Category: Public Policy

Speaker of the House Paul Ryan (R-WI) will preside over a GOP majority, despite the loss of six seats this past election cycle. Speaker Ryan handily won the speakership with little or no opposition from his GOP colleagues. This as well as the selection of Reince Preibus as President-elect Trump’s Chief of Staff signaled the incoming administration’s desire to work with the Congress.

On the other side of the spectrum, the Democrats will face a period of transition, as they no longer hold the majority in either the House or the Senate. Congresswoman Nancy Pelosi (D-CA) has once again been elected as House Minority Leader. Despite her re-election, unity has proven to be an issue among Democrats after Representative Tim Ryan (D-OH) unsuccessfully challenged Minority Leader Pelosi for the position, showing signs of frustration with the Democratic leadership. Should the division amongst the party continue, it would come as no surprise if these frustrated Democrats assembled a voting bloc in order to swing votes in either passing or defeating pending legislation.

As this Congressional session begins issues surrounding the economy will most likely become the dominant topic on the House floor. In an interview with WPR’s Rob Ferrett, House Speaker Ryan discussed a preliminary outline of Congressional priorities in 2017 and addressed three areas that will be critical in building a stronger economy placing emphasis on the Affordable Care Act, burdensome regulations, and taxes.

“Well, we’ve got a lot of number-one priorities, I guess I’d say. The first we’re going to do is start working on a budget. And in that budget we’re going to try and bring Obamacare relief.” 

“But also [cutting back] the regulatory state, which is really putting a chilling effect on jobs, and reforming the tax code to make American businesses, particularly our manufacturers, much more competitive globally so we can grow more jobs here at home and increase take home pay, and just get faster economic growth.”

“What we ought to be doing is cleaning up our economic policy so that we’re the best…with a healthy economy, with strong companies that are in America, building, selling, exporting and engaging in the world, and pushing the values of freedom and free enterprise. That to me is what American leadership needs to look like.”[i]

Since the passage of the Affordable Care Act, House Republicans have been working on plans to repeal the healthcare law. Though preparations have been in the works since the enactment of the law, any proposals of legislation have been thwarted by veto threats from the Obama Administration, a significant obstacle that will be removed by the President-elect. With the nomination of Representative Tom Price, M.D. (R-GA), a physician and critic of the Affordable Care Act, as Secretary of Health and Human Services, President-elect Trump has sent a very strong signal that the healthcare law can expect major changes in the near future. Rep. Price has been very vocal opponent of the ACA and even introduced legislation in 2015 to repeal Obamacare all together.[ii] Actions have already been taken towards the dismantling of the ACA just days after the Congressional session began. The Senate passed a resolution on January 12, to instruct key committees to draft legislation repealing Obamacare. The House of Representatives followed suit passing the measure a day later.

Though the initial steps have been taken to repeal the Affordable Care Act, several members of the House have voiced concern over the strategy of voting for a repeal first without having a legitimate replacement prepared. Speaker Ryan has stated that the maximum number of suitable replacement provisions should be added into the legislation to repeal Obamacare.[iii]

The next matter that Speaker Ryan would like to revisit is burdensome regulations. Notwithstanding the overlap with the Affordable Care Act, the regulatory state has increased dramatically over the past eight years.[iv] Since 2009, the Obama Administration has imposed 229 major regulations, and in 2015 alone, federal regulators issued 2,353 new rules.[v] To put that in perspective, as stated in a CRS Report on Federal Regulations, “In 2015, approximately 30% of the total pages in the Federal Register were in the “Rules and Regulations” section, the section in which final rules are published.”[vi]

One major piece of legislation that Congress will look at is the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into federal law by President Obama in July 2010. Since the implementation, Republican members of Congress have been critical of its impact toward the smaller banks and community banks, especially as it relates to a financial institution’s ability to make loans.[vii] While on the campaign trail, President-elect Trump stated on several occasions that he plans to dismantle Dodd-Frank, and even considered Rep. Jeb Hensarling (R-TX), the bill sponsor to The Financial CHOICE Act of 2016 that proposed significant amendments to Dodd-Frank, for Treasury Secretary.

The third factor that Speaker Ryan noted as having a critical effect on the economy is the tax code. The majority of Americans have viewed the current tax code as burdensome. In 2016 a gallup poll showed that 57% of Americans felt they pay too much and 47% said their taxes are unfair. [viii] Speaker Ryan believes that reforming the tax code will allow the U.S. to be, “much more competitive globally so we can grow more jobs here at home and increase take home pay, and just get faster economic growth.”

House Republicans have an excellent opportunity to address the issues that they have campaigned for in the last six years. They can no longer use the excuse of a presidential veto for unsuccessfully converting legislation into law. The challenge for the Republican leadership is to see this opportunity as a two-year window to fulfill the promises that they have made.

To learn more about pending legislation for this upcoming Congressional Session, check us out on Twitter and Facebook. In our next segment, Part 2 of this series will turn our focus to the Senate.

[i] Ryan Outlines 2017 Congressional Priorities on WPR. (2016, December 6). Retrieved January 10, 2017, from http://paulryan.house.gov/news/documentsingle.aspx?DocumentID=398585

[ii] Price Introduces Empowering Patients First Act. (2015, May 13). Retrieved January 10, 2017, from https://tomprice.house.gov/HR2300

[iii] Cornwell, S. (2017, January 12). U.S. Senate Approves Measure Launching Obamacare Repeal Process. Reuters. Retrieved from http://www.reuters.com/article/us-usa-obamacare-idUSKBN14W0MC

[iv] Lux, M. (2016, April 14). Dodd-Frank Is Hurting Community Banks. The New York Times. Retrieved from http://www.nytimes.com/roomfordebate/2016/04/14/has-dodd-frank-eliminated-the-dangers-in-the-banking-system/dodd-frank-is-hurting-community-banks

[v] Gattuso, J. L., & Katz, D. (2016, May 23). Red Tape Rising 2016: Obama Regs Top $100 Billion Annually. Retrieved January 10, 2017, from http://www.heritage.org/research/reports/2016/05/red-tape-rising-2016-obama-regs-top-100-billion-annually#_ftn6

[vi] Carey, M. P. (2016, October 4). Counting Regulations: An Overview of Rulemaking, Types of Federal Regulations, and Pages in the Federal Register (Rep. No. R43056). Retrieved January 10, 2017, from Congressional Research Service website https://fas.org/sgp/crs/misc/R43056.pdf

[vii] Lux, M. (2016, April 14). Dodd-Frank Is Hurting Community Banks. The New York Times. Retrieved from http://www.nytimes.com/roomfordebate/2016/04/14/has-dodd-frank-eliminated-the-dangers-in-the-banking-system/dodd-frank-is-hurting-community-banks

[viii] Norman, J. (2016, April 14). Most Americans in 15 Years Say Their Tax Bill Is Too High. Retrieved from http://www.gallup.com/poll/190778/americans-years-say-tax-bill-high.aspx   Gallup Poll, April 6-10

There is no doubt that the United States is one of the most welcoming and most sought out countries for foreign investors; however, certain foreign investments could impair the national security of the United States. Pursuant to the regulations, the president has broad authority to “mitigate any threat to the national security of the United States that arises” from a foreign acquisition of a U.S. company or “covered transaction.”

Potential foreign acquisition of U.S. companies that are subject to CFIUS review include, but are not limited to, investments involving critical infrastructure and critical technologies. Pursuant to the regulations, critical infrastructure includes a “system or asset, whether physical or virtual, so vital to the United States that the incapacity or destruction of the particular system or asset … would have a debilitating impact on national security.” While critical technologies include a wide array of defense articles or services controlled for export by the State Department, Commerce Department, of the Department of Energy, among others.

Frankly, many moons ago, as in graduate school years, I was not a huge fan of this process because, at first look, it seems like an unwarranted interference with the free markets. However, decades later and, I hope, slightly wiser, the CFIUS review process remains one of many much-needed safeguards along with export controls that are utilized by the U.S. government to protect and strengthen U.S. national security. Our allies and adversaries are constantly on the hunt for anything that could give them an edge. If they have to steal it, they will. In a heartbeat. Also after the 2001 terrorist attacks on the United States, the CFIUS process should become an even more important safeguard.

According to a series of questions presented to the Comptroller General, Congress seems to be a laying a foundation for expanding the jurisdiction of the CFIUS review process. Stressing that the “evolving nature of national security threats” as well as the aggressive efforts by state-owned foreign companies in China and Russia to invest in the U.S. may require a “structural update” of the CFIUS process. They also request a closer look at “soft power” sectors such as the media and other entities that could be acquired by foreign powers or interests and, potentially, used for propaganda. If you think the latter does not happen, think again. In fact, there are reports that certain Fox News personalities have lost their jobs because certain foreign investors on their board did not appreciate certain news coverage about events in the Middle East.

Opponents of the CFIUS process argue that the process is too secretive, onerous and unpredictable. In the long run, it also chills foreign investment. Compared to other federal regulatory processes, the CFIUS process is not be as transparent; however, consider the subject. It can’t be. Despite this, subjecting a potential transaction to a CFIUS review is usually well worth the cost and aggravation. The U.S. taxpayer has tasked the federal government to safeguard national security and the homeland. The benefits of the process to Americans are substantially outweighed by the potential inconveniences that it imposes on potential foreign investors. Remember that access to the U.S. market is a privilege, not a right.

 

Jacobson further explained that the President was being courteous when he shook hands with the Cuban leader. She wished that people focused on the President’s speech especially the line of those nations who were in “solidarity with Mandela, but would not tolerate the same dissent in their country.” She said that the President did have the Cuban government in mind when he made that statement.

She also noted the sad irony that 20 Ladies in White were arrested in Cuba along with others Cuban dissidents in the island, while the Cuban government was remembering Mandela’s struggle for freedom against apartheid. She also noted how average Americans through various cultural exchange, religious institutions, and etc.. are visiting Cuba.

She stressed numerous times that the White House has been clear with regard to Cuba, but disappointed when Cuba takes a step back in terms of freedom for the Cuban people. Noting that this year marks the 5th anniversary of Alan Gross imprisonment in Cuba, Jacboson stated that no new relations with Cuba could be discussed until Mr. Gross is released.

Brazil: An Evolving Relationship

The next question dealt with Brazil. She discussed that the Pacific Alliance will eventually change from a geographic organization to something different. She reiterated Secretary Kerry’s concern for a regulated internet, in wake of the NSA spy scandal, given the fact that the internet is an engine of innovation despite some of the problems. The third question dealt with the issues of emerging democracies. She did state that just because she did not mentioned it in her speech, that does not represents that this issue was not a priority in the administration. She cited the most recent elections in Honduras. But she also explained that democracies are not just about elections, it is about governing as well.

Venezuela: Productive Relationship Desired, But Rough Road Ahead

The final question dealt with Venezuela. She explained that the US wants to have a productive relationship with Venezuela, but that Venezuela is the one responsible for placing the obstacles in the relationship. She expressed the U.S. commitment to meet with all people-government, opposition, labor, etc.

All and all, it was an interesting and informative session. These issues are of great interest in South Florida, a gateway city and financial hub for the Western Hemisphere and Latin America. Because political and economic developments in Latin America can greatly impact our area, our clients are always asking us for updates on these matters.

 If you factor in the billions of dollars Cuba owes foreign lenders, as well as the confiscated property and related U.S.-Cuba claims, Cuba will have no choice but to work with foreign investors to start digging out of this problem. No matter the faction, all of them understand that a key element of success will require foreign economic assistance of various forms. This will be needed for many reasons, but most importantly, foreign capital will be needed to stabilize the Cuban economy.

While tourism and commodity exports are likely to represent the prominent source of Cuba’s monetary earnings during the early stages of an economic transformation, a major acceleration in economic growth and trade will require large inflows of foreign direct investment and services. Of course, American companies will have to wait until the economic embargo is lifted before they can participate in this process.

Cuba’s current and future leaders understand that their main economic support will come ninety miles to the north. Once a transition government is recognized under U.S. law, significant economic investment from the U.S. will most likely occur when investors are convinced of Cuba’s commitment to a more open society consistent with U.S. law and policy, free markets, the rule of law, as well as the protection of property rights and the enforcement of commercial contracts. These are just a few of the current underlying preclusions to the United State’s involvement with Cuban economic growth.

Investing in Cuba’s infrastructure will provide many lucrative investment and business opportunities. For example, Cuba does not have enough hotel rooms to accommodate tourists. New hotels will have to be built and so will the infrastructure to support that line of business in order to accommodate the expected large influx of new tourists that will visit the island. 

The island’s transportation system is in shambles, the electrical grid system is very outdated, roads and bridges are old, most of the country’s water supply is lost by leaks along its aged pipes, and the railway system is almost non-existent. The airports and seaports are also in need of repair and modernization. The list of critical infrastructure updates and repairs that need to occur to support a vibrant economy is much longer and more extensive.

One thing Cuba has in its favor is a very high literacy rate compared to most other countries in Latin America. This fact can and will make it very attractive for business looking to outsource work to send business to the island in many fields. The Cuban people are also extremely resourceful and hard-working. With the economic and political freedom, the transition process from a closed to open economy in Cuba should provide a fertile foundation for exponential growth that will surpass the successes of similar transition economies of Eastern Europe after the Cold War. 

At Poblete Tamargo, we are very well-prepared to help your company — no matter how big or small — to start developing a strategic plan for your business whether you seek improvements on the inner workings of your business or are looking to upgrade your company’s way of or potential interfacing with Cuba and its economy. We can also advise you on current U.S. law and regulations, as well as how Washington will play a pivotal role in Cuba transition matters.

Our understanding of the political, economic and social climate on Cuba in particular gives us the added advantage of improving your position for the future when US Cuba relations resume. The time to plan for this future is now. Give us a call so we can discuss your interests and start preparing your plan with you to enter the future free and democratic Cuban marketplace.