InsideSources

Former President Barack Obama was accused by critics of unilaterally implementing an extensive labor policy agenda by going beyond what the law allowed. Now some say lawmakers should pass legislation ensuring that doesn’t happen again.

The Obama administration aggressively pursued its workforce agenda with the promise workers would benefit. The result was a pretty significant shift in federal labor policy. President Donald Trump has already done a lot to upend those policy reforms, but the partisan back-and-forth on federal labor policy is nothing new.

The Obama administration proposed legislation, issued executive actions, sent memos, and implemented regulations to achieve their goals. Critics denounced the changes as being harmful to employers and workers and an overreach of federal powers. It also strengthened the call for congressional action to better clarify federal labor laws like the National Labor Relations Act and the Fair Labor Standards Act.

The National Labor Relations Board (NLRB) was among the most active federal agencies on the labor policy front during the last administration. The board has a history of reflecting the political leanings of whoever the president is at the time and of altering policy by changing how it interprets federal law during labor dispute cases. Its ability to change policy became a critical tool during the Obama years.

“For the NLRB, this is kind of what happens,” Trey Kovacs, labor policy expert at the Competitive Enterprise Institute, told InsideSources. “It’s a highly political agency that makes decisions depending on who president is. I don’t know how much headway you can really make unless you have several consecutive Democratic presidents in a row, it’s going to get flipped back whenever there’s a change in the presidency.”

The NLRB was able to make several significant policy changes ranging from contracting to union elections. Republicans and the business community argued the board went way beyond the intent of the law — fueling a call for legislative action to clarify what the limits of the law actually are.

“I would also say they should probably think about addressing some of these policies with legislation,” Kovacs said. “If the next president is a Democrat, they’re going to do the exact same thing. They’re going to get their majority on the NLRB, takeover the Department of Labor, and reverse course again.”

Congress has already started taking action on some of these policy fronts – especially in regards to what is known as the joint-employer standard. The joint-employer standard determines whether an employer is legally responsible for the employees of a company it contracts with. Employers have typically had to have direct control over the employment policies of another company to meet the standard. The NLRB, during the last administration, expanded the interpretation to indirect control.

The legal interpretation of the standard was expanded during the last administration to the dismay of the business community. The Save Local Business Act was proposed to address the concern.

“The joint-employer issue is one that can only be fully solved with permanency by Congress,” International Franchise Association public affairs vice president Matt Haller told InsideSources. “The Senate should exercise its power to create certainty in legal precedent for franchises and all businesses, which are facing a great deal of uncertainty.”

The business community denounced the new standard as being overly vague and unnecessarily burdensome.

The new NLRB announced Dec. 14 that it has overruled a previous decision which set the precedent for the expanded joint-employer standard. But that decision could too be reversed back if a more progressive president takes office. The Save Local Business Act would ensure that couldn’t happen by making the limits of the law clear – while also addressing a patchwork of legal interpretations from different agencies and courts.

“This is a problem with the joint-employer issue at large,” Kovacs said. “There’s a number of federal statutes and different agencies that govern enforcement of those laws. So you have come at it from different angles. That’s what’s good about this legislation going through Congress because it would harmonize the National Labor Relations Act and the Fair Labor Standards Act, and set common standards for joint-employer.”

The Obama administration did a lot more than just change the joint-employer standard. Federal agencies tackled issues ranging from overtime, the franchise model, independent contractors, union elections, and workplace safety standards. The Trump administration has aggressively reined in many of those reforms, but without congressional actions that can just as easily be reversed back under a future president.

The Senate still needs to pass the joint-employer bill and it’s unclear which other labor policy issues lawmakers will tackle next. Trump also still has more work to do with his administration working through the regulatory process to undue more labor reforms from the last administration.

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President Donald Trump has taken an aggressive approach in his push to rollback regulations, begging the question of what the impact will be for everyday Americans.

Trump pledged in the latter weeks of last year that he would bring regulations down to their 1960s levels. He stood between two radically different size stacks of paper that compared the regulatory burden between the two eras. His administration has since worked to roll back regulations in the hopes of boosting economic growth.

“You can see another really vivid illustration of the monumental task we face,” President Trump said at the time. “In 1960, there were approximately 20,000 pages in the Code of Federal Regulations. Today, there are over 185,000 pages.”

Republicans and the business community have long argued that the current regulatory framework has become too burdensome. The administration is optimistic the new approach will help lift the burden many employers face – which would allow them to invest more time and money into their businesses and employees.

The Trump administration has looked to areas like labor policy, consumer rights, healthcare, and the environment in its deregulatory effort. But the push has also faced backlash from critics who argue the administration is eroding critical workplace and environmental protections.

“The Trump administration has clearly focused on deregulation and evidence indicates it has had some success,” George Washington University Prof. Susan Dudley told InsideSources. “Working with Congress, the president has rescinded several regulations issued at the end of the previous administration, and the pace of new regulations is dramatically less than during previous presidents’ first years.”

Former President Barack Obama has become a central target for much of the deregulatory effort. His administration implemented many new regulations intended to protect workers, consumers, and the environment. But critics argue the changes hurt people throughout the country by creating a drag on the economy.

The Environmental Protection Agency (EPA) has since eliminated Obama-era rules intended to combat climate change. The Federal Communications Commission is in the process of eliminating net neutrality. Health and Human Services reined in some of the requirements under the Affordable Care Act, better known as Obamacare. The Department of Labor has started to eliminate many regulations covering the workforce and financial industry.

Those efforts have resulted in some fairly notable cuts to regulations and other federal rules. The Competitive Enterprise Institute found in a report Oct. 1 that the administration had reduced the federal register by 32 percent. The American Action Forum noted Oct. 3 that the administration has saved $560 million annually by cutting regulations.

The Trump administration still has a lot of regulations it is in the process of dismantling. Federal regulations often require a lengthy process that involves a public comment period to either implement or undo. The process could take a year or more depending on the regulation.

The American Enterprise Institute (AEI) has long argued that regulations have become a drag on economic growth. AEI financial policy expert Peter Wallison notes that the new shift towards deregulation has been fairly dramatic – adding that nearly every federal agency has been rolling back or reforming existing regulations.

“The change has been quite dramatic,” Wallison told InsideSources. “The first, and probably most important as a symbol of Trump’s intentions, was the elimination of 14 Obama regulations under the Congressional Review Act, which allows Congress to repeal regulations made within 60 legislative days of the repeal vote.”

Federal regulations have become a hot-button political topic with the current deregulatory effort being no exception. It’s not just a matter of reducing regulations – it’s also a question of which regulations should be scrapped, which should be kept, and which just need to be reformed. Dudley believes the current approach will be beneficial.

“Regulations have been accumulating with little attention paid to their actual effects once they’re in place,” said Dudley, who also serves as the director of The George Washington University Regulatory Studies Center. “At some point, even well-intentioned regulations can slow economic growth. I think the focus on reviewing existing regulations, as well as carefully evaluating the need for new regulations, should be beneficial.”

Wallison also believes the new approach will be helpful – especially when it comes to the economy. He notes that some of the economic growth will eventually taper off as businesses begin to adjust to the reformed regulatory system. But the recently enacted tax reform law, he argues, should offset that drag.

“The benefits are obvious,” Wallison said. “The new growth in the economy, the rising wages, and the ebullience in the stock market. If you think that we don’t have enough regulation in the U.S. economy—that the government should become even more deeply embedded in making decisions for the private sector—then the cost is the loss of that opportunity.”

The Center for American Progress (CAP) has been much less optimistic with the new approach to regulations. Its research has found ordinary Americans will lose important protections. CAP senior policy adviser Sam Berger argues that the administration seems more focused on helping businesses than on what harm it might be causing to ordinary people.

“[Trump] doesn’t seem concerned at all about the effects on everyday citizens,” Berger told InsideSources. “When you talk about regulations you must talk about the costs and the benefits. But with the administration, it’s all about the costs. More specifically, it’s all about the costs to industry. His idea of deregulation is to allow large corporations to cut corners at the expense of everyone else. It’s something you see throughout all the regulatory actions that have been taken.”

Berger adds that the deregulatory push mirrors a larger agenda of putting the wealthy before the middle class. He points to the tax reform law which he argues also benefits large corporations at the expense of ordinary people. Berger believes that former President Barack Obama took a more sensible approach to regulations.

“When you look at the Obama administration, there was a focus on two things,” Berger said. “They put forward new regulations that were going to be net beneficial to society: they were going to help people, protect them from dangers, make sure kids weren’t playing with unsafe toys, making sure workers weren’t being cheated out of their wages. But there was also an effort to look at some of the old rules to see where things could be updated or eliminated entirely.”

Federal regulations aren’t the only thing the administration has been working to roll back. While regulations take time to unravel, there have been various other rules and executive actions that have been upended much more easily. President Obama used legislation, regulations, and executive orders to implement his agenda.

The process to upend a federal rule tends to be as easy or difficult as it is to implement. An executive order, for example, can just be rescinded with another executive order. President Trump was able to undo many rules from his predecessor already simply because of how they were implemented.

“There have been pretty significant changes where Obama did things unilaterally, by executive order or guidance document,” Brookings Institution senior fellow Philip Wallach told InsideSources. “In those cases, it’s been pretty easy for the Trump administration to reverse course and erase some of those changes. So there has been a number of important things done that way.”

A new administration also means a change in the culture throughout the government. While elements within the bureaucracy have appeared unwilling to change, the federal government is steadily moving towards Trump’s vision. American Action Forum regulatory policy director Dan Bosch argues the cultural shift can be seen throughout the government.

“Even agencies that aren’t reporting to the administrations are taking a look now that most of them are under Republican leadership,” Bosch told InsideSources. “So in that respect, the impact has been felt throughout government regardless of whether it’s the executive or an independent agency.”

Wallison adds that the business community has recognized the shift in direction as well. He notes that employers are becoming confident they can invest more back into their business without worrying about new regulations that could undermine that decision.

“The most profound change has been the attitude of the government, and the business community recognizes this,” Wallison said. “They have begun to believe that they can make investments without having the ground cut out from under them by a new and unanticipated regulation.”

The administration is also facing legal challenges over its push to deregulate. The EPA was sued by a group of state attorneys general for delaying implementation of a 2015 regulation. The Natural Resources Defense Council and the Communications Workers of America filed a lawsuit against the administration regarding an executive order which requires that two rules get scrapped for every new one added.

“It will be interesting to see how the courts deal with the legal challenges that will certainly come from these deregulatory actions,” Bosch said. “A lot of what we’re seeing is the Trump administration opening public comment periods, taking comments, and saying we disagree with the previous administration about this so we’re getting rid of the rule. It will be interesting to see whether that holds up.”

Bosch adds that the courts could create a lot of uncertainty if they allow new administrations to just toss regulations. He argues that congressional action could help to better clarify those laws. Berger argues that the administration has drawn some of the legal scrutiny by how they justified the reforms.

“Some of the steps that have been taken have relied on faulty math,” Berger said. “Suddenly a regulation that was providing billions of dollars in benefits is rewritten to provide no benefits, or where a rule is simply delayed without there being a reason for why that’s the case. We’ve already seen some of these actions to deregulate get challenged in the courts, and the courts have said, ‘you haven’t explained why you’re doing this.'”

Lawsuits also have the potential to make the process to implement or remove regulations significantly longer. A court could rule against the change, in which case it’s dead unless there is a higher court to appeal to. A judge could also delay a regulation to give time for a proper ruling.

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Former President Barack Obama oversaw significant changes to employment policies during his time in office, but much of that legacy has been shredded since he left less than a year ago.

The White House during those years did a lot to implement policies which were intended to help workers. The administration encouraged unionization and imposed stricter rules to protect workers against abusive employers – but critics along the way warned those policies were actually hurting both employers and workers alike.

Obama encapsulated his stance on workforce issues in 2015 while speaking at the White House Worker Voice Summit. He argued that unions were more necessary now than ever so that they can protect average workers in a constantly changing and technologically advanced labor market.

“So we’re here today to think about where do we go next,” Obama said at the summit. “What does the next generation of American jobs look like? How do we make sure those jobs reward hard work? At a time of shrinking union membership, but a growing number of digital tools for organizing, how do we make sure everyone who works hard has a chance to get ahead?”

President Donald Trump has also focused on workforce issues during his short time in office, but his approach has been vastly different. He has looked towards tax reform and deregulation to lessen the burden job creators face in the hopes they’ll spend more time and money growing their business and investing back into their employees.

The Obama workplace legacy was a significant shift in direction for labor law and seemed to mark the beginning of a new era – reminiscent of the slew of reforms enacted during the New Deal. It was a huge leap forward for progressives who have made worker rights and corporate accountability central to their agenda for decades.

Now that legacy is crumbling.

The Trump administration has already upended several of those policy changes and is currently working through the regulatory process to undo more. Marni von Wilpert, an associate labor counsel at the progressive Economic Policy Institute, sees it as a huge step backward for worker rights and protections.

“A lot of workplace rights are being rolled back by the Trump administration,” Wilpert told InsideSources. “We see it across agencies from worker safety under OSHA to wage and hour under the Department of Labor, rescinding their joint-employer guidance at the National Labor Relations Board.”

The Competitive Enterprise Institute (CEI), a free-market think tank, takes a different view on how those policy changes have impacted workers. The group has argued that the Obama-era policies hinder companies to such an extent that it was negatively impacting workers. Its research has tracked issues like the joint-employer standard and the minimum wage.

“President Obama touted a lot of these policies as helping workers, but really they just added massive costs on employers, and minimal benefits to workers,” CEI labor policy expert Trey Kovacs told InsideSources. “So I think this is a good change in direction for the Trump administration.”

Wilpert says that the problem isn’t just that the new administration is attacking reforms designed to better protect workers. She argues it isn’t even suggesting a new policy framework to replace what it is upending. Wilpert adds the administration is essentially leaving working people with nothing.

“I don’t see it getting better for workers anytime soon,” Wilpert said. “I haven’t seen any kind of comprehensive policy plan from the Trump administration that is doing anything affirmative to provide workers with protections. What we’ve seen is a bunch of rollbacks.”

The Department of Labor (DOL) and National Labor Relations Board (NLRB) became pivotal players in changing workforce rules during the last administration. The two federal agencies tackled issues including union elections, independent contracting, franchising, overtime, and safety standards.

“To the extent that the NLRB and other independent agencies were using the tools under their purview to issue a new policy or upend precedent, we saw a prolific amount of rulemaking,” Lizzy Simmons, the senior director of government relations at the National Retail Federation, told InsideSources. “That’s very cumbersome for employers to deal with. That means employers are consistently having to reevaluate their employment structure.”

President Trump hasn’t completely dismantled his predecessor’s legacy, being in office for such a short time. But even the slowdown of new regulatory proposals has come as welcome news to the business community. Angelo Amador, the senior vice president and regulatory counsel for the National Restaurant Association, described the previous system as being a constant onslaught of new rules.

“We were at the point where we didn’t know what would come next,” Amador told InsideSources. “So as you are planning your business model and what you were going to do, you didn’t know what would change.”

The business community has been particularly optimistic about the new change in direction. Trade associations and other business groups had fought back against the labor reforms throughout the last administration. The International Franchise Association (IFA) has been at the forefront of the policy fight from the beginning.

“This has been a breath of fresh air,” IFA public affairs vice president Matt Haller told InsideSources. “Franchise businesses can finally see the light at the end of the tunnel here from the rules that were created in the Obama years. While the administration has done a lot to peel back these regulatory impediments, for some issues, Congress is going to need to act.”

Trade associations and other business groups have filed lawsuits and launched media campaigns with the intent of reversing the reforms and showing why they were bad ideas to begin with. The business community has argued that the reforms were a huge overreach of federal powers because they ignored the intent of the law.

“I think it was a very hard environment to focus on economic growth, growing your business, and scaling up your workforce, when you’re consistently having to keep in mind what might be coming in the federal register that day,” Simmons said. “Not having as many regulations as possible coming at you is in itself helpful.”

The Obama administration pursued several significant labor policy changes. One of the most controversial updated what is known as the joint-employer standard. The business community denounced the change as a dangerous federal overreach. The NLRB defended it as a needed update that better aligned with the law’s intent.

The joint-employer standard determines whether an employer is legally responsible for the employees of a company it contracts with. Prior to the change, the joint-employer standard was determined based on whether a company had direct control over the employment policies of another company. The updated standard was instead determined based on  indirect control

“You had employers who chose to eliminate using temporary employment agencies or self-contractors, and franchises that might have been more hesitant to issue franchising licenses,” Kovacs said. “A lot of people get their start or first careers using temporary employment agencies.”

The business community denounced the new standard as being overly vague. The franchise model was of particular concern since it relies on large brand names contracting with many smaller and independently-owned businesses. McDonald’s, for instance, is not one company but rather many, contracting under the same corporate brand name.

“There was no problem that the Obama NLRB and DOL was trying to solve by creating a patchwork of expanded joint-employer policies,” Haller said. “The only problem they were trying to solve was a political goal–make it easier for labor unions to organize a brand from the top-down, and eviscerate franchisees that owned and operated these businesses.”

The Trump administration has already destroyed the updated standard multiple times over. The new NLRB announced Dec. 14 that it had overturned a previous decision involving Browning-Ferris Industries – the case that allowed the previous board to change the standard by setting a new case precedent.

Labor Secretary Alexander Acosta also withdrew from an earlier informal guidance upholding the Obama-era standard. Congressional Republicans are working to pass legislation intended to ensure the joint-employer standard is never again changed in such a dramatic way by clarifying what exactly it is.

“Having those withdrawn out of the gate was very helpful, and I think signaled the direction the administration would be taking,” Simmons said. “I think we’re seeing progress, and we’re not seeing new regulations coming out every other day.”

The new NLRB has done a lot to roll back those labor reforms in the short time it has been fully operating. It has already upended several Obama-era reforms and has signaled its intention to make further changes. The fast pace of the new board has come as welcome news for some, but a terrible setback for others.

“It’s certainly welcome news, and I guess, initially it was unexpected that they would act so quickly,” Kovacs said.

The NLRB has worked fast in the short time it has been set on a new path. Trump didn’t even get a majority vote on the five-member board until his last nominee was approved Sept. 25. It would be another few weeks before he got a new general counsel – a critical position that decides which cases the board will review.

“A lot of this has been done really quickly and in the dark without public comments,” Wilpert said. “That’s what we saw with the National Labor Relations Board [in December]. The board departed with huge and major precedents that it overruled and didn’t even give the public a heads up, let alone the chance to file briefs.”

President Obama pursued his workforce agenda through a couple different means including legislation, regulations, and executive orders. The process to dismantle those changes correlates with how easy or difficult they were to create. Regulations, for instance, require a lengthy process that involves a public comment period to either implement or undo. An executive order, in contrast, can just be rescinded with another executive order.

“President Obama did focus a lot on labor and employment and brought a lot of radical changes which put burdensome requirements on employers,” Kovacs said. “But he did it in a way that can be easily uprooted. You do everything through adjudication and rulemaking, and executive guidance, in a lot of instances they’ve been rescinded in ways that take no time at all.”

Kovacs adds that the court system has also weakened many of those reforms as well. The business community and others have launched a multitude of lawsuits against the changes – litigation that has slowly chipped away at the reforms even before the new administration began.

“I think a lot of what the Obama administration did got caught up in lawsuits and lost a lot of those, which certainly made it a lot lesser of a lift for the Trump administration to reverse things when the courts did a lot of that for them,” Kovacs said.

The Obama workforce legacy is still partly in place since some reforms were implemented through the regulatory process. But the new administration has already taken notable steps to roll back those changes. Haller notes the Obama-era system is barely hanging on.

“There are still parts of it standing,” Haller said. “The joint-employer issue isn’t gone. That’s still there. You still got uncertainty on issues like overtime. But it’s largely hanging by a thread. Like I said, I think there’s still uncertainty, but I think its clear that the Obama labor policy framework did nothing that helped employees.”

Wilpert counters that unending those reforms even further will only hurt workers more. She also notes particular concern over two legal cases that could fundamentally change labor law. The U.S. Supreme Court is scheduled to hear cases on mandatory union dues and employers’ mandatory arbitration agreements.

“Unfortunately, I think it’s going to get worse next year,” Wilpert said. “Hopefully, eventually, it will get better. But we have some major cases on the Supreme Court docket that are going to change everything.”

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U.S. Ambassador to China and Former Iowa Governor Terry Branstad assured both U.S. and China business professionals, students, and dignitaries that “progress has been made” on the relationship between U.S. President Donald Trump and Chinese President Xi Jinping, several days after the Trump Administration criticized China’s economic policies in its National Security Strategy.

Last week, the Trump Administration released its National Security Strategy, which criticized the Chinese government for designing economic policies with the aim of weakening America.

In a prepared statement from the Chinese Embassy in Washington, D.C., the Chinese called the U.S. strategies and policies “contradictory.”

“On the one hand,” the statement said, “the U.S. government claims that it is attempting to build a great partnership with China. On the other hand, it labels China as a rival. The self-contradictory rhetoric of the U.S. betrays the truth that China and the U.S. are becoming increasingly interdependent and have growing intertwined interests. The U.S.’ rhetoric also runs counters to China’s efforts to cooperate with the U.S. on bilateral and global issues.”

Branstad spoke at the Iowa-China Business Forum in Des Moines on Friday, December 22, stating that the “chemistry” between the two leaders is “very good,” but there are issues that still need to be resolved.

“There are some frictions but my hope is we can overcome those,” Branstad said. “I think one of the big concerns is that with regard to the fact that both China and Russia are certainly building their military strength and we want to make sure that the U.S. continues to be an important power in the Pacific. That’s one of the issues that America is concerned about in protecting its own national security. President Trump wants to make sure America looks out for its own interests as every country has the right to do.”

Branstad took limited questions at the forum which was meant to discuss future U.S. relations with China under the Trump Administration.

On trade, Branstad said that there are “still issues that need to be resolved,” but expressed that the the U.S. is hopeful that it can increase its exports to China, and decrease tariffs. Branstad said that with the recent signing of tax reform legislation, more companies will want to locate facilities in the U.S., which will help reduce the trade deficit. He believes that more European companies will follow suit of Mercedes and BMW in establishing a strong base of operations in the U.S.

Kentucky Governor Matt Bevin, also in attendance at the forum, applauded the Chinese relationship with the U.S., as well as its relationship with Kentucky. Bevin stated that in 2015, there were 44,000 U.S. employees working for Chinese-owned companies in the states. He also stated that China was the fourth largest trading partner with Kentucky, behind France, the United Kingdom, and Canada, stating that the state will export between $2.5-$3 billion worth of goods and services to China.

Both Branstad and Bevin’s comments seemed to at times be in direct contrast to Trumps opinion on China, not only in the White House but also on the campaign trail. Trump has been aggressive on China’s economic policy and global strategies, calling the government a “currency manipulator” and an “enemy” to U.S. industry. Back in August, Trump signed an executive memorandum to launch investigations into China’s investment and trade practices.

“I will say as a governor [of Kentucky],” Bevin said, “the president we have is a business man. He understands the nature of global business. Behind the tweets and the comments that get people’s attention, he has done business all over world.”

Many pundits have said that Trump’s actions could signal a shift away from 30 years of promoted economic engagement. Others say that it could be a U.S. strategy to encourage China to take action against North Korea, which Branstad said was a priority of the Chinese.

“The [United Nations] Security Council is debating a resolution dealing with North Korea,” Branstad said. “China has supported past resolutions over the last six months to tighten sanctions on North Korea, and working to enforce that and trying to convince North Korea to denuclearize.”

Branstad ended his comments on trade relations with China by stating that he’d like to find “win-win” outcomes for the two nations on both trade and other issues. Branstad highlighted China’s coordination with the U.S. in addressing the Ebola epidemic in Africa, China’s commitment to fueling cars with 10 percent ethanol by 2020, and taking action on fentanyl producers that are creating different strains of the drug which result in numerous U.S. deaths.

Linda McMahon, Administrator of the U.S. Small Business Administration (SBA), stopped through Iowa on December 13 as part of her “Ignite Tour” to hear from small businesses across the state and tour several of their facilities. McMahon and Iowa Governor Kim Reynolds began the day with a roundtable with area businesses to discuss a wide range of issues, from business hurdles to accomplishments.

According to Iowa’s Small Business Profile of 2017, produced by the SBA, the state has 266,382 total small businesses (defined as having 500 employees or less), comprising 99.3 percent of Iowa’s business. The total employees employed by small businesses is 641,288, which makes up 48.7 percent of all Iowa employees. These small businesses comprise 82.9 percent of Iowa’s exporters. A total of 14,686 small businesses are owned by minority owners. To see a the full report, click here.

Reynolds told reporters that the most important issue facing small businesses in Iowa is tax reform. She said a priority for her administration in the 2018 legislative session would be a tax cut for small businesses. While she remains “cautiously optimistic” about Congress’ ability to pass tax reform this year, she hopes to be able to release a tax reform plan for Iowa next year at her State of the State address.

“Our tax code is complicated, uncompetitive and we need to do what we can to simplify and lower taxes,” Reynolds said. “We need to take an opportunity to modernize the tax code, to make sure it fits the modern economy, and have Main Street fairness. In addition, we need to make sure that’s it’s financially responsible and sustainable. We need to pass tax reform to help Iowa businesses grow and have the opportunity to add more jobs to our growing communities.”

McMahon is the former CEO of World Wrestling Entertainment, which she grew from a small travelling road show to a billion-dollar international corporation. She often makes the case that she understands the challenges small businesses face as someone who confronted those challenges herself. As head of the SBA, she now advocates for small businesses and oversees the SBA’s loan programs, which help to encourage banks to lend to small companies.

Following her visit, McMahon spoke exclusively with InsideSources to discuss her findings along her Ignite Tour, and her upcoming goals at the SBA. The interview has been edited for clarity.

 

Since you have taken the position of Administrator, what do you believe are your most significant accomplishments?

Well, I have been on a mission since I came on board last February to make sure that the SBA doesn’t remain the best kept secret in the country. So I’ve utilized, I believe, my marketing background and my promotion background, as well as my CEO, executive, and management background to bring to the SBA some of those opportunities to re-imagine SBA.

It’s a program we’re working on now that will be rolled out Spring of next year, to make sure that our district offices are totally aligned with headquarters, with input from both sides to make sure that we are providing our field offices with the tools that they need to help grow our lenders in the market place, to help grow our research partners like SCORE, women’s business centers, small business development centers, and veterans outreach, because we have so many opportunities to counsel and to mentor small businesses and start ups so that they can be more directly on the path to success.

 

As you’ve spoken with small business owners across the country, what have they been telling you are their greatest concerns with the current tax code?

Basically, they don’t pick apart the tax code, per se. What they talk about is the opposite–in having a reduction in taxes. They don’t talk so much about tax reform. They talk about tax cuts, and without fail, there hasn’t been one business that I’ve spoken to that has not told me that they would re-invest tax cuts into their business. Whether it was raising wages, hiring new employees, maybe producing more goods and services, looking at alternate sites. Whatever it was, to give them an opportunity to utilize the tax cuts, they would use it to grow their business.

 

One of the most important provisions of the new tax bill is the change in the pass through rate. Based on your conversations with business owners, and as someone who has grown a small business, how important will that pass through change be to helping small companies expand?

Well, anytime that you are reducing the amount of taxes that you’re going to have to pay, and you get to hold onto more of that money, it’s more money that you have to operate with. And capping the upper rate there at 25 percent would be very helpful to those businesses that might have gone above that in the past. So I think you’re going to see a continued growth with our small businesses.

 

Having completed a year at the SBA, what future reforms do you want to make going forward to help small businesses?

Well of course the SBA doesn’t make policy. We can only advocate on behalf of the small business around the country that I talk to, and I am following certainly the president’s lead to eliminate overburdensome regulation. I think what small business that I have spoken to, and I’ve visited now with about 500 different small businesses, and participated in business roundtables and touring their companies specifically, is basically they really talk about the volume of overburdensome regulation.

They don’t talk about a particular one so much as the collective number of regulations and how we need to simplify them and how they need to be able to know when they’re in compliance or not, instead of having to read through zillions of pages. You won’t have billions of pages if you eliminate the regulations.

Now, the president has already rolled back over 900 regulations and he clearly, even in government, all of our agencies, we can’t propose a new regulation unless we get rid of two. And he’s also looking in the private sector of a 10-1 rollback on regulation, and so, I think what you’re seeing around the country today, with that enthusiasm, with these statistics that are showing the enthusiasm for small businesses to start or to grow, is because we do have the promise of imminent tax reform. And also, the President has already shown that he will keep to his word and continue to roll back regulations and that’s what small businesses are looking for: the ability to run their business and not to have to spend all their time making sure they’re compliant.

American millennials have shown much love for avocado-based foods, but the success of the superfruit in recent years, and its future, depends a lot on international trade.

The avocado market has become increasingly popular over the last two decades with younger adults driving at least some of that demand – often being the center of jokes for their love of avocado toast and guacamole. But alongside the growing popularity of avocados are years worth of trade reforms that have allowed foreign producers more access to domestic consumers, an arrangement that could be at risk.

President Donald Trump has argued on numerous occasions that current trade deals have put American workers at an unfair disadvantage against foreign competitors. His administration has worked to shield domestic workers against foreign competition. Avocados could potentially be at risk since they are primarily imported into the country by Mexican producers.

The Avocado Producers and Exporting Packers Association of Mexico (APEAM) argues that the avocado market exemplifies how trade can benefit both countries even when one is the primary producer. APEAM has represented avocado producers and exporters throughout Mexico since it was founded in 1997.

“In these 20 years, consumption in the U.S. has increased, and I’m talking per capita, from one and a half pounds to more than seven pounds now,” APEAM strategic advisor Ramón Paz told InsideSources. “So increasing consumption more than 650 percent per capita. Nowadays in the U.S., more than 50 percent of households are regular consumers of avocados, and you see that in the restaurants and everywhere. That was not the case 20 years ago when this first began.”

Paz adds that the narrative imported products hurt domestic workers simply isn’t true in the case of avocado productions – for several key reasons. He noted that the surge of avocado imports into the country has actually helped to create American jobs and economic growth while simultaneously helping Mexico as well. He points to a study from  Texas A&M University which found in 2015 that avocado imports have helped to create roughly 19,000 domestic jobs along with $600 million in tax revenue.

“We say it’s a success as an example of the benefits of trade because everyone in the supply chain receives benefits,” Paz said. “The supply chain of avocados from Mexico is creating 19,000 jobs, American jobs, on this side of the border, which represent $1.2 billion in labor income. It is contributing $3.5 billion in economic output. Out of that $3.5 billion, 2.2 are added in the U.S. as part of the gross domestic product.”

Paz also takes issue with the idea that avocado imports somehow hurt domestic producers. There has been a growing notion that the United States should rely less on foreign imports to shift demand towards domestic producers – one that fueled much of the economic populist movement that helped get Trump elected.

“Another comment on trade is that sometimes it hurts local producers,” Paz said. “In this case, the local producers are California avocado growers, it’s the only place in the U.S. avocados are grown. I can tell you there hasn’t much much harm to them, actually, they receive a lot of benefits. Just to give you a data point, in 1996, before we had access, the California growers received 69 percents per pound for their avocados. Last year, 2016, they received one dollar per pound.”

Avocados also require very specific soil and climate conditions in order to grow. California is able to grow avocados because certain areas of the state have the right conditions. But that space is limited and the state also has a specific growing season which means production is not consistent year round.

Mexico, in contrast, has more regions that can grow avocados and is the only country in the world that can produce them year round. Mexican producers accomplish this through a unique combination of natural conditions. The University of Florida found in a 2011 study that Mexico, as a result, supplies 45 percent of the global avocado market.

“All this fruit comes from the state of Michoacán, in the center of Mexico,” Paz said. “This is a state that used to be one of the main sources of migrant workers. In 1995, before we had access, there were more Michoacán workers in the U.S. than Michoacán. Now the avocado industry represents 55 percent of agricultural activity in the state. We created 75,000 permanent year-round jobs because this is an industry that works year round. And we create something like 300,000 seasonal jobs.”

The North American Free Trade Agreement (NAFTA) has become a main target for the administration as it has looked to renegotiate trade deals. NAFTA was implemented in 1994 as a free trade agreement between North American countries like the United States, Canada, and Mexico.

“We are concerned with the current negotiations, but at the same time we are cautiously optimistic,” Paz said. “The reason for that is we represent 80 percent of avocado supplies to the U.S. We are the only country in the world that can supply on a year-round basis. All the other suppliers of avocados have a very specific season.”

Paz adds that while he is optimistic he does have two concerns as the trade deal gets renegotiated. He hopes the administration doesn’t go back to the old standard which imposed a tariff on avocado imports – raising costs on people throughout the supply chain, including the consumer. He also hopes they don’t implement seasonal restrictions that could impact the consistent flow of avocados that restaurants and households have come to rely on.

CNBC found after reviewing a handful of surveys that the obsession millennials have over avocados may be a purely financial decision. They would rather spend money on travel and small luxuries, like avocado-based foods, instead of homes and expensive cars like previous generations.

Many of them also became adults during lackluster economic times making the more expensive life purchases less realistic. The Huffington Post and YouGov also found in a poll that the perception that millennials love avocados more than older generations may be somewhat overblown.

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President Donald Trump had another critical nominee confirmed Wednesday, tilting the federal agency tasked with resolving labor dispute cases further in his favor.

The National Labor Relations Board (NLRB) is an agency responsible for enforcing federal labor law and resolving unfair labor practice complaints. Trump has already managed to fill three key positions on the five-member board since entering office. Peter Robb being confirmed by the Senate to serve as the general counsel of the agency further solidifies the new board.

Robb was previously working as the director of labor and employment at the law firm Downs Rachlin and Marin. His career practicing law stretches back to the 1980s. During those years, he also had firsthand experience working for the NLRB as chief counsel to former member Robert Hunter, a Reagan appointee.

Trump was tasked with filling two vacant seats and selecting a new board chairman when he entered office earlier this year. Philip Miscimarra, who was already a member and thus didn’t need Senate approval, was picked to serve as the chairman of the board. William Emanuel and Marvin Kaplan were nominated by the president to be members and later approved by the Senate. The NLRB general counsel plays a critical role in the agency but is independent from the five-member board.

Former President Barack Obama oversaw a board which critics contested was overly activist. Republicans and the business community have fought to rollback policy changes the previous board made, which they saw as unfairly benefiting unions. The NLRB in those years was essentially able to make new policies simply by altering how it ruled on labor dispute cases. The new members could potentially reverse those changes if provided relevant cases to rule on.

The NLRB was still facing one setback before it could hope to readdress those policy changes. The general counsel investigates and decides which cases the board will review. Richard Griffin, an Obama-era holdover, was still serving as the general counsel and was unlikely to bring up cases that would allow the new board to reverse course. Griffin was eventually replaced by an acting general counsel when his term expired Nov. 1.

The Obama administration argued the changes in recent years were designed to better protect workers. Those changes were praised by progressives and unions who see organized labor as being critical to upholding worker rights. The previous NLRB focused on union elections, how companies can contract together, and how contract workers are classified.

The NLRB was formed in 1935 during a series of economic-related reforms known as the New Deal. The reforms included worker rights laws and support for the economically disadvantaged. Former President Franklin D. Roosevelt helped implement the changes in response to the Great Depression.

The NLRB is supposed to act as an independent judicial body for labor dispute cases. Some critics, particularly conservatives and business groups, have argued the board is politically driven, with the issue becoming radically more pronounced during the Obama years. They have argued the board overstepped its authority by unilaterally changing labor law through case precedent.

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Congressional Republicans unveiled legislation to reform the tax code Thursday in a major step towards implementing one of their top policy goals.

Republicans have long advocated for tax reform as a means of creating economic growth. They began laying the groundwork for the current reform effort nearly two years ago. They have hinted at what the bill might look like while releasing a few summary plans over the past year. The Tax Cut and Jobs Act now reveal exactly what lawmakers hope to accomplish.

Republicans have focused on cutting rates and simplification throughout the process. The tax reform bill reduces the seven current income brackets down to four. The bill is also written to lower rates for most upper and middle-income earners. It will also eliminate or reduce some tax deductions and exemptions.

The tax brackets determine what people will be taxed based on their income level. The highest income bracket under the bill taxes married couples making over $1 million dollars and individuals making half that at the current top rate 39.6 percent, despite earlier promises it would be reduced. The threshold is increased so fewer people will be at the top rate. Republicans explored the possibility of a 33 percent top rate last year, but it was slowly raised throughout the negotiation process.

The next highest income bracket taxes individuals making over $200,000 and married couples making over $260,000 at 35 percent. The next bracket will tax individuals making above $67,500 at 25 percent. That increases to $90,000 for joint filings. The lowest income bracket imposes a tax of 12 percent. A zero percent rate will also be applied to the lowest income earners.

Republican leaders began unveiling details of their tax reform bill hours before it was officially released. The talking points were circulated among members of the media. It included several notable changes from earlier policy drafts like maintaining the 39.6 percent rate for the highest income earners.

The National Taxpayers Union Foundation found in a 2015 study that the tax code is so complex that the economy loses $233.8 billion and 6.1 billion hours of productivity annually. The bill is designed to simplify the tax code by eliminating certain tax breaks. Charitable gift tax deductions will be protected with cash contributions seeing an increased limit.

The tax reform bill would also repeal deductions for taxes not paid or accrued in a trade or business, personal casualty losses, state and local income taxes and sales taxes, tax preparation expenses, most medical expenses, and expenses attributable to the trade or business of performing services as an employee. It allows personal casualty loss deduction only for those affected by the recent hurricane season.

The bill also repeals the alternative minimum tax and the death tax. The death tax, officially known as the estate tax, will be fully repealed after six years. The bill will first double exemptions for the death tax from a $5 million threshold to $10 million, so more people can avoid it before it is completely phased out.

Republicans are also hoping their plan will boost economic growth by alleviating the tax burden businesses face. The bill reduces the top rate for corporations down to 20 percent. The top rate is currently at 35 percent. It also limits the rate paid by pass-through entities down to 25 percent. Those businesses are often small and family-owned.

Pass-through businesses include sole proprietorships, partnerships, and S corporations. The owners and investors are directly taxed on their income instead of having a corporate rate applied to their business. But critics have warned the policy could be abused by wealthier individuals since not every pass-through business is small or family-owned. The bill addresses the concern by establishing safeguards intended to distinguish between individual wage income and pass-through business income.

The tax reform bill was delayed by a day due to lingering disagreements among party members. The House Ways and Means Committee confirmed the delay Tuesday night after it was first reported by media outlets. The committee is confident it is still on schedule to pass the bill next week. The bill would then go onto a final vote on the House floor.

Republicans have faced criticism throughout the last year as they have formulated their tax reform plans. Democrats and other critics have expressed concern that the reforms will mostly benefit the rich while doing little for middle and lower income earners. The White House countered that the top rate will see a bigger reduction simply because they pay a lot more taxes already.

Critics expressed concern at an earlier policy draft for appearing to increase rates for lower-income earners. The lowest income bracket is currently below the proposed 12 percent rate at 10 percent. But the bill also includes what is known as a zero percent rate for the lowest income earners in the form of an enhanced standard deduction.

The zero percent tax rate essentially acts as an unofficial fifth tax bracket. The bill is written to roughly double standard deductions so those that make below the increased amount will pay nothing. The changes will eliminate taxes on the first $24,000 of income earned by a married couple, and $12,000 earned by individuals.

President Donald Trump has focused his agenda on helping employers and their workers. He has been particularly concerned with keeping jobs from going overseas. The bill reflects that by taxing domestic parent companies of foreign subsidiaries at 50 percent of those offshore profits.

The tax reform bill also repeals what are known as state and local (SALT) tax deductions. SALT deductions allow taxpayers who itemize to deduct some of their local taxes on their federal taxes. The repeal faced backlash when it was proposed in earlier policy drafts. There were rumors the SALT deductions would be preserved in the week leading up to the release of the bill.

The tax reform bill also includes a long list of other provisions within its 429 pages. The bill enhances the child tax credit while including a new family tax credit. It repeals nonrefundable credits, and it allows for full expensing for at least five years. It also streamlines higher education benefits with the intent of helping families save for education expenses like college tuition.

Former President Ronald Reagan was still in office the last time the tax system was reformed in a comprehensive way in 1986. It has gone through minor changes in the decades since. The Congressional Budget Office (CBO) found in an analysis that many other developed countries have since started moving towards a more competitive tax system, putting domestic businesses at a disadvantage.

Congressional Republicans provided a preview into how the bill might look when they released a framework for tax reform Sept. 27. The tax reform framework came after a year of hearings and discussion among party members.  House Speaker Paul Ryan and Rep. Kevin Brady introduced a blueprint which outlined their earlier policy goals June 2016.

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Congressional Republicans are poised to release their long-anticipated tax overhaul bill Thursday, after delaying it a day to address lingering disagreements.

The GOP’s primary aim is to cut rates and simplify the tax code. The party suggested the outlines of the bill with a policy framework released on September 27, after nearly a year of hearings and internal discussions of early policy drafts.

The tax framework offered a glimpse of the tax reform debate as it unfolded. But it also excluded key details, and named certain provisions  that could change in the final bill. While there are still areas of concern and uncertainty among lawmakers and stakeholders, Congress seems to be moving in the right direction, said National Taxpayers Union executive vice president Brandon Arnold .

“I think it’s been much more a member-driven process than it was on, say, health care reform,” Arnold told InsideSources. “I think the members have had the opportunity to voice their opinions and preferences to the tax-writing committees, to leadership. It’s been a bottom-up process that I think has made the membership, generally speaking, a lot happier with their ability to weigh in.”

Republicans hope to simplify the tax system by reducing the seven current income brackets down to three, and by eliminating some deductions. They also plan to cut corporate and individual rates to lighten the tax burden many face. But, till Thursday at the earliest, the finer details of hotly awaited tax reform remain just out of reach.

“It’s also, to some of our great frustration, been a very insulated process,” Arnold said. “By that I mean there hasn’t been a lot of information that has leaked out thus far. We’ve gotten tiny bits and pieces and rumors. But for the most part leadership and the tax-writing committees have made it a very high priority to make sure that members know what the plan looks like before the lobbyists and media do. Therefore, there’s still a lot of questions that haven’t been answered yet, and won’t be answered until the official release tomorrow.”

The framework reduces the top individual tax rate from 39.6 percent down to 35 percent. It taxes middle-income earners at 25 percent, and lower-income earners at a slightly higher 12 percent. A mere outline of what may come, it did not  reveal what income levels will define each bracket. The framework also promises to boost simplicity and fairness by eliminating many itemized deductions that primarily benefit the wealthy. But it also preserves home mortgage interest, charitable contributions, work, higher education, and retirement security.

“I think one of the big question marks will be the brackets,” Arnold said. “Those have a huge impact on the distribution of taxes, particularly for lower and middle-income families. Same is true for things like the Child Tax Credit. We know it’s going to be expanded, but is that going to be $1500, $1800, $2000, or somewhere north of that. That will speak a lot to how the distribution tables are going to look.”

Republicans are also looking to spur economic growth through tax reform. In the past, they’ve considered limiting the maximum tax rate for pass-through businesses, which are often small and family-owned, to 25 percent. The framework also reduces the top corporate tax rate to 20 percent—from its current peak at 35 percent.

“The corporate tax rate, I think there’s a strong idea that is going to move to 20 percent,” Arnold said. “But is it going to be 20 percent on day one, or is there going to be a two, three, or five year phase-in process, in which case there is going to be some rumbling from the conservative and free-market crowds about getting to a competitive rate as quickly as  possible.”

President Donald Trump has expressed concern with companies outsourcing jobs to other countries. The tax bill is likely to include provisions that encourage companies to keep operations in the country: A foreign minimum tax, for one, would tax offshore profits earned by domestic companies.

“There hasn’t been a lot of color filled in on things like the foreign minimum tax,” said Arnold, who regularly testifies before Congress on fiscal policy. “There’s a lot of speculation on what that might look like, whether that will be done by countries or some kind of aggregate mechanism.”

The prospect of a border adjustment tax was raised early on as a means of keeping companies in the country. The border adjustment tax—applied when a product is produced in a foreign country but sold domestically—could also offset tax revenue lost to rate cuts. But the idea prompted infighting among party members and likely won’t be in the bill.

“The border adjustment tax is definitely off the table, but there will be something to try to prevent base erosion, trying to prevent companies from shifting their operations overseas,” Arnold said. “I think that will be the foreign minimum tax in some form or another. Hopefully, that will be a very low rate. It’s not ideal because it’s still going to add additional complexity in the tax code.”

Republicans will face pressure from various interest groups as they look to reduce tax deductions. Businesses, industry associations, and other groups benefit from the deductions and will want to defend them. Democrats, for example, were quick to denounce a plan to eliminate state and local (SALT) tax deductions. SALT deductions allow taxpayers who itemize to deduct some of their local taxes on their federal taxes.

“The lobbying campaigns have started ramping up on issues like the mortgage interest deduction, and we have the home builders and realtors grumbling about that,” as Arnold puts it. “SALT was obviously a big fight going into the budget vote, and those issues are only going to worsen going forward. There’s a delicate balance here of crafting good tax policy, and making the politics of it all work.”

The federal deficit is another looming concern with impending tax rate cuts. Most government revenue flows from taxes, a funding pool that will drain if rate cuts aren’t offset somehow. Eliminating deductions could help, but, with the full plan still in the shadows, it’s unclear to what degree.

It’s also possible taxpayers could see the addition of what would essentially amount to a fourth bracket for the lowest income earners. Republicans hope to consolidate standard deductions and personal exemptions at an increased amount. These changes would aim to create a zero percent rate by eliminating taxes on the first $24,000 of income earned by a married couple, and $12,000 earned by individuals.

“This $24,000 standard deduction, which is roughly doubling the current standard deduction, is going to take a lot of taxpayers at the lower end of the economic ladder completely off the income tax rolls,” Arnold said. “We coupled that with an expanded Child Tax Credit. You’re going to see even more people that aren’t going to have income tax liability, and people that have a middle income are going to get a big tax cut as well.”

Yet another additional bracket for the highest income earners could also be in the offing. Lawmakers might choose to add an additional top rate to ensure that the reformed tax code is at least as progressive as the current structure—so that it does not shift the tax burden from high-income to lower and middle-income taxpayers.

“The politics at the upper end of the economic ladder are a little trickier, I would say, particularly for Republicans,” Arnold noted. “But it does appear, most likely, that they are going to preserve a 39.6 percent rate, the top rate, but adjust that bracket upwards, so we’re going from about $470,000, where the bracket is now for families, all the way up to a million dollars.”

Republicans have also considered including provisions that will let businesses immediately write off the cost of new investments for at least five years. It would be a step in the right direction, Arnold said, adding that they ought to address capital investment, “moving as close to full expensing as we possibly can.”

“That is going to generate the most immediate growth and job creation out of any proposal on the table with the possible exception of corporate rate cuts,” he said. “I’m hoping that will be high on the to-do list.”

Roughly doubling standard deductions and enhancing the Child Tax Credit to leave middle-income families more money after taxes are also on the table. Republicans have also explored the idea of repealing the Alternative Minimum Tax and the estate tax—though early reports anticipate delayed estate tax repeal.

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