Friday, January 27, 2017

Get Ready for $12 billion to $15 billion in Wall Taxes

Trump’s planned border wall with Mexico faces reality check

The Japan Times  AP, Reuters, AFP-JIJI  Jan 27, 2017

The border between the U.S. and Mexico runs into the sea between Tijuana and Imperial Beach, south of San Diego, in this photo taken by a drone on Thursday. | AFP-JIJI 

WASHINGTON – President Donald Trump’s vow to accelerate construction of a “contiguous, physical wall” along the Mexican border is slamming into a Washington reality — who is going to pay for it and how?

Not us, say the Mexicans.

Instead, U.S. taxpayers will foot the bill, starting with money already in the Department of Homeland Security account that amounts to a small down payment. Then it will be up to the Republican-led Congress to come up with $12 billion to $15 billion more, according to an estimate offered by Senate Majority Leader Mitch McConnell on Thursday from a GOP issues retreat in Philadelphia.

GOP leaders refused to commit to paying for the wall with spending cuts elsewhere in the budget. That could mean costs will be paid for by adding to the government’s $20 trillion debt. Press secretary Sean Spicer Thursday floated the idea of a 20 percent tariff on products imported from south of the border with Mexico.

Mexican President Enrique Pena Nieto later announced that he is scrapping a planned trip to meet with Trump.

Trump told Republicans in Philadelphia that the cancellation was by mutual agreement. “Unless Mexico is going to treat the United States fairly, with respect, such a meeting would be fruitless, and I want to go a different route. I have no choice,” he said.

Spicer said the “lines of communications” will remain open and Washington hopes to “schedule something in the future.”

The swift fallout signals a remarkable souring of relations between Washington and one of its most important international partners just days into the new administration. The U.S. and Mexico conduct some $1.6 billion a day in cross-border trade, and cooperate on everything from migration to anti-drug enforcement to major environmental issues.

There was great ambiguity about the tariff proposal. White House officials later clarified that the tax is but one possible way Trump could finance the wall project.

The White House said Congress’ tax overhaul will place a 20 percent tax on imports from any country selling more goods and services to the U.S. than buying from it. The idea appears to overlap with a plan that House Republicans are pushing called “border adjustment,” in which the U.S. would not tax American companies’ exports but would tax their imports. Trump has said he doesn’t like that idea.

The money would not necessarily be coming from Mexican taxpayers or the Mexican government.

While the tax would land first on companies exporting from Mexico, the costs would likely be passed on to consumers. That leaves Americans footing much of the likely bill.

Trump has said he is OK with being “reimbursed” at a later point because he is keen to start building the wall immediately.

The U.S. has a range of obligations under the North American Free Trade Agreement and at the World Trade Organization. Mexico is likely to challenge any new tax that penalizes its economy, and the border likely would be struck down by the WTO if it targets Mexico.

Other countries may also object if their products and services are targeted.

On Wednesday, Trump promised “immediate construction” will begin on the border wall, telling ABC News that planning is starting immediately. He again vowed that Mexico would pay the U.S. back, though he offered no details.

It is true there is a small amount available now in the Department of Homeland Security accounts dedicated to “border security fencing, infrastructure, and technology” — $100 million, by one congressional estimate — that would permit work to get immediately under way.

So far, thanks to spending in the late 2000s, Congress has provided about $2.3 billion to construct 654 miles (1,052 km) of fencing and vehicular blockades. But Trump has promised a wall, not just fencing, and it is not a universally popular idea by any stretch.

“The facts have not changed. Building a wall is the most expensive and least effective way to secure the border,” said GOP Rep. Will Hurd, whose sprawling West Texas swing district encompasses more than 800 miles (1,290 km) of the border. “Many areas in my district are perfect examples of where a wall is unnecessary and would negatively impact the environment, private property rights and economy.”

GOP members of the appropriations committees are more likely to take a green eyeshade approach to the money since they are familiar with the likely trade-offs.

“There’s any number of complications,” said Rep. Harold Rogers, former House Appropriations Committee Chairman, citing obstacles such as Indian reservations and national parks and forests. And much of the remaining 1,300 miles (2,100 km) is very rough terrain, with steep construction costs and a limited return for the dollar. “It’s expensive and it’s complicated.”

Hundreds of miles of the border are so rugged and inhospitable that it doesn’t make sense to even try to build.

And in Texas, almost all of the land along the border is privately owned. When former President George W. Bush tried to build border fencing starting in 2006, he faced stiff opposition from local ranchers and farmers, many of whom took the government to court on plans to use their land.

In many areas along the Rio Grande the fencing is built well inside the United States, as far as a mile (1.6 km) north of the Rio Grande, to ensure that the structure doesn’t interfere with the flow of the river or is built on solid ground. The middle of the channel marks the international border and a 1970 treaty with Mexico requires that structures built there not interfere with water flow.

“We have built a fence along the border almost as much as we possibly can without violating tribal laws, environmental requirements, and taking over people’s personal, private property,” said Michelle Mrdeza, who worked for the House Appropriations panel during the fence debate of the mid-2000s.

The existing blockade — roughly 350 miles (480 km) to block pedestrians and 300 miles (560 km) to block vehicles — has already been built along the southern border. That fencing was built in the areas that are most vulnerable to illegal crossings.

“Insofar as the problem is a physical barrier, we’ve basically addressed that issue,” said Rep. David Price, who chaired the congressional panel that funded the border fence when Democrats controlled Congress. “This focus, this fixation on a wall and pouring untold billions of dollars into a wall, is foolishness.”

Cost estimates prepared a decade ago already varied widely. A 2009 Government Accountability Office analysis put costs at $6.5 million a mile for pedestrian fencing and $1.8 million per mile for vehicular blockades. An actual wall constructed of concrete and steel would be more costly and difficult.

Trump has repeatedly promised that Mexico will pay for his wall, though neither he nor his allies in Congress are able to articulate how. Pena Nieto is emphatic that his country will not pick up the tab.

Already, U.S. agencies have been told to scrub their budgets for savings that could be used for the wall.
“These taxpayer dollars would be better spent on investing . . . to find cures for cancer and other diseases, spending on hospitals and doctors to care for our veterans, helping communities with clean water investments, supporting police in our communities,” said Vermont Democratic Sen. Pat Leahy.

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