WASHINGTON -- Issues affecting the supermarket industry are caught up in the fray on Capitol Hill, as Congress reconvenes this week with an agenda largely driven by the events of Sept. 11 and politicking in advance of the November elections.
Two bills on deck are of immediate concern to retailers. One measure would take steps to protect imported food from being used as terrorist weapons, but as written could impede commerce, retailers say. The other bill would require supermarkets to label all produce and meat as to its country of origin, legislation retailers earlier had succeeded in quashing, but which has been resurrected by supporters as a means to keep tabs on the food supply in light of terrorism.
In the wings is the contentious debate left over from December as to what should be contained in an economic stimulus package and, moreover, whether a menu of tax cuts and unemployment benefits are still needed to bolster the economy, which is showing signs of rebounding.
Retailers are hoping to see lawmakers enact a plan that, among other things, would allow businesses to claim a 30% depreciation on capital investments for 36 months. The issue of tax cuts, however, appears mired in election-year posturing between the parties, further clouding prospects of legislation emerging.
Most other issues dear to the food industry will also be debated against this backdrop of divisive election-year politics, pitting Republicans with a slim majority in the House against Democrats in the Senate with an even narrower, one-vote margin of control over the chamber. The only thing tempering matters could be the remnants of cooperation between the parties seen just after last year's terrorism attacks.
David French, vice president of government relations with Food Distributors International, Falls Church, Va., told SN, "Since Sept. 11 it's been hard to project how Congress is going to react to things."
Provision Threatens Estate Tax Status
While trying to ensure government doesn't slap burdensome rules on the distribution and marketing of food, industry officials also are poised to protect a long-fought victory: last year's repeal of the estate tax. While the tax is scheduled to be phased out by 2010, a "sunset" provision in the bill means lawmakers will still have to renew repeal within eight years.
That's worrisome for retailers because the political environment to uphold repeal could change, particularly if power in Congress were to shift more into Democratic hands, or when pro-repeal President Bush leaves office.
Tim Hammonds, president and chief executive officer of the Food Marketing Institute here, describes the in-limbo status of the estate tax legislation as such: "It has been repealed, but that has to be made permanent. At some point over the next three years, during President Bush's first term, we need to get that done."
For the time being, the issue of estate tax repeal, as well as any talk of tax breaks, remains a hot-button issue. Democrats are concerned about having enough money to fund anti-terrorism efforts and social programs in light of the vanished federal budget surpluses and rising federal debt of late. Republicans continue to press for more tax cuts as a means to boost spending and manufacturing and thus the economy.
Tom Wenning, vice president and general counsel, National Grocers Association, Arlington, Va., said, "Certainly the climate is going to be more difficult than it was in the past," discussing the chance for a vote this year to make the estate tax repeal permanent. "Still, there is a legitimate need for family-owned businesses to be able to grow and prosper without being saddled with the tax," Wenning added.
However, two widely popular tax measures that expired last year, the Work Opportunity and Welfare-to-Work tax credits, are expected to be renewed. Retailers use the generous credits to hire disadvantaged workers or long-term welfare recipients.
But extending these tax credits may carry a small price: an increase in the minimum wage. For three years House and Senate Democrats have been threatening to force an increase of $1 to $1.50 to the $5.15 wage floor. President Bush recently renewed his opposition to an increase, citing the slowing economy. Nevertheless, in election years increasing the minimum wage among Republicans in Congress has garnered support.
If a minimum wage bill starts to move, French said food wholesalers hope to see one of their pet causes attached: having inside sales employees made exempt from the 40-hour workweek limit of the Fair Labor Standards Act. This could be one of several probusiness proposals attached to a wage hike bill designed to help offset the cost of increased employee costs.
Having the 40-hour workweek exemption would allow inside salespeople the chance to make more money on commissions while increasing sales, according to supporters. The bill, which would guarantee a minimum base pay for employees, has already been approved by the House Subcommittee on Workforce Protections.
Labeling Origin of Country
Probably the most dire issue facing retailers is the specter of having to label produce and meat as to its country of origin. Labeling would be required for produce under a farm bill already passed by the House. The Senate, set to vote on its version of the farm bill, has added beef, lamb, pork and farm-raised fish to the list of products for labeling. The labeling issue is meeting with White House opposition.
The push for labeling is largely being fueled by farm-state lawmakers from both parties with livestock ranchers as constituents. Opponents say mandatory labeling would be unworkable and costly for retailers, particularly for meat since it's typically delivered in boxes containing cuts from various states and countries. Supporters say labeling is a needed food-safety measure.
"It is a protectionist measure. This has nothing to do with food safety," said Hammonds, who hopes to see the labeling provisions extracted from both bills as differences between the House and Senate versions are reconciled. "We are happy that it's been pushed back into this year so we can get some distance from the Sept. 11 attacks and have a chance for it to be considered on its own merits and not lumped into a big anti-terrorism scheme."
One piece of legislation favoring the global trade of fresh and processed food that appears poised to clear Congress is Trade Promotion Authority, which would grant the president more leverage in negotiating trade pacts like the pending Free Trade Area of the Americas. The House in December approved TPA by a one-vote margin, underscoring controversy when it comes to the negative impact lowering trade barriers can have on U.S. jobs, particularly in low-wage industries like apparel making.
Senate Majority Leader Tom Daschle, D-S.D., a TPA supporter, said he'll bring the legislation to a vote early in the year. Under TPA, trade pacts can't be amended by Congress, only voted up or down. The administration says the authority gives foreign countries confidence that negotiations won't be undercut by changes brought on Capitol Hill.
Mary Sophos, senior vice president of government affairs at the Grocery Manufacturers of America here, said having TPA will speed trade talks along, resulting in lower tariffs and trade barriers. In turn, that will translate into a boon for U.S. food exports destined for foreign retail shelves and manufacturers. "When we export we still face some of the highest tariffs in the world," she said.
Another legislative priority for GMA is passage of a national, uniform labeling measure that would keep states from issuing separate ingredient or health warnings on food. The issue has garnered widespread support from both parties, but has yet to move forward. "Obviously, it's an election year and there will be a lot of other things on the front burner," said Sophos, who's working to couch the measure as a common-sense, nonpolitical issue lawmakers should rally behind.
To the delight of food industry officials, one bill election-year politicking may kill altogether is health reform. Opponents to reform bills now in the Congress say they would increase employer costs, something to avoid in a soft economy and an election year.
Early in the two-year congressional session that began in 2001, health reform became a must-do issue with competing bills passing the House and Senate. Both measures carry increased liability provisions, which employers -- including supermarkets -- detest. The Senate version, in particular, would essentially open the door for workers to sue employers over mismanaged health care plans, opponents say. Now, employers are exempt from such lawsuits.
Differences between the two health care bills now are ready to be reconciled, but lawmakers haven't been eager to negotiate a final package.