U.S. Rep. Erik Paulsen flexes his muscle on economic panel

WASHINGTON – As U.S. Rep. Erik Paulsen chaired his first hearing of a key economic panel last week, the employment news was rosy.

The latest week's jobless claims had fallen to their lowest level in a half-century, and the Eden Prairie Republican was eager to promote the tax code overhaul that he had helped shape as a member of the influential House Ways and Means Committee. But Paulsen also had pointed questions for Kevin Hassett, President Donald Trump's chief economic adviser, on the administration's plan to impose large tariffs on steel and aluminum.

Such measures could "backfire and cost us jobs at home, force consumers to pay higher prices for goods and ultimately hurt our economy," he said.

Paulsen's January appointment to the U.S. Joint Economic Committee by House Speaker Paul Ryan raises his profile in what promises to be a tough election year. Paulsen is one of the most politically vulnerable GOP members in the House and must hold onto his swing district against well-funded Democratic challenger Dean Phillips. Republicans have to defend at least two dozen seats targeted by Democrats to maintain control of the House amid a wave of lawmakers' retirements.

The bipartisan committee has 10 members each from the House and Senate — including Minnesota Sen. Amy Klobuchar, a former chair — and makes recommendations on economic policy. Recent hearings have involved Federal Reserve Chairwoman Janet Yellen's economic outlook and the causes and consequences of declining economic opportunity in America.

Last year, during a hearing on the economic effects of the opioid crisis, Paulsen voiced concern about the rise in deaths from fentanyl and carfentanil and said Congress has a role to play in ensuring that opioids aren't easy to access.

On Wednesday, the panel heard from Hassett on Trump's 568-page economic report that touted a "pro-growth agenda" of tax cuts and deregulation, citing a controversial estimate that the average family's income would increase by more than $4,000 from the tax revisions.

"Consumer confidence is up, Americans are seeing more take-home pay, many will spend less time preparing their taxes next year, and businesses are paying special bonuses, giving their employees a raise, repatriating offshore earnings, and investing more in the United States again," Paulsen said in his opening remarks.

"We are in a better place every day as this economy has moved upwards, and it is not because 'government' fixed it. It's because government finally allowed the American people to fix it."

Sen. Martin Heinrich of New Mexico, the committee's ranking Democrat, welcomed Paulsen to the chairmanship but raised doubts about the GOP's economic wisdom.

"I wish I were as optimistic as the chairman about the policies put in place since you came before this committee in October," Heinrich told Hassett.

"I'm going to be pretty direct," continued Heinrich. "The tax bill serves special interests and will cost our children dearly for generations. The GOP tax law ... jeopardizes our fiscal condition and further tilts the scale in favor of large corporations and especially wealthy individuals. While the law's impact on economic growth is debatable, the impact on inequality is clear."

With the $1.5 trillion spent on the tax bill, Heinrich said, the government could have erased everyone's student loan debt or invested in infrastructure.

Hassett repeatedly trumpeted the benefits of reducing the corporate tax rate from 35 to 21 percent. In a bid to humor Paulsen's Minnesota roots, Hassett presented a hypothetical business in which he and Paulsen were making hockey pucks under the old tax system, which would have encouraged them to make the items in Ireland and, through arcane tax maneuvers, receive a tax refund through their U.S. parent company.

By changing the system to bring the U.S. company's foreign profits back home, he argued, companies will invest more domestically.

Even as Republicans celebrate their tax overhaul victory, Paulsen has found himself in a politically delicate position when it comes to the economy. After Trump's move last week to impose a 25 percent tariff on steel imports and 10 percent on aluminum, he joined other GOP lawmakers in raising concern that the plan will cause a global trade war.

Paulsen was invited to the White House ahead of the tariff announcement; what he saw concerned him. The day before the hearing, he told the Star Tribune, "We are so globally connected now that we can't expect that it's going to be our way or the highway. You don't win trade wars."

He added that imposing sweeping tariffs sets up the U.S. for retaliation.

"There had been some abuses, and enforcement is important to do against China and maybe some other cases," Paulsen said. "But we did not think the European Union would be dragged into it. We didn't think Canada or Mexico would be drawn into it." [Trump eventually decided to give the latter two countries a temporary exemption.]

During the hearing, Hassett told Paulsen that Trump was "very serious" when pursuing symmetry and reciprocity in trade with other countries.

At Wednesday's hearing, Klobuchar questioned Hassett about the economic effect of not extending protections for Dreamers — undocumented immigrants who are part of the Deferred Action Childhood Arrival program, many of whom are working or in school. But the economic adviser deflected the question, saying he hadn't studied the economic impact and would have to get back to Klobuchar.

The committee was formed when Congress passed the Employment Act of 1946. The late Democratic Sen. Hubert Humphrey chaired the panel from 1975 to 1976 and, amid rising unemployment, pushed for the federal government to intervene directly to ensure people had jobs.

Paulsen, not surprisingly, sees the government's role as less overbearing. At Wednesday's hearing, he noted that the Obama administration struggled to find government solutions to the financial crisis. The new administration, he said, approached the issue very differently.

On Friday, the Bureau of Labor Statistics released its employment figures for the full month of February, finding that nonfarm payroll employment increased by 313,000 — with employment rising in construction, retail, professional services and manufacturing.

This demonstrates, Paulsen said in a statement, "how tax cuts and regulatory reform have created real momentum in our economy."

Star Tribune staff writer Jim Spencer contributed to this report. Maya Rao • 202-662-7433