibuster.
In addition to trade policy, the White House and the Republican Congress could also find agreement on tax reform, specifically corporate tax reform. In the past few years, the White House has offered suggestions on reforming the corporate tax code, while the House Ways and Means Committee under former Chairman Dave Camp (R-MI) attempted to produce a comprehensive billfocused on both the individual and corporate codes. His efforts, however, fell victim to election-year politics. Republicans were hesitant to publicly back Camp’s bill and unable to find agreement with a White House that was focused strictly on corporate reform.
The outlook for reform has improved with the new GOP majority. The current Chairman of the House Ways and Means Committee, Rep. Paul Ryan (R-WI), and McConnell have said recently they are open to overhauling the corporate tax code. Sticking points remain, such as what the corporate rate should be, how the U.S. should tax repatriated earnings of multinational corporations and whether reform should be revenue-neutral. It also remains to be seen just how much of the Camp tax reform proposal is incorporated into Ryan’s plan, whether Republicans would agree to a proposal that does not include individual reform, and to what extent Democrats will side with an agreement co-authored by the White House and Republicans.
A lot of potential for compromise, yet still a lot of unknowns. Bigger issues are on the horizon, such as funding the Department of Homeland Security and lifting the debt ceiling. The political battles likely to emerge during those debates could very well determine whether TPA legislation and corporate tax reform make it to the president’s desk during the 114th Congress.