Capital Thinking Update - March 14, 2011

    View Authors 14 March 2011

    Budget, Appropriations

    • Senate Rejects Continuing Resolutions. As expected, on Wednesday, the Senate procedural votes on H.R. 1, the House-passed Continuing Resolution (CR), and the Senate alternative were both unsuccessful. H.R. 1 failed by a vote of 44 – 56, with three Republicans voting against the measure, and the Senate alternative failed by a vote of 42 – 58, with ten Democrats and one Independent voting against the measure.
    • Negotiations for Continuing Resolution Covering the Remainder of FY2011.  Following the Senate rejection of both CRs, Republican and Democratic leaders must now come up with a compromise that satisfies all factions of the strongly divided Congress. All agree spending must be reduced, but they have considerable ground to cover to come up with a consensus on how much to cut and from which programs to make such cuts. Additionally, some Members want to expand the negotiations to cover entitlements and taxes; there are also a number of controversial policy riders that many Members want to add to a long-term bill.
    • Another Short-term Continuing Resolution in the Works. This afternoon the House Appropriations Committee released a draft of another short-term CR. The three-week CR will further reduce current spending by $6 billion by terminating 25 programs and again reducing select program funding by the amount earmarked for each program in FY2010. As the current CR is set to expire March 18, this will allow enough time for the House and Senate to each consider and pass the extension next week.

     

    Education

    LEGISLATIVE ACTIVITY

    • Patent Reform. On March 8, the Senate overwhelmingly passed (95-5) a patent overhaul bill, which would transition the United States to the first-inventor-to file system, commonly used in the rest of the world. While some in academia worry that the new system could create a greater pressure on academics to publish more quickly in order to preserve their intellectual-property rights, the Senate rejected an amendment which sought to retain the current “first-to-invent” standard for obtaining a patent. The House has yet to vote on the measure, but Congressman Lamar Smith (R-TX), the Judiciary Chairman in that chamber, is drafting his version of the bill. Some House Members have voiced concerns over provisions in the Senate bill, including the “first to file” system, fee collection from the Patent Office and the “inter partes” review process for challenging the validity of issued patents.
    • For-profit Colleges. On March 10, the Senate HELP Committee held a hearing on the oversight of for-profit colleges, which consisted of a case study of Bridgepoint Education Inc. The for-profit company, based in San Diego, offers graduate and undergraduate programs online and at its two traditional campuses. Chairman Harkin criticized the company’s rate of student withdrawals and its student loan defaults, despite increased enrollment and profits over the same period. With the exception of Ranking Member Michael B. Enzi (R-WY), who appeared to make an opening statement, Republicans boycotted the hearing.
    • Campus Bullying. On March 10, the same day as the White House conference on bullying prevention, New Jersey Democrats, Senator Frank Lautenberg and Representative Rush Holt, reintroduced legislation which would require colleges and universities to recognize and include “cyberbullying” as a form of harassment in school policies. The measure would also provide programmatic funding for harassment-prevention initiatives.
    • ESEA Reauthorization. Congressional education leaders will continue to meet regularly with Administration officials over the next few months as they press forward to rewrite the No Child Left Behind law. During a meeting at the White House on March 10, all participants agreed to complete a reauthorization bill this year, which will include a “growth model” for measuring academic gains over the entire school year (instead of relying on proficiency exams), as well as stronger provisions for teacher and principal evaluation.
    • Upcoming Hearings. The following hearings are scheduled for next week:

                March 16 - The Senate HELP Committee will hold an organizational business meeting to consider subcommittee assignments and any pending nominations.

                The House Education and the Workforce Committee will hold three education hearings over the next week: 
                    March 15 - "Education Regulations: Burying Schools in Paperwork" for the K-12 Community
                    March 17 - "Education Regulations: Roadblocks to Student Choice in Higher Education"
                    March 21 - "Reviving our Economy: The Role of Higher Education in Job Growth and Development"

    REGULATORY ACTIVITY

    • Education Department Regulations. With Department of Education regulations on the “credit hour” definition and expansion of state authorization requirements set to take effect in July, higher education groups urged Congress this week to impose a one-year delay of the rules.

     

    Energy

    LEGISLATIVE ACTIVITY

    • Pipeline Safety. The House Energy and Commerce Committee is expected to hold hearings on efforts to improve pipeline safety laws, following a year that witnessed an oil pipeline leak in Michigan and a natural gas pipeline explosion in California. Although the Energy and Commerce Committee does not have principal jurisdiction, Chairman Fred Upton (R-MI) is expected to introduce legislation addressing financial spill penalties and regulations to promote technologies that better control pipelines in the event of an accident.
    • Nuclear. Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-NM) and Ranking Member Lisa Murkowski (R-AK), along with Senator Mark Begich (D-AK), have introduced legislation (S. 512) to advance development of small, scalable nuclear reactors (less than 300 megawatts). Figuring out a way to harness emission-free nuclear power is expected to play an important role in Congressional discussions to develop a “Clean Energy Standard,” particularly now that President Obama has urged Congress to enact legislation that would increase the percentage of electricity generated from clean energy sources to 80% by 2035.
    • Rising Oil Prices. As Gulf State Senators push bipartisan legislation that would grant a 1-year extension to leases impacted by the offshore moratorium following the April 2010 Deepwater Horizon disaster, some House Democrats are proposing legislation that would either penalize fuel price gouging or encourage the release of oil from the nation’s Strategic Petroleum Reserve to alleviate rising gas prices at the pump.
    • Congressional hearings. The Senate Energy and Natural Resources Committee will receive a classified briefing on Tuesday regarding cybersecurity and the nation’s critical electric infrastructure and will hold a hearing on Wednesday to examine global investment trends in clean energy technologies and the impact of domestic policies on that investment. The House Energy and Commerce Committee will hold a hearing on Wednesday to examine community and economic impacts of the “Obama Administration’s De Facto Moratorium in the Gulf of Mexico” as gas prices continue to rise.

    REGULATORY ACTIVITY

    • Onshore Oil/Gas Royalty Rates. The Interior Department is expected to complete a comprehensive study of onshore oil and gas royalty rates in coming weeks. Following criticism of the Interior Department’s handling of royalty collections and concerns by House Democrats that the American taxpayer is not receiving a fair investment return from private companies developing energy on public lands, Interior is also expected to begin a public rulemaking process to consider raising onshore oil and gas royalty rates in the near future.

     

    Environment

    LEGISLATIVE ACTIVITY

    • Greenhouse Gases. On Thursday, March 10, the House Energy and Commerce Committee, Subcommittee on Energy and Power voted favorably to report a bill that would prevent the Environmental Protection Agency (EPA) from regulating greenhouse gas emissions, including carbon dioxide. We anticipate that the full Energy and Commerce Committee and the House also will vote in favor of the legislation. However, we anticipate that the legislation will be met with significant opposition in the Senate and from the White House. Given that opposition, we do not anticipate that the legislation will become law.

    REGULATORY ACTIVITY

    • EPA’s Review of Federal Regulations. On Tuesday, March 15, the EPA will host a public listening session for citizens to provide input on EPA’s retrospective review of regulations as part of the Agency’s response to President Obama’s January 18, 2011 executive order, “Improving Regulation and Regulatory Review.” The executive order (EO) directs each federal agency to consider how best to promote retrospective analysis of rules that may be outmoded, ineffective, insufficient or excessively burdensome. Specifically, the EO calls on every agency to develop a preliminary plan, under which the Agency will periodically review its existing significant regulations to determine whether such regulations should be modified or repealed to make the Agency’s regulatory program more effective and or less burdensome. EPA’s public listening session will be held in Atlanta, GA. Written comments must be received on or before March 20, 2011.

      Electricity Generation. EPA has released two updated databases that provide information about potential health and environmental impacts of electricity generation. EPA’s Emissions and Generation Integrated Resource Database (eGRID) is a database accounting for emissions from almost all electric power generated in the United States. The tool is used to show impacts of electricity generation as well as benefits from reduced electricity demand. eGRID contains emissions information for nitrogen oxides (NOx) and sulfur dioxide (SO2) which contribute to unhealthy air quality and acid rain in many parts of the country. eGRID also contains emissions information for carbon dioxide (CO2), methane (CH4) and nitrous oxide (N2O), which are known greenhouse gases that contribute to climate change.

      EPA’s Power Profiler is also an updated online database that provides air emissions information by the type of electricity generation, such as coal or nuclear, in various regions of the country. By entering a zip code and selecting a utility, users can identify where their electricity comes from and what impact it has on air quality and the environment.

     

    Financial Services

    LEGISLATIVE ACTIVITY

    • House Addresses Government Housing Programs. On Thursday, March 10, the House voted 256 - 171 to terminate the FHA Refinance Program (H.R. 830). The program, which was allocated $8 billion through the Troubled Asset Relief Program (TARP), had only disbursed $50 million. On Friday, March 11, the House approved legislation (242-177) rescinding $1 billion that was authorized last year for a Housing and Urban Development (HUD) program that would provide emergency loans to unemployed homeowners facing foreclosure (H.R. 836). Next week, the House could vote on two additional measures which recently passed out of the House Financial Services Committee: a proposal to terminate the Home Affordable Modification Program (HAMP) (H.R. 839) and a bill to end the Neighborhood Stabilization Program, which makes grants to states and local governments to purchase and redevelop foreclosed and abandoned homes and residential properties (H.R. 861).
    • Bipartisan Covered Bond Legislation Introduced. On March 8, House Financial Services Subcommittee on Capital Markets and Government-Sponsored Enterprises Chairman Scott Garrett (R-NJ) and Ranking Member Carolyn Maloney (D-NY) introduced the United States Covered Bond Act of 2011 (H.R. 940). The legislation is designed to facilitate the creation of a domestic covered bonds market.
    • Senate Banking Committee Addresses Housing Finance. On Tuesday, March 15, the Senate Banking Committee, chaired by Senator Tim Johnson (D-SD), will hold a hearing titled, “The Administration’s Report to Congress: Reforming America’s Housing Finance Market.”  Witnesses will include Treasury Secretary Timothy Geithner and Housing and Urban Development Secretary Shaun Donovan.
    • House Oversight Subcommittee to Discuss Municipal Debt. On Tuesday, March 15, the House Oversight Subcommittee on TARP and Financial Services, chaired by Representative Patrick McHenry (R-NC), will hold the second in a series of hearings titled, “State And Municipal Debt: The Coming Crisis?”  Witnesses will include a Utah state senator, Moody’s Investors Services, Standard & Poor’s Public Finance Ratings Group and a scholar.
    • House Subcommittee to Review Consumer Financial Protection Bureau. On Wednesday, March 16, the House Financial Services Subcommittee on Financial Institutions and Consumer Credit, chaired by Representative Shelley Moore Capito (R-WV), will hold a hearing titled, “Oversight of the Consumer Financial Protection Bureau.”

    REGULATORY ACTIVITY

    • FDIC to Hold Open Meeting, Discuss Liquidation Authority. On Tuesday, March 15, the Federal Deposit Insurance Corporation (FDIC) will hold an open meeting to discuss an FDIC memorandum and approve for publication a notice of proposed rulemaking regarding the priorities and claims process under the orderly liquidation authority provisions of the Dodd-Frank Act.
    • FDIC to Hold Roundtable on Brokered Deposits. On Friday, March 18, the FDIC will host a roundtable to discuss brokered deposit restrictions with government officials, industry executives and other stakeholders.

     

    Health Care

    LEGISLATIVE ACTIVITY

    • 1099 Repeal. While both chambers have moved legislation to repeal the IRS 1099 reporting requirement included in the health reform law, disputes over offsets have temporarily stalled final approval of the bipartisan proposal. The Senate version would give the Administration the authority to redirect funds already appropriated for certain budget items that they no longer deem necessary. The House would tighten rules surrounding federal subsidies in health reform by requiring recipients to pay back more of those subsidies if it were determined that they received higher incomes than reported. The House offset has been unpopular with Senate Democrats who view the policy as harmful to consumers, but House Members are urging quick action.
    • Ways and Means Hearing. The House Committee on Ways and Means Health Subcommittee has scheduled a hearing on Tuesday, March 15 to examine the Medicare Payment Advisory Commission’s (MedPAC) annual March report to Congress on Medicare payment policies. The MedPAC report is expected to be released on Monday, with Chairman Glen Hackbarth presenting their findings to the Subcommittee on Tuesday.
    • Ways and Means Hearing. The House Committee on Ways and Means Chairman of the Subcommittee on Select Revenue Measures will hold a hearing on Wednesday, March 16 on the tax related provisions of H.R. 3, the No Taxpayer Funding for Abortion Act. H.R. 3 was considered and ordered reported by the House Judiciary Committee on March 3, 2011.
    • Finance Hearing. The Senate Committee on Finance will hold a hearing on Wednesday, March 16, on “Health Reform: Lessons Learned During the First Year.”
    • HELP Hearing. The Senate HELP Committee has scheduled a hearing for Thursday, March 17 to examine health insurance exchanges and ongoing state implementation of the Affordable Care Act.

    REGULATORY ACTIVITY

    • GME Regulations. On Friday, the Center for Medicare and Medicaid Services (CMS) released the interim final rule regarding hospitals' FTE Resident Caps for Graduate Medical Education Payment. The regulations implement section 203 of the Medicare and Medicaid Extenders Act of 2010 relating to the treatment of teaching hospitals that are members of the same Medicare graduate medical education affiliated groups for the purpose of determining possible full-time equivalent resident cap reductions. Comments must be received by 5:00 PM on April 13.
    • State Innovation Waivers. The Departments of Health and Human Services (HHS) and Treasury released a proposed rule detailing a process for approval of "State Innovation Waivers" under the Affordable Care Act. Starting in 2017, states that meet specified standards for providing comprehensive and affordable coverage without increasing the federal budget deficit may be exempted from major requirements of the law. Comments will be accepted for 60 days. President Obama endorsed model legislation introduced by Senator Ron Wyden (D-OR), the Empowering States to Innovate Act (S. 248), that would allow states to apply for waivers of certain health insurance coverage requirements (including requirements for the establishment of qualified health plans and health insurance exchanges) for plan years beginning on or after January 1, 2014. The law currently allows states to apply for such waivers beginning in 2017.
    • Physician Payments in Medicare. Last week, CMS sent a letter to MedPAC detailing the Agency's estimates for the CY2012 physician fee schedule update. It advises the Commission that the current statutory formula will result in a 29.5 percent cut in physician payments. The American Medical Association was quick to respond, calling for a permanent fix to the ongoing challenges of the sustainable growth rate formula and encouraged Congress to act now to find a solution.

    OTHER HEALTH NEWS

    • CBO Budget Options. The Congressional Budget Office released an analysis of budget cutting proposals that found more than $2.5 trillion in savings could be achieved by altering Medicare/Medicaid and other health-related policies. The proposals and attached savings include $88 billion over 10 years by adding a public option to health reform insurance exchanges that pays Medicare rates plus 5 percent and by allowing drug negotiations in the program ($62.4 billion) by placing caps on non-economic damages along with reforms to the medical malpractice system and $282 billion by repealing the individual mandate. The biggest savings would be achieved through changes to the Medicare and Medicaid programs, which include $181 billion over a decade by reducing the “floor” for the federal share of Medicaid payments from 50 percent to 45 percent, $287 billion over 10 years by converting the federal share of Medicaid payments for long-term care services into a block grant, $124.8 billion by raising the Medicare age to 67 and $650 billion by replacing the current .9 percent Medicare surcharge on higher-income taxpayers with a 1 percent tax on all earnings. Many of the proposals are not currently politically viable in the current climate, but the savings attached are certainly attractive to deficit hawks and will remain a part of ongoing discussions.
    • Court Challenges. The ruling of Judge Roger Vinson that the entire health reform law is unconstitutional in the challenge brought by the state of Florida, the National Federation of Independent Businesses (NFIB) and 26 states was officially appealed last week by the Obama Administration and will be heard by the 11th Circuit Court of Appeals in Atlanta. The Justice Department is requesting expedited review and asked the Court to agree that the opening brief be due April 18. The 26 states' response would be due May 18, and the Obama Administration's reply would be due on June 1.

     

    Tax

    LEGISLATIVE ACTIVITY

    • House Democrats Introduce Legislation to Extend BABs. On March 10, House Ways and Means Committee Democrats introduced the Building American Jobs Act of 2011 (H.R. 992) to extend the Build America Bonds (BABs). The legislation would extend the BABs program through 2012, but would reduce the subsidy rate to 32 percent in 2011 and to 31 percent in 2012.
    • Senate Delays Consideration of House 1099 Reporting Repeal. Senate Majority Leader Harry Reid (D-NV) has postponed bringing the House-passed bill to repeal the new Form 1099 rules (H.R. 4) to the Senate floor after Democrats failed to reach agreement on the measure. The bill was expected to come to the floor as early as March 10. Agreement on how to pay for the bill’s $24.7 billion cost has been a major issue in moving the bill forward. 
    • CBO Releases Policy Options Book. On March 10, the Congressional Budget Office released its biennial compilation of options for reducing the budget deficit, including over 100 policy ideas covering both revenues and spending. The largest revenue raisers included in the report include: imposing a 5 percent value-added tax; putting in place a cap-and-trade system for carbon emissions; and limiting the tax benefit of itemized deductions to 15 percent.
    • JCT to Elect Chairs for 112th Congress. Members of the Joint Committee on Taxation will elect a Chairman and Vice Chairman at a March 15 organizational meeting. 

    REGULATORY ACTIVITY

    • Guidance on International Tax Provisions. On March 8, Treasury indicated a likelihood that forthcoming guidance on the Foreign Account Tax Compliance Act (FATCA) will include changes to reflect taxpayer concerns about the mechanics for banks to identify and report U.S.-owned foreign accounts to U.S. tax authorities. Another notice on FATCA is expected to be introduced in the next several months.
    • IRS Issues Guidance on Exempt Health Insurance Entities under Section 501(c)(29). On March 10, the Internal Revenue Service issued guidance on tax-exemption requirements for qualified nonprofit health insurance issuers (qualified issuers) under Internal Revenue Code Section 501(c)(29). The notice set out five requirements an organization must meet to be a qualified issuer described in Section 501(c)(29).

     

    TechComm

    LEGISLATIVE ACTIVITY

    • Patent Reform. On March 8, following a week of debate, the Senate passed the America Invents Act (S. 23) by a vote of 95-5. President Obama expressed his support for the Senate’s action, calling the bill “the most significant patent reform in over half a century.” The bill’s lead sponsor, Senate Judiciary Committee Chairman Patrick Leahy (D-VT), stated that it “will improve patent quality and help to reduce patent application backlogs at the U.S. Patent and Trademark Office (PTO) [and] will transition the U.S. patent system to a first-inventor-to-file system, and ensure that the PTO has the funds necessary to process the backlog of more than 700,000 pending patent applications.” Judiciary Committee Ranking Member Charles Grassley (R-IA) added that the bill “helps keep America’s researchers, entrepreneurs, engineers and inventors in the driver’s seat in our global economy.” The final bill retains provisions permitting the PTO to keep all the fees it collects to assist with the patent application backlog, a shortage of examiners and outdated computer systems, as well as those to implement a system to base patent awards on which inventor is “first to file,” rather than the current “first to invent” criteria – a position supported by the Administration. The House is drafting its own patent reform legislation, with House Judiciary Committee Chairman Lamar Smith (R-TX) hinting that a “similar” bill may be introduced this month. In particular, Chairman Smith voiced support for both the first-to-file and post-grant review process provisions that “help[s] to reduce frivolous lawsuits filed by holders of weak or overbroad patents.” During a House Judiciary Subcommittee on Intellectual Property hearing last week, however, at least two witnesses expressed great concern about the impact of a “first to file” system. Scott Smith, Professor and Chair of the University of North Carolina at Charlotte’s Department of Mechanical Engineering and Engineering Science, told the Subcommittee that universities, small businesses and independent inventors benefit from “first to invent” over “first to file,” which he said favors organizations with large patent staff and a large funding base because the motivation is to file quickly and often.
      In other intellectual property (IP) news, Senator Amy Klobuchar (D-MN) said last week that she is working on an IP proposal with colleague John Cornyn (R-TX) that would increase "penalties for [pirated] video streaming to a felony." Senator Klobuchar said IP is a top priority for her, adding: "We are working with the Justice Department right now," and the legislation should be introduced "soon." The Senator also noted she is finalizing a cloud-computing measure with Senator Orrin Hatch (R-UT), which would be "launching soon."
    • Net Neutrality. On March 9, the House Energy and Commerce Subcommittee on Communications and Technology held its second hearing on a resolution of disapproval of the Federal Communications Commission’s (FCC) December 2010 net neutrality rules, H.J.Res. 37. The resolution was introduced under the Congressional Review Act, which allows Congress to pass a joint resolution to nullify agency regulations. The Act provides for expedited resolution consideration in the Senate, where it cannot be filibustered or amended. Following the hearing, the Subcommittee approved H.J.Res. 37 on a party-line vote of 15-8. The full Committee is expected to act on the resolution on Monday at 3:00 PM, and it potentially could pass the full House before the spring recess in mid-April. The Senate is not expected to act on a companion resolution introduced by Commerce Committee Ranking Member Kay Bailey Hutchison (R-TX) until this summer, at the earliest. President Obama has stated his intention to veto any such resolution.
    • Spectrum. Senate Commerce Committee Chairman Jay Rockefeller (D-WV) spoke on the Senate floor on March 10 in support of his public safety broadband bill. His floor statement took place nearly six months before the 10-year anniversary of the September 11, 2001 terrorist attacks. “With that historic date approaching, I think that it is important that we honor the tremendous bravery of all public safety officials. Our police. Our firefighters. Our emergency medical technicians. And the countless others who fought that day to keep us safe – and who work every day to protect us from harm," Chairman Rockefeller said. He urged colleagues to support his measure, which would reallocate the so-called D Block of 700 MHz spectrum to public safety agencies so that they can build a nationwide broadband network for first responders. "In short, this bill marries resources for first responders with good commercial spectrum policy. It can keep us safe – and help grow our economy," Chairman Rockefeller said, noting that the Administration supports the initiative. He also proposes to devote some of the proceeds from the voluntary auctioning of television broadcast spectrum to construction and operation of the public safety network. While broadcasters do not oppose incentive auctions, they are concerned that such auctions would not be truly voluntary. The FCC National Broadband Plan’s reference to new spectrum fees, broadcasters suggest, could be designed to force broadcasters to relinquish their licenses. Lawmakers are weighing several measures, including one introduced in the House by Homeland Security Committee Chairman Peter King (R-NY) and Ranking Member Bennie Thompson (D-MS) that also would dedicate the D Block to public safety purposes, but that would fund the nationwide broadband network with a share of proceeds from an auction of spectrum in the 1755-1780 MHz band.
    • Upcoming Hearings. The following hearings are scheduled for next week:
      • March 14– House Judiciary Intellectual Property, Competition and the Internet hearing: “Promoting Investment and Protecting Commerce Online: Legitimate Sites v. Parasites, Part I”
      • March 15– Senate Judiciary Committee hearing: “The Freedom of Information Act: Ensuring Transparency and Accountability in the Digital Age”
      • March 15– House Judiciary Courts, Commercial and Administrative Law Subcommittee hearing: “The Wireless Tax Fairness Act of 2011” - this bill is yet to be introduced.
      • March 15– House Homeland Security Border and Maritime Security hearing: “Strengthening the Border – Finding the Right Mix of Personnel, Infrastructure, and Technology”
      • March 16– Senate Commerce Committee hearing” “The State of Online Consumer Privacy.” “The hearing will kick off the 112th Congress’ deliberations on consumer privacy, an issue that is front and center on the Commerce Committee’s agenda,” according to Chairman Jay Rockefeller (D-WV).
      • March 16 – House Homeland Security Cybersecurity, Infrastructure Protection, and Security Technologies hearing: “Examining the Cyber Threat to Critical infrastructure and the American Economy.”

    REGULATORY ACTIVITY

    • Truth in Caller ID Act NPRM. On March 9, the FCC released a Notice of Proposed Rulemaking (NPRM) to implement the Truth in Caller ID Act signed into law on December 22, 2010. The Act is aimed at preventing caller ID “spoofing,” the practice of causing the telephone network to display a number on the recipient's Caller ID display which is not that of the actual originating station. Comments are due on April 18. Response comments are due May 3.