WASHINGTON - The grocery and food retailing industry's legislative wish list in 2006 contains several critical leftovers from last year's agenda, but getting any congressional action in an election year could prove to be a difficult challenge.
President Bush's domestic agenda ran into several roadblocks in 2005, forcing him to shelve key initiatives such as an overhaul of the federal tax code and Social Security.
Escalating defense spending associated with the increasingly unpopular war in Iraq, a ballooning federal deficit and the devastating impact of hurricanes on the Gulf Coast region last fall dealt a major setback to the president's agenda.
Food-industry lobbyists had a full plate of legislative goals last year and the following will carry over into the new year: eliminating the estate tax; pressing to make country-of-origin labeling voluntary for beef, lamb, pork, produce, peanuts and shellfish; reforming employer pension rules; and fighting for a compromise on allowing cold medicines - often used to illegally make methamphetamine - to be sold by retailers without pharmacies, behind any counter or in a locked display case.
However, the midterm elections in November could change the political landscape as Republicans battle to maintain majorities in the Senate and House. As lawmakers gear up their campaigns, there won't be much time for legislative action due to a shorter calendar, and chances for passage of major legislation could fade as the entire House and one third of the Senate begin gearing up for midterm elections and typically try to steer clear of controversy.
"In any election year, you generally reduce legislative output, at least on controversial subjects," said Larry Sabato, executive director of the Center for Politics at the University of Virginia, Charlottesville. "Secondly, we are approaching - if we are not already in - Bush's lame-duck period, and that means presidential leadership doesn't mean that much. The president can still get things done, but it takes more effort and there are fewer achievements."
The political wrangling over the food industry's goal of replacing a mandatory country-of-origin food-labeling law with a voluntary program could heat up again this year in Congress.
A Republican-controlled Congress passed the mandatory law in 2002 and it was signed by Bush as a food-safety program. Food retailers, however, complain the fines are onerous and the paperwork burdensome.
Because of the controversy, lawmakers voted to delay mandatory labeling for beef, pork and produce until 2008. Labeling of fish and shellfish began in April. Rep. Robert Goodlatte, R-Va., reintroduced legislation that would create a voluntary labeling program for all of the commodities, but Congress did not consider it during the year.
"It [COOL] will pick up steam next year and it will play out over 12 months, starting early next year," said Tim Hammonds, president and chief executive officer, Food Marketing Institute, Washington. "Obviously, we would like to find the opportunity to move a voluntary program now with a Congress we know with a greater degree of certainty, because the midterm elections could bring a new cast of characters."
The debate over COOL is expected to take shape around the Farm Bill, which expires in mid-2007. Congress will begin writing the Farm Bill this year.
The push for a voluntary program could become much more difficult if Congress waits until late 2007 to take it up because two proponents of a voluntary COOL program - Sens. Rick Santorum, R-Pa., and Jim Talent, R-Mo., face competitive races in November.
"We would have a more difficult time if it waits until 2008 and if one or both of them should happen to lose their seat," Hammonds said.
Proponents of mandatory COOL run across party lines in both the House and the Senate, and generally represent ranchers in Midwest states who are pushing for a distinction between their meat and competing foreign meat, particularly from Canada.
Curbs on Cold Medicines
Another issue being tracked by food retailers for action in Congress is a measure designed to deter labs from obtaining pseudoephedrine - a key ingredient in common over-the-counter cold medicines - which is used to illegally produce methamphetamine. (See "Regulatory Storm," Page 21.)
The Senate passed a bill to put cold medicines behind pharmacy counters, which would severely restrict consumer access to them and essentially prohibit grocery stores and convenience stores without pharmacies from carrying the medicine. The House passed a different version that would allow the medicines behind any counter or in a locked display case but would impose some limits on retailers without pharmacies - allowing such stores to sell 3.6 grams of the product on a daily basis.
The provision was attached to the Patriot Act, which became a lightning rod as Congress raced to adjourn last year, and the House version allowing all retailers to carry the medicine with certain restrictions prevailed in the conference report. However, Congress failed to approve the Patriot Act at the end of the year, extending the previous act for a month without including the methamphetamine provision.
When Congress reconvenes at the end of January it will have to reconsider the Patriot Act, and it is unclear whether GOP leaders will include the methamphetamine provision in the act or try to find another vehicle to move it.
"We are well set up to address this early this year but it is unclear what shape it will take," Hammonds said. "I think we are well-positioned to continue to make the argument that we need to strike a fair balance between the need of law enforcement to have some reasonable limits on sales and the need of consumers to have access to them, including in stores that do not have pharmacies that could place it behind another counter or locked case."
Erik Lieberman, director of government affairs at the National Grocers Association, Arlington, Va., said he expects the methamphetamine provision to be scrutinized more closely this year.
"There is no guarantee the [meth legislation] will be attached to the Patriot Act," he said. "If they don't get it on the Patriot Act, I think they will manage to get it on something else or pass it as a stand-alone, too."
The supermarket industry has made permanent repeal of the estate tax a top priority for several years, and Congress came close to satisfying the industry's goal in the fall until two devastating hurricanes - Katrina and Rita - turned the legislative agenda upside down.
"For the last three years our priority has been repeal of the death tax for family-owned businesses," said Tom Wenning, vice president and general counsel, NGA. "The family-owned businesses feel they are strongly disadvantaged on tax policy."
The estate tax is currently being phased out over a 10-year period as part of a budget reconciliation package that passed in 2001. The phase-out of the estate tax expires in 2010, and the tax will presumably be reinstated in 2011. The way it stands now, the estate tax will be fully repealed for one year and reinstated unless Congress takes some action to permanently repeal the tax.
The House has passed legislation permanently repealing the estate tax a few times during Bush's first term - largely due to the GOP majority it maintains in that chamber - but it has never passed in the Senate because of chamber rules requiring 60 votes to avoid a filibuster. Currently, 55 Republicans hold seats in the Senate, but a few don't support a permanent repeal of the tax and there are not enough Democrats who support it to make up the difference to reach the 60 votes.
The Senate was poised to vote on the legislation, which had already passed the House, last fall but the congressional agenda was sidetracked, primarily by Katrina and the subsequent federal funding required to begin the slow process of rebuilding the devastated region.
Wenning said he expects this legislative issue to come back to the table this year despite it being an election year.
Hammonds of FMI said repeal of the tax has been the No. 1 priority of the association.
He said he hopes Congress keeps the issue of permanent repeal of the estate tax separate from another Bush priority of overhauling the federal tax code.
"One of the things we have pressed for since the president's tax reform commission made recommendations on big tax reform and significant changes to the tax code is, we would like to get some of the issues that have already passed and need to be made permanent out of the way before we go into that kind of debate," Hammonds said. "We will press hard to get as much done early this year as possible, but you lose some control over that because you don't know what the parties will decide should be part of the election set of issues."
Another top legislative priority in 2006 is multi-employer pension reform. The House and Senate passed separate bills aimed at reforms in the management of multi-employer pension plans that would call for more transparency in how they're managed to determine if they're under- or overfunded. The supermarket industry is supportive of reform "to ensure the plans remain solvent for workers and retirees who depend on them," according to Hammonds.
"The legislation [in both the House and Senate versions] gives employers transparency in looking at the financial statement of trusts and it makes it easier for them to identify plans in need of contributions to prevent them from going into insolvency," Hammonds said.
He added FMI feels the current legislation is a "big step in the right direction to preserve the financial health of pensions for workers."
Wenning of NGA said the association is reviewing the legislation to determine the impact it might have on the industry.
"Review of this legislation shows that it requires those companies remaining in plans to increase their funding for defined benefit contributions or multi-employer plans so they are more fully funded," Wenning said. "Our concern is this could have adverse budgetary problems for some of our members if they are in plans that are poorly funded, particularly in the multi-employer arena."
Wenning said the conference committee that Congress will convene this year to reconcile the House and Senate bills could be long and may not be resolved until May or June.
A new issue on the radar for grocery manufacturers is a bill that would create uniform national food-safety and labeling standards.
The House Energy and Commerce Committee approved the bill in mid-December and it now awaits a vote on the House floor.
The bill has bipartisan support in the House and backing by food and grocery industry associations. It would amend the Federal Food, Drug and Cosmetic Act and give the Food and Drug Administration authority to establish national safety and warning standards on food items, for example, that contain carcinogenic ingredients.
"Our legislative goal is to secure passage of the [bill]," said a spokeswoman for the Grocery Manufacturers Association. "The bill has more than 220 co-sponsors in the House and there is definitely strong support for it there, but it has not yet been introduced in the Senate."
Food retailers and grocery manufacturers will be pressing Congress to consider other issues this year including:
Extension of capital gains and dividend tax reductions for an additional two years. The Senate and House have passed bills reauthorizing those reductions for two years and those two bills have to go to a conference committee to be hammered out.
Capping debit card interchange fees paid banks on transactions, which have been escalating. The NGA, along with retailer, wholesaler and state association members of NGA filed an antitrust, class-action lawsuit in the U.S. District Court for the Eastern District of New York in mid-November, alleging that Visa U.S.A., MasterCard and several major banks are engaging in "illegal collusive practices by setting credit card interchange fees at supra-competitive levels in violation of federal antitrust laws," according to an NGA statement.
Monitoring and trying to expand on recently passed legislation that creates an Organized Retail Theft Task Force in the FBI to better protect retailers against multibillion dollar losses. The House and Senate passed the bill at the end of the year and it awaits signature by the president. The task force will help the industry establish a national database or clearinghouse that would be housed and maintained in the private sector to track and identify where the crimes are being committed. The FMI plans to press Congress early this year to focus on the need to add limitation to what flea markets can do in selling sensitive high-theft items, such as pharmaceuticals and baby formula, according to Hammonds.