Capital Thinking Update - January 21, 2011

    View Author 21 January 2011

    General Legislative

    The House will reconvene on Monday, January 24, with legislative business beginning at 2:00 PM. The Senate will return from its early January recess on Tuesday, January 25.


    Health Care


    • House Committees Begin Health Law Replacement Activities. Shortly after approving H.R. 2, the Repealing the Job-Killing Health Care Law Act, the House approved H. Res. 9 instructing the committees of jurisdiction to report health legislation addressing 13 goals, including fostering economic growth, lowering health care premiums and expanding insurance coverage. An amendment offered by Congressman Jim Matheson (D-UT) was also approved adding overhaul of the current formula used to determine physician payments in Medicare to the list of directives. The resolution does not set a deadline for reporting legislation, but the Committees on Energy and Commerce, Ways and Means, Judiciary and Education and Workforce have indicated that they will move quickly to craft replacement legislation and oversight hearings. It remains unclear how broad the legislation will be or how the package will fare in the Senate, but the committee chairmen have committed to an open legislative process that will include hearings and open markups. Several priorities are already clear, including medical liability reform, allowing for the purchase of health insurance across state lines and a ban on the use of federal funds for abortion services.
    • Ways and Means Hearing. The House Committee on Ways and Means has scheduled a hearing for Wednesday, January 26: “The Health Care Law’s Impact on Jobs, Employers and the Economy.” The hearing will examine the economic and regulatory requirements established by the Affordable Care Act. It will explore the impact on jobs stemming from the new taxes and new federal regulatory requirements, and it will analyze the impact of the employer mandate on job creation.
    • HELP Hearing. The Senate Committee on Health, Education, Labor and Pensions will hold a hearing on Thursday, January 27, on the Affordable Care Act: “The Impact of Health Insurance Reform on Health Care Consumers.”


    • Exchange Grants. The Department of Health and Human Services announced the availability of additional grants to help states develop health insurance exchanges. This follows the release of $49 million in federal funds last summer to states for exchange start up costs. States are in various stages of development and are waiting for additional guidance regarding exchange design and regulations, but the additional availability of federal assistance is welcome news to many cash-strapped states.
    • Institute of Medicine. The Committee on the Review of the Food and Drug Administration is scheduled to meet Friday, January 28, to discuss the recommendations in the report, “Enhancing Food Safety: The Role of the Food and Drug Administration,” and the implementation of these recommendations. The discussion forum is expected to include presentations from the Food and Drug Administration, the Environmental Protection Agency, Department of Agriculture, Department of Homeland Security and representatives from industry and consumers.
    • Medicaid and CHIP Payment and Access Commission. MACPAC is scheduled to hold a public meeting on January 27-28.


    • State of the Union. While President Obama’s State of the Union address on Tuesday is largely expected to focus on issues related to the economy and job creation, we anticipate that he will draw on health care reform as a success highlight. As the Congress turns to repeal and replace activities, President Obama is expected to tout the benefits of health care reform, particularly changes that are already in effect, including insurance reforms assistance for Medicare Part D beneficiaries through the coverage gap that began this year.


    Financial Services


    • House Financial Services Committee Announces Subcommittee Leadership. The House Financial Services Democratic Subcommittee leadership for the 112th Congress was recently announced. The subcommittee leadership assignments are as follows:
      • Subcommittee on Capital Markets and Government Sponsored Enterprises: Scott Garrett (R-NJ), Chairman; Maxine Waters (D-CA), Ranking Member
      • Subcommittee on Domestic Monetary Policy and Technology: Ron Paul (R-TX), Chairman; William Lacy Clay (D-MO), Ranking Member
      • Subcommittee on Financial Institutions and Consumer Credit: Shelley Moore Capito (R-WV), Chairman; Carolyn Maloney (D-NY), Ranking Member
      • Subcommittee on Insurance, Housing and Community Opportunity: Judy Biggert (R-IL), Chairman; Luis Gutierrez (D-IL), Ranking Member
      • Subcommittee on International Monetary Policy and Trade: Gary Miller (R-CA), Chairman; Carolyn McCarthy (D-NY), Ranking Member
      • Subcommittee on Oversight and Investigations: Randy Neugebauer (R-TX), Chairman; Michael Capuano (D-MA), Ranking Member
    • House Oversight Committee to Hold First Financial Oversight Hearing. On Wednesday, January 26, the House Oversight and Government Reform Committee (Rep. Darrell Issa (R-CA), Chairman) will hold a hearing entitled, “Bailouts and the Foreclosure Crisis: Report of the Special Inspector General for the Troubled Asset Relief Program.” Witnesses will include Neil Barofsky, Special Inspector General of the Troubled Asset Relief Program (SIGTARP), and Treasury Acting Assistant Secretary for Financial Stability, Tim Massad. The hearing coincides with the release of the SIGTARP’s quarterly report to Congress.
    • House Financial Services Committee to Hold Hearing on Economic Activity and Job Creation. House Financial Services Committee Chairman Spencer Bachus (R-AL) announced the first hearing of the 112th Congress will be held on Wednesday, January 26. The hearing, called, “Promoting Economic Recovery and Job Creation: The Road Forward,” is expected to be one in a series of hearings to review issues frustrating small businesses and community banks and other ways Congress can spur the economy.


    • SEC Dodd-Frank Rulemaking Open Meeting. On Tuesday, January 25, the Securities and Exchange Commission will hold an open meeting to consider proposed rules relating to the implementation of the Dodd-Frank Act. Issues expected to be addressed include (i) rules which require shareholder advisory votes to approve the compensation of executives (“say-on-pay”), and the frequency of shareholder say-on-pay votes; (ii) rules regarding the definition of “accredited investor;” and (iii) rules under the Investment Advisers Act establishing reporting obligations for advisers to private funds.
    • CFTC Dodd-Frank Rulemaking Open Meeting. On Wednesday, January 26, the Commodity Futures Trading Commission (CFTC) will host its eleventh open meeting to consider proposed rules relating to the implementation of the Dodd-Frank Act. Issues expected to be addressed include (i) reporting by investment advisers to private funds and certain commodity pool operators and commodity trading advisors on Form PF (a joint proposal with the Securities and Exchange Commission) and (ii) amendments to compliance obligations for commodity pool operators and commodity trading advisors.
    • CFTC Technology Advisory Committee. The CFTC’s Technology Advisory Committee, chaired by Commissioner Scott O’Malia, is scheduled hold its quarterly meeting on Thursday, January 27. The meeting will address (i) disruptive trading practices and the CFTC’s new anti-manipulation rulemaking; (ii) high frequency trading, algorithmic trading and direct market access rules and best practices; (iii) swap execution facilities; and (iv) swap data repositories and real time reporting.
    • CFTC Staff Roundtable on Recordkeeping and Reporting. On Friday, January 28, the CFTC staff will hold a public roundtable to discuss issues related to swap data recordkeeping and reporting requirements. Issues to be addressed include (i) unique counterparty identification; (ii) unique product identification; (iii) unique swap identification; and (iv) master agreement library and portfolio data warehouse.


    • Jeffrey Immelt to Serve as White House Economic Adviser. On Friday, President Obama announced that Jeffrey Immelt, General Electric Co.’s chairman and chief executive officer, will head his outside panel of economic advisers, replacing former Federal Reserve Chairman Paul Volcker. Mr. Immelt will serve as the leader of the newly renamed President’s Council on Jobs and Competitiveness, previously referred to as the President's Economic Recovery Advisory Board.
    • FCIC Report Expected on January 27. The Financial Crisis Inquiry Commission (FCIC) will release its report on the causes of the financial crisis on Thursday, January 27. The report will include the results of the FCIC’s inquiry and the commission’s conclusions as to the causes of the financial crisis based on this inquiry.




    • Communications and Technology Priorities. House Energy and Commerce Committee Chairman Fred Upton (R-MI) recently announced his techcomm priorities for the year ahead. Key among them is introducing legislation that would direct the Federal Communications Commission (FCC) to auction spectrum for broadband deployment, a revenue raiser certain to garner support in a cost-cutting environment. Look for the legislation to include: incentive auctions that would allow licensees voluntarily returning spectrum to the agency to share in auction proceeds; commercial auction of the D-block, which the public safety community would prefer to see reallocated for their use; and return of government spectrum through relocation and more efficient use. Other key issues for the chairman include reforming the FCC regulatory process, which he described as “slow” and “less than transparent;” overseeing the broadband grants awarded by NTIA in the federal stimulus package; and reform of the Universal Service Fund (USF). Mr. Upton’s counterpart in the Senate, Commerce Committee Chairman Jay Rockefeller (D-WV), likewise announced his goals for the 112th Congress. Broadband deployment and USF reform top the list, as does oversight of the FCC and Federal Trade Commission. Protecting consumer information and privacy on the Internet, key issues for the chairman last year, continue to be highlighted in the year ahead. Also, expect the Chairman to focus on consumer fraud, including online billing issues and to support first responders in their efforts to secure public safety communications resources and spectrum, the latter of which is at odds with Chairman Upton’s approach to auction spectrum public safety wants.
    • Net Neutrality. GOP members of the House Energy and Commerce Committee announced their support of Verizon’s move last week to challenge the authority of the FCC to impose net neutrality rules the agency approved in December. Committee Chairman Fred Upton (R-MI) joined Reps. Greg Walden (R-OR) and Lee Terry (R-NE) in commending the move, noting that it is important to put “a check on an FCC that is acting beyond the authority granted to it by Congress. Between our legislative efforts and this court action, we will put the FCC back on firmer ground.” Verizon filed its lawsuit in the D.C. Circuit Court of Appeals, which last year rejected the FCC’s attempt to impose net neutrality rules. In a press release about its challenge, Verizon stated that “we believe this assertion of authority goes well beyond any authority provided by Congress and creates uncertainty for the communications industry, innovators, investors and consumers.”  Among the priorities on Chairman Upton’s legislative agenda are the nullification of the net neutrality rules through a resolution of disapproval under the Congressional Review Act. Such a measure requires a simple majority in both chambers and is filibuster proof in the Senate, but must be introduced with 60 days of official transmittal of the FCC rules. Upton also has promised a series of hearings on the impact Internet regulation would have on investment, innovation and jobs, as well as the FCC’s abuse of authority and process.
    • Regulatory Reform. The House Energy and Commerce Committee’s oversight subcommittee will hold a hearing on January 26 regarding President Obama’s plans to review all existing federal regulations. The Oversight and Investigations Subcommittee, chaired by Rep. Cliff Stearns (R-FL), will hear from one witness, Cass Sunstein, who heads the administration’s Office of Information and Regulatory Affairs. Under the president’s regulatory plan, the economic effects of existing regulations must be reviewed. New regulations are subject to a series of new standards.
    • Patent Reform. Senate Judiciary Committee Chairman Patrick Leahy (D-VT) is expected to reintroduce his patent reform bill during an executive meeting on January 27. In remarks recently, Leahy said he was encouraged that House Judiciary Committee Chairman Lamar Smith (R-TX) agrees that patent reform is “sorely needed.” Smith has named patent reform among his priorities and has created a new Subcommittee on Intellectual Property, Competition and the Internet, chaired by Bob Goodlatte (R-VA), to bring attention to speeding up the patent approval process and combating IP theft.


    • Comcast-NBCU Deal. The FCC, on January 18, gave the green light to Comcast’s proposed acquisition of NBC Universal (NBCU) by a 4-1 vote. Democratic Commissioner Michael Copps cast the dissenting vote, criticizing the merger for conferring “too much power in one company’s hands.” Although the merger was conditionally approved, many of the commitments were voluntarily offered by Comcast-NBCU early on in the FCC’s review, and the FCC’s approval is considered favorable. Attempts by industry stakeholders to strengthen the conditions largely went unheeded, leading some lawmakers to express displeasure. “The FCC’s action . . . is a tremendous disappointment,” said Senator Al Franken (D-MN), one of the merger’s most outspoken critics. “The commission is supposed to protect the public interest, not corporate interests. But what we see today is an effort by the FCC to appeal the very companies it’s charged with regulating.”  Meanwhile, Senate Commerce Committee Chairman Jay Rockefeller said, “I am very disappointed that the consumer protections were not stronger. . . . When communications companies swell to include both content and distribution, we have a responsibility to be sure consumers are not left with lesser programming and higher rates. Going forward, we will need to make certain that Comcast and NBC follow through on their commitments to quality news and children’s programming and also protect the development of online video competition.”
    • FCC Open Meeting. At its January 25 monthly open meeting, the FCC will consider an Order and Further Notice of Proposed Rulemaking (FNPRM) to create a nationwide interoperable public safety network. (This rulemaking will not address the allocation of the D-block spectrum.) Also on the docket is a presentation regarding the agency’s efforts to improve its decision-making process.




    • Tax Reform. On Thursday, the House Ways and Means Committee held its first in a series of hearings on tax reform. Committee Chairman Dave Camp (R-MI) has stated previously that he supports fundamental tax reform and, on Thursday, called for bipartisanship as the committee investigates the potential for reform. Ranking Member Carl Levin (D-MI) also called for bipartisanship and indicated that tax reform must be undertaken with the goals of helping to create jobs, promote fiscal responsibility and benefit working families. Thursday's witness panel included: Honorable Nina Olson, National Taxpayer Advocate; Robert McDonald, Chairman of the Board, President, and CEO of Proctor and Gable (testifying in his capacity as chairman of the Business Roundtable); Warren Hudak, President of Hudak & Company LLC; Kevin Hassett Ph.D., Senior Fellow & Director of Economic Policy Studies, AEI; and Martin Sullivan Ph. D., Contributing Editor, Tax Analysts. Discussion at the hearing focused on the complexity of the tax code, the high marginal and effective U.S. corporate tax rate as compared to other countries and the possibility of making any reform revenue-neutral. Committee members and panellists also debated whether converting the U.S. international tax regime to a territorial system would be beneficial, with Rep. Lloyd Doggett (D-TX) suggesting that conversion to a territorial system would be the equivalent of a permanent repatriation holiday.

      Tax reform will likely be addressed in the president's State of the Union speech next week, as well as in the administration's budget proposal.
    • Reform of Pension Laws. A Democratic Senate Finance staffer indicated this week that reform of pension laws will be an important part of the tax reform debate, as the tax benefits related to pension plans are among the largest expenditures in the tax code (such as the employer-provided health care exclusion). Elimination of the tax benefits afforded to pension plans could negatively impact employers and pension plans themselves.
    • Health care Tax Provisions. On January 20, House Ways and Means Committee Chairman Camp stated that the Committee will be examining provisions in the Patient Protection and Affordable Care Act. Camp specifically mentioned the Form 1099 reporting requirement and the mandate for insurance coverage as focus areas for the Committee.


    • Health care Law Requirements for Tax Exempt Hospitals. In a letter dated January 20, 2011, the ABA Section of Taxation and Health Law asked the IRS for clarification on new requirements imposed on tax exempt hospitals. These hospitals must comply with the new requirements in order to maintain their tax exemption. Specifically, the letter asks what the phrase “amounts generally billed” means, as it is the standard for limiting charges for patients qualifying for financial assistance. The technical explanation to the health care law indicates that the charges can be based on the best commercial rates, an average of the three best commercial rates or Medicare rates. As the authors of the letter have explained, these standards create potential problems for hospitals. The letter also addresses other requirements introduced by the health care law, which are included in the tax code under section 501(r). Clarification of the section 501(r) requirements will be important for the hospitals that must maintain their tax exemption.




    • Oil Spill Legislation. House Natural Resources Committee Chairman Doc Hastings (R-WA) indicated that he is willing to consider oil spill response legislation – provided that it includes industry incentives, such as opening new areas for offshore drilling, and does not impose new fees to pay for regulatory reforms.  Given the likelihood of other House oil and gas oversight hearings and initiatives from other committees, the oil and gas industry will have a friendlier platform to comment on new regulations and plans to tax the industry to pay for new regulatory initiatives.
    • EPA Emissions Regulations. Key House Republicans are considering legislation that would permanently revoke the Environmental Protection Agency’s ability to regulate greenhouse gas emissions. That effort, as with legislation pending to simply delay regulatory enforcement, stands little chance of becoming law since Congress would need to overcome a presidential veto with a two-thirds vote in both the House and Senate. However, bicameral legislative efforts, combined with House oversight hearings critical of the administration’s regulatory activities, could be an important factor in shaping future energy legislation. It is anticipated that President Obama will again address the environmental and job-related benefits of transitioning the nation to a clean energy economy, though stopping short of calling for enactment of comprehensive climate change legislation given the new focus on working toward a broader, bipartisan energy proposal. The House Energy and Commerce Committee has scheduled a Wednesday hearing to gather additional information from the White House on the president’s newly-proposed regulatory review executive order and how it might affect, among other things, EPA’s climate change agenda.


    • Offshore Drilling. Organizational reforms at the Bureau of Ocean Energy Management, Regulation and Enforcement will continue through the remainder of this fiscal year as the former MMS is formally divided into three separate regulatory agencies to handle revenue collection, offshore resource development and enforcing enhanced safety and environmental regulations. This reorganization does not go quite as far as the president’s Oil Spill Commission had recommended, which Interior officials believe would require congressional action. Interior is also establishing a new Offshore Energy Safety Advisory Committee as a “first step” in creating an Ocean Energy Institute proposed last fall. The permanent committee, for which nominations will be publicly solicited, will institutionalize technical expertise and provide advice on offshore drilling safety, well containment and spill response. Interior is also expected to issue non-emergency rulemakings on future safety measures, such as next generation subsea containment equipment and workplace safety reforms to provide further industry guidance and clarity on what must be done to resume meaningful deepwater drilling activities.
    • Regulatory Review. President Obama issued a new, government-wide regulatory review framework by executive order on Tuesday, directing certain federal agency rulemakings (including EPA’s greenhouse gas rules) to undergo additional cost-benefit analyses. As announced by the president, the goal is to reduce overly burdensome regulatory requirements for industry, particularly small businesses, by ensuring that rules are “cost-effective, evidence-based regulations that are compatible with economic growth, job creation and competitiveness.”  It is anticipated that independent regulatory agencies – such as the Federal Energy Regulatory Commission and the Nuclear Regulatory Commission – will adopt the spirit if not the terms of the directive. (The president by law cannot order independent regulatory agencies to adopt a specific approach to reviewing proposed and existing regulations, but we have little doubt that they will do so on a voluntary basis.) Still, industry groups may cite this executive order in efforts to challenge the administration on rulemakings they believe are unreasonable or overly burdensome to compete globally and press regulators to be more transparent in the development and implementation of regulatory standards.




    • Review of BP Deepwater Horizon Oil Spill Report. On Wednesday, the Senate Committee on Energy and Natural Resources intends to hold a hearing to review the report and recommendations by the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. The commission was established by the president by executive order on May 21, 2010 to examine the root causes of the Deepwater Horizon explosion and to develop options to guard against oil spills associated with offshore drilling in the future. The report includes recommendations to Congress concerning improvements to federal laws, regulations and industry practices.

      Should Congress decide to take up and pass the recommendations of the commission, conservation groups may lend their support for proposals that favor more review and safety measures surrounding deepwater drilling operations, while the deepwater drilling industry may take issue with new regulations being proposed on top of those that have already been set in place since the incident. As such, deepwater drilling may advocate for those regulations to be taken into consideration before new regulations are added. Currently, under the new regulations governing the Bureau of Ocean Energy Management, Regulation and Enforcement, expectations for new permit approvals from Interior are anticipated within the first half of the year.
    • Aftermath of the Deepwater Horizon Oil Spill. On Thursday, the Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Disaster Recovery intends to hold a hearing entitled, “Gulf Coast Recovery: An Examination of the Claims and Social Services in the Aftermath of the Deepwater Horizon Oil Spill.”  Such hearings could lead to the formation of legislation to improve the claims process in order to benefit to those business and residents disadvantaged by the BP oil spill.
    • Oil Spill Commission Report. Also on Wednesday, the two co-chairmen, William Reilly and Bob Graham of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, will testify before the House Natural Resources Committee. Chairman Doc Hastings (R-WA) has recently stated that he may consider legislation to lift the current deepwater drilling moratorium that is still in effect for the eastern portion of the Gulf of Mexico. Such legislation would likely be protested by environmentalists and benefit the deepwater oil drilling industry.


    • Revision to Construction and Development Effluent Guidelines. Of interest to local, state and federal government entities, the EPA has issued a Notice of Public Rule Making (NPRM) concerning a revision to the Effluent Guidelines and Standards for the Construction and Development Industry. The rule requirements control the discharge of pollutants from construction sites and require construction site owners and operators to implement a range of erosion and sediment control measures and pollution prevention practices. This action affects not only the effluent guidelines, but also Construction General Permits to be issued by EPA and by states. This action is intended to address an error that was identified in the Effluent Limitations Guidelines for the Construction & Development Point Source Category. This rule contains a numeric effluent limit for turbidity, based on the application of passive treatment technology. Based on EPA's examination, current data does not support the new effluent limit. EPA intends to propose a correction rule for public comment and then take final action on a revised limitation.


    International, Defense, Homeland Security

    • RSC’s Proposed Foreign Assistance Cuts Substantial, Not Surprising. The 165 conservative House members in the Republican Study Committee (RSC) have proposed to cut the always-vulnerable budget of the U.S. Agency for International Development (USAID) by $1.39 billion annually. The entire administrative budget of USAID is $1.65 billion per year in fiscal year 2010, although some of the proposed reductions obviously would come from USAID’s separate programmatic budget for foreign assistance programs. The RSC has also targeted other aspects of the international affairs budget, including economic assistance for Egypt, the International Fund for Ireland, the Woodrow Wilson Center and the U.S. Trade Development Agency. Cuts to State Department administrative costs may be on the table as well. While the RSC’s proposals are highly unlikely to survive the Senate intact, they will find a generally receptive audience among House Republican leaders on foreign policy. House State Department/Foreign Operations Appropriations Subcommittee Chairwoman Kay Granger (R-TX) is an RSC Member. House Foreign Affairs Committee (HFAC) Chairwoman Ileana Ros-Lehtinen (R-FL) is not, but the Congresswoman already had expressed her desire to reduce the administrative and foreign aid spending of the State Department. House Majority Leader Eric Cantor (R-VA), a former HFAC Member, also has gone on record as favoring elimination of foreign assistance to countries whose interests and worldviews, in Congressman Cantor’s opinion, do not mesh with those of the United States. The RSC’s proposals, and leadership’s generally receptive reactions to them, are not at all surprising. USAID’s foreign aid budget, of course, has few domestic constituents to help defend it. Moreover, many Republican members tend not to trust the State Department’s worldview even during Republican administrations, much less under President Obama and Secretary Clinton. Compromise discussions on more targeted cuts likely lie ahead.
    • Trade Developments. House Ways and Means Committee Chairman Dave Camp (R-MI) has scheduled a full committee hearing for Tuesday, January 25 on the pending Free Trade Agreements (FTAs) with Korea, Panama and Colombia. The Ways and Means Committee’s hearing announcement focused much more on the potential trade benefits with Colombia than on those with Korea, despite the significantly larger Korean market and the currently broader level of U.S. political support for the Korea FTA (KORUS). Analysts suggest that many House Republicans, notably including Chairman Camp and Ways and Means Trade Subcommittee Chairman Kevin Brady (R-TX), are attempting to generate leverage versus the administration regarding the Colombia and Panama FTAs, given the currently more advanced standing of KORUS in the eyes of the White House. Nevertheless, potential House Republican leverage on KORUS remains somewhat limited, as President Obama submits each FTA to Congress separately and under the schedule he sees fit for consideration under “fast track” procedures. The President is expected to provide some more details with regard to the administration’s anticipated schedule, at least for KORUS, and likely with some reference to future discussions on the Panama and Colombia FTAs, during his State of the Union speech on Tuesday.
    • Middle East Developments. Despite President Obama’s supportive words for the Tunisian people following the toppling of former President Ben Ali last week, Tunisia’s student- and dissident-led pro-democracy movement remains suspicious of U.S. motives in the country. The Bush and Obama administrations were strong supporters of Ben Ali’s efforts on counter-terrorism, so the White House and State Department now are charged with demonstrating to the Tunisian people the administration’s belief that increased pluralism will in fact assist Tunisia’s efforts to deter extremism. Meanwhile, Lebanon, Saudi Arabia, Turkey and other U.S. allies have curtailed their efforts to help mediate between pro-Western Prime Minister Hariri and Hezbollah. A Hezbollah-led, Syrian-supported government for Lebanon looks increasingly possible.
    • East Asia Developments. Most commentators view Chinese President Hu Jintao’s visit to the United States as a success for the Obama administration. Some observers remain concerned about Senate Majority Leader Harry Reid (D-NV) and Speaker of the House John Boehner (R-OH) deciding not to attend Wednesday’s state dinner, but from both the White House and China’s perspective, the decisions were not altogether surprising. Human rights advocates generally view President Obama and President Hu’s exchange as a positive, albeit tentative, step. Both sides continue to disagree on next steps regarding Iran and North Korea, although President Hu joined President Obama in welcoming the decision by North and South Korea to hold bilateral talks.