InsideSources

Labor Secretary Alexander Acosta and the labor movement came to vastly different conclusions over how withdrawing from a recent multinational climate agreement will impact jobs.

The Paris Climate Accord seeks to address environmental issues mankind might be contributing to. The agreement specifically sought to address greenhouse gas emissions, which many believe are responsible for climate change. President Donald Trump withdrew from the agreement arguing it wasn’t a good deal for the United States.

“On these issues and so many more, we’re following through on our commitments,” Trump said Thursday at the White House. “I am fighting every day for the great people of this country. Therefore, in order to fulfill my solemn duty to protect America and its citizens, the United States will withdraw from the Paris Climate Accord.”

The decision by the president to withdraw was already being met with political battle lines before it was officially announced. His administration and many others on the right applauded the decision as a good move for the economy. Democratic leaders denounced it as destructive to the environment.

“The United States’ withdrawal from the Paris climate accord is this administration’s bold commitment to promoting pro-growth principles and rebuilding America’s manufacturing base, which was under siege by the Paris accord,” Acosta said in a statement. “The U.S. Department of Labor remains laser focused on ensuring all Americans have access to good, safe jobs and will continue standing arm-in-arm with the American worker.”

National unions expressed a vastly different viewpoint when it came to the decision. While unions traditionally lean left, environmental issues tend to have a bit more of a gray area since so many union members work in industries that would benefit from projects like the Keystone XL pipeline.

“Pulling out of the Paris climate agreement is a decision to abandon a cleaner future powered by good jobs,” AFL-CIO President Richard Trumka said in a statement Thursday. “A deteriorating environment is not the only thing at stake here. When our leaders isolate America from the rest of the world, it hurts our ability to raise incomes for working families and achieve fairness in the global economy.”

The Paris Climate Accord was negotiated by representatives from 195 countries at a 2015 global climate change conference in Paris, France. Former President Barack Obama and his administration became major advocates for the agreement in his final years in office.

“By withdrawing from the Paris Climate Agreement, President Trump and his self-interested political allies are killing the creation of new industries and jobs,” Mary Kay Henry, president of the Service Employees International Union, said. “Already, in the United States, clean energy jobs vastly outnumber fossil fuel jobs, with solar and wind energy at the forefront.”

President Trump was able to withdraw from the agreement because it wasn’t considered a treaty under domestic law. Obama did not get consent from the Senate which would have been required. Without Senate approval, the president had no legal obligation to uphold the agreement.

“For many years, the United States has been a leader in innovation and technology to combat climate change,” United Steelworkers President Leo W. Gerard said. “Withdrawing from this non-binding agreement further cedes our strength in this sector to China, and signals to domestic innovators and manufacturers that the United States will not support them.”

Trump has centered his presidency on a promise to help domestic workers and the economy. The president has argued on many occasions that the government has failed workers and companies alike. Reducing Obama-era environmental policies have been a major focus of that message.

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As of Thursday, America is beginning to pull out of the Paris Climate Accord. Despite being a longstanding campaign promise by President Donald Trump, the move was contentious to say the least. Environmentalists lamented the announcement, while many conservatives hoped that leaving the climate agreement would provide a boost to the American economy. Somewhat unexpectedly, many major oil companies and other large corporations came out in favor of the agreement, reflecting the realities of shareholder pressure and operating an international business.

In a statement in the Rose Garden on Thursday, Trump stressed that the Paris Climate Accord hurt the American economy and American workers. Citing a study by the National Economic Research Associates, he said that the terms of the accord could cost America as many as 2.7 million lost jobs by 2025, and close to $3 trillion in lost GDP.

“The Paris Climate Accord is simply the latest example of Washington entering into an agreement that disadvantages the United States to the exclusive benefit of other countries, leaving American workers — who I love — and taxpayers to absorb the cost in terms of lost jobs, lower wages, shuttered factories, and vastly diminished economic production,” he said.

The move was met with approval in conservative circles, many of which saw the Paris Climate Accord as an ineffective and costly means of addressing climate change. More surprisingly, industry figures had mixed reactions, with several major energy companies speaking out in favor of the Paris Climate Accord.

For some companies, the increased focus on climate change comes at the behest of shareholders. At its annual meeting in Dallas this week, ExxonMobil shareholders approved a proposal to force the company to release assessments of how technology advancement and global climate change policies could affect the company’s business. Company management had resisted the proposal, saying that their business plans were available through other reports, but others saw the vote as an important step toward broader climate change disclosure.

“This is an unprecedented victory for investors in the fight to ensure a smooth transition to a low carbon economy,” New York State Comptroller Thomas P. DiNapoli, a trustee of a retirement fund which co-sponsored the proxy resolution, told the Wall Street Journal. “Climate change is one of the greatest long-term risks we face in our portfolio and has direct impact on the core business of ExxonMobil.”

The Paris Climate Accord also created stability. At a shareholder meeting last week, ExxonMobil CEO Darren Woods urged the administration to stay in the agreement, saying that the industry “need[s] a framework like that to address the challenge of climate change and the risk of climate change.”

Additionally, although the United States has pulled out of the agreement, most European countries remain. This means that large corporations like BP and Shell, which are based in Europe, will still have to toe the politically correct line in their international operations.

Other companies are unlikely to abandon the goal of increased energy efficiency after spending billions on new technologies. General Electric, whose CEO Jeffrey Immelt expressed disappointment with the administration’s decision, has made reducing energy consumption a key part of its business. Ford also signaled that it would continue technology investments to make its vehicles more efficient and emit less carbon dioxide. The company also says that it is not abandoning long term plans to develop affordable fuel cells.

Some in the industry say that leaving the Paris Climate Accord increased market uncertainty and that companies are loathe to invest in expensive projects like nuclear power plants without some assurance that future policies will remain consistent.

“Executives are making multibillion-dollar decisions about assets that last decades. Suddenly injecting a bunch of uncertainty into the debate makes long-lasting, slow-to-build, expensive assets—like nuclear—even riskier,” said Michael Webber, deputy director of the Energy Institute at the University of Texas at Austin.

However, Trump’s decision has strong support from one key corner: the coal industry. Coal has been struggling to compete with cheap natural gas for the past several years, and Obama-era policies like the Clean Power Plan and the Paris Climate Accord only exacerbated the adverse business climate. Leaving the accord, like overturning the Clean Power Plan, has been a boon to the industry.

“In following through on his promise, President Trump is supporting America’s uncompromising values, saving coal jobs, and promoting low-cost, reliable electricity for Americans and the rest of the world,” said Robert Murray, controlling owner of Murray Energy.

Peabody Energy, a coal company based in St. Louis, also supported Trump’s decision, saying that remaining in the agreement “would have substantially impacted the U.S. economy, increased electricity costs and required the power sector to rely on less diverse and more intermittent energy.”

Some industry observers take a cynical view of the situation, saying that oil and gas companies have an incentive to promote clean energy standards that will force out coal.

“The only way to get the price of gas back up is to kill coal. The Paris Agreement kills fossil fuels, but it kills coal first,” Myron Ebell, director of the Center for Energy and Environment at the Competitive Enterprise Institute, told The Daily Signal.

For the time being, the only certain prediction is increased uncertainty. Although the regulatory environment has recently become more friendly to coal, natural gas remains low and provides a cheap way to produce clean electricity. Meanwhile, investor pressure and the uncertain future of Trump’s regulatory changes make companies hesitant to make dramatic investment shifts.

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The Trump administration announced plans Monday to extend a program that protects 50,000 Haitians from deportation. But the fight is not over for one union at the forefront of the issue.

The Haitians have lived in the country with a temporary protected status since their homeland was hit by an earthquake seven years ago. Advocates have fought to save their temporary status which was set to expire Tuesday. The hotel workers union Unite Here says more work is needed with the program scheduled to expire again in six months.

“Folks have responded with mixed emotions around it,” Mike Hill, research coordinator for Unite Here Local 355, told InsideSources. “We’re going to be going through a series of meetings here locally with some local faith leaders, ourselves, other unions, and community folks to figure out what our plans are for the next six months to expand it beyond January. But I think folks feel happy about a short-term reprieve but very committed to figuring out how to do something longer term.”

Local 355, which is based in Florida, became involved early on with the earthquake impacting many of its own members. The union has turned its attention to the temporary status issue in recent months. It has since worked with other advocates, unions, and its national affiliate to bring attention to the issue.

“No one can believe that 50,000 people are just going to pack up their homes, going to pack up their kids, they’re going to pack up their roots, leave their job, that’s an insane proposal,” Unite Here National Vice President María Elena Durazo told InsideSources. “Entire sectors of industries would be severely impacted, and our industry would be one of those.”

Durazo adds the six-month extension doesn’t feel like a real solution. She notes it’s more like telling the Haitians they have an extra six month to pack their things. Hill says the ideal is to allow them to stay as long as possible, and work to develop pathways so they can stay permanently.

“The ideal, obviously, would be that people could have a long-term permanent solution,” Hill said. “I don’t know how long it’s going to take for Haiti to recover and be able to support folks. I know a lot of our members who are here to work, they send a lot of money back to Haiti. Their extended families are still in Haiti.”

Temporary Protected Status (TPS) allows foreign nationals to stay in the country legally if they are unable to return to their home country safely, or their government is unable to handle the return of its nationals adequately. The Department of Homeland Security (DHS) announced the six-month extension just a day before it was set to expire.

“After careful review of the current conditions in Haiti and conversations with the Haitian government, I have decided to extend the designation of Haiti for Temporary Protected Status for a limited period of six-months,” Homeland Security Secretary John Kelly said in a statement. “Haiti has made progress across several fronts since the devastating earthquake in 2010.”

The situation in Haiti continues to be problematic despite almost a decade of relief efforts. The World Bank reports that the magnitude 7.0 earthquake in 2010 killed up to 230,000 people while causing around $8 billion in damage, at 120 percent of gross domestic product (GDP). The country still faces some major economic challenges.

“The folks that have been talking here locally, obviously, are thinking about going to other countries, not just Haiti, if they were forced out,” Hill said. “One of our members was talking about going to Canada. Folks think about their immediate economic concerns.”

The Haitians with a temporary status face other issues beyond the immediate economic concerns. In the seven years since the earthquake hit, many have settled down to start families and new lives here in the states. Some don’t have families to go back to because they were killed in the earthquake.

“For us, it goes way back,” Hill said. “Our membership was severely affected when the earthquake happened. Many of our folks were panicked, trying to find loved ones, trying to talk to folks back home, trying to figure out what happened. We had members who lost multiple members of their family who died in the earthquake.”

The earthquake became a personal issue for the union from the very beginning. Union officials met to discuss how to help people impacted by the earthquake. Members also united to donate money to the relief effort. The union became involved again several months back to bring attention to the looming temporary status deadline.

“Our members were talking to their employers, encouraging them to take a public stand since they heavily depend on Haitian labor, and its just the right thing to do in general, as well,” Hill said. “Then we had a series of protests, press conferences, and all of that.”

Unite Here organized protests and launched a petition to bring national attention to the issue. The union also joined forced with other advocates like the Haitian Women of Miami and the Florida Immigrant Coalition. Now the union is looking ahead to the next six months in the hope more can be done.

“That’s what we have to figure out,” Hill said. “What we’re going to do now is, tomorrow evening we have a large prayer service in one of the largest Haitian churches here in south Florida. That will be the beginning of the discussion, and then I think a bunch of us are going to spend some time thinking about what does the next six months look like, and how do we keep the pressure up.”

Unite Here represents 270,000 members across the hotel, gaming, food service, manufacturing, textile, distribution, laundry, transportation, and airport industries. The union, in general, has been a vocal supporter of a more open immigration system. President Donald Trump has taken a much stricter stance on immigration.

“We have been greatly concerned with the president’s approach of making everyone a subject of deportation,” Durazo said. “It used to be limited to those that have been convicted of crimes, and now it’s everybody and nobody is safe.”

Trump has promised to better enforce immigration law, and pursue policies that protect domestic workers from unfair foreign competition. The administration has said it will prioritize criminal aliens, but critics have expressed concern over mass deportation, which would include illegal immigrants that are otherwise acting lawfully.

Local union officials and other advocates will start meeting Tuesday to figure out what the next steps should be.

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Republicans have looked towards policies like the border adjustment tax to protect domestic workers against unfair foreign competition. But what’s often overlooked in that conversation is how foreign slave labor gives some companies a huge and unethical advantage.

House Speaker Paul Ryan and Rep. Kevin Brady proposed the border adjustment tax to serve two main purposes. The policy aims to protect domestic companies from foreign competition by taxing imported goods. It is also supposed to raise tax revenue to make up for cuts to corporate and individual rates.

Slave labor poses one of the more egregious and unethical examples of unfair foreign competition. Domestic companies that act within the law are at a huge disadvantage to companies willing to produce goods with exploited workers. The question is whether the border adjustment tax could potentially combat that type of unfair competition when it comes from foreign producers.

“I think that needs to be an evidence-based question,” Terry FitzPatrick, communications director for the global slave watchdog Free the Slaves, told InsideSources. “So, if the answer is that this will have some impact on slavery overseas, well then, of course, it should be a consideration. Could this help create pressure on countries to weed out slavery in their exports? Could it make the problem worse in those countries? Maybe.”

The first issue is that the question ventures into unknown territory. There’s not much information available on how a border adjustment tax could potentially impact imports made with slave labor simply because the policy hasn’t been tried in the modern American economy. There just isn’t much observable data. It’s also not clear how it would fit into the existing legal framework, which already includes laws and regulations that combat slave labor.

“The reason I hesitate to answer is because we’re in completely unknown territory, and we may be in unknown territory also for legal reasons,” Nottingham University Prof. Kevin Bales told InsideSources. “You have to first answer the question, are you telling us we could import, we just need to pay a higher tariff. So you’d have to work that out and say no, that’s not what it’s about. What this is about is a punitive tax that’s going to be higher if we know countries are allowing the export of quantities of slave-made commodities and so worth.”

What is known is that slave labor continues to be a huge problem worldwide. The Department of Labor (DOL) found in a report last year that roughly 350 common products are made with forced and child labor. One reason is global supply chains are incredibly complex, making it easier to hide where slave labor occurs.

“The world is a place of integrated supply chains, and commodities come from one place that are sewn into components in another place, and they’re assembled into a finished product in another place and brought to America, or sometimes assembled in America,” FitzPatrick said. “We are interdependent in that regard.”

News reports recently drew attention to alleged abuses in Chinese prisons. A purse bought from a Walmart in Arizona supposedly had a letter in it written by a Chinese prisoner forced to produce American goods. The letter claims that prisoners are being beaten and forced to work 14 hour days.

“Rwanda, which has no coltan or cassiterite, is one of the larger exporters in Africa of coltan and cassiterite,” Bales, who teaches contemporary slavery, said. “How does that magically happen? It magically happens because there’s this constant smuggling of those minerals across the border from the Congo, where they do have it and there are mines with slave labor.”

The International Labour Organization (ILO) found almost 21 million people worldwide are victims of forced labor. Almost every victim is exploited by individuals or enterprises, with only two million forced into slave labor by a state or rebel group. Forced labor in the private economy generates $150 billion in illegal profits annually. Reports elsewhere have found the problem might be much worse.

“The use of forced labor is quite pervasive; lots of countries, lots of different types of products and so on,” Shawn MacDonald, president of the slave labor research nonprofit Verité, said. “Low labor standards are a problem because it is noncompetitive behavior, and if you look at forced labor and child labor, the worst ones are child labor, they are really the more egregious examples of it. So already poor labor standards do gives countries a noncompetitive advantage, an unfair advantage.”

President Donald Trump has pledged to protect domestic workers against unfair foreign competition. Verité provides lawmakers and world leaders resources so they can better understand and combat slave labor. A recent transition report to the president highlighted how slave labor undermines lawful domestic companies and workers.

“One of the principals that underlines the recommendations to the Trump administration is that forced labor undercuts American labor at home,” FitzPatrick said. “That means that ending slavery overseas isn’t just the right thing to do, it’s a smart thing to do because it can help, not entirely erase, but it can help with this price differential.”

The border adjustment tax in its current state would likely do little to address the problem. The current proposal raises rates on imports without considerations of whether any steps along the supply chain involved slave labor. The policy would have to include provisions that target countries that use exploited workers in that way.

“I just don’t see how the border adjustment tax deals with the problem,” MacDonald said. “I just don’t see the link to forced labor unless you really tailor it to say we are going to use the U.S. Department of Labor list or some criteria to say we will tax products that are known to be associated with forced labor.”

The DOL tracks imports made with slave labor. That list could be used to determine which countries should have the tax levied against them. Bales notes it would have to also include a substantial financial penalty for it to actually discourage countries that use slave labor.

“Could it be a blunt instrument to use on countries, well possibly, except that there doesn’t seem to be any of that type of stuff in this provision,” Bales, who also coauthors the Global Slavery Index, said. “We need to bankroll things like building walls, but we’re going to reduce corporate and personal tax revenue so we’re going to have to get it somewhere else, and they’re looking at tariffs.”

The border adjustment tax would also have to integrate itself into the legal framework that already exists. The Tariff Act of 1930 included a provision which prohibits the importation of goods produced by slaves and prison labor. There have since been many other laws, regulations, and court decisions banning slave imports.

“The other thing to keep in mind is that it’s already illegal to import into the United States items that are made by forced labor or child labor, and it has been that way for decades,” FitzPatrick said. “The problem has been lax enforcement, only a handful of incidences since the Tariff Act was introduced long ago, and there have been loopholes. Now one of the loopholes was closed last year.”

The Tariff Act did include what is known as the consumptive demand loophole. The loophole allowed for slave-made imports if there was not sufficient supply to meet domestic demand. The law, however, didn’t clearly define what the standard was. Former President Barack Obama closed the loophole when he signed a bipartisan bill last year.

“There is existing legislation and regulation around how federal contractors should behave in relation to forced labor and human trafficking,” MacDonald said. “I think there’s a lot more the government could be doing to deal with this problem if you think about it as a problem of forced labor generally, or you want to categorize it as a problem of unfair competition for American businesses.”

The federal laws already in place haven’t been perfect, but they have still been effective tools in combating the practice. A tax on slave made imports is unlikely to do much on its own, but it may be possible to design it to complement the laws already in place.

“It takes a whole of government approach to solving slavery and forced labor in manufacturing, and you can’t find a silver bullet for it,” FitzPatrick said. “Trying to end slave labor overseas by taxing it isn’t a holistic approach. More is needed. It may be one approach, but no single approach will end the problem.”

FitzPatrick adds lawmakers should look to prevent the problem, and not just combat it. Lawmakers, for instance, should try to reduce the supply of vulnerable workers by providing programs and pathways to seek out help. FitzPatrick notes laws and programs against slave labor should look at the problem in three ways.

“You have to look at modern slavery around the world from three directions,” FitzPatrick said. “One is by reducing the demand for products made by slaves, and the other is enforcement of the laws against slavery and access to justice and restitution for people who are victimized by this crime. The third way is to reduce the supply of vulnerable people.”

Any border adjustment tax tailored to prevent slave labor would have to consider the potential unintended consequences. MacDonald, for instance, notes the law would have to include mechanisms to ensure the exploited workers don’t get hurt even more.

“But if you just say we’re going to raise tariffs, I think in fact it could make the problem worse because then you’re putting more pressure on those producers overseas,” MacDonald said. “They’re suddenly making less money, and in general what happens is, when you squeeze the profits of businesses, they just try to get more labor and more work from the workers.”

MacDonald adds really any law meant to help people should consider the unintended consequences, and put mechanisms in place to prevent them.

 

Another consideration is who the policy is meant to target. The border adjustment tax in its current form is designed to protect domestic production by targeting foreign imports. A border tax aimed at combating slave labor wouldn’t necessarily want to levy the same penalties on foreign production that doesn’t use exploited workers.

“You don’t want to tax the good companies because there are a few bad actors in their industry or their sector,” FitzPatrick said. “Slavery is more of a scalpel approach to get at where the problem is worst, and what products and companies are the worst.”

MacDonald adds the president does have plenty of other options to prevent slave labor. The federal government could increase enforcement, and be more aggressive with investigating alleged incidences of slave labor. Federal investigations could potentially discourage slave made imports if they were aggressive enough.

“They could truly and genuinely resource the border protection people to really investigate, and begin to stop it,” MacDonald said. “It would be a tax in the sense that businesses that were tied to this would have an immediate impact on their bottom line in terms of their goods being seized and being held for an investigation.”

Supply chain transparency laws have been proposed as a promising way to address slave labor. The policy requires larger companies to track the supply chains they get products and components from. The companies are then required to deploy internal policies to ensure their suppliers and subcontractors are not using slave labor. The California Transparency in Supply Chains Act has been used as a model since being enacted in 2012.

“Any company that is registered in the state of California, as either a manufacturer or retailer, with the state taxation and revenue board, and does $100 million in gross receipts worldwide, not just in California, has to, on their website, disclose what they’re doing to investigate and rout out slavery in their supply chains,” FitzPatrick said. “That has become a model for a law that was introduced by Carolyn Maloney from New York into Congress.”

The California transparency law has also gained traction as a model internationally. The United Kingdom passed a version of the law that mirrored many of the same provisions in 2015. The European Union is currently considering whether to enact its own version of the policy, too.

“So we have slavery supply chain transparency law for all of the United Kingdom now,” Bales said. “And so all these corporations over a certain size have to explain what they’re doing in terms of digging into their own supply chains, how they’re policing it, and how they’re training their staff, and how they’re dealing with their subcontractors.”

Bales adds there has been a push domestically to make it a national law. He notes it’s still a slow process to fully implement since supply chains are so complex. Companies need time to setup necessary procedures to track their supply chains and comply with the law.

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Business leaders testified before a congressional hearing Thursday to share their views on how to reform the tax system to promote economic growth.

President Donald Trump has made tax reform one of his top priorities. The administration hopes a simplified and reduced tax rate will help spur economic growth. The administration released a summary of its plan April 26. The House Ways and Means Committee held the hearing to get suggestions from the private-sector.

“One of the biggest issues facing the country is how to unleash economic growth, which has underperformed for the last decade,” AT&T chief financial officer John Stephens said during the hearing. “If we’re serious about robust growth, then we must get serious about jump-starting private-sector investment. And the best way to do that is to fix our broken, last-century corporate tax code.”

House Speaker Paul Ryan and Rep. Kevin Brady introduced a blueprint last year which included many of the same reforms the administration is now pursuing. Both plans are intended to reduce the number of income brackets to three while reducing rates for upper and middle-income earners. They also lower the corporate tax rate.

“Our twentieth-century tax code fails to reflect the realities of today’s twenty-first century global and internet-focused economy,” Stephens said. “We no longer live in a world where the U.S. can set a corporate tax rate without considering what our international competition looks like.”

Advances in technology have quickly changed the economy is radical ways. It has opened up new opportunities like in the information technology sector while also threatening traditional jobs like in manufacturing. Technology has also allowed the world to connect more easily which has created a more open global economy.

“The U.S. federal tax code was last updated over 30 years ago,” S&P Global President Douglas Peterson testified. “We have a markedly different economy today. For example, who could have foreseen the ubiquitous nature of technology in the way we conduct business today? Intellectual property is more important than ever to our global economy. And the pace of technological change is only accelerating.”

The Organisation for Economic Co-operation and Development (OECD) is an intergovernmental organization founded to promote economic progress and world trade. The United States has increasingly become less competitive with other member countries since its last major tax overhaul in 1986.

“Currently, the U.S. has the highest statutory corporate tax rate among the 35 countries in the OECD,” Peterson said. “Importantly, other countries are attempting to lure our businesses, and their tax revenues, abroad.”

The Congressional Budget Office (CBO) found in an analysis that many other developed countries have been moving towards a more competitive tax system for over a decade. The study encompassed changes from 2003 to 2012. The United States, however, has done little to its tax code to stay competitive during that time.

“In reality, tax policy and trade policy go hand in hand, and I believe that tax policy has far greater effect on trade than any trade agreement ever could,” Zachary Mottl, the chief alignment officer for the Atlas Tool Works, said during the hearing. “Good tax policy, one that encourages domestic production and exports, is in effect good trade policy.”

Emerson Electric Company President David Farr notes the current tax system also adds costs in ways outside the higher rates. The tax system is incredibly complex which forces companies to spend time and additional resources in order to comply with the law. The simplified tax code could potentially save companies on those additional costs.

“While we’ve seen some positive changes, manufacturers and other businesses in the United States still struggle to compete against our international competitors under an outdated tax system that includes very high tax rates for both corporate and pass-through businesses, arcane rules for taxing international income, and a significant compliance burden,” Farr, who also serves as the chairman of the board of directors at the National Association of Manufacturers, said.

Farr suggests policymakers should lower tax rates for businesses, modernize international tax rules, encourage private-sector investments, and promote innovation by incentivizing research and development. He also notes the tax code should recognize companies are becoming more global.

“I want to highlight two things, the opportunity for trade competitiveness through tax reform and the unique pain felt by small manufacturers due to excessive complexity and unfair treatment under the current tax code,” Mottl, who also spoke on behalf of the Technology and Manufacturing Association, said. “Today, the most difficult barrier to growth American manufacturers face is our self-inflicted tax code.”

Mottl adds the tax code could also be used to shield domestic companies against unfair foreign competition. The border adjustment tax, for instance, could ensure companies don’t dump products in the country at a lower cost because they were developed by cheap foreign labor. Many other developed countries use some form of a border adjustment tax.

The border adjustment tax is a value added tax levied on imported goods. It is essentially applied when a product is produced in a foreign country but sold domestically. It has become a major point of contention among those on the right with critics warning it could hurt people domestically by increasing costs for goods and services.

It’s more than just the business community calling for lawmakers to overhaul the tax code. The idea generally has bipartisan support, though the approach is still up for debate. Over 30 economists from leading think tanks and academic institutions argued in a letter to lawmakers Wednesday that comprehensive tax reform is long overdue. The letter highlighted the border adjustment tax as being critical to those reforms.

The Business Roundtable found in a survey that business owners would begin investing more back into their companies and employees if the tax system was reformed successfully. The overwhelming majority of CEOs surveyed, at 76 percent, said they would increase hiring if reforms were done right. Most of the CEOs surveyed, however, fear delaying tax reform would hurt capital investments and hiring.

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A major union echoed claims Thursday that the Republican healthcare bill would allow states to do away with coverage for preexisting medical conditions. The claim, however, overlooks key aspects of that provision.

The American Health Care Act (AHCA) has faced fierce criticism over its potential impact on the health insurance market. Communications Workers of America (CWA) warned the law would allow states to do away with coverage for individuals with preexisting medical conditions. The claim glosses over what the law really does.

“[It] allows the states to do away with coverage for pre-existing medical conditions, affecting 130 million, or one in every four Americans,” CWA claimed on its website.

President Barack Obama completely overhauled the health insurance industry with the Affordable Care Act (ACA). One major provision in the law prohibited insurance companies from denying coverage based on a preexisting condition. The AHCA keeps that provision but allows states to request a waiver under limited circumstances.

Republican Rep. Tom MacArthur proposed the waivers after an earlier healthcare repeal bill failed March 24. States could request a waiver so that local insurance companies have the ability to setup high-risk pools for people with preexisting conditions. Critics fear the high-risk pools could lead to increased costs which might price individuals with preexisting conditions out of coverage.

The CWA and other critics have neglected to mention that a state waiver doesn’t mean everyone with a preexisting condition will automatically lose coverage. The Washington Post, among other outlets, found an individual with a preexisting condition would first need to have a lapse in health coverage for longer than 63 days.

“Nothing in this Act shall be construed as permitting health insurance issuers to limit access to health coverage for individuals with preexisting conditions,” the bill states.

States also have to meet at least one of several conditions in order to get a waiver. PolitiFact reported states that request a waiver must show how it would help reduce average premiums, increase enrollment, stabilize the market, stabilize premiums for individuals with preexisting conditions, or increase health insurance options.

“No state may obtain a waiver for health status unless it has taken these efforts to protect those who might be affected,” a fact sheet from MacArthur argued. “In states with a waiver, individuals who maintain continuous coverage could not be rated based on health status.”

The Center for American Progress (CAP), a progressive nonprofit, estimated the 130 million figure the union cites.  It released a report that found the bill could undo protections for many people with preexisting conditions. The report doesn’t mention states must meet certain conditions, or that individuals need to have a coverage gap.

PolitiFact does point to one potential issue that may leave some low-income individuals without coverage. Many people with limited means aren’t always able to stay covered without breaks. Those individuals could face penalties for having a preexisting condition if they don’t get coverage back in time.

The ACA provision protecting people with preexisting conditions became a major point of contention throughout the last administration. Supporters argue it was a necessary policy to protect all Americans regardless of health or financial status. Critics warned it would destabilize high-risk markets and increase prices.

Republicans were originally opposed to mandating that insurance companies had to cover people with preexisting conditions. They are now looking to uphold that provision with the hope the addition of state waivers will help mitigate issues in high-risk markets.

The CWA also claims the bill would cause 24 million people to lose coverage based on a review from the  Congressional Budget Office. The review, however, looked at the earlier version of the bill and not its current form. A review of the latest version has not yet been released.

MacArthur proposed his amendment to help the replacement bill actually pass. The earlier replacement bill included a provision which required participants to have continuous coverage or face a 30 percent increase in rates over one year. Republican leadership failed to keep the party united and the bill failed to get enough support.

The conservative House Freedom Caucus became one of the primary opponents. It was a major reason why congressional leaders failed to get enough support. The caucus later said that they do support the addition of the MacArthur amendment in the latest replacement bill.

PolitiFact also reports that states can request a waiver that would allow them to participate in a risk-sharing program with the federal government. Both waivers are intended to avoid issues that could potentially arise in high-risk markets.

The final version of the bill is also likely to look little like the one that is currently being considered. House Republicans were barely able to pass it May 4. The Senate looks even more hostile which has led many to speculate the bill will be radically changed. Lawmakers would then have to go to a conference committee to ensure both bills are identical.

The CWA did not respond to a request for comment by InsideSources.

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The business community has experienced a surge in optimism since President Donald Trump was elected, but those hopes have also been met with a high level of uncertainty.

Trump’s views on economic issues have come as welcome news for a business community who felt overburdened by federal policies, but the president has also sparked uncertainty from business owners awaiting to see how that agenda gets implemented.

“I’ve been impressed by the conflict between the uncertainty that business leaders feel and the optimism that they feel,” William Conerly, the president of the economic advising company Conerly Consulting, told InsideSources. “I’m kind of expecting the uncertainty side to win out, but there is a lot of optimism there.”

The National Federation of Independent Business (NFIB) found in a recent survey that optimism among small business owners has surged since Election Day. Business optimism during the last administration trended below average. The same survey showed uncertainty increased dramatically, as well.

“We think that’s tied to their expectations of policy changes and their uncertainty about whether those changes are going to take place,” NFIB’s Jack Mozloom told InsideSources. “They are optimistic, they like what they see so far from Washington, but promises aren’t worth the paper they’re written on, its time for some action.”

Former President Barack Obama implemented numerous labor regulations in an attempt to protect workers. Critics have contested the regulations actually hurt workers by depressing economic growth and employment opportunities. Trump has looked to decrease the regulatory burden in order to create a more robust economy with job opportunities.

“They like the direction the president is pointing to with his policy pronouncements. They like a lot of the actions he has taken, but they still want to see results,” Mozloom said. “Our members, small business owners, are keenly interested in what’s happening in Washington and they pay close attention, and that affects their outlook, that affects their optimism.”

Business owners are primarily focused on regulations, taxation, and healthcare. The president has been able to rollback some regulations, but healthcare and tax reform remain unresolved. The National Association of Manufacturers (NAM) estimated that total federal regulatory costs reached $2 trillion in 2012 alone.

Trump promising to decrease regulations is welcome news to businesses owners, but it’s not enough. Businesses owners also want to see results. The administration is likely going to be judged by business owners based primarily on the perception it’s working to meet those goals and the ability to actually deliver.

“But there needs to be progress on these things and it needs to be serious,” Mozloom said. “It needs to be quantifiable, and to the extent that they can show small business owners that they really are working on this stuff, and there’s going to be a positive result at the end, I think you’ll see small business optimism remain high, and that’s going to translate naturally into economic growth for the country.”

The National Labor Relations Board (NLRB) is one place the president could institute some major changes. The board works as an independent judicial body for overseeing unions and labor dispute cases. Critics have contested the board overstepped its authority by using case precedent to unilaterally change labor law.

“That has been a huge business community priority since election day,” Michael Layman, vice president for regulatory affairs at the International Franchise Association, told InsideSources. “We’re still anxious for NLRB nominations and confirmations in the days ahead, but overall, as mentioned, franchise business people are much more optimistic than they were a year ago, and a lot of that is due to the new administration.”

Trump named Philip Miscimarra to serve as the chairman of the board April 24. Miscimarra was already a member and serving as the acting chairman. The Senate still needs to approve two more nominations before the administration gains majority control.

Trump has also managed to fill appointments that are critical to his economic agenda. Alexander Acosta being confirmed as labor secretary is one of the more critical appointments for businesses since he will be overseeing national workforce regulations.

The business community also believes the administration will allow for more regulatory clarity. The onslaught of new regulations during the last administration left many business owners in a rapidly changing and complex legal framework. Trump has already started to rein in those regulations.

“I think the biggest reason for optimism among business people is, again, the restoration of more regulatory certainty,” Layman said. “Business people want to know what the rules are so that they can abide by them, and grow their businesses, and create jobs, and serve their communities.”

President Obama entered office during a severe economic downturn roughly a decade ago. The recovery was unusually sluggish and only started to see significant improvements in recent years. Mozloom adds that the sluggish economic growth during the last administration was partially due to the wave of new regulations.

“They can’t engage in business activities if they can’t anticipate the regulatory climate, or the tax climate, or the cost of healthcare,” Mozloom said. “Those are major things they have to consider before they can go out and borrow money to buy a pizza oven, or put in a patio, or extend their driveway.”

Trump is not the only reason his administration has faced uncertainty from the business community. He entered office at a time politics and economics have been changing rapidly both domestically and internationally.

“We live in uncertain times, that’s the reality of the administration, that’s the reality of the world, and I think he’s dealing with that as president,” Alfredo Ortiz, president and CEO of the Job Creators Network. “Everyone has had that experience of being on the job for the first time. There’s a learning pain, there’s growing pains, and I think that’s to be expected from anybody.”

Trump has been able to rollback some major regulations from the last administration. The president reduced offshore drilling restrictions and ordered federal agencies to withdraw two regulations for every new one implemented. He also signed a bill ending a rule that blacklists companies with labor violations from getting federal contracts.

Trump is also looking to overhaul the tax code so that it promotes economic growth. The administration unveiled its tax reform plan last month during a press conference. The president hopes to simplify the tax code while also lowering rates in order to reduce the tax burdens businesses currently face. The plan reflected many of the same ideas that were detailed in a tax blueprint released by congressional leaders last year.

The Job Creators Network released a recent survey which found 60 percent of small business owners believe the president has a good agenda that will be beneficial to their employees and customers. Tax reform was one of the more important issues for business owners surveyed.

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President Donald Trump was denounced as a hypocrite by a major union Friday for supposedly subsidizing companies that continue to outsource jobs.

Trump promised throughout his campaign that he would protect domestic workers. He has primarily focused on immigration and outsourcing. The American Federation of State, County and Municipal Employees (AFSCME) is now claiming the president continues to provide billions in subsidies to companies that outsource jobs.

“One of Trump’s most recurrent campaign promises was to protect American jobs from being shipped overseas,” AFSCME expressed on its website. “But something’s changed. After 100 days in office, Trump continues to reward U.S. companies that offshore jobs.”

AFSCME points to a recent report which claims the president has failed to take even the most basic steps to prevent outsourcing. The report notes the administration continues to reward federal contracts and subsidies to companies that outsource domestic jobs.

“Despite the president having expansive executive authority to set procurement policy and past presidents using that authority to deliver on their policy commitments and goals, the Trump administration has failed to exclude offshoring firms from qualifying for billions of dollars in federal contracts,” the report stated. “Trump’s inaction is especially notable given that the U.S. government has a long tradition of using its contract spending to promote national policy goals.”

AFSCME also points to a deal the president made with the Carrier Corporation during the campaign. The Carrier Deal appeared to be a big win even before he took office. Indiana would provide $7 million in subsidies to keep the company from closing a plant in the state. USA Today later reported that only a fraction of those jobs were saved.

The report was released by the Good Jobs Nation and Public Citizen’s Global Trade Watch. Public Citizen is progressive consumer rights advocacy group founded in 1971. The Good Jobs Nation is a union-backed worker advocacy group.

Labor unions have been generally opposed to the president since he announced his campaign. They were among those groups that accused the president of inciting hate during the election. AFL-CIO President Richard Trumka even called him the most racist presidential candidate ever.

The president, of course, has taken steps to prevent outsourcing since he took office. His approach has aligned more with traditional right-leaning views. He has begun the process of reducing regulations to create a more business-friendly environment.

Trump has paid particular attention to immigration as a means of protecting domestic workers. He has argued immigration laws need to be better enforced and reformed to protect domestic workers from unfair competition. The labor movement generally supports a more open immigration system.

The president has also looked at international trade as a means preventing companies from outsourcing. His opposition to current trade deals set him apart from many in his own party. The labor movement even praised him when he killed the Trans-Pacific Partnership upon entering office.

Trump has also targeted tax reform as an avenue to keep businesses from outsourcing. The idea is to have a simple tax code with reduced rates to decrease the burden businesses face. Unions and other critics have warned the business-friendly approach could leave the environment and workers without necessary protections.

The White House did not respond to a request for comment by InsideSources.

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“Carried interest is on the table,” said White House Chief of Staff Reince Priebus on ABC’s This Week last Sunday. “The president wants to get rid of carried interest so that balloon is not going to stay inflated very long, I can assure you of that.”

While the so-called “carried interest loophole” is a frequent punching bag of populist politicians, it is generally misunderstood. Experts explain that the tax code treats carried interest as it does for specific reasons, and while President Donald Trump has claimed it primarily is a boon for hedge fund managers, it’s more often a policy that affects venture capital and private equity investments.

Investment managers often receive carried interest payments instead of income. Critics have argued it’s being used unfairly as a tax loophole since these payments are not taxed as income. But the carried interest discussion is often plagued with misconceptions. The policy simply allows investment managers to receive a percentage of gains made through investments rather than a salary. The tax treatment can result in a lower tax rate, but it’s primarily designed to incentivize managers to create more returns.

“The current rhetoric misstates what the treatment actually is in several respects,” American Enterprise Institute scholar Alan Viard told InsideSources. “If the treatment was what the rhetoric suggested, I think it would be bad. But the rhetoric just isn’t a correct description of what the current tax law is doing.”

Trump spoke out against the carried interest loophole during the campaign, as well. He promised to eliminate the policy in his economic growth plan. The president and his administration are likely referring only to ending the lower tax rate, though some of the administration’s rhetoric on the issue has been very imprecise. The administration has not yet detailed exactly what it hopes to do. Other Republicans have fought past attempts to eliminate the carried interest loophole.

“When I hear someone like the president say we’re going to get rid of carried interest, I don’t interpret that as we’re going to eliminate the carried interest fee structure for compensating fund managers,” Scott Greenberg, an analyst at the Tax Foundation, told InsideSources. “I hear that as a shorthand for we are going to eliminate the ability to claim the lower capital gains rate on their carried interest income.”

The administration still faces potential risks with implementation. The president could just try to address the tax portion, but even that comes with plenty of obstacles. A proposal that only targets investment managers could create further complications by inadvertently adding a new tax rate.

“Presumably they’ll want to reclassify this as business income,” Viard, who has written extensively on carried interest, said. “The problem with the Trump plan is that we now have three tax rates floating around, not two. There’s the ordinary tax rate on wages, there’s the 15 percent rate on business income, and there’s the 20 percent rate on capital gains.”

Investment returns like capital gains or dividends are taxed at a lower rate than income. Investment managers that are compensated through carried interest often pay the lower tax rate since they are receiving a percentage of the capital gains or dividends.

“There’s this other issue that, what fund managers are doing looks an awful lot like work, and therefore their compensation looks like it ought to be treated as wages and salaries,” Tax Policy Center fellow Donald Marron told InsideSources. “I find that compelling. I don’t technically view that as a loophole issue, more a description of what we think their work is.”

If the tax code were changed, investment managers would likely then have their carried interest payments taxed like income. Viard contests the criticism reflects a misconception of what carried interest actually is.

“People assume that the carried interest arrangement has been adopted solely for the purposes of tax minimization, and that’s not true,” Viard said. “It’s obvious that this arrangement is giving managers a stake in how the fund is doing for incentive capability reasons. What better way to motivate the managers to get the highest investment returns.”

Investment managers aren’t the only ones that benefit from the lower rates. Investors and others that make money through those investment gains only have to pay the reduced tax rate. Viard argues that proposed reforms should need an explanation of the reasoning if it only targets investment managers.

“I think the case for reclassifying this income seems uncertain to me,” Viard said. “Business partnerships, in general, are free to allocate their income among the partners as they wish, and it’s not clear why there should be an exception made in the case of carried interest.”

Viard adds there are other misconceptions that are driving the discussion. He notes it’s not true that carried interest payments are unique to investments since various business partnerships have formed similar arrangements. The lower rates don’t always apply either since some come from unqualified dividends or short-term capital gains.

“All the carried interest arrangement does is reallocate part of that income, 20 percent of it typically, from the investors to the managers,” Viard said. “There is a tax benefit there, but it’s not exactly a question of reclassifying income in the aggregate as being dividends and capital gains. It’s a question of how it’s allocated.”

Despite Trump’s rhetoric on the campaign trail, investment managers don’t always receive carried interest payments either. Trump described hedge fund managers as “getting away with murder” and stated: “They make a fortune, they pay no tax. It’s ridiculous, OK?” But reality often runs counter to these claims. The arrangement only really yields results for long-term capital gains and qualified dividends. It’s commonly used for private equity and venture capital investments, but not so much for hedge funds.

Viard believes if people understood carried interest better there wouldn’t be such an uproar. Some may still work to reform the system, but with a better understanding of what carried interest is meant to do. Greenberg notes that reforms may not even be worth it since it would require a lot of work with little in the way of potential benefits.

“When we’re talking about carried interest, we’re talking about a very small share of federal income,” Greenberg said. “It’s an interesting debate to have on the merits, and it’s an interesting policy topic to talk about, but it’s ultimately not as consequential as people make it out to be.”

The Congressional Budget Office estimated in 2013 that taxing carried interest as ordinary income would raise federal revenue by $17.4 billion over a decade. The potential savings pale in comparison to what the government is expected to collect in revenue over those ten years.

Democratic lawmakers have proposed several bills in recent years that are designed to reform carried interest payments. Viard notes the bills are often intricate but lack key details in how reforms should be implemented. Trump and his administration have not drafted a bill for their own plan yet.

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