Last Friday, President Obama, House Republicans, and free-trade advocates suffered a defeat at the hands of Minority Leader Nancy Pelosi. On tactical grounds, Pelosi deserves admiration for achieving a well-executed win for protectionists, unions, and House Democrats. While all the inside-the-beltway policy buzz focused on whether the president would be given Trade Promotion Authority (TPA) so that he can complete negotiations of two major trade deals, Leader Pelosi cleverly pulled the rug out from under the deal by defeating a politically integral measure: renewal of Trade Adjustment Assistance (TAA).
The House rule governing consideration of the trade package provided that votes on both TAA and TPA had to pass in order for either of them to head towards the President’s desk. After Pelosi ensured that TAA failed last Friday, the vote approving TPA became meaningless.
House Republicans and a well-organized team of free-trade advocates worked diligently for weeks explaining the intricacies of the TPA bill and describing how it would pave the way for two major pending trade deals that would boost exports, wages and economic growth. But the GOP largely ignored the TAA bill, which would have renewed benefits and services to workers who lose their job as a result of global trade and offered a tax credit to help pay for health insurance for those workers.
Republicans took the TAA bill for granted, viewing it as the deal sweetener that would allow teetering Democrats to show compassion for workers while embracing the benefits of trade. Pelosi led Republicans to take this view in a handful of clever moves. First, when the House Ways and Means Committee considered the TAA legislation in April, Democrats allowed the bill to pass on a simple voice vote, avoiding any signs of political polarization.
Second, Pelosi cooperated with Republicans in crafting the bill and even negotiated a major change in it a few days before the vote. That change altered the means by which the cost of TAA was offset for budgetary purposes, replacing small cuts in Medicare payments in 2024 with increased IRS penalties on taxpayers who fail to provide 1099 forms.
Finally, Pelosi was patient. She waited until after Republicans scheduled the vote to occur. She waited patiently while hosting President Obama in a rare visit to Capitol Hill to persuade Democrat lawmakers to support him. And she waited until all debate on the bill was nearly complete. Then she dropped a bombshell, announcing that she would vote against TAA, defy the President, and lead the charge to bring down the entire package.
She succeeded.
Republicans should draw two lessons from last Friday’s experience—one concerning trust, and the other substantive policy issues.
First, Republicans should not have trusted House Democrats as legislative partners. Despite recent bipartisan cooperation on a debt-laden Medicare reform, House Democrats remain focused only on recapturing the majority, even if it means defying the President. Republicans, who have focused of late more on fulfilling their job as legislators and have turned away from their 2010-era obstructionism, must learn to only rely on themselves in pursuit of an economic growth agenda.
Second, Republicans should not have “outsourced” the TAA bill to the Democrats. Traditionally, Republicans have viewed TAA as costly and ineffective. Most GOP lawmakers simply consider it the price of buying Democratic votes for trade and have shown little interest in improving the program.
Instead, GOP lawmakers should acknowledge the painful displacement that trade liberalization imposes on some workers and design truly effective policies to mitigate those costs. The primary intent of TAA is to help workers get necessary new skills and receive helpful assistance finding new employment opportunities. Compared to extended unemployment benefits that reached to upwards of 99 weeks after the last recession and in some instances caused more harm than good for unemployed workers, TAA has the potential to effectively help displaced workers get new jobs.
To be clear, TAA is not effective in its current form. Research sponsored by the Department of Labor concluded that, “[T]he net benefits of the TAA program as it operated under the 2002 amendments were negative, whether calculated from the perspective of society as a whole, participants, or other members of society. However, if TAA made even a relatively modest contribution to the ease of enacting free-trade policies, the program’s benefits would outweigh its costs.” In other words, taken by itself, the program is worse than ineffective.
Instead of trying to cut a deal to allow Democrats to extend this malfunctioning program, Republicans should recognize its true necessity as a policy matter, make it work for the benefit of those workers truly harmed, and deliver the votes to pass it themselves.
Today, Republicans should admire Leader Pelosi’s political prowess. Tomorrow, they should wean themselves from relying on Democratic support for free trade and design a TAA program that they can support themselves: One that really helps displaced workers.
Alex Brill is a research fellow at the American Enterprise Institute. Previously, he served as the chief economist and policy director to the House Ways and Means Committee.
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