WASHINGTON — President Bush has exuded confidence about his agenda after winning a second term and seeing the Republican Party boost its majority in Congress. He will need those votes for key legislative battles ahead on Capitol Hill.
The President’s agenda requires him to get Congressional approval of a Central American Free Trade Agreement, an overhaul of the Social Security system, proposals for health care reform, creation of a foreign worker visa program and the mammoth task of revamping the federal tax code.
All of these “are being watched in retail suites throughout the country,” said Steve Pfister, senior vice president for government relations at the National Retail Federation. “Executives will be asking what proposals mean for interest rates and consumer confidence, how Wall Street reacts. This is going to be a fairly controversial time on Capitol Hill.”
Bush will have to cope with dissension from within GOP ranks, in addition to challenges from Democrats on everything from CAFTA to anything that costs the U.S. Treasury and worsens the federal deficit, including the war in Iraq, said Larry Sabato, executive director of the Center for Politics at the University of Virginia.
“There will be fights about everything….The Bush view is, ‘I’m only President for a short period of time longer and…by reaching for the stars, I might get to the moon,’” Sabato said.
Getting CAFTA through Congress is important to retailers who want the benefits of a vital garment-making center near the U.S. International trade is a particularly sensitive area since the Jan. 1 removal of quotas restricting apparel and textile imports among World Trade Organization countries.
Congressional consideration of CAFTA was shelved in 2004 when passage was questionable because of the election-year focus on global trade’s uneven effects on U.S. jobs and the potential negative political consequences of supporting it. This year, CAFTA is the top legislative issue facing retailers and other importers. CAFTA countries Costa Rica, Guatemala, El Salvador, Nicaragua and Honduras, as well as the Caribbean nation of the Dominican Republic, are responsible for 18.5 percent of foreign apparel imported into the U.S. for the year ending Oct. 31.
Debate over the impact of CAFTA on U.S. employment remains fierce and votes might have to be won with promises for pet projects in Congressional districts, said Capitol Hill experts.
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Trade agreements and legislation typically find more support in the Senate from both parties. In the House, about two dozen or so GOP members, such as Rep. Howard Coble of North Carolina who has textile mills in his district, have joined the bulk of Democrats in opposing free-trade pacts largely out of criticism that U.S. trade policy promotes foreign imports at the expense of domestic industry. For passage, support is generally needed from among 25 or so trade-minded Democrats such as Rep. John Tanner of Tennessee who subscribe to GOP free-market tenets but are less socially conservative.
With Democrats smarting from the fall election, finding enough CAFTA votes among the party could prove difficult.
“The fate of CAFTA will rest with the Republican majority and the number of Republican votes that can be garnered,” said Charlene Barshefksy, who was Clinton’s U.S. Trade Representative.
Kevin Burke, president and chief executive officer of the American Apparel & Footwear Association, said Bush will have to lobby hard for CAFTA, one of a series of free-trade pacts the President initiated in his first term.
“I don’t want to be too optimistic because I think it will be tough sledding for awhile,” said Burke, who argues that, if CAFTA isn’t approved, the U.S. textile industry will take a final nosedive along with its Central American and Dominican apparel customers.
With CAFTA, “the U.S. textile industry would continue to grow in a region where they already have a tremendous amount of business,” Burke said.
House Ways and Means Committee chairman Bill Thomas (R., Calif.), who will shepherd CAFTA through the House, said he expects a vote in the late spring.
The U.S. textile industry is joining with the domestic sugar industry, family farmers and organized labor to quash the deal, arguing it is an American job killer despite the region being a top customer for their fabric, yarn and thread, amounting to $4.2 billion in business for the year ending Oct. 31. Textile officials maintain that CAFTA’s tariff-free benefits would be canceled out by competition from limited amounts of fabric from Mexico and elsewhere to be used in apparel receiving U.S. duty-free treatment.
Augustine Tantillo, executive director of the American Manufacturers Trade Action Coalition, a textile lobbying group, said the White House will be weighing CAFTA against the rest of its sizable agenda in plotting its Capitol Hill strategy. Administration officials “will have to ask themselves, ‘How many chips do we want to cash in on trade when we’re trying to reform the tax code or social security?’” Tantillo said.
The other trade issue for the fashion industry to watch this year in Congress is renewal of the President’s Trade Promotion Authority, which the administration maintains is crucial to negotiations with foreign countries, since having TPA means Congress can’t change trade pacts.
TPA was last approved in 2001 — narrowly in the House — but faces less of a chance of defeat this year, people close to the situation said.
Among Bush’s most fiercely debated proposals is his overhaul of Social Security, the retirement program established in the Great Depression and long considered untouchable by either party.
Bush has expressed urgency in tackling Social Security fund shortfalls expected by midcentury, but said he won’t seek increases in the 12.4 percent payroll tax shared by employers and workers used to fund the program. However, aside from proposing that workers divert some of their payroll tax into investment accounts to improve returns, the President hasn’t provided specifics about how he wants Congress to change the system.
Details of Capitol Hill and administration plans to stem rising health care insurance costs are also pending. Also to come are details from the President for Congress to make wholesale changes to the federal tax code.
Retailers are concerned about one tax code revamp proposed by Rep. John Linder (R., Ga.) that would create a national sales tax of as much as 25 percent on all purchases to replace all individual and corporate taxes. Linder’s plan has some traction, including support from House Majority Leader Tom DeLay (R., Tex.). Merchants’ main concern is that the tax will depress retail sales.
“We are very wary of it,” said Paul Kelly, senior vice president of government affairs at the Retail Industry Leaders Association. “A large part of our membership are discount retailers and their customers are moderate income people.”
Retailers in general remain supportive of the President’s call to make permanent tax cuts that Congress approved in Bush’s first term, but which are to expire in coming years. The tax breaks included reductions in corporate and individual tax rates, inheritance taxes and equipment depreciation, and were widely viewed among business officials as key to pulling the economy out of the 2001 recession.
Any tax legislation worsening the federal deficit is guaranteed to ruffle moderate Republicans in addition to Democrats. They question Bush’s argument that budget cuts in other areas, along with economic growth, should halve the red ink by the end of his term. The deficit — approaching $500 billion — has drawn concern because of its potential implications for higher interest rates triggering slower economic growth.
House passage of tax legislation is considered more likely for extending the tax breaks because of the chamber’s rules and a larger Republican majority, but the President is likely to face roadblocks in the Senate. That’s because Senate rules require 60 votes to curtail a filibuster and Republican leadership may have trouble reaching that “magic number,” said the NRF’s Pfister, even though they increased their majority in the chamber to 55 in the November elections.