Capital Thinking Update - July 11, 2011

    View Authors 11 July 2011

    General Legislative
    On Monday, July 11, the House comes in at 12 p.m. for morning hour. Beginning at 2 p.m. the House will resume consideration of H.R. 2354, the Energy and Water Appropriations Act, 2012. The Senate will convene at 2 p.m. on Monday and resume consideration of S.1323, a bill to express the sense of the Senate on shared sacrifice in resolving the budget deficit, with the time until 5:30 p.m. equally divided and controlled between the two leaders or their designees. At 5:30 p.m., the Senate will conduct a roll call vote on the motion to proceed to S.1323.



     

    Budget, Appropriations

    LEGISLATIVE ACTIVITY

    • Senate Considers Non-Binding Deficit Reduction Motion. On Thursday, the Senate began consideration of a non-binding “Sense of the Senate” measure expressing that “any agreement to reduce the budget deficit should require that those earning $1 million or more per year made a more meaningful contribution to the deficit reduction effort.” Republicans will counter with amendments which focus on spending cuts.
    • Senate Budget Resolution. Senate Budget Committee Chairman Kent Conrad (D-ND) presented his FY2012 budget proposal to Democratic leaders and the White House with a positive response. The proposal will reportedly reduce the deficit by $4 trillion over 10 years through spending cuts and revenue increases, including $1 trillion generated through the cessation of tax breaks. Chairman Conrad continues to hold off on a public release or Committee markup of the bill pending progress of the ongoing deficit reduction negotiations so that the resolution can be modified to serve as a vehicle for a budget/deficit reduction deal. Senate Appropriators’ work for FY2012 also remains on hold pending the negotiations and passage of a budget resolution.
    • House Appropriations Activity. The House will continue to work on its FY2012 Appropriations bills this week. Upon returning from its July 4th recess, the House Appropriations Subcommittees for Commerce-Justice-Science, Interior-Environment, and the Legislative Branch approved their respective FY2012 spending bills on July 7; all are tentatively scheduled for full committee markups this week. Additionally, the full House passed the FY2012 Defense Appropriations bill on July 8 and is expected to take up the FY2012 Energy and Water bill next week.

    OTHER BUDGET, APPROPRIATIONS NEWS

    • High Level Deficit Reduction Efforts Continue. Negotiations on a deficit reduction package and an increase in the debt ceiling remain at the forefront for the Administration and Congressional leaders. With an August deadline to raise the debt limit quickly approaching, three options are being considered: a short-term debt limit increase to allow more time for negotiation; a deal equaling approximately $2.5 trillion in deficit reduction over 10 years; or a $4 trillion deal. President Barack Obama threatened to veto a short-term deal and is instead pushing for a $4 trillion deficit reduction over 10 years.

      President Obama, Vice President Biden, White House officials and top Congressional leaders held what was described by both parties as a “productive” meeting on Thursday. Staffers will work through the weekend in anticipation of another meeting on Sunday. Congressional participants include: Senate Majority Leader Harry Reid (D-NV); Senate Minority Leader Mitch McConnell (R-KY); Senate Majority Whip Richard Durbin (D-IL); Senate Minority Whip Jon Kyl (R-AZ); House Speaker John Boehner (R-OH); House Majority Leader Eric Cantor (R-VA); House Minority Leader Nancy Pelosi (D-CA), and House Minority Whip Steny Hoyer (D-MD).

      While the parties remain divided over how to handle entitlements and taxes, those positions eased somewhat on Thursday with the White House indicating it would consider adjustments to Social Security and Medicare/ Medicaid, and Republicans seemed willing to discuss a tax revenue of $1 trillion over 10 years, with the understanding that tax reform legislation would be addressed in the very near future. A $4 trillion agreement cannot be reached without both entitlement changes and tax revenue. However, it is unclear how party leaders will garner the 218 House votes and 60 Senate votes required to approve an agreement including such provisions. Progressive Democrats continue to express their opposition to entitlement cuts, most Republicans remain opposed to any deal that includes tax increases and several Senate Republicans vow to oppose a debt limit increase unless Congress passes a Constitutional balanced-budget amendment.

    Education

    LEGISLATIVE ACTIVITY

    • ESEA Reauthorization. On July 5, the Committee on Education and Workforce Chairman, John Kline (R-MN), cited to a newly released report by the Congressional Research Service (CRS) in raising legal concerns with Secretary Arne Duncan’s waiver proposal. In June, Secretary Duncan proposed to grant conditional waivers of Elementary and Secondary Education Act (ESEA) requirements in exchange for new reform requirements. Although the report states that Secretary Duncan’s authority to waive requirements “appears very broad,” the authority to grant waivers in exchange for implementation of alternative reforms remains unclear. On June 23, the Committee sent a letter to Secretary Duncan asking for more information about the Department’s recent waiver proposal by July 1. According to Chairman Kline, the Secretary has yet to respond.

      On July 7, Chairman Kline announced that the Committee will consider the State and Local Funding Flexibility Act as the third bill under the reauthorization of ESEA. The Act shifts federal authority to states and school districts in deciding the use of federal education funds. The Act aligns with the Committee’s efforts to restrict the federal government’s role in the educational system.
    • Hearings. The House Education and Workforce Subcommittee on Higher Education and Workforce Training held a joint hearing with the House Committee on Oversight and Government Reform’s Subcommittee on Regulatory Affairs, Stimulus Oversight and Government Spending on Friday, July 8. The hearing, titled, “The Gainful Employment Regulation: Limiting Job Growth and Student Choice,” investigated the implications of regulations on institutions and students.

      On Friday, July 15, the Senate Committee on Health, Education, Labor, and Pensions will hold a full committee field hearing titled, “Educating Our Children to Succeed in the Global Economy.” The hearing will take place at Gilbert Height Elementary School in Portland, OR.

    REGULATORY ACTIVITY

    • Promise Neighborhoods. The Department of Education released the application for the second phase of the Promise Neighborhoods program on July 6. The second phase includes new implementation grants and a second round of planning grants, totaling $30 million. The Department will likely award four to six implementation grants ranging from $4 million to $6 million during the first year. Over the three-to-five-year life span of the implementation grants, grantees will receive a total of $12 to $30 million. The Department expects to award $500,000 in planning grants.

      The deadline to submit applications is September 6. The Department will announce grantees and offer awards no later than December 31. Pre-application webinars will be offered on July 14 and August 2. Applicants are encouraged to submit a notice of intent to apply by July 22.

    Energy

    LEGISLATIVE ACTIVITY

    • Lighting. The House could soon vote on a bill (H.R. 91) that would repeal 2007-enacted incandescent light bulb efficiency standards, such as phasing out the traditional 100-watt light bulb by year-end.
    • House Energy Priorities. Energy and Commerce Committee Chairman Fred Upton (R-MI) has highlighted energy-related issues for upcoming subcommittee consideration. These include efforts to delay EPA guidelines affecting non-utility boilers and industrial incinerators, in order to “to develop achievable standards;” strengthen and modernize oil and gas pipeline regulations; and improve electric grid security.
    • Congressional Hearings. On Tuesday, the Senate Energy and Natural Resources Committee will hold a legislative hearing to hear testimony on Chairman Jeff Bingaman’s (D-NM) Department of Energy Administrative Improvement Act of 2011 (S. 1160), the 10 Million Solar Roofs Act of 2011 (S. 1108) and the Geothermal Exploration and Technology Act of 2011 (S. 1142). On Thursday, the Committee is scheduled to markup a short-list of legislation. A House Natural Resources Subcommittee will hold an oversight hearing on Thursday regarding innovative solutions for restoring the environment, improving safety, and creating jobs on abandoned mined lands. On Friday, the full House Natural Resources Committee will hold a hearing on “Offshore Energy: Interior Department’s Plans for Offshore Energy, Revenue, and Safety Reorganization.”

    REGULATORY ACTIVITY

    • National Offshore Safety Advisory Committee. Membership applications for individuals interested in serving on the Secretary of Homeland Security’s advisory committee, concerning offshore exploration matters under the Coast Guard’s jurisdiction, are due August 22.

    Environment

    LEGISLATIVE ACTIVITY

    • Drinking Water. On Tuesday, July 12, the Senate Committee on Environment and Public Works will hold an oversight hearing to examine the EPA’s implementation of the Safe Drinking Water Act's Unregulated Drinking Water Contaminants Program.
    • EPA IRIS Program. On Thursday, July 14, the House Committee on Science Space and Technology, Subcommittee on Investigations and Oversight will hold a hearing titled, “EPA’s IRIS Program: Evaluating the Science and Process Behind Chemical Risk.” EPA's Integrated Risk Information System (IRIS) is a human health assessment program that evaluates risk information on effects that may result from exposure to environmental contaminants. Through this program, EPA provides science-based human health assessments to support the Agency's regulatory activities. The IRIS database contains information for more than 540 chemical substances including data on human health effects that may result from exposure to substances in the environment. IRIS is prepared and maintained by the EPA’s National Center for Environmental Assessment (NCEA) within the Office of Research and Development (ORD). The heart of the IRIS system is its collection of searchable documents that describe the health effects of individual substances concerning cancerous and noncancerous effects.
    • Forest Management. On Thursday, July 14, the House Committee on Natural Resources, Subcommittee on National Parks, Forests And Public Lands will hold a hearing titled, "Secure Rural Schools Reauthorization and Forest Management Options for a Viable County Payments Program." The Secure Rural Schools program was established in 2000 to provide rural counties that have significant federal forest lands with critical funding needed for schools, roads and local forest management programs. The program’s authorization expires on September 30, 2011.
    • Native American Lands. On Tuesday, July 12, the House Committee on Natural Resources, Subcommittee on Indian and Alaska Native Affairs, Forests And Public Lands will hold a hearing to consider two bills to reaffirm the authority of the Secretary of the Interior to take land into trust for Indian tribes and a third bill to amend the Water Resources Development Act of 1986 to clarify the role of the Cherokee Nation of Oklahoma with regard to the maintenance of the W.D. Mayo Lock and Dam in Oklahoma.

    REGULATORY ACTIVITY

    • Commercial Aircraft. EPA is proposing to adopt new air pollution standards for engines used primarily in large commercial aircraft including 737s, 747s and 767s. The proposal is intended to reduce ground-level nitrogen oxide emissions by an estimated 100,000 tons nationwide by 2030. Exposure to nitrogen oxide emissions can cause and aggravate lung diseases and increase susceptibility to respiratory infection. The standards were previously agreed to by the United Nations International Civil Aviation Organization (ICAO). Due to the global nature of air travel, EPA works with international agencies in effort to identify cost effective emissions reductions. If adopted in the United States, the standards would be phased in over the next two years, applying to all new engines in 2013.
    • Recycling Hazardous Materials. EPA is proposing new safeguards for recycling hazardous materials in an effort to protect public health and the environment. This proposal modifies EPA’s 2008 Definition of Solid Waste (DSW) rule, which revised hazardous waste regulations to encourage recycling of hazardous materials. EPA is opening up this proposal for public comment. EPA’s re-examination of the 2008 DSW final rule identified areas in the regulations that could be improved to better protect public health and the environment. The proposal addresses increased transparency and oversight for hazardous materials recycling. The proposed rule also intends to create a level playing field by requiring all forms of hazardous waste recycling to meet requirements to ensure materials are recycled and not being disposed of illegally. This proposal will affect facilities that recycle onsite and those that send their recycling offsite.

    Financial Services

    LEGISLATIVE ACTIVITY

    • House Committee on Financial Services to Discuss GSE Reform and Mortgage Origination. On Tuesday, July 12, the House Subcommittee on Capital Market and Government Sponsored Enterprises, chaired by Scott Garrett (R-NJ), will hold a markup of six bills to reform the Government Sponsored Enterprises. The next day, the Subcommittee on Insurance, Housing, and Community Opportunity, chaired by Judy Biggert (R-IL), will hold a hearing titled, “Mortgage Origination: The Impact of Recent Changes on Homeowners and Businesses.”
    • Semi-Annual Monetary Policy Report. On Wednesday, July 13, the House Financial Services Committee, chaired by Spencer Bachus (R-AL), will receive the testimony of the Honorable Ben S. Bernanke, Chairman of the Federal Reserve Board of Governors, on monetary policy and the state of the economy. The following day, Chairman Bernanke will present the monetary policy report to the Senate Banking Committee, chaired by Tim Johnson (D-SD).
    • Oversight of the Office of Financial Research and the Financial Stability Oversight Council. On Thursday, July 14, the House Subcommittee on Oversight and Investigations, chaired by Randy Neugebauer (R-TX), will hold an oversight hearing on the Office of Financial Research and the Financial Stability Oversight Council.
    • Examining the Financial Crisis Inquiry Commission. On Wednesday, July 13, the Subcommittee on TARP, Financial Services and Bailouts of the Public and Private Programs, chaired by Patrick McHenry (R-NC), will examine what went wrong at the Financial Crisis Inquiry Commission.
    • Oversight of the Consumer Financial Protection Bureau. On Thursday, July 14, the Oversight and Government Reform Committee, chaired by Darrell Issa (R-CA), will hold a hearing titled, “Consumer Financial Protection Efforts: Answers Needed.” This hearing is a follow-up to a hearing held in May in the TARP, Financial Services and Bailouts of the Public and Private Programs Subcommittee. At that hearing, Chairman Patrick McHenry (R-NC) got into a public dispute with Professor Elizabeth Warren, architect of the Consumer Financial Protection Bureau, over the length of her availability to the Subcommittee. Although Chairman Issa told Professor Warren to “clear her schedule for the full day of the hearing,” the July 14 hearing is currently scheduled for only two hours.

    REGULATORY ACTIVITY

    • U.S. Commodity Futures Trading Commission Approves Dodd-Frank Final Rules. The Commodity Futures Trading Commission (CFTC) approved five final rules this week under the Dodd-Frank Wall Street Reform and Consumer Protection Act. Among the five rules approved by the CFTC is a final rule broadening the types of market manipulation cases the CFTC can pursue by lowering the standard of proof the CFTC must show from “intent to manipulate prices” to “recklessness.” Under a recklessness standard, the CFTC can prosecute fraud-based manipulation. The CFTC also approved final rules enhancing reporting requirements for major traders in physical swaps, clarifying the definition of an agriculture commodity, and protecting consumer information and privacy.
    • U.S. Securities and Exchange Commission to Delay Enforcement of “Self-Executing” Derivatives Rules. The Securities and Exchange Commission (SEC) announced it will not enforce most of the “self-executing” derivatives provisions for security-based swaps until the entire rule-making process reforming the derivatives market is complete. Last month, the CFTC took similar action, voting to delay the self-executing rulemakings until December 31, 2011, or until the agency finalizes corresponding regulations.
    • President Obama Nominates New Comptroller of the Currency. President Obama has nominated current Federal Deposit Insurance Director Thomas J. Curry to be Comptroller of the Currency. If confirmed, Mr. Curry will take over from John Walsh, who has been servicing as acting head of the Office of the Comptroller of the Currency since August 16, 2010.
    • Upcoming CFTC Open Meetings. The CFTC has scheduled open meetings for July 19, August 4, September 8, and September 22, 2011, to consider various rulemaking matters, including the issuance of proposed rules and the approval of final rules.

    Health Care

    LEGISLATIVE ACTIVITY

    • Energy and Commerce Legislative Session. The Subcommittee on Health has scheduled a hearing on Monday, July 11 at 2:00 p.m. to consider H.R. 1852, the Children's Hospital GME Support Reauthorization Act of 2011 and H.R. 2005, the Combating Autism Reauthorization Act of 2011.
    • House VA Hearing. The Health Subcommittee of the House Veterans’ Affairs Committee will hold a hearing titled, “Implementation of Caregiver Assistance: Moving Forward” on Monday, July 11 at 4 p.m.
    • Senate HELP Session. The Senate Committee on Health, Education, Labor and Pensions will meet in Executive Session on Wednesday July 13 at 10 a.m. to consider S. 958, the Children’s Hospital GME Support Reauthorization Act of 2011, S. 1094, the Combating Autism Reauthorization Act, and S.__, the Workforce Investment Act Reauthorization of 2011.
    • Senate Finance Hearing. The Senate Committee on Finance has scheduled a hearing on Thursday June 30 at 10:00 a.m. titled, “Perspectives on Deficit Reduction: A Review of Key Issues.”
    • Energy and Commerce Hearing. The House Committee on Energy and Commerce Health Subcommittee scheduled a hearing for Wednesday, July 13 at 9 a.m., titled “IPAB: The Controversial Consequences for Medicare and Seniors.”
    • Senate VA Hearing. The Senate Veterans’ Affairs Committee will hold a hearing titled, “VA Mental Health Care: Closing the Gaps,” on Thursday, July 14 at 10 a.m.

    REGULATORY ACTIVITY

    • Regulations. CMS released a proposed rule that would revise the Medicaid home health service definition as required by section 6407 of the Affordable Care Act to add a requirement that physicians document the existence of a face-to-face encounter with the Medicaid eligible individual within reasonable timeframes. The proposed rule would also cut Medicare payments to home health agencies for calendar year (CY) 2012 by 3.35 percent, or $640 million.

      Following the release of a number of regulations last week (Hospital Outpatient Prospective Payment System, End Stage Renal Disease PPS, Physician Fee Schedule and Ambulatory Surgical Centers), HHS is expected to release regulations related to the state health insurance exchanges as required by the Affordable Care Act.

    OTHER HEALTH NEWS

    • NGA Meeting. The National Governors Association will hold their annual meeting July 15-17 in Salt Lake City. The agenda will cover a number of health related sessions, including a focus on implementation of the health reform law and organization of the health insurance exchanges required by the Affordable Care Act.
    • Health Reform Challenges. A federal district court in Ohio ruled in favor of the health reform law, upholding a recent decision by the 6th Circuit Court of Appeals. While the decision provides additional support for the Administration’s health reform law, the challenge is expected to ultimately be settled by the Supreme Court.

    International, Defense, Homeland Security

    • Free Trade Agreement (FTA) Developments. In Thursday’s mock mark-ups, Senate Finance Committee and House Ways and Means Committee majorities voted in favor of the Panama, Colombia and South Korea FTAs. However, the differing composition of the Korea FTA (KORUS) implementing legislation considered by the two committees, as well as the entirely dichotomous party-line votes that those differing versions produced, indicate that bargaining between the White House and the Congressional Leadership is far from complete. At issue, again, was the Democrats’ desire to attach a renewed and slightly expanded Trade Adjustment Assistance (TAA) package to the KORUS implementing bill. Such a move would help to ensure TAA’s passage in unamended form, thanks to KORUS’ protections under “fast-track” Trade Promotion Authority (TPA), the Administration asserts it would transfer to TAA. Senate Republicans remains strongly opposed to TAA. Chairman Max Baucus (D-MT) took the “KORUS plus TAA” approach in the Senate Finance Committee’s mock mark-up, leading all 13 Democrats, including noted FTA skeptics, such as Senator Jay Rockefeller (D-WV) and Senator Debbie Stabenow (D-MI) to vote in favor of the agreement and all 11 Republicans, almost all of whom generally support free trade, to vote against it. Conversely, Chairman Dave Camp (R-MI) removed the TAA package from the KORUS bill in the package considered by the House Ways and Means Committee. Accordingly, all 22 Committee Republicans voted for KORUS, and all 15 Democrats voted against it. A majority of Ways and Means Democrats likely would have voted yes if TAA had been included. The most likely compromise to produce a path forward lies in Speaker Boehner’s preferred approach: four separate votes on TAA and the three FTAs. The White House and Congressional Democrats will have to ensure House and Senate Republicans will agree to up-or-down floor votes on TAA, with limited or no amendments, but more discussions will have to occur before arriving at that point. Importantly, both Chairman Baucus and Chairman Camp signaled a willingness yesterday to consider alternatives to the FTA packages their respective committees considered Thursday, but other key players will have to display similar degrees of flexibility in order to move forward.

    Tax

    LEGISLATIVE ACTIVITY

    • Tax Revenues Central in Debt Ceiling Discussions. Increasing tax revenues remains a major sticking point in the debt ceiling discussions. Although House Speaker John Boehner (R-OH) recently indicated that comprehensive tax reform is “under discussion” in the context of negotiations, Republicans continue to voice their opposition to raising taxes as part of any compromise. The Administration has raised several specific tax measures for consideration, including those related to repealing oil and gas incentives ($45 billion), reclassifying the taxation of carried interest ($15 billion), corporate jet depreciation ($3 billion), and the last-in, first-out (LIFO) method of accounting ($50-75 billion). Sunday’s scheduled negotiations at the White House are likely to explore additional significant tax increases, both corporate and personal. Still, there is little certainty regarding the shape of an agreement pending the results of that discussion. Further, Friday’s release of a disappointing monthly jobs report may frustrate agreement, hardening those views that taxes should not be increased in a slowing economy.
    • Tax Writing Committees to Hold Joint Hearing on Reform. Hearings on fundamental tax reform continue on both the House Ways & Means and Senate Finance Committees. On July 13, the committees will hold a joint hearing to review the tax treatment of debt and equity and to consider distinctions in the treatment of each in the context of comprehensive tax reform. In connection with the hearing, the Joint Committee on Taxation (JCT) is expected to release two reports analyzing the taxation of household debt and business debt, which were requested by Ways and Means Committee Chairman Dave Camp (R-MI) and Senate Finance Committee Chairman Baucus (D-MT), at an organizational meeting of the JCT on March 15, 2011.

    TechComm

    • Spectrum Bill. Senate Commerce Committee Chairman Jay Rockefeller (D-WV) continues to press for passage of S. 911, the Public Safety Spectrum and Wireless Innovation Act, before the scheduled August recess – as either a stand-alone bill or as part of the debt ceiling measure that Congress must pass before August 2 or risk default on U.S. obligations. However, questions about implementation of such legislation, the current lack of a House bill, and the potential differences between Senate and House positions, increase the chances that broad spectrum legislation will not be enacted before the August recess in any form. Chairman Rockefeller continues to state, “We’d like to see the public safety bill move to the Senate floor as soon as possible so that President Obama can sign it into law by September, the anniversary of 9-11.”

      On the House side, where leaders of the Energy and Commerce Committee prefer an auction of the 700 MHz D-block spectrum rather than outright reallocation to public safety, work continues on drafting legislation that could be ready for consideration as early as the week of July 11. Such a bill would require the D-block to be reauctioned and would authorize the FCC to hold incentive auctions. A hearing on the draft House bill is tentatively in the planning for the week of July 11, as is a potential mark-up for later this month, but nothing is yet scheduled.

      In the meantime, on July 8, the National Association of Broadcasters (NAB) sent a letter to all House members urging them to keep in mind "specific safeguards," specifically related to incentive auctions as they consider spectrum reform. "Broadcasters are not opposed to granting the FCC voluntary incentive auction authority, so long as the authorizing legislation includes specific safeguards to ensure that broadcasters remaining in the business (and the public they serve) are held harmless in any auction and repacking process, the latter being involuntary and likely to affect hundreds of television stations across the country." The NAB calls for the following safeguards: Any bill should protect access to over-the-air signals, refrain from repacking broadcasters so that they end up on "inferior spectrum bands" (like the low VHF band), provide regulatory certainty in part by allowing the "FCC to conduct only one incentive auction of broadcast spectrum" and reimburse broadcasters for any costs associated with a spectrum rearrangement.
    • Patent Reform. Despite ongoing efforts in the Senate to move a clean House-passed version of patent reform legislation, there is an increasing likelihood that Senate leaders will have to allow votes on amendments when the bill is finally scheduled for Senate floor consideration. At issue is language dealing with Patent and Trademark Office (PTO) funding. The Senate bill (S. 23) allows the PTO to keep and spend all revenue generated by fees. Alternatively, the House bill, in a move to placate House appropriators, moves fees in excess of Congressionally-approved funding levels into a separate account to be made available to the PTO via future appropriations bills. Both PTO Director David Kappos and the Administration support passage of the House bill as currently constituted. But Senator Tom Coburn (R-OK) is standing by his vow to block any bill that prohibits the PTO from keeping and spending all the fees it collects and may force a vote on the issue in the Senate. We continue to monitor this issue.
    • Privacy. On July 12, the House Judiciary Subcommittee on Crime, Terrorism and Homeland Security will hold a hearing on H.R. 1981, the Protecting Children from Internet Pornographers Act of 2011, sponsored by Committee Chairman Lamar Smith (R-TX) and Committee member Debbie Wasserman Schulz (D-FL). The bill creates new penalties for possessing, sharing or funding child pornography and, most critically, requires Internet providers to store all user IP addresses for 18 months. On July 14, the House Energy and Commerce Subcommittee on Commerce, Manufacturing, and Trade and the Subcommittee on Communications and Technology will hold a joint hearing titled “Internet Privacy: The Views of the FTC, the FCC, and the NTIA.”
    • Business Activity Tax Simplification Act. On July 7, the House Judiciary Committee approved H.R. 1439, the Business Activity Tax Simplification Act, by voice vote. The bill, sponsored by House Judiciary Subcommittee on Intellectual Property, Competition, and the Internet Chairman Bob Goodlatte (R-VA), expands protections in current law to include intangible property and services, as well as tangible personal property. Of particular importance, the bill establishes a “physical presence” test that requires an out-of-state company to have an actual physical presence in a state before the state can impose business activity taxes on the company. "Just because a website can be accessed by consumers in a certain state, doesn't mean that state should be able to collect taxes from the website owner,” said Representative Goodlatte, who continued, "this legislation focuses on allowing the Internet and the commerce that it facilitates to expand, by eliminating excessive taxes that harm online growth.”
    • Content Alert System. On July 7, content industry groups and Internet service providers (ISPs) announced a new system to combat piracy on peer-to-peer, dedicated file-sharing networks. Under the new Content Alert System, the content owner would alert the ISP of a potential violation. The ISP would then send an alert to a subscriber warning that the Internet account is being used for illegal content theft. That message would also include an educational message about the potential consequences. If the subscriber failed to respond, the ISP would warn a few more times before triggering a “mitigation measure” such as a slowdown in the subscriber's Internet speed or redirecting them to a landing page when they go on the Internet until they respond.

      The White House was involved in talks in the effort, and U.S. Intellectual Property Enforcement Coordinator Victoria Espinel praised it. “We believe that this agreement is a positive step and consistent with our strategy of encouraging voluntary efforts to strengthen online intellectual property enforcement and with our broader Internet policy principles, emphasizing privacy, free speech, competition and due process." Participating groups include the Motion Picture Association of America, the Recording Industry Association of America, the Independent Producers & Distributors of Film and Television Programming, AT&T, Cablevision, Comcast, Time Warner Cable, Verizon, and American Association of Independent Music.
    • FCC Open Meeting. At the regularly scheduled open meeting on July 12, the FCC will consider Notices of Proposed Rulemaking (NPRM) on the following items: 1) low power FM and FM translator stations; 2) E-911 location accuracy; and 3) prevention and detection of unauthorized telephone bill charges ("mystery fees" or "cramming") by improving the disclosure of third-party charges on wireline telephone bills. Senate Commerce Committee Chairman John Rockefeller (D-WV) has stated that he also plans to look closely at the “cramming” issue in the coming months.

    Transportation

    LEGISLATIVE ACTIVITY

    • SAFETEA-LU Reauthorization. Chairman Mica began the rollout of his reauthorization measure on Thursday, July 7, releasing a high-level summary at a late morning press conference. Mr. Mica’s rollout was followed by a response from Democratic leaders on the Transportation and Infrastructure Committee and Senate Banking Committee. Chairman Mica’s rollout and the Democratic response lays bare the fundamental clash between a two-year bill at or near current spending levels, as is being pursued in the Senate (and supported by House T&I Democrats), versus a six-year bill that, as currently outlined by Chairman Mica, would reduce spending by 30 percent from current levels in order to work within available Highway Trust Fund revenues. While House and Senate Democrats have emphasized the potential job losses associated with the House funding level, citing a potential 630,000 jobs lost, Chairman Mica has emphasized the benefits of a long-term bill in terms of predictability and stability, and also that he is constrained on the revenue question by House rules and the FY2012 Budget Resolution which limit authorization levels to projected HTF revenues. Chairman Mica also points out that his approach leaves the HTF solvent into the future, whereas a two-year bill would leave the HTF “running on fumes” at the end of FY2013, forcing a 50 percent cut in FY2013 without additional revenue in order to maintain HTF solvency. Chairman Mica also indicated on several occasions that he would be working with House Ways and Means, potentially on other innovative financing measures (e.g., Private Activity Bonds). Mica did indicate that the proposal will likely maintain the current funding rations between highways and transit.

      Chairman Mica mentioned that he may hold hearings on the proposal on July 12, but that the timing for introducing the legislative text and holding a mark-up had not been determined and would depend on securing floor time and ongoing negotiations with Committee Democrats.

      In addition to the funding levels and duration, key features of Chairman Mica’s proposal are as follows:
    • Maximizing Existing Revenue Through Increased Leverage and PPPs
      • Dramatically expands TIFIA, increasing budget authority from $122 million annually to $1 billion, and allowing TIFIA to cover up to 50% of project costs.
      • Reforms the underutilized RRIF program, by creating a faster and more predictable application process and allowing more flexibility in loan terms.
      • Increases the potential capitalization of State Infrastructure banks, by allowing states to spend a larger portion of their formula funds for that purpose.
    • Streamlining Project Delivery and Cutting Red Tape
      • Allows agencies to review transportation projects concurrently to expedite NEPA.
      • Delegates project approval authority to states.
      • Establishes hard deadlines for federal agencies to make decisions on permits and project approvals.
      • Expands the list of activities that qualify for Categorical Exclusions.
    • Consolidating Programs
      • Consolidates or eliminates nearly 70 duplicative programs or programs “not in the federal interest.”
    • Reforming Federal Transit Programs:
      • Streamlines the New Starts and Small Starts competitive grant program, with the goal of cutting project development time in half.
      • Repeals discretionary programs (i.e. Bus and Bus Facilities) that are unpredictable and not transparent, and focuses available funding on formula programs.
      • Increases the percentage of available formula funds for transit programs that benefit suburban and rural areas, and programs that support transit services for the elderly, disabled, and transit-dependent.
      • Encourages and rewards public-private partnerships when building new rail transit systems.
      • Removes current barriers that prevent the private sector from offering public transportation services.
      • Strengthens the rail transit safety oversight program without creating a new federal transit safety bureaucracy.
      • Emphasizes and incentivizes improved performance by establishing performance management targets for all formula grant programs and incentivizing higher ridership through incorporating performance factors in apportionment formulas.
    • Reforming the Federal Highway Program
      • Eliminates approximately 40 FHWA programs to “focus our limited federal resources on projects that have regional or national significance.”
      • Allocates 90 percent of FHWA funding through formulas to state DOTs, “allowing state and local transportation officials to prioritize projects rather than bureaucrats in Washington D.C.”
      • Directs more than half of funding provided for the Federal Highway Program to projects on the National Highway System, which includes the Interstate System.
        • Otherwise provides states maximum flexibility in choosing what projects to fund with their federal highway dollars, but holds states accountable through performance measures and transparency.
      • Provides states the flexibility to fund the broad range of projects currently eligible under programs such as STP and CMAQ, but ends the apportionment/allocation of funds for those specific purposes.
      • Streamlines federal approvals and processes to ensure projects are expedited, and administrative overhead is reduced through programmatic reform, increasing the amount of funding available for projects.
      • Continues the Highway Safety Improvement Program and allows funding to be used on safety projects on virtually any road.
    • Reforming Rail Transportation
      • Increases leveraging by reforming the RRIF program.
      • Streamlines rail project delivery.
      • Increases the opportunity for the successful implementation for Positive Train Control (PTC) by changing the implementation deadline, providing clear direction for rail carriers and allowing for technology neutral solutions, while maintaining commitment to safety.
      • Promotes regulatory reform by requiring regulations to be based on reasoned cost/benefit analysis and the best available science, and to consider effects on jobs and the economy.
      • Reforms Amtrak and the High-Speed Rail program by “limiting Amtrak’s use of federal funds to focus it on providing better service,” and reducing Amtrak’s operating subsidy by 25 percent in FY 2012 and 2013; “ensuring high-speed rail projects are truly high-speed in their definition and design,” leveraging “private sector dollars and expertise for high-speed rail project financing” and requiring “transparency in project funding application evaluation and selection.”