The Federal government has shutdown, and Democratic and Republican leaders are not bending in their discussions on how to achieve fiscal responsibility. Concern is deepening in financial markets, and among businessmen, about the potential for a U.S. default of its debt.In just one day this week interest rates rose, making it twice as expensive for the federal government to borrow short term.

The key to the blockage of extension of the debt ceiling is a strategy of using the federal budget to dismantle the president’s health care law, commonly known as Obamacare. This has also slowed progress for approval of federal appropriations for the new fiscal year.

It is clear no one wins from this battle. However, it is clear that small business and concessionaires on federal properties are losing. Access to federal lakes and parks has been closed, denying boaters and anglers their ability to recreate. In addition, hunting season on federal properties should be opening across the nation, but access may be denied there too. Reacting to pressure, the House of Representatives has approved 11 bills along Party lines to partially fund favorite causes, but the Senate has refused to consider them, opting instead for a Continuing Resolution that would fund the entire government.

So What’s Next? With barely a week to go until the next big deadline, when the federal government runs the risk of not being able to pay its bills and its debt obligations, Congress appears to be preparing for several more days of partisan posturing—with no signs of negotiations to solve the fiscal crises.

The Senate and House continue down separate legislative paths. The House is expected to continue to pass a series of small spending plans to fund popular government programs daring the Senate to reject these funding bills.The shutdown has greatly reduced committee staff so most hearings have been cancelled. The Senate has given no indication of taking up any of these bills.The Senate is drafting legislation to give the Treasury Department more flexibility to borrow without specifically breaching the debt limit law. The Senate Democrats want a “clean” debt extension bill raising the limit by $1 trillion.

MRAA will continue to watch these efforts closely, and will continue to advocate Congress open lakes, reservoirs and lands important to boating and fishing recreation.

In August the U.S. Environmental Protection Agency established the 2013 annual percentage standards for the RFS program for biofuel, biomass based diesel, biofuels and renewable fuels. These standards will apply to all gasoline and diesel produced or imported in 2013. The EPA also provided more lead time to obligated parties to demonstrate compliance with the 2013 standards by extending the compliance deadline from February 2014 to June 30, 2014. The EPA recognized there are constraints in the market’s ability to consume renewable fuels at the volumes specified in the Clean Air Act in future years. The EPA anticipates making adjustments to the 2014 volume requirements to address market conditions.

The EPA recognized ethanol will likely continue to predominate the renewable fuel pool in the near future, and that for 2014 the ability of the market to consume ethanol in higher blends such as E15 is highly constrained as a result of infrastructure and market-related factors. The EPA said it does not foresee the market consuming enough ethanol sold in blends greater than E10 to meet the volumes of total renewable fuel required by federal law in 2014.

The EPA expects to adjust the 2014 volume requirements by estimating the available supply of biofuels and assess the ethanol blendwall and propose new volume requirements. However, the EPA has denied requests for reconsideration of the 2013 diesel standard. According to federal law, 16.55 billion gallons of ethanol blend gasoline with a 9.74% standard need to be consumed in 2013 to meet the renewable fuels standard.

MRAA strongly supports repeal of the renewable fuels standard and continued testing of the mechanical effects of higher ethanol blends on marine engines.

MRAA attended a meeting last week organized by the Ethanol Coalition. The overall feeling was that Congress itself has done little legislative work. However, the coalition felt Congress is still on schedule for hearings and perhaps reform/repeal legislation in October, which is the original goal.

A press gathering was held in San Francisco in August with the Ad agency managing the coalition getting good camera footage. The press briefing was well attended with the Recreational Boaters Association of California representing boating at the press event. In addition, one ranch/farming group met with California Member District offices during the recess. Rep Waxman (D-California) is the ranking member of the House Energy and Commerce Committee and is key to Democratic support. The report is that some Members are supportive and others had no expressed interest.

A “Dear Colleague” letter is being organized in the House. The Coalition is hoping for more than 154 signatures, which were on last year’s letter.

The Ad agency said the two big issues they have heard are engine damage and voided warranties.

The Coalition believes it is time to target the Energy and Commerce Committee with letters asking for support of repeal/reform of the RFS (renewable fuel standard).

The Coalition agreed to look into meeting more often, perhaps beginning with a face-to-face meeting in Washington D.C. for the week starting 9/9/2013.

The MRAA is working hard in opposition of an increase in Ethanol Blend Level.

Members of the House and Senate tax-writing committees are putting together legislative drafts that may determine the fate of one of our most prized tax benefits, the second home mortgage interest deduction. In addition other key tax deductions, such as, property tax write offs and capital gains exclusions are on the table for elimination too.

Committee chairs have promised tax reform and have been evaluating deductions, credits, and loopholes in terms of revenue cuts and economic benefits, which includes both primary and secondary home mortgage interest deductions.

On the Senate-side of Congress, Finance Committee Chair Max Baucus (D-Montana) asked other Senators in both parties to submit recommendations on which tax preferences should be preserved starting from an assumption that all current benefits (deductions) would be eliminated. His approach is the most serious effort to simplify federal tax law since the Tax Reform Act of 1986.

To keep the negotiations under a political cover, the Senate Finance Committee has placed all recommendations under a 50-year top secret classification and has restricted access to just 10-staff.

On the House-side, Ways and Means Committee Chairman Dave Camp (R-Michigan) instructed committee staff to move ahead with drafts during the recess. which would allow the committee to consider a tax reform bill in October.

So what is really on the chopping block?

The House bill being drafted seeks to reduce individual and corporate marginal tax rates. It would clear out deductions enough to lower the maximum individual tax rate to 25% down from the current 39.6% The alternate minimum tax would be eliminated and corporate tax rates would be reduced.

The problem is that lowering the tax rates would cost trillions of dollars in lost revenues over the coming decade and would only be partially paid for by eliminating or cutting tax deductions. The deficit could possibly soar. In addition, the mortgage interest and property tax deductions are so engrained in our economy that eliminating them or significantly reducing them would shock the national economy, especially the boating economy. Think tanks in DC are predicting we would loose about one million jobs just due to elimination of the mortgage and property tax deductions.

These findings lead some DC Hill insiders to predict that neither the House nor Senate can afford to make the decision to support this kind of tax reform. As a result even though staff are putting together a major tax reform package and Committee chairs have indicated a willingness to consider a bill, the politics are far too great for either Chamber to pass anything.

I hope this brings you up to date on what is happening on the tax reform issue and the threat to the second home mortgage interest deduction.

I think the time is right for our industry to contact Members of Congress in support of the second home mortgage interest deduction.

The MRAA has always sought to protect the interest deduction for boats qualifying as second home. We will continue to watch this issue closely.