Happy Thursday and welcome back to On The Money, where we’re celebrating the final congressional votes of 2019. I’m Sylvan Lane, and here’s your nightly guide to everything affecting your bills, bank account and bottom line.
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THE BIG DEAL– House approves Trump’s new NAFTA amid shadow of impeachment: The House on Thursday passed a bill to implement President Trump’s overhaul of the North American Free Trade Agreement (NAFTA), advancing a crucial piece of his economic agenda with strong bipartisan support.
The bill to enact Trump’s U.S.-Mexico-Canada Agreement (USMCA) passed 385 to 41, with 38 Democrats, two Republicans and Rep. Justin Amash (I-Mich.) voting against the deal. The measure now moves to the Senate, where it is expected to pass after the chamber concludes Trump’s impeachment trial.
The big picture:
- The USMCA’s passage in the House marks one of the most significant bipartisan breakthroughs in a bitterly divided Congress.
- The resounding bipartisan vote comes less than 24 hours after the House voted almost exclusively along partisan lines to impeach Trump, who is unlikely to be convicted and removed from office by the GOP-held Senate.
- USMCA may also prove to be a political win for both Trump, who pledged to rip up NAFTA in 2016, and for vulnerable Democrats eager to show moderate voters they can legislate amid impeachment.
Despite the shadow of the House’s indictment, Trump and lawmakers in both parties hailed USMCA as a boon for U.S. workers, manufacturers and farmers. I explain why here.
The background: Trump’s scorn for NAFTA was crucial to his support among disaffected Democrats in industrial states that lost thousands of jobs under the 1994 pact. His vow to replace NAFTA helped propel him to electoral victories in Michigan, Wisconsin and Pennsylvania, which had reliably supported Democratic presidential candidates since 1992.
Democratic lawmakers have also been fiercely critical of NAFTA, and many were eager to team up with Trump to rewrite the agreement, but Trump’s initial proposal fell flat.
- House Democrats and U.S. Trade Representative Robert Lighthizer, the top White House trade negotiator, spent six months in heated negotiations to overhaul the deal.
- A final agreement came together early last week after Democrats secured a slew of victories that clinched support from major labor unions and progressive lawmakers.
- Democrats were able to add a provision to create independent panels to ensure Mexican factories are complying with the agreement, and allow the U.S. to impose tariffs on firms that violate the deal’s labor standards.
Reactions:
- “You can vote for what we’ve negotiated, or you can embrace the status quo. If this fails today, that’s precisely what you’re doing.” — House Ways and Means Committee Chairman Richard Neal (D-Mass.).
- “Due to Democrats’ misguided obsession with impeachment, they neglected moving forward on this pro-worker and pro-growth trade agreement for far too long.” — Rep. Kevin Brady (R-Texas), ranking Republican on the House Ways and Committee.
- “USMCA is not a model moving forward, but it establishes important principles we can build from.” — Rep. Rosa DeLauro (D-Conn.)
- “Mexico has not demonstrated the will meaningfully to reform its labor system, and the weakness of the USMCA’s enforcement mechanisms means that we will not be able to hold Mexico’s feet to the fire when promised reforms do not occur.” — Rep. Andy Levin (D-Mich.).
- “House passage of the USMCA with such huge bipartisan support is a major milestone and shows just how much President Trump is successfully changing U.S. trade policy so it works for the benefit of American workers, farmers, ranchers and businesses.” — U.S. Trade Representative Robert Ligthhizer.
What comes next: Several Republican senators griped that USMCA had drifted too far in labor’s favor and would hinder the deal’s fundamental goal of reducing trade barriers.
Some Republican senators are expected to vote against USMCA. Sen. Pat Toomey (R-Pa.), a staunch conservative, said he would oppose the deal over its “myriad provisions to warm the hearts of protectionists.” Other like-minded Republicans are expected to follow.
Even so, Senate Republicans will almost certainly cement a key pillar of Trump’s economic agenda despite their ideological misalignment with the president.
LEADING THE DAY
Senate passes $1.4 trillion spending package: The Senate on Thursday passed a $1.4 trillion spending package to fund the government through the rest of the fiscal year, averting a second government shutdown in 2019.
Senators broke the package into two chunks, passing the first measure in a 71-23 vote before an 81-11 vote on the second bill that included funding for the Pentagon.
The House passed the bills on Tuesday.
What’s next: The two bills now head to President Trump’s desk, where White House officials have indicated he would sign it before the end of the day Friday, when current funding expires.
A long struggle: The Senate vote caps months of negotiating that blew past the beginning of the 2020 fiscal year in October. Congressional leaders said this week that the alternative to a massive spending deal would be another stopgap continuing resolution (CR) — which would extend fiscal 2019 funding levels.
“A lot of hard work brought this appropriations process back from the brink,” said Senate Majority Leader Mitch McConnell (R-Ky.). “This legislation touches all 50 states. This is why full-year funding bills are better than chronic CRs.”
The Hill’s Jordain Carney has more on what’s in the spending package.
House votes to temporarily repeal Trump SALT deduction cap: The House on Thursday voted to temporarily repeal much of the GOP tax law’s cap on the state and local tax (SALT) deduction, a key priority for many Democrats.
The bill passed on a near party line vote of 218-206, but Republicans got their own victory in the process when Democrats agreed to adopt their motion to amend the legislation.
The vote underscored how the SALT deduction cap is a tricky issue for Democrats. Lawmakers in high tax states — including many freshman Democrats who flipped Republican-held seats in 2018 — strongly oppose the cap. But analysts across the ideological spectrum, including at progressive think tanks, argue that repealing the SALT deduction cap would largely benefit high earners. The Hill’s Naomi Jagoda and Juliegrace Brufke explain why.
Budget watchdogs howl over deficit-ballooning deals: Budget watchdogs are howling over last-minute deals that will add hundreds of billions of dollars to the deficit as part of year-end spending legislation.
Measures tacked onto government spending bills this week will amount to $426 billion in lost revenue over the next decade, adding 30 percent to the cost of annual appropriations bills, according to the Joint Committee on Taxation.
“This budget deal just keeps getting worse,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget who highlighted a package of “tax extenders” that lawmakers agreed to include in a massive spending package the night before it passed in the House.
“Passing hundreds of billions of dollars of tax cuts should not be needed just to keep the government open,” she added. The Hill’s Niv Elis fills us in here.
GOOD TO KNOW
- Democrats are hitting vulnerable GOP senators up for reelection in 2020 with a digital ad campaign this week criticizing them for their support for President Trump’s tax plan in 2017.
- The technology industry is spending big to elect Democrats in 2020, even as the party’s presidential candidates vow to get tough on regulating Silicon Valley.
- The IRS on Thursday released new regulations for the opportunity zone program geared toward driving investment to low-income areas.
- Congress started the year with heady talk of bipartisan action to lower drug prices and protect patients from surprise medical bills. It ended the year with a massive government funding deal that did little to address those issues but did cut taxes on the health care industry by $373 billion.
- Secretary of State Mike Pompeo announced new sanctions against Iran on Thursday, targeting individuals in the judicial courts and security services in response to fallout from popular protests in the country that started last month.
ODDS AND ENDS
- The New York Times asks “Where are the Tech Zillionaires?”…” All those tech I.P.O.s this year that were supposed to make people megarich only made them rich-ish.”
- And in The Wall Street Journal, “Traders Got Head Start on Bank of England News Conferences.”