AED Washington Insights Newsletter
December 2009
Prepared by Christian A. Klein, AED Vice President of Government Affairs
and the AED Washington team
In this Issue:
Senate health care bill discriminates against construction industry
We're guessing that most AED members have been following the health care debate in the Senate with something ranging between mild ambivalence and great concern, but now there's reason to be truly outraged.
In the course of negotiations over the final health care bill this past week, Senate Democratic leaders consented to the inclusion of language that singles out the construction industry for harsher treatment than any other sector of the economy.
The Senate bill requires companies with 50 or more workers to either help their employees obtain health insurance or pay penalties. However, new language included in the bill at the behest of Sens. Jeff Merkley (D-OR) and Al Franken (D-MN) would lower that mandate's threshold to five employees for companies whose "substantial annual gross receipts … are attributable to the construction industry."
The amendment is a blatant handout to organized labor. Unions and contractors employing unionized workers assert that non-unionized contractors would have a huge advantage in the bidding process because they don't have to provide health insurance to employees (or pay the required fines) and because most construction firms employ fewer than 50 employees. But this provision isn't just a problem for our contractor allies. As written, it's so vague that it could be read to include equipment distributors, equipment manufacturers, material suppliers, and even construction industry trade associations!
The inclusion of the construction industry discrimination language is especially appalling given the current economic health of the construction industry. The construction unemployment rate is close to 20 percent and the equipment industry has laid off 37 percent of its workforce since 2006. Do Senate Democratic leaders really think that targeting construction companies with costly new mandates is going create jobs or help the industry recover?
Unfortunately, the passage of the Senate bill tomorrow morning is a virtual certainty. We're guessing that given the convoluted way by which the Senate health care bill was crafted, most senators don't even know the construction language has been included. That means we have to make a lot of noise about this issue to make sure that even the bill's supporters understand that it's a nonstarter and must be dropped when the bill goes to conference next year.
To send an angry message to members of your congressional delegation, click here: http://capwiz.com/aedaction/issues/alert/?alertid=14489131
Merry Christmas and Happy New Year from AED's Washington office. Strap yourself in. We're in for a heck of a ride in 2010!
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As busy year comes to an end, no rest for the weary
The first session of the 111th Congress has been one of the busiest and most controversial legislative years in recent memory. Feeling good after huge victories in November 2008, Democrats took control with substantial majorities in the House and Senate, and occupying the White House. Promises of "change" were soon replaced with some of the worst polarization and partisanship our nation's capital has seen.
Whether it was climate change, health care, card check, highway and water infrastructure reauthorization, stimulus, or estate tax, there was no shortage of high-profile and impactful legislation being considered in Washington. For now, AED and our coalition partners have been successful in stalling climate change, card check legislation, and giving family-owned businesses estate tax relief (albeit temporary). We have fervently advocated on behalf of small business in the health care debate.
And, with the Association of Equipment Manufacturers (AEM), we have significantly raised the profile of the equipment industry on Capitol Hill while pushing Congress for multi-year highway and SRF reauthorization bills, and tax policies that will create jobs and spur economic growth. With Congress coming back in January, our work is far from over, and we will continue to represent the interests of equipment distributors in Washington.
Our successes of the past year could not have happened without the involvement of AED members. If you participated in a Start Us Up USA! rally, got involved with AED PAC or the Washington Education Fund (WEF), joined the Highway Infrastructure Taskforce (HIT), sent a letter to Congress, or took the time to personally come to Washington to advocate on the industry's behalf, we thank you.
Over 3,000 messages were sent on aedaction.org in 2009, nearly 10 times the number of messages sent in 2008. We look forward to another record-breaking year in 2010 and your involvement is crucial to our success!
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AED, AEM urge senior lawmakers on multi-year highway bill, as Obama signs another extension
As part of the Start Us Up USA! campaign, AED and the Association of Equipment Manufacturers (AEM) continue to raise awareness on Capitol Hill about the construction equipment industry economic crisis and the need for fast action on legislation – including the overdue highway reauthorization bill – to get the industry back on track.
Last week, the campaign completed two full days of high profile meetings with top policymakers in Washington, D.C., organized by AED's and
AEM's Washington offices.
On Dec. 15, AED President & CEO Toby Mack and AEM President Dennis Slater were joined by AED Board Member Monty Boyd of Whayne Supply Co. and incoming AEM Chairman Chuck Martz of Link-Belt Construction Equipment Co. for meetings with key members of the Kentucky congressional delegation. The group met with Senate Minority Leader Mitch McConnell (R-KY), Reps. Brett Guthrie (R-KY), John Yarmuth (D-KY), and Ben Chandler (D-KY) to inform the lawmakers about the broader economic consequences of the construction equipment industry depression.
The following day, on Dec. 16, Mack was joined by Tom Kirchhoff of Cleveland Brothers Equipment Co., Jeff Mitchell of H.O. Penn Machinery, Ron DeFeo of Terex, and Craig Paylor of JLG Industries for another full day of meetings with key members of Congress and the Obama administration.
AED and AEM delegations met with House Transportation & Infrastructure Committee Chairman Jim Oberstar (D-MN); House Small Business Committee Chairwoman Nydia Velázquez (D-NY); Senator Arlen Specter (D-PA); Senator James Inhofe (R-OK) Rep. Jason Altmire (D-PA); Rep. Tim Holden (D-PA); Rep. Mike McMahon (D-NY); and Victor Mendez, Administrator of the Federal Highway Administration (FHWA).
In total, since AED and AEM joined forces as part of the Start Us Up USA! campaign, members of both organizations have come to Washington to meet with 35 key policymakers, including senators, members of Congress, and Obama administration officials, to urge action on multi-year highway legislation and other infrastructure and tax policies that will create jobs and spur economic recovery. These meetings are an important supplement to the regular meetings on Capitol Hill by AED and AEM Washington staff.
If you would like to get involved and visit Capitol Hill to advocate on behalf of the equipment industry, please contact AED's Washington office.
Congress enacts another SAFETEA-LU extension
While AED and AEM members were on Capitol Hill, Congress sent President Obama H.R. 3326, the Department of Defense Appropriations Act, 2010, which included an extension of the current SAFETEA-LU authorization through Feb. 28, 2010. The previous extension was set to expire on Dec. 18. This interim extension will give the Senate time to act on the Jobs for Main Street legislation and the longer SAFETEA-LU extension included therein (see article in this issue of Insights). President Obama signed the bill on Dec. 21.
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Infrastructure funding central in House jobs bill
While Congress still hasn't enacted a multi-year highway bill, it is clear lawmakers are getting the message about the nexus between construction equipment industry employment and infrastructure investment. On Dec. 16, the House of Representatives took a bold step in addressing the nation's continuing unemployment numbers by passing the Jobs for Main Street Act (HR 2847). The legislation cleared the House, 217-212, with 38 Democrats joining a unified Republican caucus in opposition to the bill.
Designed to build upon the American Reinvestment and Recovery Act (ARRA or "stimulus bill") enacted in early 2009, the bill uses Troubled Asset Relief Program (TARP) funds to provide $37.3 billion for transportation programs, including $27.5 billion for highways and $8.4 billion for transit. The legislation also includes $2 billion for water infrastructure ($1 billion for the drinking water state revolving fund (SRF) program and $1 billion for the wastewater SRF program) and $500 million for the Airport Improvement Program (AIP).
Similar to the requirements in ARRA, the transportation funding in HR 2847 is required to support "shovel-ready" investments, with no less than 50 percent of funds received going to support projects that can begin within 90 days.
Unfortunately, HR. 2847 strengthens the confusing and burdensome "Buy American" provisions contained in the Recovery Act. Those provisions, which sought to ensure the use of American-made products in Recovery Act projects, have been criticized by free trade advocates and global trading partners as being protectionist. Additionally, the provision has caused significant delays as contractors are having difficulty getting "American-made" certifications and "Buy American" waivers where necessary.
Language in H.R. 2847 will tighten "loopholes" which, according to organized labor, have permitted too many "Buy American" waivers, resulting in the use of foreign-produced materials in stimulus projects. The strengthened language would require greater oversight by the Department of Transportation (DOT) on waiver requests and would also require the Government Accountability Office (GAO) to issue a report on the use of the waivers.
Additionally, HR 2847 incorporates the Surface Transportation Extension Act of 2009, which extends the core highway, highway safety, and transit programs through Sept. 30, 2010, at $53.3 billion, the level assumed in the FY 2010 budget resolution. The long-term authorization for these programs, SAFETEA-LU, expired on Sept. 30, 2009. Since then, these programs have been extended on a short-term basis at a funding level that is significantly below the FY 2009 authorized level. H.R. 2847 will increase funding by $10.7 billion, nearly to the FY 2009 authorized level.
The bill also includes provisions to stabilize the Highway Trust Fund. It restores $19.5 billion in interest payments foregone on the Trust Fund's previous cash balances, and lifts the ban on the Trust Fund receiving interest payments in the future. This will increase the Trust Fund's balance by an estimated $500 million to $1 billion annually, in the near-term.
Finally, the bill calls for the General Fund, rather than the Highway Trust Fund, to support long-standing fuel tax exemptions, such as those provided to state and local governments. This provision will increase Trust Fund balances by about $1.7 billion annually, for a total of $9.8 billion over six years.
The Senate is expected to consider similar legislation in 2010. The "Buy American" provisions, the bill's total price tag of $154 billion, and the use of TARP funds (Republicans favor using unspent ARRA monies) ensure a heated discussion when the Senate takes up the legislation in 2010. Republicans and moderate Democrats will likely oppose the measure, as doubts still remain on the impact of ARRA.
While AED believes that the equipment industry will be benefit from infrastructure stimulus, we are continuing to remind lawmakers that the best medicine for the ailing equipment industry is a multi-year highway bill with significant investment increases that restore contractor confidence in the future of construction markets.
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Fundraising underway for AED WEF, "The Cornerstone of AED's Government Affairs Program"
Every day, AED's Washington office is advocating for legislation that would benefit our members and opposing policies that will be harmful to equipment distributors. We're much more effective when others join the fight, whether AED members are engaging at the grassroots level or other associations join with us in coalitions. That's why AED Washington Education Fund (WEF) is so important to what we do.
The WEF provides funding for a number of elements of AED's Government Affairs Program. One of the most important is the AEDaction.org Web site, which facilitates communication between AED members and government officials, including senators, representatives, and Obama administration officials, such as the Secretary of Transportation. Over the course of our Start Us Up USA! campaign, the site has helped generate close to 2,000 e-mails to lawmakers and officials urging action on our equipment industry recovery agenda.
The WEF also enables AED Washington staff to travel to local equipment distributor group meetings to keep members informed about what's happening in the nation's capital. In the past year, AED Washington team members have spoken to local groups in Houston, Louisville, Oklahoma City, Dallas, Kansas City, Chicago, Columbus, the Delaware Valley (Pa.), New Jersey, and Des Moines.
In 2010, the WEF will also help pay for our Spring Government Affairs Conference, which brings distributors from around the country to D.C. to personally meet with their senators and representatives on Capitol Hill.
In addition to these grassroots efforts, AED supports select coalitions that fight for issues that benefit our members. The WEF provides the funds that allow AED to play a leadership role on issues like LIFO, highway reauthorization, card check, health care reform, and water infrastructure investment.
Funding for the WEF comes exclusively from voluntary contributions by AED member companies (including manufacturers and associate members) that support our legislative goals. Unlike funding for our Political Action Committee (AED PAC), corporate contributions are permissible.
The 2010 AED WEF fundraising drive is in full swing. If you value what AED does on your behalf in Washington, please take a moment to pledge your support online today: http://www.aednet.org/government/wef.cfm
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Start Us Up USA!: Coming soon to an AED Summit Near You
The Start Us Up USA! grassroots campaign has been one of the most successful undertakings in the history of AED's Government Affairs program. The goal of the campaign is simple: Educate lawmakers in Washington, D.C., about the economic crisis facing the equipment industry and urge action on a multi-year highway bill and other initiatives that will spur economic growth and create jobs in our industry.
Working together, AED and the Association of Equipment Manufacturers have generated thousands of e-mails to elected officials, held three successful rallies and "Idle Equipment Caravans" in Las Vegas, Chicago, and Washington, D.C., reached more than 14 million voters through media coverage of the campaign, and coordinated dozens of meetings for equipment industry leaders with senior members of Congress and Obama administration officials.
Recent movement on key legislation suggests lawmakers are hearing our message, but we're still a long way from the finish line. We need to keep the campaign's momentum going and continue to inform key policymakers that inaction is unacceptable. If you haven't already gotten involved in Start Us Up USA!, here's your chance.
On Jan. 20, 2009, Start Us Up USA! will be coming to San Antonio in connection with the 2010 AED Summit and CONDEX. A number of local and national industry leaders will participate in a noon Start Us Up USA! rally on the plaza outside the Henry B. Gonzalez Convention Center. Confirmed speakers include AED President Toby Mack; 2009 AED Chairman Bennett Closner (Closner Equipment); Peter Holt (Holt CAT), Dean Word, III, a leading San Antonio contractor; Texas State Senator Jeff Wentworth, a local champion of increased infrastructure investment; and equipment manufacturer representatives.
Following the rally, a caravan of idle equipment, provided by Texas AED members, will make its way past the rally site and through the streets of San Antonio to focus public attention on the local impact of the equipment industry downturn and the need for fast action on the highway bill.
We hope all Summit attendees will make time to participate in this important event and help us keep the Start Us Up USA! campaign's momentum going.
If you're a Texas AED member who wants to get involved, please contact AED Vice President of Government Affairs Christian Klein at 703-739-9513 or caklein@aednet.org.
To learn more about the campaign and watch highlight videos of past rallies, go to http://www.startusupusa.com.
See you in San Antonio!
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31 Organizations Join AED-led Effort to Extend Business Purchasing Tax Incentives
Earlier this month, a broad coalition of 31 national organizations representing the construction, manufacturing, aviation, professional services, and distribution sectors month joined Associated Equipment Distributors (AED) in calling on Congress and President Obama to extend business purchasing tax incentives included in recent economic stimulus legislation.
The American Recovery and Reinvestment Act (ARRA) allows businesses to write off 50 percent of new equipment purchases and permits qualified small businesses to expense up to $250,000. The depreciation bonus and increased small business expensing provisions were included in the ARRA to encourage companies to make new capital investments in 2009. Both incentives expire at the end of the year.
In a letter to congressional leaders and the White House coordinated by AED's Washington office and sent on Dec. 2, the coalition said that while the depreciation bonus and increased small business expensing levels have had a positive impact, "the depression in capital-intensive sectors of the economy (e.g., construction and manufacturing), lack of access to credit and general uncertainty about the future of the economy have combined to prevent many businesses from taking advantage of the law and the incentives have not had the chance to fully achieve their intended effect."
The coalition letter said that in light of recent data from the Bureau of Economic Analysis showing that capital investment increased in the third quarter of 2009 after six quarters of consecutive decline, "Extending the depreciation bonus and higher Sec. 179 expensing levels would help inoculate the economy against a backward slide in business purchasing in the months ahead and enhance the impact and benefits of other job creation legislation (e.g., infrastructure investment)."
While it is likely that Congress will extend the capital investment incentives (probably in the context of another economic stimulus/job creation bill), it won't happen this year. If you or your customers want to take advantage of the depreciation bonus or increased Sec. 179 expensing levels, the only sure bet is to do it before the end of 2009.
The text of the letter with the list of signatories is available at: http://www.depreciationbonus.org/pdf-2009/DepreciationBonusExtensionCoalitionLetter-20091202.pdf
To send an e-mail to President Obama, Treasury Secretary Timothy Geithner, and your congressional delegation on this issue, go to: http://capwiz.com/aedaction/issues/alert/?alertid=14424391.
AED has provided more information about the capital investment tax incentives at http://www.depreciationbonus.org.
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Estate tax disappears for 2010 after Senate fails to act
The estate tax will vanish next year because the Senate, preoccupied with health care legislation, failed to address the controversial tax before the end of the year. Under the 2001 Bush tax cuts, the estate tax top rate has gradually dropped, while the exemption level has increased throughout the decade. However, the 2001 law required the estate tax to disappear in 2010 for one year before returning to pre-2001 levels in 2011, a 55 percent top rate and $1 million per-person exemption.
On Dec. 3, the House passed the Permanent Estate Tax Relief for Families, Farmers, and Small Businesses Act of 2009 (HR 4154), 225-200. The entire Republican caucus (except three absent Republicans) were joined by 26 Democrats in opposition to the legislation that would make permanent the 2009 estate tax rate and exemption levels. The 2009 estate tax includes a top rate of 45 percent and a $3.5 million exemption.
The Senate was expected to take up HR 4153 or consider a one-year extension of the estate tax law at the 2009 rate and exemption levels. However, Senate Republicans refused to accept these proposals, preferring to allow the estate tax to expire for one year.
Senate Democrats are not content with the estate tax disappearing for 2010. Word on the Hill is that Sen. Max Baucus (D-MT), chairman of the Senate Finance Committee which has jurisdiction over tax legislation, will attempt to retroactively extend the 2009 estate tax law into 2010 when the Senate returns after the new year. It is unclear whether there is enough support in the Senate to make this a reality.
The repeal of the estate tax does not necessarily mean lower taxes for all small business owners. Currently, heirs receive what is known as "stepped-up basis" on assets they inherit. As a result, when heirs sell inherited assets, they pay capital gains taxes only on the difference between the value when inherited and the value at the time of the sale. In 2010, stepped-up basis is replaced with a "carryover basis" system for assets after the first $1.3 million. Carryover basis will result in heirs paying capital gains taxes on the difference between the value of assets when sold and the value when originally purchased. For many, the tax bill will be greater than if the estate tax were left in place.
Most Republicans and several moderate Democrats do not want the estate tax to return to pre-2001 levels in 2011. It is expected that that Sens. Blanche Lincoln (D-AK) and Jon Kyl (R-AZ) will offer legislation next year that would permanently cap the top estate tax rate at 35 percent with a $5 million per-person exemption (indexed for inflation).
In April, a similar proposal was approved by the Senate 51-48 as an amendment to the budget resolution. The Senate amendment was taken out during conference between the House and Senate, and the final budget resolution allowed for the estate tax rate and exemption to be frozen at 2009 levels (similar to HR 4154).
However, next year's congressional agenda is already starting to fill up and members of Congress do not like to take tough votes on controversial issues in election years, making it uncertain whether the estate tax will be considered in 2010. There is also a core group of more liberal Democrats that are content with allowing the estate tax to go away for one year in anticipation of the tax returning to pre-2001 levels in 2011.
AED will continue to monitor the estate tax debate and urge Congress to find a reasonable solution to provide small, family-owned businesses with much needed certainty. To send an e-mail to your senators/representative urging permanent estate tax reform, visit www.aedaction.org.
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FCC seeks comments on rural broadband infrastructure deployment
Equipment distributors serving utility contractors in rural areas take note: The Federal Communications Commission (FCC) has started gathering public comments on how to deploy broadband in rural areas and ensure universal coverage.
The American Recovery and Reinvestment Act (ARRA), directed the FCC to create a national broadband plan by Feb. 17, 2010, that will "ensure that all people of the United States have access to broadband capability and … establish[es] benchmarks for meeting that goal." Among other things, the FCC is supposed to provide "an analysis of the most effective and efficient mechanism for ensuring broadband access by all people of the United States" and "a detailed strategy for achieving affordability of such service and maximum utilization of broadband infrastructure and service by the public."
The FCC has identified the lack of available private financing for network deployment (whether through capital investment, debt financing, or other financial support) as a major obstacle to broadband access in rural communities. While several federal programs support broadband deployment in underserved areas, challenges in obtaining private debt or equity support that prevent effective deployment remain. According to the FCC, even with government support, many enterprises may be unable to achieve a profitable operating model, and the business case for potential deployment projects in many rural areas may be inadequate to merit sufficient private sector support.
In an effort to address these challenges, the FCC is seeking comment on potential private sector and government funding vehicles for effective financing of broadband deployment projects in rural and high-cost areas. While many of these vehicles may be outside the FCC's scope and jurisdiction, the Commission is considering a range of potential vehicles in order to address the congressional call for "an analysis of the most effective and efficient mechanism for ensuring broadband access" to all Americans.
For more information and to find out how to share your ideas, go to: http://hraunfoss.fcc.gov/edocs_public/attachmatch/DA-09-2610A1.doc
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AED Board Member Monty Boyd (Whayne Supply) and AED President & CEO Toby Mack in the Capitol's Howard Baker Room before meeting with Senate Minority Leader Mitch McConnell (R-KY) on Dec. 15.