INSIGHT: Obama, Congress drive toward deadlock on recovery plans

01 September 2011 16:17  [Source: ICIS news]

By Joe Kamalick

Democrats, Republicans butt heads over jobs plansWASHINGTON (ICIS)--As President Barack Obama prepares for a major address on jobs growth next week, he and Republican leaders in the US House of Representatives couldn’t be further apart on what ails the tottering US economy and how to fix it.

The resulting clash between the two camps could well spell gridlock for the rest of this year and into the next, with both sides intent on staking out campaign themes in the run-up to the November 2012 presidential and congressional elections.

Broadly speaking, the two sides are standing at opposite ends of the spectrum of policy options.

Obama, the majority Democrats in the US Senate and their liberal base favour more government stimulus spending, fuelled by increased taxes on upper-income Americans and repeal of tax credits for energy producers.

Republicans, led by House Speaker John Boehner of Ohio and majority leader Eric Cantor of Virginia, want to block or suspend what they term a flood of Obama administration job-killing regulations, plus cut federal spending and taxes in order to free US businesses to expand and hire.

Details of Obama’s sweeping jobs proposal have not been revealed by the White House, but his plan is likely to include policy goals the president often has advocated before. 

Those include a $2,500 (€1,725) tax credit for employers who hire new workers, extension of a payroll tax holiday that would put an extra $1,000 in taxpayers’ pockets, and creation of a government-funded infrastructure investment bank to help rebuild US highways, bridges, railroads, airports and ports.

Liberal groups, such as the Center for American Progress (CAP), contend that those measures are far too timid.

“At a minimum,” said CAP in its recommendations to the White House, “the president’s jobs plan should include a federal investment of an additional $65bn over two years” for repairing roads, bridges, ports, dams and levees, plus clean energy investments, broadband expansion and energy efficiency spending on schools.

In addition, CAP said the president should establish a $100bn federal infrastructure bank to fund repair and expansion work not covered by the $65bn in direct government spending.

The group also called for more than $10bn to repair and retrofit foreclosed homes so they could be turned into low-cost rental homes, and another $6bn in federal incentives for homeowners to install energy-saving appliances.

But even if he were to accept those CAP suggestions and incorporate them into his jobs growth proposal, Obama would have a hard time selling Congress on some $180bn in fresh government spending.

Bear in mind that the special budget cutting congressional committee set up by the recent debt-raising legislation is supposed to come up with some $1,500bn in additional spending reductions by late November.

In contrast, House Republicans have already put forward their own jobs plan, including a laundry-list of federal regulatory programmes and rules that they contend are killing what otherwise would be additional hiring by US businesses.

Among the ten major programmes or policies that Cantor has laid out for the House Republicans’ legislative agenda for the rest of this year are several that US petrochemical and refining interests have opposed.

That agenda includes bills that would suspend indefinitely several major US Environmental Protection Agency (EPA) actions, such as the Boiler MACT, the Utility MACT and the Cement MACT. Each requires a wide range of US manufacturing or power industries to install “maximum achievable control technology” (MACT) to sharply reduce their emissions.

Similarly, the Republican House agenda would shut down or suspend EPA’s existing regulations forcing sharp cuts in greenhouse gas (GHG) emissions by refineries, chemical plants and other manufacturers, and the agency’s developing plans for new and tougher restrictions on ozone emissions by producers.

The Cantor plan also provides for extending existing lower tax rates, plus creation of a 20% tax incentive for small businesses.

Separately, US manufacturers, construction contractors and energy sector leaders have urged their own jobs-growth recommendations on the White House and Congress, asking for more freedom to develop domestic energy resources, approval of long-pending trade deals, elimination of regulatory burdens and a boost for government spending on infrastructure.

“The economic data tells the story,” said US Chamber of Commerce chief economist Martin Regalia in a press conference on Wednesday. 

“The current policies coming out of Washington are not creating economic growth,” he said, “and both the administration and Congress need to come together to remove barriers to job creation and open up new markets”.

The chamber said it would provide a detailed jobs-growth plan for the White House next week, but Regalia said it would include recommendations for increasing domestic oil and natural gas production and government investments and incentives to rebuild US infrastructure, such as highways, bridges, inland waterways, rail and port facilities and expanded electricity transmission lines.

He also urged prompt White House action on three long-pending trade agreements with South Korea, Colombia and Panama. 

The trade deals were worked out under the Bush administration in 2005-2006, but before advancing the agreements, the Obama White House wants more compensation and job training benefits for US workers who may be displaced by cheaper foreign labour.

“Approving the pending trade agreements will not only save 380,000 jobs but will also create thousands of new ones in America,” Regalia said.

“Perhaps more than anything, we need to remove the regulatory barriers that are weighing down our economy,” he added.

Increased US public and private sector spending on such infrastructure projects would increase demand for a wide range of US petrochemicals, chemicals and resins.

The Independent Petroleum Association of America (IPAA) urged the Obama administration to abandon its repeated calls for elimination of tax credits and incentives for energy production and instead to lift restrictions on onshore and offshore drilling.

The association, whose member firms account for more than 90% of all oil and gas wells drilled in the US, argued that expanded domestic energy production would quickly create tens of thousands of new jobs, generate more consumer spending and raise more revenue for federal and state governments facing budget cuts.

In another policy pitch, the Associated General Contractors of America (AGC) called on policymakers to repeal taxes that burden small and medium construction firms, increase tax credits for energy efficiency and double federal spending on transportation infrastructure.

But given the wide gulf that separates Democrat or liberal spending proposals on one hand and the Republican agenda for regulatory relief and spending cuts, the two sides seem to be driving towards deadlock, with no prospect of more than incidental compromises until after the November 2012 election - if then.

But Bill Allmond, vice president for government relations at the Society of Chemical Manufacturers and Affiliates (SOCMA), thinks there could be more common ground between Senate Democrats and House Republicans than seems apparent.

“I do believe we may see some attention to regulatory relief among Democrat and Republican senators,” Allmond said.

“Several bills have been introduced by senators of both parties that would direct the government to reduce regulatory burdens, particularly on small business,” he added.

“We reasonably expect attention to this issue critically important to SOCMA in both houses,” he said.

($1 = €0.70)

Paul Hodges studies key influencers shaping the chemical industry in Chemicals and the Economy

By: Joe Kamalick
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