Washington Watch

Washington Watch

April 2009

 

Thank You Senator Lincoln for Opposing "Card Check"

Earlier this month, Arkansas ’s own Senator Blanche Lincoln dealt a major blow to the prospects for the misnamed Employee Free Choice Act (EFCA), which remains alive in the Senate committee, when she became the first Democratic Senator to announce opposition to the measure, also known as "Card Check."

As The Hill newspaper reported, “Sen. Blanche Lincoln ( Ark. ) became the first Senate Democrat to oppose the card-check bill heavily backed by unions. In a statement, Lincoln pledged to vote against legislation formally known as the Employee Free Choice Act (EFCA). "We need all hands on deck, including business and labor, to get our economy moving again, this issue is dividing us," Lincoln said in a statement. "I am stating today that I cannot support Employee Free Choice Act in its current form and I can’t support efforts to bring it to Senate consideration [cloture] in its current form.”

Over the past months, Arkansans have contacted Senator Lincoln to voice opposition to this issue and ultimately had a huge impact. If you have not already done so, please take a moment to thank Senator Lincoln for publically stating her opposition to Card Check.

Previously, Senator Arlen Specter (R-PA) had announced on the Senate floor that he also intends to oppose EFCA and that he will vote against cloture. Senators Lincoln and Specter had been considered key votes in the EFCA debate.

While we are encouraged by the recent decisions by Senators Lincoln and Specter it is imperative that we work together to keep the pressure on. Labor officials were quoted in Politico on April 3 saying, “Anyone who thinks the battle over the Employee Free Choice Act is over is wrong with a capital W. We are more determined than ever and the expenditures on ads and massive field operations show that we are putting 100 percent of our efforts behind this bill.”

Labor is not backing off on their efforts, and neither are we. Please join the Arkansans for the Secret Ballot coalition by visiting www.yoursecretballot.com.

In addition to contacting members of Congress about EFCA, we are also asking members of the Arkansas business community to write a letter to the editor of your local newspaper. With the changing face of EFCA, it is more important than ever to educate Arkansans about the bill and its potential consequences. Please contact Arkansans for the Secret Ballot for assistance in writing your letter.

Thirdly, if one or more members of Arkansas ' Congressional Delegation is visiting your community, please take advantage of the opportunity to approach them about EFCA.

Thank you all for your hard work and continued efforts. Because of you, we are making progress toward the defeat of EFCA. 

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Update on the Economy

 

While the U.S. economy remains in critical condition, National Association of Manufacturers Chief Economist Dave Huether reports growing signs show the economy is off life support. Of the six major indicators that came out last week, half improved. Moreover, several of the negative reports that came out last week either (1) fell more modestly than in prior months or (2) declined due to one-time factors.

 

First the good news: After seven consecutive monthly declines, sales at the wholesale level increased by 0.6 percent in February. The rise in sales was likely due to stronger than expected retail sales in the first quarter. In addition, wholesalers are finally making headway on lowering their inventories to levels consistent with the pace of sales. The inventory-to-sales ratio fell in February for the first time since last June and declined at the fastest pace in more than two years. While declining inventories will act as a constraint on GDP growth in the first quarter, reducing this overload is a necessary step for demand to resume.

 

The other positive news that came out last week was on the trade front. The U.S. trade deficit narrowed to a level of $25.9 billion in February from $36.2 billion in January. The consensus expectation called for a mild increase in the deficit to $36.5 billion in February. Exports rose unexpectedly by $2.1 billion (1.6 percent) while imports fell $8.2 billion (5.1 percent). While the fall off in imports was no surprise, given the downturn in the U.S. economy, the upturn in exports was unexpected, and marked the first increase since last July. However, it should be noted that two thirds of the February export gain was concentrated in consumer products, primarily pharmaceuticals. Exports in other areas only showed modest increases.      

 

Even last week’s dark clouds contained some silver linings. Chain store sales in March fell for a sixth consecutive month. However, the shift of Easter from March to April this year was a significant reason for the decline. The International Council of Shopping Centers, which conducts the monthly survey, estimated that sales growth was reduced by 3 percentage points by the shift in Easter. Thus, excluding this one-time factor, sales appear to be starting to stabilize.

 

Finally, while the OECD composite leading indicators hit a new record low in February, the pace of the downturn, which actually started to moderate last December, was the slowest in eight months. While a recovery in the global economy is not expected any time soon, according to Huether the fact that the deterioration is starting to slow is a hopeful sign that the worst of the global economic collapse is moving into the rear view mirror. 

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American Recovery and Reinvestment Act of 2009 Helps Small Businesses

 

Congress approved and the President signed new economic recovery legislation, the American Recovery and Reinvestment Act of 2009 (ARRA), two months ago. Here are some key highlights for small businesses:

·         Net Operating Loss Carryback – Small businesses with deductions exceeding their income in 2008 can use a new net operating loss tax provision in ARRA to get a refund of taxes paid over the past five years instead of the usual two.

·         Section 179 Deduction - A qualifying taxpayer can choose to treat the cost of certain property as an expense and deduct it in the year the property is placed in service instead of depreciating it over several years. This property is frequently referred to as section 179 property.

Under ARRA, qualifying businesses can continue to expense up to $250,000 of section 179 property for tax years beginning in 2009. Without ARRA, the 2009 expensing limit for section 179 property would have been $133,000. The $250,000 amount provided under the new law is reduced if the cost of all section 179 property placed in service by the taxpayer during the tax year exceeds $800,000.

The new law does not alter the section 179 limitation imposed on sport utility vehicles, which have an expense limit of $25,000.

·         Reduction of Estimated Tax Payments – Normally, small businesses have to pay 110 percent of their previous year’s taxes in estimated taxes. The Recovery Act permits small businesses to reduce their estimated payments to 90 percent of the previous year’s taxes.

 

·         Extension of Bonus Depreciation Deductions Through 2009 – Bonus depreciation is extended through 2009, allowing businesses to take a larger tax deduction within the first year of a property’s purchase.

 

·         Capital Gains Tax Break for Investment in Small Business – Investors in small business who hold their investments for five years can exclude from taxation 75 percent of their capital gains.

 

Additional information on the above programs and other provisions for employers and employees is available at the IRS’s American Recovery and Reinvestment Act of 2009 Web site.

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White House Wants Congress to Set Climate Policy by Year's End

 

The Wall Street Journal reported, "Climate czar Carol Browner said she wants Congress to establish a broad U.S. greenhouse-gas policy before global climate-change talks near the end of the year." Browner on Monday "said she is confident Congress can move forward on a climate-change policy, citing hearings scheduled for next week on sweeping legislation proposed by Rep. Henry Waxman (D., Calif.) and Rep. Ed Markey (D., Mass)." She "didn't provide a timetable for when she would like to see congressional action, but said advancing climate-change legislation is 'absolutely essential' to what the U.S. can accomplish during" UN talks in Copenhagen this December.

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White House Indicates Flexibility on Climate Bill

 

The Washington Post reported, "The Obama administration might agree to auction only a portion of the emissions allowances granted at first under a cap-and-trade system to limit greenhouse gas pollution, White House science adviser John P. Holdren said [last Wednesday], a move that would please electric utilities and manufacturers but could anger environmentalists." Holdren "said a group of Cabinet-level officials is trying to establish principles to guide the climate legislation that has just begun to move in Congress." Regarding the auction of 100 percent of emissions allowances, Holdren said, "whether you get to start with that or get there over a period of time is something that's being discussed."

 

The Wall Street Journal noted, "The White House is open to compromise on certain key elements of its climate-change agenda, including whether businesses could get some emissions allowances for free, administration officials said [last] Wednesday. '[The president's] preferred approach was 100 percent auction to create incentives for companies to reduce their greenhouse-gas emissions,' said White House spokesman Ben LaBolt. 'Members of Congress are looking at a variety of policy options to help us make that transition, and the administration will be flexible during the policy-making process as long as those larger goals' of a clean-energy economy, 'green' job creation and cutting oil imports are met, he said in an email."

 

The New York Times reported from Missouri , "Even residents who endorse wind and solar energy have grown accustomed to the benefits of state policies that favor coal by putting a premium on low-cost electricity. So the idea of federal climate legislation that could increase electricity bills...is unsettling." Democratic lawmakers "from coal-using states" are "concerned that the new costs would get passed on to consumers," and have voiced concern "that in an already wounded economy, increased costs could turn one of the relatively few economic blessings into a blight." 

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Corporate Lobbyists Intensify Efforts to Block Overseas Profit Tax

 

The Wall Street Journal reported, "In one of the biggest battles between the business community and the White House, corporate lobbyists are intensifying efforts to block an Obama administration proposal to raise taxes on overseas profits." Recently, groups including the Business Roundtable, the U.S. Chamber of Commerce, the NAM and the National Foreign Trade Council have "helped form a lobbying coalition called Protect America 's Competitive Edge that is devoted specifically to the issue." Yet "even if businesses succeed in holding off the plan, they are likely gaining only a temporary respite." Corporate defenders of the policy say "it is a sensible way for the U.S. to level the global playing field for American firms, because many foreign governments don't tax their companies' overseas earnings." But critics of the U.S. provision, known as deferral, say "the policy encourages American multinationals to add facilities and jobs overseas rather than expanding back home."

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Groups Urge Fixes for New Product Safety Law

 

The Journal of Commerce Online reported last week that the National Association of Manufacturers (NAM) "joined a rally on Capitol Hill to urge Congress to make changes in the Consumer Product Safety Commission Improvement Act." The NAM 's President John Engler on April 1 said "the law caused unintended harm to consumers and businesses by applying the same criteria to a wide range of products, regardless of their intended use." Engler said at the rally last Wednesday, "By the CPSC's own account, implementation of the new law has overwhelmed the agency and jeopardized its ability to meet critical safety priorities. The law's unrealistic compliance deadlines made it impossible for the CPSC and industry to adequately prepare before the new law went into effect."

 

The Wall Street Journal on April 2 reported, "The head of the Consumer Product Safety Commission (CPSC) urged President Barack Obama Wednesday to appoint a new CPSC chairman to deal with mounting complaints about a consumer-product safety law that has left retailers stuck with more than $1 billion of goods they can't sell." The letter "was sent to Mr. Obama by CPSC Acting Chairman Nancy Nord" and it underscored "concerns about the pace at which the Obama administration is filling key posts at federal agencies." The Toy Industry Association says its members already "have more than $1 billion in inventory that has been returned from retailers or is sitting in limbo in warehouses as members are hoping for exemptions, amendments to the law or clarifications." The NAM is also "urging Congress to amend the law to 'fix the flaws.'" In addition, "Consumer groups are calling on Mr. Obama to act, but they think a new agency leader, not Congress, should help resolve concerns about the law."

 

In related news, Reps. Joe Barton (R-TX) and George Radanovich (R-CA) have introduced H.R. 1815, legislation aimed at: clarifying product safety standards for children's toys, apparel, and other goods; adjusting CPSIA deadlines to reflect marketplace realities; and giving the CPSC flexibility to protect children from harm while regulating the market. 

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U.S. Treasury Kicks Off Aid to Auto Parts Makers

The Wall Street Journal reported, "The U.S. Treasury Department [last] Wednesday kicked off a program to help ailing auto parts makers, providing $3.5 billion in aid to be funneled to suppliers through General Motors Corp. and Chrysler LLC." GM will "oversee $2 billion under the department's program while Chrysler will oversee $1.5 billion." Although the aid for parts makers is "limited to GM and Chrysler suppliers, the impact is expected to ripple through the industry since those same companies provide parts to other auto makers operating in the U.S." Suppliers are "starting to apply to GM and Chrysler. Under the plan they can opt to insure their accounts receivable or have the car maker accelerate payments for parts in return for a 3 percent fee."

 

The AP reported GM and Chrysler, "which have received $17.4 billion in federal aid and face upcoming deadlines to restructure their companies, will designate the auto parts suppliers that need the financing, giving them a large role in determining which suppliers will survive. Ford Motor Co., which has not sought the government aid, has said it does not intend to use the program." The White House sent "a team of 15 people to Detroit on Wednesday to work with GM over the next two weeks to accelerate the restructuring process." The Treasury Department, working with the Obama administration's auto task force, "created the support program to address a critical cash crunch faced by many parts suppliers, whose collapse could lead to the disruption of car production and hurt the ability of GM and Chrysler to return to profitability."

 

Reuters added that GM, Chrysler and the suppliers are required to kick in capital to participate in the program.

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FCC Opens Discussion on Broadband Ideas

 

The Washington Post reported last week that the U.S. Federal Communications Commission "began mapping out a plan to bring high-speed Internet service to the entire nation, starting with questions on how to increase its availability, improve its quality of service and make it more affordable." Last Wednesday, "acting FCC Chairman Michael J. Copps invited comments from the public on the national broadband plan the agency has been ordered by Congress to complete by February 2010. He said the process for creating the plan will be 'open, inclusive, out-reaching and data-hungry.'"

 

Reuters added the FCC opened a discussion on how the US, considered to be behind a number of developed nations regarding penetration and usage of broadband Internet, can extend the reach of technology to under-privileged areas.

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