Capital Thinking Update - June 11, 2012

more+
less-

General Legislative

The House is not scheduled to be in session next week.  The Senate will convene at 2:00 p.m. on Monday to resume consideration of the motion to proceed to S.3240, the Farm bill, post-cloture.  


Agriculture

LEGISLATIVE ACTIVITY

  • House Appropriations Subcommittee Markup. On Wednesday, June 6, the House Appropriations Subcommittee on Agriculture approved by voice vote the FY 2013 agriculture spending bill. The markup only lasted an hour, most of which was spent discussing cuts to the Commodity Futures Trading Commission (CFTC). The bill includes a policy rider that would allow farmers to keep planting genetically-engineered crops until the Department of Agriculture completes necessary regulatory reviews, once a court invalidates the Department’s approval due to environmental concerns. The Center for Food Safety has opposed the provision, calling it a violation of the separation of powers, and saying it was a direct response to litigation the group had initiated in recent years related to sugar beets.

    In expressing his support for the policy rider, Subcommittee Chairman Jack Kingston (R-GA) said that the Department has already approved farmers’ use of crops facing challenges in courts; however, advocacy groups have used the courts to delay planting. He believes that producers should be allowed to use scientifically-approved practices while the courts address the issue. The Biotechnology Industry Organization supports the provision, explaining that court-imposed bans on genetically-engineered crops hurt farmers who have already incurred preliminary expenses for growing such crops.
  • Senate Farm Bill Timeline. On Thursday, June 7, the Senate voted 90 to 8 on a cloture vote on a motion to proceed on the Farm Bill. The Senators voting against cloture were: Tom Coburn (R-OK); John Cornyn (R-TX); Jim DeMint (R-SC); Orrin Hatch (R-UT); Dean Heller (R-NV); Jim Inhofe (R-OK); Ron Johnson (R-WI); and Mike Lee (R-UT). Senators Dean Vitter (R-LA) and Mark Kirk (R-IL) did not vote.

    There remains a rift between southern Senators and the Senate Agriculture leadership regarding the treatment of rice and peanuts under the proposed Agriculture Risk Coverage program. In his floor speech, Senator Saxby Chambliss said he could not support the current Farm Bill because of the one-size-fits-all crop insurance program. Senator Chambliss, instead, proposed that producer choice should be the main policy. While he did not reference specific amendments, Senator Chambliss said he hoped for an open amendment process.
    The Senate will reconvene at 2:00 pm on Monday, June 11 to resume consideration of the Farm Bill. The Senate will vote on a motion to proceed on Tuesday, June 12, which requires a 50-vote threshold to pass. The Senate leadership, including Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Ranking Member Pat Roberts (R-KS) are reviewing amendments filed and working on a unanimous consent agreement to present to the Senate early in the week.
  • Farm Bill Amendments. Senators have filed more than 90 amendments to the Farm bill. Amendments include:
    • Striking the $4.5 billion funding cut to the Supplemental Nutrition Assistance Program (SNAP) (Senator Kirsten Gillibrand (D-NY))
    • Replacing SNAP with a block grant (Senator Lindsey Graham (R-SC))
    • Requiring the Secretary of Agriculture to implement nutrition pilot programs under SNAP (Senator Ron Wyden (D-OR))
    • Requiring a study on the impact of sugar-sweetened beverages on obesity (Senator Frank Lautenberg (R-NJ))
    • Repealing the sugar program (Senator John McCain (R-AZ)); Phasing out or reforming the sugar program (Senator Jean Shaheen (D-NH))
    • Establishing conservation compliance for federal crop insurance (Senator Ben Cardin (D-MD))
    • Prohibiting packers from owning, feeding, or controlling livestock (Senator Chuck Grassley (R-IA))
    • Imposing tariff-rate quotas on certain casein and milk protein concentrates (Senator Chuck Schumer (D-NY))
    • Requiring a report on the effects of budget sequestration on the Defense Department (Senator John McCain (R-AZ))
    • Prohibiting the Secretary of Labor from finalizing a proposed rule on child labor on farms (Senator John Thune (R-SD))

      The leadership has stated that it would like to limit amendments to a number Senate Majority Leader Harry Reid (D-NV) will accept by early next week. However, limiting amendments will pose a challenge as Republicans have acknowledged division in their conference over several of the non-germane amendments and the bill itself. If Republicans are unable to limit amendments, there will likely be no unanimous consent agreement, which may prompt Majority Leader Reid to file cloture to end debate on Tuesday. Many suspect that if Majority Reid does file cloture, Republicans will oppose the cloture vote. If the vote should fail, Majority Leader Reid could pull the bill from the Senate floor.
  • Statement of Administration Policy. On Thursday, June 7, the White House released a Statement of Administration Policy in support of the Senate Farm Bill. The Statement highlighted the bill’s consolidation and streamlining of conservation assistance programs, funding levels for bio-energy programs, and the proposal by Senators Debbie Stabenow (D-MI) and Pat Roberts (R-KS) to establish a foundation to solicit private donations to support agricultural research. The Statement also noted concerns about cuts to the Supplemental Nutrition Assistance Program and the need to cut funding further for commodity and crop insurance programs.

Budget, Appropriations

LEGISLATIVE ACTIVITY


  • FY 2013 Appropriations Action. Last week, the House approved three FY 2013 Appropriations bills – Energy and Water (H.R. 5325); Homeland Security (H.R. 5855); and Legislative Branch (H.R. 5882). The Agriculture, Financial Services, and Transportation-Housing Subcommittees also approved their FY 2013 spending measures.

    The House is in recess this week for district work and Appropriations efforts will resume when Members return the week of June 18; the full committee is expected to consider the Agriculture, Financial Services and Transportation-Housing bills and the Labor-HHS-Education Subcommittee is tentatively scheduled to hold a markup on its bill on June 20 (pending a Congressional Budget Office (CBO) score of the bill). This would leave the Interior-Environment bill as the only FY 2013 Appropriations measure awaiting subcommittee action in the House.

    Following a week with no Appropriations activity, the Senate will resume its FY 2013 efforts this week with the Labor-HHS-Education and Financial Services spending bills scheduled for subcommittee action on Tuesday, June 12 and full committee consideration on Thursday, June 14.

    While the House and Senate will each continue to move FY 2013 Appropriations bills throughout the summer, a Continuing Resolution to start FY 2013 remains inevitable. As previously reported, the House is advancing its FY 2013 bills, albeit with Democratic and some conservative Republican opposition, under an overall discretionary spending cap that is $19 billion less than the $1.047 trillion cap established in the Budget Control Act of 2011 (P.L. 112-25) and being utilized by the Senate. The White House has threatened to veto any FY 2013 Appropriations measure that does not adhere to the Budget Control Act. These ‘lines in the sand’ will certainly make for contentious negotiations to reach agreement on an overall spending level for the Continuing Resolution.

OTHER BUDGET, APPROPRIATIONS NEWS

  • Congressional Budget Office Releases 2012 Long-Term Budget Outlook. On Tuesday, June 5, the Congressional Budget Office (CBO) released its long-term budget outlook, which projects fiscal health based on long-term demographic trends and the impact of rising health care costs. The report tracked two economic scenarios and the long-term impact of each: (1) if current policies are continued and the Bush-era tax cuts are extended and sequestration is canceled, the federal debt will increase from the current level of 73 percent of gross domestic product (GDP) to 90 percent of GDP in 2022 and nearly 200 percent in 2037; and (2) if current law is followed and the tax cuts expire and sequestration goes into effect as scheduled in January 2013, the deficit will decline from 73 percent of GDP to 60 percent of GDP in 2022; however, the immediate impact would be “an added drag on the weak economic expansion.”

    The report was immediately seized upon by both Democrats and Republicans as supporting their respective positions on spending and deficit reduction. At a June 6 House Budget Committee hearing, in which CBO Director Douglas Elmendorf testified, Chairman Paul Ryan (R-WI) stressed that the House Budget Resolution (H. Con. Res. 112) addresses many of the concerns outlined in the CBO report, while Ranking Member Chris Van Hollen (D-MD) said the report underscores the need for a balanced approach to deficit reduction.

Cybersecurity

LEGISLATIVE ACTIVITY


  • Senate Cybersecurity Legislation. The Senate continues to work toward a compromise on cybersecurity legislation between Homeland Security and Government Affairs Committee (HSGAC) Chairman Joe Lieberman (I-CT), Ranking Member Susan Collins (R-ME) and Senator John McCain (R-AZ). On Thursday, June 7, former military, intelligence, and security leaders from Republican and Democratic administrations sent a letter to Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) reiterating the need for the Senate to act quickly on cybersecurity legislation that includes critical infrastructure protections. The letter was signed by former Homeland Security Secretary Michael Chertoff, former National Security Agency Director and former Director of National Intelligence Mick McConnell, former Deputy Secretary of Defense Paul Wolfowitz, former National Security Agency and CIA Director Michael Hayden, former Vice Chairman of the Joint Chiefs of Staff General James Cartwright, and former Deputy Secretary of Defense William Lynn III.

With many reports of Members working together to compromise on some of the more controversial portions of the cybersecurity legislation, it is unclear when the Senate will move to take up the legislation. At this point, it appears that the Senate will take up the cybersecurity bill on the floor in the coming weeks.

  • Stuxnet Cyberattack on Iran. A New York Times article on June 1 detailed U.S. involvement with a computer virus, the Stuxnet worm, which was used against an Iranian nuclear facility to prevent it from developing nuclear weapons. The story was leaked to the newspaper by an unknown source and detailed joint efforts between the U.S. and Israel to develop the virus for use against Iran’s nuclear program.

    Members of Congress on both sides of the aisle have spoken out this week against the leaks to the press, with the Senate Armed Services Committee promising to hold hearings on the issue. The Committee’s Ranking Member Senator John McCain has used this incident, along with the details that were leaked regarding the Osama bin Laden raid, to accuse President Obama’s Administration of leaking details of secret operations to the press in order to boost the President’s image during an election year.

    The House and Senate Intelligence Committees plan to write legislation to attempt to prevent classified national security leaks. Although the House has already passed its intelligence authorization bill, Senate Intelligence Committee Chairman Dianne Feinstein (D-CA) said that she is working with House Intelligence Committee Chairman Mike Rogers (R-MI) to add provisions to the final intelligence authorization bill to address the leaks to the press.

Education

LEGISLATIVE ACTIVITY


  • Student Loan Interest Rates. Democratic leaders criticized offsets offered by Republican leaders in late May to extend the current 3.4 percent Stafford student loan interest rates set to expire in July. Senate HELP Committee Chairman Tom Harkin (D-IA) called them “not acceptable.” As the rhetoric continued to ratchet up over the week, on Thursday, June 7, Senate Majority Leader Harry Reid (D-NV) offered two new options to pay for the extension. The first proposal would expand a change to employer pension funding contributions by creating a “stabilization range” for employers to compute their pension liabilities. The change would allow businesses to invest less in their defined benefit pension plans while increasing their tax obligations. A similar provision already has been passed by the Senate as part of its surface transportation reauthorization package and is expected to generate $9.5 billion. The second proposal would increase the premiums paid by employers for the insurance provided by the Pension Benefit Guaranty Corp and is estimated to generate up to $8 billion.
    Senate Republicans did not immediately dismiss the proposal – a sign both sides could be closer to agreement – but neither chamber’s Republican leadership embraced the ideas, either. The White House indicated that the proposal reflected progress and encouraged lawmakers to continue working.

    On Wednesday, June 6, Senators Richard Burr (R-NC) and Tom Coburn (R-OK) introduced legislation (S. 3266) that would restructure interest rates for government-backed student loans.
  • Workforce Investment Legislation. On Thursday, June 7, the House Education and the Workforce Committee approved H.R. 4297, the Workforce Investment Improvement Act of 2012, on a party-line vote of 23 to 15. Congresswoman Virginia Foxx (R-NC), Chair of the Subcommittee on Higher Education and Workforce Training, offered an amendment in the nature of substitute for the measure, which seeks to provide comprehensive reform to the nation’s workforce development system. Some, but not all of those changes do the following: repeal WIA National Emergency Grants; add industry- and postsecondary- recognized credentials as a common performance measure; require state and local workforce leaders to specify the strategies and services they will offer at-risk youth; and reduce the number of staff at the Department of Labor.

    Democrats and many labor and civil rights groups opposed the bill’s aim to reduce the role of federal government in the workforce system and to reduce education, job training and supportive services to disadvantaged populations. Therefore, we do not expect the bill to progress in the Democrat-controlled Senate.
  • Appropriations and Sequestration. As noted above, the Senate Appropriations Subcommittee on Labor, Health and Human Services, and Education (LHHS) scheduled a markup for its FY 2013 Appropriations bill on Tuesday, June 12, with the Full Committee consideration set for Thursday, June 14. The House also tentatively scheduled its markup for June 20, but Subcommittee Chairman Denny Rehberg (R-MT) said he is awaiting a CBO score before officially scheduling a markup.

    A recently-formed coalition of nonprofit organizations with an interest in funding areas outside of the defense and mandatory spending worlds (e.g., spending for education, transportation, income security, veterans’ health care, homeland security, and other purposes) held a town hall meeting on Monday, June 4 to discuss non-defense discretionary (NDD) spending. The event was well attended and organizers urged coalition members to support a balanced approach to deficit reduction that does not include further cuts to NDD programs in FY 2013. 
  • Other Hearings and Events. The Senate Veterans’ Affairs Committee will host a hearing on Wednesday, June 13 concerning “Economic Opportunity and Transition Legislation.” As such, the following four veterans’ education bills will be considered:
    • S. 2206 (Lautenberg (D-NJ)): GI Educational Freedom Act of 2012
    • S. 2241 (Murray (D-WA)): GI Bill Consumer Awareness Act of 2012
    • S. 2179 (Webb (D-VA)): Military and Veterans Education Reform Act of 2012
    • S. 1634 (Tester (D-MT)): to improve the approval and disapproval of programs of education for purposes of educational benefits under laws administered by the Secretary of Veterans Affairs

      On Monday, June 11, the Business-Higher Education Forum, representing industry and academic leaders, is hosting an event to publicly launch the Business-Higher Education Forum (BHEF)’s National Undergraduate Partnership Strategy and Regional Workforce Projects – “sharing the power of revolutionary industry-higher education partnerships to meet unique regional workforce needs.”

REGULATORY ACTIVITY

  • Program Integrity Rule: State Authorization Requirements for Online Programs. On Tuesday, June 5, the U.S. Court of Appeals for the District of Columbia Circuit backed a lower court’s decision to strike down a Department of Education “program integrity” rule extending state authorization requirements to online programs. In response to the court’s ruling, House Education and the Workforce Committee Chairman John Kline (R-MN) and Subcommittee on Higher Education and Workforce Training Chairwoman Virginia Foxx (R-NC) issued the following statement: “The Department of Education’s package of so-called ‘program integrity’ regulations significantly increase federal intrusion in academic affairs, creating additional bureaucratic and financial burdens for postsecondary institutions that could lead to higher costs and reduced access for students …. [T]he decision by the U.S. Court of Appeals is a step in the right direction that will help protect colleges and students from poorly conceived regulations that waste time and money.”

    In February, the House voted to repeal the state authorization regulation by a vote of 303-114. The Senate has not taken any action on this issue.  
  • Income-Based Repayment Plan. On Thursday, June 7, the White House released a Presidential Memorandum discussing its new Income-Based Repayment (IBR) plan to improve repayment options for federal student loan borrowers. Legislation signed by President Obama in 2009 allows for borrowers to cap their student loan payments at 10 percent of current discretionary income starting in 2014. New efforts as part of this announcement seek to extend these lower payments to some borrowers as early as 2012, affecting as many as 1.6 million student loan borrowers. Additionally, the Departments of Education and Treasury will work together to create an online system to apply for IBR in one sitting instead of going through multiple processes.

    The Department of Education’s website currently includes a calculator that can help borrowers determine eligibility for IBR. The Administration plans to have a counseling module for IBR available within a year. The new IBR plan is part of the Administration’s broader discussion on college affordability and student loan interest rates. 
  • Mathematics Education Initiative. The National Science Foundation (NSF), in conjunction with the Department of Education, is interested in stakeholder input to inform new activities and programs related to K-16 mathematics education. The FY 2013 President’s Budget proposal proposes a jointly administrated K-16 mathematics education initiative funded by NSF ($30 million) and the Department ($30 million). This initiative will provide opportunities for state, local, and institutional stakeholders to incorporate proven practices into mathematics education.

    NSF and the Department are soliciting feedback on the highest priority issues or challenges that need to be addressed to improve K-16 mathematics teaching and learning. The deadline to submit feedback using an online form is July 1, but the initiative is dependent upon Congressional appropriations.

Energy

LEGISLATIVE ACTIVITY

  • House Legislative Outlook. House Republican Leaders have formally introduced the “Domestic Energy and Jobs Act,” sweeping legislation intended to encourage energy development on federal lands and reduce regulatory barriers. It combines five bills (H.R. 2150, H.R. 2752, H.R. 4381, H.R. 4382, and H.R. 4383) to streamline energy project leasing and permitting processes and tap the National Petroleum Reserve in Alaska. The legislation will be approved by the House but is not expected to be approved by the Senate.
  • Nuclear Waste. Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) continues work with Ranking Member Lisa Murkowski (R-AK), and Senators Lamar Alexander (R-TN) and Dianne Feinstein (D-CA) to draft legislation that would implement the Blue Ribbon Commission’s recommendations on nuclear waste management policy, including siting future waste management facilities and streamlining action for both deep geologic repositories and interim storage facilities. Chairman Bingaman is also focused on creating a new organization solely dedicated to implementing such a policy, but acknowledged that “[p]assing any legislation this year is tough, and passing anything so controversial as a nuclear waste bill is not that likely in this Congress.”
  • Congressional Hearings. On Tuesday, the Senate Finance Committee will examine the impacts of comprehensive tax reform on the nation’s energy policy. On Wednesday, the Senate Environment and Public Works Committee will hold a confirmation hearing to consider Allison Macfarlane (D) to be the new chair of the Nuclear Regulatory Commission (replacing current Chairman Gregory Jaczko, who announced his resignation on May 21, pending a replacement being confirmed) and Kristine Svinicki (R) to serve a second term as a commissioner. On Thursday, the Senate Energy and Natural Resources Committee will receive testimony on competitiveness and collaboration between the U.S. and China on clean energy.
     

Environment

LEGISLATIVE ACTIVITY  

  • EPA. On Thursday, June 28, the House Committee on Science, Space and Technology will hold a hearing concerning the Environmental Protection Agency (EPA). According to the Committee, the goal of the hearing is to examine the agency’s practices and foundations for regulations.
  • Clean Energy. On Thursday, June 14, the Senate Committee on Energy and Natural Resources will hold a full committee hearing concerning China and clean energy. The purpose of this hearing is to receive testimony on competitiveness and collaboration between the U.S. and China on clean energy.
  • Environmental Regulations. Last week, the House Committee on the Judiciary voted out of committee H.R. 4377, which would set deadlines providing agencies one year to publish an environmental assessment (EA) and two years to submit an environmental impact statement (EIS). The bill would allow agencies to use state EIS’s instead of requiring new ones. The bill would also allow the consideration of EIS’s prepared for similar projects within the past five years by state or federal agencies. This legislation is an effort to increase permitting time in the U.S. for new projects, including construction, renewable and other energy projects, which has been criticized as being one of the slowest developed countries for approving permits, taking seven to 10 years while others approve in a two to three-year time frame.
  • Nuclear Regulatory Commission. On Wednesday, June 13, the Senate Committee on Environment and Public Works will hold a full committee on the nomination of Allison Macfarlane and re-nomination of Kristine L. Svinicki to be members of the Nuclear Regulatory Commission.

REGULATORY ACTIVITY

  • Combustion Engines. On Thursday, June 7, the EPA announced a proposed rule concerning new source performance standards for stationary internal combustion engines. EPA is proposing amendments to the national emission standards for hazardous air pollutants for stationary reciprocating internal combustion engines under section 112 of the Clean Air Act. Examples of potentially affected entities and operations include: electric power generation, transmission or distribution; medical and surgical hospitals; natural gas transmission; crude petroleum and natural gas production and natural gas liquids producers. The proposed amendments include alternative testing options for certain large spark ignition (generally natural gas-fueled) stationary reciprocating internal combustion engines management practices for a subset of existing spark ignition engines in sparsely populated areas and alternative monitoring and compliance options for the same engines in populated areas. Comments on the propose rule are due on or before July 23, 2012.


Financial Services

LEGISLATIVE ACTIVITY

  • JMorgan CEO to Testify Before Senate Banking Committee. On Wednesday, June 13, Jamie Dimon will appear before the Senate Banking Committee for a hearing titled, “A Breakdown in Risk Management: What Went Wrong at JPMorgan Chase?” This hearing is the third hearing in as many weeks on Dodd-Frank Act implementation that has involved each of the primary Federal regulatory agencies.
  • Senate Appropriators to Consider SEC, Financial Services Budget. On Tuesday, June 12, the Senate Appropriations Subcommittee will hold a markup session to consider the FY 2013 Financial Services and General Government Appropriations bill.

REGULATORY ACTIVITY

  • SEC to Host Inaugural Investor Advisory Committee Meeting. On Tuesday, June 12, the Securities and Exchange Commission will host its first meeting of the Investor Advisory Committee. The Committee, charted by the Dodd-Frank Act, is tasked with advising and consulting with the SEC on regulatory priorities; issues relating to the regulation of securities products, trading strategies and fee structures, and the effectiveness of disclosure; initiatives to protect investor interest; and initiatives to promote investor confidence and the integrity of the securities marketplace. This meeting will largely be an organizational one and will consist of an introduction of the members, the consideration of an organizational document, and a discussion of possible issues for potential consideration.
  • FDIC to Hold Open Meeting. On Tuesday, June 12, the Federal Deposit Insurance Corporation will hold an open meeting. Topics to be discussed include a proposed rulemaking related to the definition of “predominantly engaged in financial activities” under Title II of the Dodd-Frank Act (orderly liquidation authority) and proposed rulemakings regarding Basel III capital standards.

Health Care

LEGISLATIVE ACTIVITY  


  • Senate Appropriations Hearing. The Senate Committee on Appropriations Labor, Health and Human Services, education, and Related Agencies Subcommittee will hold a markup of the FY 2013 Appropriations bill on Tuesday June 12. The full committee is tentatively scheduled to consider the measure on Thursday June 14.
  • House Small Business Hearing. The House Committee on Small Business Subcommittee on Contracting and Workforce will meet for a hearing on Thursday, June 14, on “Caught Up in Red Tape: The Impact of Federal Regulations on Small Businesses and Contractors.” The hearing will examine regulatory obstacles to small business job creation, economic growth and participation in the federal contracting arena. There will be a wide-ranging discussion examining regulatory actions of various federal agencies with a special focus on implementation of the Patient Protection and Affordable Care Act (PPACA), several Environmental Protection Agency (EPA) regulations and processes and the regulations affecting small business contracting opportunities with the federal government.
  • Senate Finance Hearing. The Senate Committee on Finance will hold a roundtable discussion on Thursday June 14, on “Medicare Physician Payment Policy: Lessons from the Private Sector.” The discussion will include testimony from Dr. Dana Safran of Blue Cross Blue Shield of Massachusetts, Peter Edwards of Humana, Dr. Lonny Reisman with Aetna, Chet Burrell of CareFirst BlueCross BlueShield, and Darryl Cardoza with Hill Physicians Medical Group.
  • Senate Government Affairs Hearing. The Senate Committee on Homeland Security and Government Affairs Federal Financial Management Subcommittee has scheduled a hearing on Thursday, June 14, on “Saving Taxpayer Dollars by Curbing Waste and Fraud in Medicaid.”

REGULATORY ACTIVITY

  • Primary Care Initiative. The CMS Innovation Center has announced agreements with 45 commercial, federal and state insurers in seven markets throughout the country to participate in the Comprehensive Primary Care initiative, through which CMS, state, and commercial payers will offer providers a care management fee to support enhanced, coordinated services. Approximately 75 primary care practices will be selected to participate in the Comprehensive Primary Care initiative in each designated market. Applications will be accepted until July 20.
  • Reg Deadlines. Comments on the proposed rule for Payments for Services Furnished by Certain Primary Care Physicians in Medicaid that would increase reimbursements to Medicare levels and Charges for Vaccine Administration under the Vaccines for Children Program are due Monday, June 11.
    Comments are due Tuesday, June 12 to the Food and Drug Administration on the value of making naloxene more widely available outside of conventional medical settings to reduce the incidence of opioid overdose fatalities.

OTHER HEALTH NEWS

  • CBO Long-Term Budget Outlook. The Congressional Budget Office (CBO) released the 2012 Long-Term Budget Outlook. The report estimates that approximately 90 percent of Medicare spending will be subject to the two percent across-the-board reduction as part of the sequester set forth in the Budget Control Act. CBO also notes that sequestration will decrease Medicare spending by approximately $100 billion between fiscal years 2013 and 2022 and reduce net Medicare spending by approximately $88 billion over the same period. Additionally, CBO projects that under current law, federal spending for health care programs (Medicare, Medicaid, and CHIP) would increase from 5.4 percent of GDP in 2012 to 9.6 percent in 2037, and that national health care spending will increase from 17 percent of GDP to nearly 25 percent over the same period.
  • IOM Meeting. The National Cancer Policy Forum’s Workshop on Reducing Tobacco-Related Cancer Incidence and Mortality will be held on June 11-12. The workshop will include a series of presentations and panel discussions exploring ways to reduce tobacco-related cancer incidence and mortality, including examining the impact of state and federal policies and programs to reduce tobacco use, treatment options and communication strategies to encourage tobacco cessation, the effect of tobacco use and cessation on cancer treatment outcomes, the potential for research to advance the prevention and treatment of tobacco-related cancers, and promoting collaboration between the cancer community and other disease-specific groups and government agencies implementing effective strategies to reduce tobacco use.

International, Defense, Homeland Security

Russia PNTR and Human Rights Developments. As expected, on Thursday, the House Foreign Affairs Committee (HFAC) unanimously reported out the House version of the Sergei Magnitsky legislation that aims to foster human rights improvements in Russia, despite opposition from the National Foreign Trade Council (NFTC) and other elements of the U.S. international business community. If enacted into law, H.R. 4405, sponsored by Tom Lantos and Human Rights Commission Co-Chair Jim McGovern (D-MA), would authorize the Secretary of the Treasury to freeze the U.S. assets of Russian government officials the U.S. government believes to be responsible for human rights violations in Russia, including the 2009 death of jailed activist Magnitsky. The bill also would require the U.S. Department of State to publish a list of those suspected officials. HFAC Chairwoman Ileana Ros-Lehtinen (R-FL) succeeded in pushing through a substitute version of the bill that limits the sanctions only to Russian officials, whereas HFAC Ranking Member Howard Berman (D-CA) would have preferred a global approach.

The Committee’s unanimous vote in favor of the legislation provides yet another signal that many in Congress (House Ways and Means Committee Chairman Dave Camp, R-MI, excepted) view passage of the Magnitsky bill as a necessary precursor to Congressional repeal of Jackson-Vanik trade restrictions and corresponding support for Permanent Normal Trade Relations (PNTR) with Russia, which is scheduled to join the World Trade Organization (WTO) in late July. The House Judiciary and Financial Services Committees also have jurisdiction over H.R. 4405, but they have not yet moved on the legislation. The Senate Foreign Relations Committee is considered likely to consider Senator Ben Cardin’s (D-MD) Senate version of the bill, S. 1039, in the near future. Meanwhile, in another sign of the challenges that lie ahead, Chairman Camp and Senate Finance Committee Chairman Max Baucus (D-MT) have not yet introduced corresponding legislation to repeal Jackson-Vanik restrictions against Russia, despite their stated support for doing so.

Homeland Security Bills. On Thursday, the House passed its FY 2013 Homeland Security Appropriations bill by a 234-182 margin. The White House has threatened to veto the House version of the legislation, H.R. 5855, since it side-steps the spending levels established in the Budget Control Act enacted last year. If enacted into law, the bill would appropriate $39.1 billion in discretionary spending, which is $394 million less than the Administration had requested and $484 million below FY12 levels. The bill adds another $5.5 billion in emergency disaster relief spending.

Meanwhile, the House Transportation and Infrastructure Committee reported out H.R. 5887, the Coast Guard authorization bill sponsored by Coast Guard Subcommittee Chairman Frank LoBiondo (R-NJ). If enacted into law, the bill would authorize $6.9 billion in Coast Guard spending in FY 2013 and $7 billion each in FY 2014 and FY 2015. H.R. 5887 keeps current active-duty Coast Guard staffing levels in place and includes a 1.7 percent pay raise. The full House may consider the bill later this year, but no counterpart legislation has emerged yet in the Senate.



Tax

LEGISLATIVE ACTIVITY


  • Baucus Expected to Unveil Vision for Tax Reform. On Monday, June 11, Senate Finance Committee Chairman Max Baucus (D-MT) is expected to deliver a speech at the Bipartisan Policy Center outlining his vision for fundamental tax reform. Chairman Baucus will be introduced by Pete Domenici, former New Mexico Senator and co-author of the Domenici-Rivlin Deficit Reduction Plan. After the Chairman’s remarks, a panel discussion featuring former White House Budget Director Alice Rivlin, former Senate Finance Committee Chairman Bob Packwood, former House Ways & Means Committee Chairman Bill Thomas, and President of the Center on Budget and Policy Priorities Robert Greenstein will take place.   
  • White House Reiterates Refusal to Extend Bush-Era Tax Cuts for Wealthiest. House Speaker John Boehner (R-OH) has announced that the House will vote in July on a straight one-year extension of the 2001 and 2003 tax provisions – the so-called “Bush-era tax cuts.” On June Wednesday, 6, the Obama Administration restated its position against extending the cuts for all individuals – the White House opposes extension of the cuts for couples making more than $250,000 a year or for individuals making more than $200,000 a year. At odds with the Administration’s stance, House Minority Leader Nancy Pelosi (D-CA) previously sent a letter to House Majority Leadership proposing extension of the cuts only for those making less than $1 million annually. Boehner has rejected Pelosi’s proposal, reiterating that the House will vote to extend all of the tax cuts. 
  • House Passes Medical Device Tax Repeal. On Thursday, June 7, the House passed legislation to repeal the 2.3 percent excise tax on medical devices scheduled to take effect in 2013 – the Health Care Cost Reduction Act of 2012 (H.R. 436). The bill combines the repeal of the medical device excise tax with provisions allowing the use of health-related savings accounts to buy over-the-counter medications without a prescription and letting individuals receive up to $500 in distributions from unused amounts in their health care flexible spending accounts. The estimated $37 billion cost of the measure would be paid-for by recapturing in full any overpayments of refundable section 36B healthcare exchange subsidies. 37 House Democrats joined 233 Republicans in supporting the legislation, which passed by a vote of 270-146.

    The Democratic Leadership in the Senate, including Majority Leader Harry Reid (D-NV) and Finance Committee Chairman Max Baucus (D-MT), have criticized the House-passed bill. It is not clear if or when this legislation might receive a vote in the Senate. 

    On Friday, June 8, the House Ways and Means Committee held its second hearing on the handling of expiring tax provisions.  Broadly speaking, tax extenders fall into three categories: energy tax provisions, individual tax relief, and business tax relief.  At the hearing, some witnesses suggested that the Committee take a closer look at the merits of tax extenders, offering that supporters of certain provisions should be called upon to defend the merits of such provisions.  Republicans seemed to agree that a renewed focus should be given to expiring provisions.  The lone Democrat on hand, Representative Mike Thompson (D-CA), was more skeptical, encouraging the Subcommittee to look beyond expiring provisions for review and include permanent provisions.  He also argued that certain extenders should not be difficult to continue, singling out the New Markets Tax Credit (NMTC), research and development (R&D) credit, and conservation easement incentive. 

    Much of the discussion centered on the NMTC, with one witness from the Government Accountability Office suggesting that it be reformed into a grant program, while the Massachusetts Undersecretary for Housing and Community Development supported the NMTC, arguing that it leverages and encourages private investment in neighborhoods that historically lack access to private capital.  Finally, Chairman Tiberi reminded the Subcommittee that at the previous extenders hearing in April there seemed to be consensus to phasing out the PTC. 
    While tax extenders are not expected to be included in tax cut legislation House Republicans will bring to the floor in July to extend the Bush tax cuts for one year, Chairman Tiberi explained after the hearing that Congress can still move on a separate package of tax extenders before the November election.  The Committee will continue to examine extenders over the coming weeks and months.
  • Tax Hearings Next Week. The following tax hearings are scheduled next week in the House Ways and Means and Senate Finance Committees:
    • June 12: Senate Finance Committee hearing on Tax Reform: Impact on U.S. Energy Policy

TechComm

LEGISLATIVE ACTIVITY


  • Future of Audio. Radio broadcasters advocated that the wireless industry permit more FM chips in mobile devices at a Future of Audio hearing in the House Communications Subcommittee on Wednesday, June 6, noting the need for redundant communications during times of emergency. Representative Edward Markey (D-MA) asked Jeff Smulyan, CEO of Emmis Communications, about the usage of such wireless devices with FM chip sets in European countries. Smulyan said use of the chips is widespread in Europe and noted that Americans’ interest in FM chip sets, which offer free broadcasts over via mobile devices, will increase as data usage plans become more expensive for consumers. Smulyan urged Congress to further study the use of FM chips in mobile phones. Representative Brian Bilbray (R-CA) noted that FM chips would present consumers with more choices and could provide critical information during times of emergency. He also argued that consumers are unaware that FM chips were available. Representative Anna Eshoo (D-CA) said that FM chips were not in demand by consumers and should not be mandated in mobile phones. Bilbray, however, noted that consumers simply are not aware that FM chips are an optional feature in the wireless devices. Meanwhile, Christopher Guttman-McCabe, Vice President of Regulatory Affairs for CTIA, argued that manufacturers are currently offering phone models that include the FM chips, and that consumers are not using them. Mr. Smulyan countered that the chips in these phones are not activated and therefore cannot be used by consumers. Smulyan and Commonwealth Broadcasting President Steve Newberry pointed to broadcasters’ emergency alert function as a key reason radio functionality should be included, and activated, in mobile devices. Smulyan and Newberry also noted that FM chips could help relieve wireless broadband congestion, which is what is driving the FCC and Obama Administration to reclaim TV spectrum.

    During the hearing, the eight-member panel of representatives from broadcasting companies, record labels, songwriters, and the wireless industry also explored the issue of performance royalty taxes. Representatives Marsha Blackburn (R-TN) and Energy and Commerce Committee Ranking Member Henry Waxman (D-CA) said music artists are not fairly compensated by broadcast radio stations that air their songs without having to pay a performance fee to the artists or record labels. Witnesses Ben Allison of the National Academy of Recording Arts and Sciences; David Israelite, CEO of the National Music Publisher’s Association; and Cary Sherman, CEO of the Recording Industry Association of America suggested that broadcast radio stations should pay the same royalties to artists as Internet and satellite radio stations in order to resolve compensation issues. However, Subcommittee Chairman Greg Walden (R-OR) and Representatives John Shimkus (R-IL) and Joe Barton (R-TX) suggested that the recent agreement between Clear Channel Communications and Big Machine over performance fees proved that the issue could be solved without government intervention in the free market. Representative Gene Green (R-TX) added that radio broadcasts differ from Internet or satellite broadcasts in that they have a public interest, provide emergency alerts, and provide local programming. He also expressed concern that additional fees for broadcast stations would lead to reduced access to radio services for constituents in rural areas. Steven Newberry, CEO of Commonwealth Broadcasting Corp, told lawmakers that forcing broadcast radio stations to pay royalties would create an economic disincentive for such stations to continue broadcasting.
  • FCC, FTC Appropriations. A House Appropriations Subcommittee on Wednesday, June 6 passed the FY 2013 Financial Services and General Government Appropriations bill. No vote has been scheduled yet before the full committee. The bill provides annual funding for the Federal Communications Commission (FCC) and Federal Trade Commission (FTC) among other agencies. The bill includes a total of $21.15 billion in funding for these agencies, which is $376 million below last year’s level and $2 billion below the President’s request. Compared to FY 2010, the last year of Democrat control of Congress, the bill cuts $3 billion, or nearly 13 percent. When adjusted for inflation, the legislation is virtually equal to the 2008 funding level. The bill contains $323 million for the FCC – a cut of $17 million below last year’s level. The bill provides $285.5 million for the FTC, which is $26 million below last year’s level.
  • Cybersecurity. A bipartisan group of national security experts sent a letter to Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R-KY) urging swift action on cybersecurity legislation and writing that “protection of our critical infrastructure is essential in order to effectively protect our national and economic security from the growing cyber threat.”

    Michael Chertoff, former U.S. Secretary of Homeland Security; Vice Admiral Mike McConnell, former Director of National Intelligence; Paul Wolfowitz, former Deputy U.S. Secretary of Defense; General Michael Hayden, former Director of the Central Intelligence Agency; General James Cartwright, retired vice chairman of the Joint Chiefs of Staff; and William Lynn, former Deputy U.S. Secretary of Defense, expressed their belief that performance standards for critical infrastructure are an essential component of any cybersecurity legislation.
    “Infrastructure that controls our electricity, water and sewer, nuclear plants, communications backbone, energy pipelines and financial networks must be required to meet appropriate cybersecurity standards. Where market forces and existing regulations have failed to drive appropriate security, we believe that our government must do what it can to ensure the protection of our critical infrastructure,” the group wrote.

    Since early 2009, Senator John D. (Jay) Rockefeller IV (D-WV) has been working on cybersecurity legislation that creates a partnership between the private sector and the federal government to protect our country from threats to critical infrastructure. The Cybersecurity Act of 2012, S. 2105, introduced by Senators Rockefeller, Lieberman, Collins, and Feinstein, would give the Department of Homeland Security authority to collaborate with the private sector to establish minimum security standards for the systems that control the nation’s most critical infrastructure.

REGULATORY ACTIVITY

  • Spectrum. Robert McDowell, a Republican member of the Federal Communications Commission (FCC), urged the White House on Thursday, June 7 to free up more radio spectrum for commercial use. In a speech, McDowell urged the “White House to demand that Executive Branch agencies redouble their efforts to find spectrum to bring to auction by a date certain.” In March, the National Telecommunications and Information Administration (NTIA) proposed sharing certain spectrum bands between government and commercial users. But McDowell argued that federal agencies did not provide NTIA with sufficient data about how they use the airwaves. McDowell also said “sharing” is an “amorphous” term and warned there could be interference problems and other complications with the plan.

Transportation

LEGISLATIVE ACTIVITY


  • SAFETEA-LU Reauthorization. Conference negotiations escalated this week with the exchange of offers and counter-offers between the House and Senate and the June 30 deadline looming. Events were punctuated this week when Speaker Boehner (R-OH) stated his view during a press conference that, if an agreement is not reached by June 30, there should be a six-month extension into the lame duck session versus further short-term extensions. This prompted EPW Chairman Barbara Boxer (D-CA) to reply that all attention should be focused on meeting the June 30 deadline, and House Chairman John Mica (R-CA) also interpreted the Speaker’s remarks as upping the pressure to reach a deal soon. The House has now sent counter-offers on two of the most controversial issues (Transportation Enhancements and NEPA streamlining) and is awaiting a Senate response. Progress on these issues in particular will be telling as to the prospects for a near-term deal. Many observers believe that if positive progress is made in these negotiations than, while simple timing constraints may prevent completing work by June 30, a shorter-term extension is possible allowing Congress time to continue its positive progress and complete work before the August recess or perhaps upon its return in September. At the same time, however, major issues remain outside of these exchanges, including the Keystone Pipeline, Coal Ash provision and financing issues that are likely to be decided at a Leadership level. Nonetheless, the progress on the House and Senate counter-offers on these transportation policy issues will be very telling and is expected to lead to calls from Committee and Conference leaders as to the next steps and way forward.
  • House and Senate Counter Offers. While a range of issues remain in dispute, the highest-profile offers and counteroffers (on transportation policy and funding issues) have been on the controversial subjects of Transportation Enhancements and NEPA streamlining. In the Senate-passed MAP-21, the treatment of Transportation Enhancements was reformed by ending the mandatory set aside for specific enhancement projects (such as bicycle and pedestrian projects) and instead creating a reserve fund that states have to sub-allocate to MPOs and compete out to local governments for a broader range of eligible projects. The House counter-offer would allow states to opt-out of this arrangement, which is a key change as it gives states control on an issue framed by its supporters as about local control. There are very strong and organized constituencies behind the Senate language that are likely to be fully opposed to the House offer, but for House Republicans, the enhancements issue is a fundamental ideological and policy issue that confronts squarely what our national investment priorities are. The House has also sent a counter-offer on the NEPA streamlining issue, another core issue for House Republicans. Less detail on the NEPA streamlining proposals have been made public.
  • Other Key Conference Issues. While the Senate sent over an offer covering the highway, transit and commerce titles, no offer has yet been exchanged on the financing title. Finance leaders have said in part they are waiting for how much revenue they need to raise based on the final duration of the bill. However, core disagreements also exist between the House and Senate on the specific revenue offsets. Majority Leader Reid (D-NV) entered into the financing foray this week when he sent a letter to Speaker Boehner and Minority Leader Mitch McConnell (R-KY) proposing to use revenues from various public pension reforms to finance both the student loan interest rate bill and part of the transportation bill. No progress has been reported on the Keystone Pipeline issue, although it is expected that if resolved it will be through final negotiations at the Leadership level and with White House involvement.
  • Transportation Appropriations. The House Appropriations Subcommittee on Transportation-Housing and Urban Development (THUD) approved its draft Appropriations bill on Thursday, June 7, with the full Appropriations Committee planning to mark up the bill when the House returns to work from its week-long recess. The Senate Appropriations Committee previously approved its THUD spending bill in April. The House bill provides $51.6 billion for the Departments of Transportation and Housing and Urban Development, while the Senate bill includes a slightly higher level of funding, totaling $53.4 billion. While the Senate bill maintains $500 million in funding for the TIGER program and $50 million for the Sustainable Communities Initiative, the House draft bill contains no funding for either of these programs. Both bills continue obligation limits for federal-aid highways and transit formulas out of the Highway Trust Fund at FY 2012 levels but this funding is contingent on the results of the conference negotiations on the reauthorization bill. Given the uncertainty surrounding the reauthorization negotiations, it is possible that the funding levels in the THUD Appropriations bills will be adjusted.