Written by Paul Frazer, the Canadian Chamber of Commerce’s Washington, DC-based Special Advisor on Canada-U.S. Relations. In the days after the mid-term Congressional elections of 2010, I shared with you the view that the greatest challenge facing the new Republican Speaker of the House was not how to work with the Democrats but how to work with his large caucus, specifically the increased number of “Tea Party” members, on key issues. On more than one critical occasion the “Tea Party” group within the Republican caucus led a revolt to overturn compromise proposals that Speaker Boehner had worked on with the White House. In the same timeframe, the Republican Minority Leader in the Senate, Mitch McConnell, announced that his and the Republican Party’s main objective was to insure that President Obama would not have a second term.
Now, here we are after the election and recent comments by Senator McConnell are not about how his party is interested in working with Democrat counterparts in devising good legislation. Instead he has presented a set of criticisms and reminders of the President’s failures while noting that this past Tuesday’s vote does not give the President a mandate. The President for his part has asserted that he does have a mandate, especially on the tax issue.
We may all agree or wish to believe that all of the above was nothing more than political rhetoric. Unfortunately we have no reason to think that to be the case. It is surprising and disappointing that at a time when the American people hold the Congress in such low esteem and when Americans continue to face such serious uncertain economic times that their concerns and sentiments are not recognized by the very people who should be part of the solution to national problems.
The Democrats also have to bear serious responsibility for their actions. The President must work better with his own party and with the Republicans. In the first Obama Administration, Congressional Democrats strenuously complained that the President was missing in action. They did not see his leadership in helping to determine the nature and extent of key legislative proposals. Nor, in their view, did the President build the necessary bridges to assist in moving legislation among the Congressional land-mines. The President must do this and more in order to make the case effectively for a second term agenda with any chance of success.
This is where Canadians must pay special attention. The core issues are economic. The President and the Congress face very real deadlines requiring decisions on taxation and spending. If they cannot truly come to grips with these issues by the end of December, then as of January 2013, a series of arbitrary decisions will be triggered over the ensuing months under an arrangement called “sequestration”. This was designed as a “sword of Damocles” in light of all other failed attempts to deal with urgent revenue and spending proposals.
Significant tax hikes combined with very significant spending cuts would impair the economy, throwing the country into recession. Increased unemployment, weakened financial markets, diminished investment, a drop in consumer spending and other events would reflect the seriousness of the new reality.
Canada would not be immune from the new forces in play. In such a climate we cannot predict how this would affect the impulse for trade protection legislation, new non-tariff trade barriers and regulatory action that could impact a wide variety of Canadian interests. Thirty-five U.S. states rely on their trade and economic relations with Canada for their well-being. This is a two-way street, and any weakening of American purchasing power and consumption will hit Canada’s bottom line directly. Canadian governments, businesses and communities all have an interest in how this plays out in Washington, DC.
The Congress resumed the week of November 13 for its final weeks and it must find a way to deal with these large fiscal issues by the end of December. I agree with the view that the brief time remaining in this Congress will not be sufficient to meet the need for a policy and legislative response to this set of complex issues.
The inclination will be to pass elements of the budget still outstanding and to attach to it an undertaking that the imminent tax and spending decisions will not be addressed until a date certain chosen by the Congress (with Administration agreement). In this way, the government will continue to have departmental spending in place while punting the big issues into the new Congress where work will be undertaken in a new timeframe.
Canadian issues of interest such as energy, Keystone, environmental regulation, cross-border trade and security, among others, will all pale in importance if this agenda is not addressed clearly and in a manner that brings some longer-term relief. Once again, Canadians will need to keep informed of such developments so as better to understand that the U.S. system of government can only handle a very limited number of urgent, let alone important matters, at any one time.
I am hopeful that, despite the post-election jabs and criticisms, the leadership of each political party in the Congress now will be forced by circumstances to rise above short-term political opportunism and get on with the job of good government.
The President will have to reach out in a genuine fashion and the Democratic and Republican leadership in the Congress will have to find a way to work with each other in order to work with the President in doing what is necessary for the American people. If they get it right, it will bode well for Canadian interests overall and, symbolically, will send a message globally that the United States is getting back on a track that will enable it to be a more effective international actor.
Paul Frazer provides briefs on issues and events that have implication for Canadian businesses. Mr. Frazer has over 15 years of experience in this area and is a well-known and influential player in Canada-U.S. issues.