DOMESTIC POLICY MATTERS

The Fiscal Cliff Compromise. With Vice President Joe Biden and Senate Minority Leader Mitch McConnell (R-Kentucky) stepping in over the weekend to lead negotiations, a deal on the “fiscal cliff” was reached late Monday. The Senate rang in the New Year with a vote on a compromise measure, The American Tax Relief Act of 2012, early Tuesday morning, passing it by a vote of 89-8. Despite reservations by some conservative House Members that the bill raises some income tax rates and lacks sufficient spending cuts and concerns by some liberals that the White House gave up too much ground on new revenues from upper-income tax brackets, the House passed the measure (257-167) later on Tuesday, with 172 Democrats and 85 Republicans voting in favor of the deal. On Wednesday, President Obama authorized the bill to be signed into law by autopen. The compromise fiscal cliff measure extends Bush-era tax cuts for households making less than $450,000 and individuals making less than $400,000 annually (effectively raising tax rates for those with higher incomes), delays automatic spending cuts under sequestration for two months, cancels pay raises for Members of Congress, and changes a number of tax and spending provisions – notably including a one-year payment patch for physicians who treat Medicare patients, an extension of unemployment benefits, a raising of the top estate tax rate from 35% to 40%, and an extension for an expiring dairy policy to avert a sharp increase in milk prices. However, the measure does not address the debt limit or entitlement reform in any significant way, setting up policy debates early in the 113th Congress. Congressman Jim Moran (D-Virginia), who voted against the deal, suggested on Tuesday that the legislation sets up “three fiscal cliffs,” referring to the impending debt ceiling extension debate, the new March 1 sequestration deadline, and the March 27 expiration of funding for government programs under the current Continuing Resolution. Meanwhile, Treasury Secretary Tim Geithner signaled again this week that he plans to leave the Administration within the month.

Hurricane Sandy Aid. After the Senate passed a $60 billion Hurricane Sandy disaster recovery package last week, House Republicans announced Tuesday they would not vote on the legislation in the 112th Congress. However, following bipartisan criticism from Northeastern lawmakers, House Republican leaders announced they would vote on disaster recovery aid in two installments in the 113th Congress, authorizing (by a 354-67 margin) $9.7 billion in additional borrowing by the National Flood Insurance Program (NFIP) on Friday and scheduling a vote on the remainder of President Obama’s supplemental disaster relief request on January 15. The Senate then cleared the NFIP measure by voice vote Friday and sent it to the President.

On Thursday, the 112th Congress retired, and the 113th Congress convened. The White House promptly released a statement announcing the re-nomination of thirty-three individuals whom the President previously nominated for federal judgeships in the 112th Congress and urged the Senate to consider and confirm them without delay. The House passed its rules package for the new Congress Thursday, which includes maintaining a ban on earmarks, requiring appropriations bills to include a “spending reduction account”, and replacing the House’s “pay-as-you-go” rule with a “cut-as-you-go” rule. Also on Thursday, the Federal Trade Commission announced it has reached a settlement with internet search company Google that requires the company to stop using certain smartphone patents to block products from its competitors but refuses to conclude that Google’s search techniques have harmed competition. On Thursday, the Department of Justice announced that rig owner Transocean will pay a $1.4 billion fine for its role in the 2010 Gulf of Mexico oil spill. The Department of Labor announced Friday that the U.S. economy added 155,000 jobs in December, slightly more than most economists had predicted, while the unemployment rate stayed at 7.8 percent.

Political News. Senator Mike Crapo (R-Idaho) pled guilty to a drunken driving charge this week. On Sunday, the Senate confirmed Carol Galante to lead the Federal Housing Administration. On Monday, House Appropriations Chairman Hal Rogers (R-Kentucky) announced the Chairs of the twelve Appropriations Subcommittees for the 113th Congress. New Subcommittee Chairmen include Agriculture Chair Robert Aderholt (R-Alabama); Financial Services Chair Ander Crenshaw (R-Florida); Homeland Security Chair John Carter (R-Texas); Labor, Health and Human Services, and Education Chair Jack Kingston (R-Georgia), and Legislative Branch Chair Rodney Alexander (R-Louisiana). The Senate on Tuesday confirmed Michael Huerta to be Administrator of the Federal Aviation Administration, William Doyle to be a Federal Maritime Commissioner, and James Demers and Naomi Walker to serve on the Board of Directors of the Overseas Private Investment Corporation. On Wednesday, Governor Nikki Haley signed an executive order setting a May special election to fill the former House seat of appointed Senator Tim Scott (R-South Carolina). Also on Wednesday, House Oversight and Government Reform Committee Chairman Darrell Issa (R-California) announced local Washington, DC-related legislation will be handled at the full committee level rather than through a subcommittee. Speaker of the House John Boehner (R-Ohio) formally won reelection to a second term as Speaker on Thursday, surviving defections by twelve Republicans who either abstained or voted for someone else. House Minority Leader Nancy Pelosi (D-California) suffered eight defections by Democratic House Members. Meanwhile, following the addition of 400,000 accepted provisional votes from New York, the tally in the 2012 Presidential race now stands at 65.9 million votes (51.1%) for President Obama and 60.9 million votes (47.2%) for Republican nominee Mitt Romney. President Obama is the first President to win at least 51% of the vote twice since President Dwight Eisenhower was re-elected in 1956.

FOREIGN POLICY MATTERS

After a blood clot was discovered in her head last Sunday evening, Secretary Clinton was hospitalized and placed on blood thinners. The Secretary was released Wednesday from a New York hospital and is expected to return to her office in Washington next week. However, her doctors have forbidden any international travel.

A Senate Homeland Security and Governmental Affairs Committee investigation into the attack of the U.S. Consulate in Benghazi, Libya released its findings Sunday. The report spreads responsibility beyond the State Department and finds fault with the intelligence community for the confusion surrounding the description of the attack. Senator Collins said: “The Administration must re-evaluate its budget priorities, and since the Benghazi attack, Secretary Clinton is undertaking such a review. She has asked to reprogram $1.4 billion of the FY13 budget request [toward security] to jump start this effort.”

President Obama rejoined his family in Hawaii early Wednesday morning, where he later signed into law H.R. 4310, the National Defense Authorization Act for Fiscal Year 2013. With his signing statement, the President signaled he will interpret some provisions – such as whistleblower language and detainee language restrictions – to ensure they do not impede on what the White House considers his powers as Commander-in-Chief or his ability to conduct diplomacy. The President’s objections include provisions requiring the Administration to consult Congress on a bilateral security agreement with Afghanistan and one that continues limitations on the use of funds for Afghan security forces.

Syria. Last Saturday, Secretary Clinton spoke with U.N.-Arab League Special Envoy Lakhdar Brahimi, discussing his most recent visit to Syria. The UN said Wednesday the estimated death toll for the Syrian conflict has reached 60,000. On Friday, U.S. troops reportedly arrived in Turkey to man NATO-deployed Patriot missile defense batteries near Syria. This week, Hezbollah leader Hassan Nasrallah urged the Lebanese government Thursday to take a more active role in finding a political solution to the Syrian civil war.
On Monday, Iran successfully test-fired a newly upgraded missile system near the Strait of Hormuz, as part of its naval exercises that concluded Wednesday. Iranian authorities issued an edict Wednesday ordering Isfahan’s 1.5 million residents to leave the city because pollution in the area “has reached emergency levels.” While Isfahan is also the site of a nuclear facility, Iranian officials disputed reports of a possible radiation leak.

North Korean leader Kim Jong Un gave a New Year’s speech in which he promoted a potential North-South reconciliation. In response Wednesday, the State Department said North Korea’s actions taken just before Christmas (namely test-firing a long-range missile) and its non-compliance with international obligations are the actions of a country whose leader is further isolating and impoverishing his country.

The State Department issued a statement on New Year’s Eve, calling on the rebel alliance in the Central African Republic to cease its hostilities and its movement towards the capital of Bangui, and also asking the government and the rebels to ensure the safety of the civilian population. After several protests in Iraq this week – largely Sunnis protesting against the Shia-led government in Baghdad – the State Department said the United States respects the rights of people to protest peacefully. The State Department expressed concern Wednesday over reports of “Egyptian Government efforts to restrict media freedom and criticism within Egypt….” Thursday, Venezuelan officials reported President Hugo Chavez is struggling with a lung infection following his recent cancer surgery, calling into question whether he will be well enough to return from Cuba to attend his inauguration Thursday. In Yemen on Sunday, Al Qaeda in the Arabian Peninsula issued a bounty for anyone who kills U.S. Ambassador Gerald Feierstein or a U.S. soldier in the next six months, leading the State Department to say it takes the threat seriously.

On Monday, the House cleared a bill (H.R. 6029) that will increase penalties for those engaged in economic espionage, sending the bill to President Obama for his possible signature. Outgoing House Judiciary Chair and bill sponsor Lamar Smith (R-Texas) said Congress should “provide appropriate punishment” for criminals who target U.S. economic and security interests on behalf of foreign interests.

Topics:  Al-Qaeda, American Taxpayer Relief Act, Bush-Era Tax Cuts, Department of State, DHS, Fiscal Cliff, Hillary Clinton, Hurricane Sandy, Income Taxes, NATO, NDAA

Published In: Administrative Agency Updates, Elections & Politics Updates, Finance & Banking Updates, International Trade Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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