Capital Thinking Update - September 12, 2011

    View Author 12 September 2011

    General Legislative

    On Monday, September 12, 2011, the House will convene at 2:00 p.m. to begin consideration of H.R. 2076, the Investigative Assistance for Violent Crimes Act of 2011, H.R. 2633, the Appeal Time Clarification Act of 2011, and H.R. 1059, a bill to empower the Judicial Conference to redact sensitive information from judicial financial disclosure reports. The Senate will convene at 2:00 p.m. on Monday and, after morning business, resume consideration of H.J. Res. 66, a bill approving the renewal of import restrictions contained in the Burmese Freedom and Democracy Act of 2003.

    Budget, Appropriations


    • Congressional Resolutions of Disapproval. As anticipated, resolutions of disapproval were introduced in both chambers that would block the President from accessing the second $500 billion installment of borrowing authority that was included as part of the Budget Control Act (P.L. 112-25). These measures (S.J. Res. 25 / H.J. Res. 77) are symbolic and serve only to provide Republicans a means to express their objections to increasing the nation’s debt limit and also to force Democrats into another vote reflecting their support in raising the debt ceiling (as previously reported, even if such a resolution was approved by Congress, the President would certainly veto the measure and an unlikely two-thirds supermajority of both chambers would be required to override the veto). Immediately following the President’s speech on his job creation agenda, the Senate rejected its resolution 45-52.
    • Senate FY2012 Appropriations Activity. On September 7, the Senate Appropriations Committee approved its 302(b) allocations which set top-line discretionary spending levels for each of the 12 appropriations bills based on the overall spending cap of $1.043 trillion established by the Budget Control Act. Also on September 7, the committee approved its Agriculture, Department of Homeland Security and Energy and Water spending measures. Additional Senate subcommittee and committee markups will be held in the coming weeks so that Senators can establish their funding priorities; the Defense Subcommittee will hold its markup on September 13, and the Financial Services Subcommittee will hold its markup on September 14. The Military Construction-Veterans Affairs spending measure (H.R. 2055) is the only FY2012 appropriations bill completed in the Senate.
    • House FY2012 Appropriations Activity. The House Transportation-Housing Appropriations Subcommittee approved its FY2012 spending bill on September 8. This bill, along with the Labor-HHS-Education and State-Foreign Operations bills are the only FY2012 spending measures that have not been approved by the House Appropriations Committee (a Labor-HHS-Education markup scheduled for September 9 was postponed and will likely be rescheduled this week). To date, the House has passed six of it FY2012 appropriations bills. In addition to those bills mentioned above, the Commerce-Justice-Science, Financial Services and Interior-Environment bills are awaiting full House consideration.
    • House FY2012 302(b) Revisions. As reported in our Special Edition report issued on August 4, the FY2012 discretionary spending cap set by the Budget Control Act is $24 billion higher than the cap established in the FY2012 House Budget Resolution (H. Con. Res. 34). Therefore, the funding level of the House Transportation-Housing appropriations bill was increased to $55.15 billion from the $47.7 billion identified in the Budget Resolution. It is anticipated that the majority of the remaining difference will be added to the Labor-HHS-Education bill. Conservative House Republicans, led by Representative Jeff Flake (R-AZ), are drafting a letter to House leaders urging them to adhere to the $1.019 trillion discretionary cap in the Budget Resolution. House leaders have so far indicated they intend to use the debt deal cap of $1.043 trillion in completing FY2012 appropriations, but that may be somewhat dependent on the number of signatures on the letter.
    • FY2012 Continuing Resolution. With the current fiscal year ending on September 30, at least one Continuing Resolution (CR) for FY2012 is inevitable. According to House Majority Leader Eric Cantor (R-VA), the House will vote on its FY2012 CR the week of September 19. This will provide enough time for the Senate to consider and approve the measure, but little time for negotiations as both chambers are scheduled to be in recess the week of September 26 for Rosh Hashanah. Leader Cantor did not release any additional information on the CR, except to say that it would carry through “late fall.” With the Super Committee scheduled to present its recommendations on November 23, and December 23 set as the date for Congressional approval (or rejection) of those recommendations, a three-month CR seems most likely. Congress would then be able to pass an FY2012 omnibus measure that incorporates the Super Committee’s recommendations.
    • Disaster Relief Funding. The White House requested $5.2 billion in disaster relief funding for FY2012 on September 2; the Senate Department of Homeland Security FY2012 Appropriations bill includes $4.2 billion for the Federal Emergency Management Agency’s Disaster Relief Fund; and the Senate Energy and Water FY2012 Appropriations bill includes $1.045 billion in disaster relief funding to repair damages caused by flooding of the Mississippi and Missouri Rivers, Hurricane Irene and Tropical Storm Lee. The House-passed versions of these appropriations bills also include additional disaster funding totaling $2 billion. [The House funds were offset by rescissions of unobligated stimulus funds; the Senate funds were provided through separate adjustments set by provisions in the Budget Control Act]. Senate Majority Leader Harry Reid (D-NV) intends to pull language from the Senate Department of Homeland Security Appropriations bill and bring a $6 billion stand-alone disaster aid bill to the floor this week.


    • FY2013 Budget Guidance. The Office of Management and Budget (OMB) provided its FY2013 budget guidance to federal departments and agencies on August 17. OMB called upon the agencies to submit FY2013 budget requests that are 5 percent below FY2011 discretionary levels and to identify additional reductions that would lower the requests to 10 percent below FY2011 discretionary levels. The guidance further states that these reductions should not include across-the-board reductions, decreases to mandatory spending, reclassification of existing discretionary funding or enactment of user fees. The guidance also requests efficiency, cost-saving and evaluation plans from each agency to identify program priorities and streamline agency processes.
    • Super Committee. As detailed below, the Joint Select Committee on Deficit Reduction (the Super Committee) held its first public meeting on September 8. The meeting was largely procedural in nature, however, and although Members were cautioned by their colleagues to avoid drawing “arbitrary lines in the sand,” several expressed their priorities. For example, Representative James Clyburn (D-SC) argued that the committee should not cut public education, Social Security, Medicare or Medicaid and Senator Jon Kyl (R-AZ) threatened to quit the committee if further defense cuts were proposed.
    • The American Jobs Act. In his speech to the joint session of Congress Thursday evening, President Barack Obama reiterated his opposition on earmarks noting they were not a component of the American Jobs Act: “And to make sure the money is properly spent and for good purposes, we’re building on reforms we’ve already put in place. No more earmarks. No more boondoggles. No more bridges to nowhere.” 




    • ESEA Reauthorization. Last week, the House began consideration of the Empowering Parents through Quality Charter Schools Act (H.R. 2218), which is part of House Education and Workforce Committee Chairman John Kline’s (R-MN) plan to reform No Child Left Behind. While it is the only Republican-sponsored bill in the series to receive bipartisan support thus far, consideration was postponed to accommodate preparations for President Obama’s joint address to Congress.

      The chamber did pass a series of amendments to the bill, including a Manager’s Amendment offered by Chairman Kline and Ranking Member George Miller (D-CA), which would make various technical and policy changes, including considerations for student transportation needs and input from parents. The bill is expected to pass easily this week, after consideration of two more amendments. A press release issued by the Committee on Thursday, September 8, reiterated the Chairman’s commitment to consider the “full package of education reform legislation” this year. As such, Chairman Kline is expected to introduce a pair of new ESEA-related bills that address accountability and teacher quality issues later this fall.
    • Patent Reform. On September 8, the Senate approved the Leahy-Smith America Invents Act (H.R. 1249) without amendment, by an 89-9 vote, sending the measure to President Obama for his signature. The vote marks the end to a six-year effort to overhaul the patent system and is the first time in nearly six decades that Congress has made a major revision to the way patents are examined and issued. Notably, the bill creates a “first-inventor-to-file” system in the U.S. for patent applications and an expedited system for processing applications. President Obama commended Members on the bill’s passage during his joint address that evening.
    • Super Committee. Also on September 8, the Joint Select Committee on Deficit Reduction held its first public meeting to begin to craft its long-term deficit reduction plan. Opening statements were made by each of the 12 members. During his opening statement, Representative James Clyburn (D-SC) warned against making drastic cuts to “essential services like public education.”
    • Hearings. On Tuesday, September 13, the House Science and Technology Committee will hold a hearing titled, “STEM in Action: Inspiring the Science and Engineering Workforce of Tomorrow.” The following day, the House Education and the Workforce Committee will hold a hearing on "Examining the Federal Role in Public School Accountability."   


    • President’s Jobs Speech. In his September 8 speech before a joint session of Congress, President Obama asked Members of Congress to support his plan to “repair and modernize at least 35,000 schools” and put teachers back to work. Specifically, his plan, called “the American Jobs Act,” promises to invest $30 billion to prevent up to 280,000 teacher layoffs and hire thousands more. Additionally, $25 billion would be used to support elementary and secondary school infrastructure across the country, with priority given to rural areas. The investment would target building new science labs and Internet-ready classrooms, as well as making emergency repairs and energy efficiency upgrades. An additional $5 billion is proposed to modernize infrastructure at community and tribal colleges. The President also reiterated the importance of fixing the No Child Left Behind Act.

      GOP Congressional leaders quickly criticized the plan for its focus on spending, while education advocates and Democrats supported the proposals, stating that the plan is on par with the challenges facing the education community.
    • Race to the Top. On September 7, the Department of Education released proposed rules for the third round of the Race to the Top grant competition. States that were finalists in the last round of the competition can now compete for a share of $200 million to implement part of their plans. Eligible states include Colorado, Louisiana, South Carolina, Kentucky, Arizona, Illinois, Pennsylvania, New Jersey and California.




    • President’s Jobs Address. To partially “pay for” the nearly $450 billion proposal, the details of which the Administration will provide to Congress this week, the President is again expected to recommend repealing tax preferences for the largest integrated oil/gas companies. References to significant clean energy investments – akin to a new “sputnik moment” the President had called for in his State of the Union address – were sharply minimized, seemingly in favor of immediate spending through an infrastructure bank on more traditional projects.
    • House Republicans’ Fall Energy Agenda. House Energy and Commerce Committee Chairman Fred Upton (R-MI) said that the Committee will focus on a “pro-jobs, pro-growth agenda” this fall, including pipeline safety, cybersecurity, EPA regulations and an ongoing investigation into the Administration’s decision to terminate development of the Yucca Mountain nuclear repository in Nevada.
    • Congressional Hearings. On Thursday, one House Natural Resources Subcommittee will hold a legislative hearing to consider the discussion draft offered by Chairman Doc Hastings (R-WA) that would reorganize the Interior Department’s offshore energy agencies, while another Subcommittee will consider the impacts of EPA’s new and proposed power sector regulations on electric reliability. Also on Thursday, the Senate Energy and Natural Resources Committee will consider the nominations of Gregory Woods, to be The Department of Energy’s (DOE) General Counsel, David Danielson, to be an Assistant Secretary of Energy (Energy Efficiency and Renewable Energy), and LaDoris Harris to be DOE’s Director for the Office of Minority Economic Impact.


    • EECBG. The DOE issued a “Management Alert” after finding that as much as $879 million (or 33 percent) of the $2.7 billion allocated for Energy Efficiency and Conservation Block Grants through the Recovery Act had not been obligated by recipients, even though DOE had an 18-month obligation deadline.
    • TransCanada Pipeline. The State Department will host a final public meeting in Washington, DC on October 7, as part of the Administration’s decision-making process to determine whether issuing a Presidential Permit for the proposed Keystone XL pipeline is in the national interest.
    • Oil and Gas Royalty Valuations. The Interior Department has scheduled three public workshops to discuss a proposed rulemaking to revise federal oil and gas royalty regulations. They will take place in Houston on September 27, in Washington, DC on September 29 and in Denver on October 4.
    • National Petroleum Council. The Secretary’s advisory council will meet in Washington, DC on Thursday to hear from Secretary Steven Chu, consider the Proposed Final Report of the NPC Committee on Resource Development and discuss the Progress Report of the NPC Committee on Future Transportation Fuels.




    • American Jobs Act. In President Obama’s address to the joint session of Congress he noted that with regard to the environment, he has considered, and will continue to consider, removing costly or burdensome requirements, but he refuses to roll back provisions that have protected the health and safety of Americans for decades.
    • Super Committee Talks. The Super Committee held an organizational meeting on September 8, and on Tuesday, September 13, the Super Committee will hold its first hearing where it will hear from the Director of the Congressional Budget Office. There are several possible items the Super Committee could discuss with regard to the environment including targeting EPA regulations such as greenhouse gases, coal ash, cement plants and industrial boilers. In addition, the Super Committee may entertain cuts over five years, including eliminating subsidies for fossil fuels, nuclear power and biofuels, which would produce $380 billion in savings. The deadline for Congressional committees to provide their recommendations to the Super Committee is October 14.
    • EPA Cross-State Air Pollution Rule. On Thursday, September 15, the House Committee on Science, Space and Technology will hold a full Committee hearing to consider EPA’s Cross-State Air Pollution Rule. The Honorable Gina McCarthy, Assistant Administrator of the EPA’s Office of Air and Radiation, will testify.
    • Deep Seabed. On Tuesday, September 13, the House Committee on Natural Resources, Subcommittee on Energy and Minerals Resources will hold a hearing on H.R. 2803, which proposes to direct the Secretary of the Interior, acting through the Bureau of Ocean Energy Management, Regulation and Enforcement, to conduct a technological capability assessment, survey and economic feasibility study regarding recovery of minerals, other than oil and natural gas, from the shallow and deep seabed of the United States.
    • Domestic Mining. On Wednesday, September 14, the House Committee on Natural Resources, Subcommittee on Energy and Minerals Resources will hold an oversight hearing titled, "Creating American Jobs by Harnessing Our Resources: Domestic Mining Opportunities and Hurdles." The oversight hearing will consider opportunities for job creation through new and expanded energy and mineral production and also review regulations and policies with regard to natural resources.


    • Gulf Coast Ecosystem Restoration Task Force. At the Task Force's meeting in Biloxi, MS last week, a new schedule was introduced in order to allow time for additional public comment. On October 5, the original due date for the final report to Congress, the Task Force will release its preliminary draft report. There will be a 3-week public comment period on the draft report from October 5 through October 26. The Task Force is expected to release its final report in November or December.


    Financial Services


    • American Jobs Act Addresses Housing Crisis. The White House will work with government-sponsored enterprises (Fannie Mae and Freddie Mac), the Federal Housing Finance Agency and private industry to improve the Home Affordable Refinance Program, a program initially designed to help borrowers refinance mortgages.
    • President Obama Calls for Regulatory Relief for Small Businesses. As part of President Obama’s American Jobs Act, the White House will work with the Securities and Exchange Commission (SEC) to conduct a comprehensive review of securities regulations from the perspective of small companies to reduce the regulatory burdens on small business capital formation in ways that are consistent with investor protection, specifically identifying “crowdfunding” opportunities and increasing mini-offerings. The proposal also calls for Congress to increase guarantees for bonds to help small businesses compete for infrastructure projects.
    • Senate Banking Committee Approves Nominations, Move to Senate for Consideration. On Thursday, September 8, the Senate Banking Committee reported favorably to the Senate on the following nominees. We expect that these nominees may be a part of a package of nominees to receive Senate confirmation in the next week via unanimous consent. The nominations include Martin Gruenberg to be a member and Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation; Thomas Curry to be Comptroller of the Currency; Luis Aguilar to be a member of the SEC; Daniel Gallagher to be a member of the SEC; Roy Woodall, Jr. to be a member of the Financial Stability Oversight Council; Anthony Frank D’Agostino to be a Director of the Securities Investor Protection Corporation; and Gregory Karawan to be a Director of the Securities Investor Protection Corporation.
    • House Subcommittee to Discuss Regulation and Oversight of Broker-Dealers and Investment Advisers. On Tuesday, September 13, the House Financial Services Capital Markets and Government Sponsored Enterprises Subcommittee will hold a hearing to examine studies mandated by the Dodd-Frank Act on the effectiveness of standards of care applicable to broker-dealers and investment advisers, and on the need for enhanced examination and enforcement resources for investment advisers. The witnesses at the hearing will include William Dwyer III, Financial Services Institute; Ken Ehinger, M Holdings Securities, Inc., on behalf of the Association for Advanced Life Underwriting; Terry Headley, National Association of Insurance and Financial Advisors; Steven Irwin, Pennsylvania Securities Commission, on behalf of the North American Securities Administrators Association; Richard Ketchum, Financial Industry Regulatory Authority; Barbara Roper, Consumer Federation of America; John Taft, RBC Wealth Management, on behalf of the Securities Industry and Financial Markets Association; David Tittsworth, Investment Adviser Association.
    • Senate Banking Committee to Address Housing Finance Reform. On Tuesday, September 13, the Senate Banking Committee will hold a hearing titled, “Housing Finance Reform: Should There be a Government Guarantee?” Witnesses include Peter Wallison, American Enterprise Institute; Dwight Jaffee, University of California, Berkeley; and Professor Adam Levitin, Georgetown Law Center.
    • Senate Banking Subcommittee to Discuss Conforming Loan Limits. On Wednesday, September 14, the Senate Banking Committee Subcommittee on Housing, Transportation, and Community Development will hold a hearing titled, "New Ideas for Refinancing and Restructuring Mortgage Loans." The sole announced witness is Dave Stevens, President and CEO, Mortgage Bankers Association and recently, Director of the Federal Housing Administration. Subcommittee Chairman Robert Menendez (D-NJ)  is the lead sponsor of the bipartisan Homeownership Affordability Act of 2011 (S. 1508), which would extend elevated conforming loan limits for two years beyond its September 30 expiration date.
    • House Financial Services Committee to Review SEC Structure. On Thursday, September 15, the House Financial Services Committee will hold a hearing titled “Fixing the Watchdog: Legislative Proposals to Improve and Enhance the Securities and Exchange Commission.”  SEC Chairman Mary Schapiro is expected to testify and address a report issued by the Boston Consulting Group examining the SEC’s internal operations, structure, and the need for reform.


    • FDIC to Issue Rules on “Living Wills.” On Tuesday, September 13, the FDIC will hold an open meeting to consider a final rule on resolution plans (as required by the Dodd-Frank Act) and an interim final rule on resolution plans required for insured depository institutions with $50 billion or more in total assets.


    Health Care


    • House Ways and Means Democrats Outline Potential Medicare Cuts. The House Ways and Means Committee Democratic staff released a document listing possible cuts to the Medicare program in preparation for possible cuts that will be considered by the Joint Committee on Deficit Reduction. The cuts are a compilation of the various cuts that have been offered in the numerous deficit reduction plans and total more than $500 billion over 10 years. Health care offsets include accelerated home health rebasing ($3 billion) and a new home health copay ($40 billion), post acute provider market basket freeze ($14-28 billion), increased SNF cost-sharing ($21.3 billion), elimination of the rural health hospital add-on payment ($62 billion), GME cuts ($15 billion), new cost-sharing for clinical lab services ($24 billion), new Part D rebate for dual eligibles and LIS beneficiaries ($120 billion), increased cost-sharing on beneficiaries with Medigap coverage ($12-53 billion), raise Medicare eligibility age to 67 ($124 billion), freeze income thresholds for high income beneficiaries and raise premiums ($13 billion) and chained CPI ($7 billion). Staff report that the compilation does not necessarily indicate an endorsement of potential cuts.
    • The American Jobs Act. President Obama released an outline of the American Jobs Act following his address to Congress. The proposal is expected to cost an estimated $447 billion that will likely include cuts to Medicare and Medicaid in addition to those already considered by the Joint Committee on Deficit Reduction. While his proposal does not currently include any direct cuts to health programs, President Obama conceded that Medicare needs to be reformed to ensure future sustainability and called on Congressional Democrats to allow for “modest adjustments” to the program.
    • Senate HELP Hearing. The Senate Committee on Health, Education, Labor and Pensions will hold a hearing on Wednesday, September 14 at 10 a.m. on “Securing the Pharmaceutical Supply Chain.”  Witnesses include Deborah Autor, Deputy Commissioner for Global Regulatory Operations and Poilicy, FDA; Marcia Crosse, Director, Health Care, Government Accountability Office; Kendra Martello, PhRMA; Gordon Johnston, Senior Advisor for Regulatory Sciences, GPhA; Allan Coukell, Director of Medical Programs, Pew Health Group; and Martin Van Trieste, Past Chair, Rx360.
    • House Energy and Commerce Hearing. The Subcommittee on Health has scheduled a hearing on Thursday, September 15 at 10 a.m. titled, “Cutting the Red Tape: Saving Jobs from PPACA’s Harmful Regulations.”  


    • Regulations. The Centers for Medicare and Medicaid Services (CMS) released a request for information regarding section 1331 of the Affordable Care Act, which provides states with the option to establish a Basic Health Program. This option permits states to enter into contracts to offer one or more “standard health plans” providing at least the essential health benefits described in section 1302(b) of the Affordable Care Act to eligible individuals in lieu of offering such individuals coverage through the Affordable Insurance Exchange (Exchange).
    • FDA Public Meeting on PDUFA. The Food and Drug Administration has scheduled a public meeting on October 24 to discuss proposed recommendations for the reauthorization of the Prescription Drug User Fee Act (PDUFA).


    • ACA Lawsuits. The U.S. Court of Appeals for the Fourth Circuit dismissed two challenges to the Affordable Care Act’s individual mandate and Medicaid expansion. In the challenge brought by Virginia’s Attorney General Ken Cuccinelli, the Court ruled that the state did not have standing to challenge the Affordable Care Act. The Court also dismissed the challenge brought by Liberty University stating the tax anti-injunction act stripped it of jurisdiction to hear the challenge. Upcoming developments include a scheduled September 23 hearing in the DC Circuit Court of Appeals on the challenge to the individual mandate, and a September 28 deadline for the federal government to file a response to the petition requesting the Supreme Court to hear the U.S. Court of Appeals for the Sixth Circuit judgment that upheld the individual mandate. The Supreme Court is still expected to render the final determination, likely in the spring/summer of 2012.


    International, Defense, Homeland Security

    • Trade Developments. Toward the end of Thursday night’s speech, President Obama told Congress, “Now it’s time to clear the way for a series of trade agreements that would make it easier for American companies to sell their products in Panama, Colombia, and South Korea – while also helping the workers whose jobs have been affected by global competition.” The President’s choice of words was telling in several ways. First and most generally, mentioning his support for the Free Trade Agreements (FTAs) with Panama, Colombia and South Korea relatively late in the speech, and not at all in the accompanying White House fact sheet on the American Jobs Act, reflects the delicate balance he must strike between advocating for bipartisan support for the FTAs and not abandoning the largely anti-trade elements of the Democratic base. The President continued to walk that tightrope by stressing the benefits of the FTAs for “American companies” and, simultaneously, the continuing need to assist “the workers whose jobs have been affected by global competition.” President Obama also signaled a key near-term method for helping those workers: for Congress “to clear the way” for the FTAs by passing the bipartisan Trade Adjustment Assistance (TAA) renewal package. Despite the resounding applause from Congressional Republicans upon mention of the FTAs, and the nod to labor-oriented Democrats by discussing aid to workers displaced by trade, the President’s speech only will generate bipartisan trust and momentum on the FTAs if his public advocacy efforts increase and high-level talks between the White House and the Republican Congressional Leadership accelerate. President Obama and Congressional Democrats need further assurances that the Republican-led House will pass TAA, as Speaker John Boehner (R-OH) and Ways and Means Committee Chair Dave Camp (R-MI) have indicated. In turn, Congressional Republicans need further assurances that the White House officially will submit the FTAs to Congress and that Senate Majority Leader Harry Reid (D-NV) will smooth their consideration, despite his anti-FTA voting record. In that regard, the House took a key step toward TAA renewal (and, ultimately, FTA consideration) on Wednesday, passing renewal of the Generalized System of Preferences (GSP) trade preference program for less-developed countries. The Senate is tentatively scheduled to attach TAA to the House GSP bill over the next several weeks and, after passing the combined package, return the legislation to the House. The question remains whether the Administration next would insist the House vote on TAA/GSP first or whether the White House instead would accept Speaker Boehner’s assurances and submit the FTAs to Congress first. Official submission would start accelerated Congressional consideration of the FTAs under the Trade Promotion Authority “fast-track” process and, likely, a series of House votes on the trade agreements and TAA/GSP, in some order yet to be negotiated. Clearly, additional Congressional-Executive trust-building, and corresponding procedural fine-tuning, lie ahead.
    • Homeland Security Developments. In the shadow of the increased threat warnings accompanying the 10th anniversary of the terrorist attacks on September 11, 2001, Congressional Homeland Security appropriators and authorizers sparred over several key issues last week. On Wednesday, the Senate Appropriations Committee reported out FY2012 Homeland Security Appropriations legislation that would appropriate almost twice as much as its House-passed counterpart, H.R. 2017. The Senate legislation calls for $41 billion in discretionary Department of Homeland Security (DHS) spending, $258 million for overseas Coast Guard Operations and $6 billion for FEMA’s Disaster Relief Fund. Homeland Security Appropriations Subcommittee Chairwoman Mary Landrieu (D-LA) has been particularly ardent in her support for emergency disaster relief, viewing the House-passed level of $3.7 billion as insufficient and even the Senate bill’s figure as likely only “a substantial down payment.” The Senate bill does not include offsets for disaster relief, as Senator Landrieu and others have cited the need to move quickly for additional emergency funding to respond to flooding, including from Hurricane Irene and Tropical Storm Lee. Indeed, Senate Majority Leader Reid subsequently stated his intention to schedule a Senate vote on the $6 billion in emergency funding as a stand-alone measure. Separately, the Committee rejected, by a 14 to 15 count, an amendment by Subcommittee Ranking Member Dan Coats (R-IN) to eliminate a $1.50 per ticket increase in the airline security passenger fee. Senator Coats’s amendment would have stripped an estimated $280 million offset from the Senate bill’s $7.9 billion in funds designated for the Transportation Security Administration (TSA). The House Homeland Security Appropriations bill does not include the fee increase. Meanwhile, on the authorization side, House Homeland Security Transportation Security Subcommittee Chairman Mike Rogers (R-AL) confirmed last week that the Subcommittee will take up legislation in the near future to reauthorize the TSA. Congressman Rogers’s bill is expected to contain numerous provisions with bipartisan, bicameral support. However, the legislation also may attempt to allow private-sector airport screeners or to reverse collective bargaining rights for TSA screeners; neither idea is popular among Congressional Democrats or the Obama Administration.


    Super Committee

    On September 8, the Joint Select Committee on Deficit Reduction (the Super Committee) held its first public meeting. The September 8 organizational meeting was the first in a series of public hearings designed to facilitate deficit reduction discussions and produce legislation than can pass both chambers of Congress. The initial meeting was largely procedural and consisted of general opening statements from each of the 12 committee members.

    The Super Committee also adopted rules governing its future proceedings. The adopted rules require a majority vote to close a hearing or meeting to the public. The rules also call for a seven-day advance public notice of any hearing, for the panel’s co-chairs to provide an agenda to committee members within 48 hours of any meeting ,and to make the text of matters to be considered available within 24 hours of any meeting. Under the rules, proxy voting is prohibited.

    While the President made clear in his September 8 address that he would like the Super Committee to achieve deficit reduction above its stated $1.5 trillion goal, it remains to be seen what level of savings the Committee, and the Congressional leadership, which will be actively involved in the process, will be able to produce. It is likely that they will begin by considering options included in other high-profile deficit reduction discussions in recent months, including the Biden Group discussions and the Simpson-Bowles Commission.

    While Simpson-Bowles included various entitlement spending reductions, tax reform and increased revenue, given the timeframe under which the Super Committee is working, it is far from clear that this group will be able to accomplish something so comprehensive. However, given the stated desire by some members of the committee to make large strides, it cannot be ruled out at this time. Other options include using proposals left over from the Biden Group meetings (including various mandatory spending reductions and Medicare and Medicaid provider cuts) in an effort to reach $1.2 trillion (or somewhere close to $1.2 trillion) in savings, or a hybrid approach whereby some savings are enacted into law in December, with a further process set in place to consider greater cuts (and perhaps tax reform) next year.
  • The Super Committee’s first public hearing is scheduled for September 13. The hearing will address the history of the nation's debt and the factors that have contributed to it, with Dr. Douglas Elmendorf, Director of the Congressional Budget Office, testifying at the hearing.




    • Tax Reform in Super Committee Deliberations. On September 8, the Joint Select Committee on Deficit Reduction – or so-called “Super Committee” – held its first public meeting. While committee members spoke generally on the importance of the Committee’s charge and the considerable work ahead, several members specifically mentioned aspects of tax reform. Notably, House Ways and Means Committee Chairman Dave Camp (R-MI) indicated that comprehensive tax reform should be part of the committee’s discussions, while Senate Finance Committee Chairman Max Baucus (D-MT) suggested that the Committee’s deliberations must take tax expenditures, not just spending measures, into consideration for deficit reduction purposes.
    • Tax Proposals in the President’s Jobs Bill. In his speech before Congress on September 8, the President unveiled the American Jobs Act, which contains several tax provisions, including hiring tax credits and certain reductions in payroll taxes for both employers and employees. The proposal, which also includes some spending measures, is estimated to cost $447 billion, which the White House has indicated the President will call on the Super Committee to account for in adopting its deficit reduction proposal. The Administration is expected to unveil its deficit reduction proposal in the coming weeks.
    • Tax Reform Hearings. Hearings on fundamental tax reform continue on both the House Ways and Means and Senate Finance Committees. The following hearings are scheduled for next week:
      • September 13: Senate Finance Committee, Subcommittee on Fiscal Responsibility and Economic Growth hearing on “Examining Whether There is a Role for Tax Reform in Comprehensive Deficit Reduction and U.S. Fiscal Policy”
      • September 14: Senate Finance Committee hearing on “Tax Reform Options: Marginal Rates on High-Income Taxpayers, Capital Gains and Dividends”
      • September 15: Senate Finance Committee hearing on “Tax Reform Options: Promoting Retirement Security”


    • IRS Issues Final Regulations on Redesigned Form 990. The IRS issued final regulations implementing the Form 990, Return of Organization Exempt from Income Tax, which was redesigned in 2007. Effective September 8, 2011, the final regulations establish new threshold amounts for reporting compensation, modify the scope of organizations subject to information reporting requirements and eliminate the advance ruling process for new organizations. All tax-exempt organizations required to file annual information returns are subject to these regulations.




    • Patent Reform. Having fended off efforts by both Republican and Democratic Members to send long-pending patent reform legislation back to the House for further consideration, the Senate approved a clean House-passed version of the America Invents Act (H.R. 1249) by a vote of 89-9 on September 8. The House passed H.R. 1249 on June 23 and since that time, Senate leadership and the Administration have worked to see the Senate pass the House bill unchanged and send it to the White House. Since passage of the House version, provisions concerning Patent and Trademark Office (PTO) funding have been the main bone of contention with the Senate bill (S. 23) allowing the PTO to keep and spend all revenue generated by fees and the House bill moving fees in excess of Congressionally-approved funding levels into a separate account to be made available to the PTO via future appropriations bills. Senator Tom Coburn (R-OK) led the charge in the Senate in opposition to the House provisions, but his amendment to give the PTO authority to spend the fees it collects was narrowly defeated by a vote of 50-48. President Obama, who supported passage and is expected to sign the bill, later touted the Senate's action in his jobs address to a Joint Session of Congress that same evening saying "[t]oday you passed reform that will speed up the outdated patent process, so that entrepreneurs can turn a new idea into a new business as quickly as possible. That's the kind of action we need." 

      In related September 8 patent news, the PTO hosted a ceremony honoring its issuance of its 8,000,00th  patent number. The ceremony was held at the Smithsonian American Art Museum and celebrated the historic patent that was presented to Second Sight Medical Products, Inc., for a visual prosthesis apparatus that enhances visual perception for people who have gone blind due to outer retinal degeneration. At the ceremony, Acting Commerce Secretary Rebecca Blank urged the Senate’s swift passage of a clean House-version of patent reform saying that the legislation will “help create a more efficiently operating and cost-effective intellectual property protection system. And ultimately, that will mean more new products getting to the market in a timely way and the creation of new businesses and new jobs powered by those products. She also called the bill “vital to the administration’s growth-by-innovation strategy.”  As noted, the Senate ultimately passed the bill.
    • President’s Jobs Bill. The President recognized the important role of mobile broadband when he unveiled his $400 billion American Jobs Act on September 8. The plan reaffirmed the Administration’s stance that “freeing up the nation’s spectrum” will lead to expanded access to high-speed wireless services for all Americans. The plan also called for modernizing at least 35,000 public schools across the country and supporting “Internet-ready classrooms.” Interestingly, the Administration’s endorsement for spectrum auctions comes days after the Justice Department announced that it is suing to block AT&T’s acquisition of T-Mobile. If DOJ prevails, that might make a spectrum auction more attractive to capacity-constrained AT&T, although AT&T has vowed to request an expedited hearing on the matter.

      Although the technology issues did not give rise to Republican concerns surrounding the jobs plan, some Republican Members of the Joint Select Committee on Deficit Reduction expressed concern with the White House’s view that the so-called “Super Committee” identify some of the savings for the President’s jobs plan in addition to the $1.2 trillion in cuts they must deliver under the Budget Control Act. More details of the President’s plan are expected on September 19.
    • Spectrum Bill. The nation’s first responders headed to Washington last week in advance of the anniversary of the September 11, 2001, attacks and to emphasize the need for Congress to support legislation to deploy an interoperable public safety broadband network.

      Meanwhile, the Joint Select Committee on Deficit Reduction held its first organizational meeting in its effort to identify $1.5 trillion in additional deficit reduction. Earlier in August, the House and Senate Chairmen of panels with jurisdiction over spectrum issues were selected along with 10 other lawmakers to serve on the so-called “Super Committee.” With Representative Fred Upton (R-MI), Chairman of the House Energy and Commerce Committee, and Senator John Kerry (D-MA), Chairman of the Senate Communications, Technology, and the Internet Subcommittee joining the committee, it is widely believed that spectrum auctions will play a prominent role in discussions among the panel as a way to raise revenue to help offset the federal debt. Meanwhile, the President’s newly unveiled American Jobs Act also may prompt greater focus on spectrum auctions. The jobs package notes that “freeing up the nation’s spectrum” and expanding access to high-speed wireless service are critical to modernization efforts that will help put Americans back to work.

      The Joint Select Committee’s budget recommendations are due November 23. Each chamber must consider the committee proposal on an up-or-down basis without any amendments by December 23. If Congress fails to enact the recommendations by that date, mandatory spending cuts will occur.

      Independent of the Super Committee’s efforts, spectrum policy leaders are moving forward with stand-alone spectrum bills. Senators Jay Rockefeller (D-W.VA) and Kay Bailey Hutchison (R-TX), the Chairman and Ranking Member, respectively, of the Commerce, Science and Transportation Committee, reiterated the need for a public safety broadband network with the approach of the 9/11 anniversary. “Too often first responders lack the interoperable networks that are essential to providing an effective response in emergencies,” Chairman Rockefeller said in a September 8 statement entered into the Congressional Record. “They lack the ability to communicate with one another, with other agencies and across different city and state lines. This hampers our ability to respond to crisis. Whether that crisis is a terrorist attack or natural disaster, it puts lives in unnecessary danger.”

      In June, the Commerce Committee approved Rockefeller’s bill that would use the D-block of spectrum to create a nationwide interoperable public safety network and give the FCC authority to conduct incentive auctions to help fund the network’s construction and operation.

      In addition to S. 911, the House Energy and Commerce Committee is crafting its own version of spectrum legislation. Discussions between Democratic and GOP leaders of the committee continue in the wake of competing discussion drafts that parties floated earlier this summer. The key sticking points center on the approach to the 700 MHz D-block, which Republicans would rather see auctioned to raise revenues for the U.S. Treasury. Republicans also favor a network-of-networks approach to governance of the public safety network over the formation of a non-profit corporation that Democrats support to oversee network deployment. Representative Peter King (R-NY), chairman of the House Homeland Security Committee who introduced another version of a public safety spectrum bill (H.R. 607) said last week that “no one wants to go through again what happened on September 11, where there was an inability to communicate. Yet 10 years later, we’ve still taken no action.”
    • Low Power FM. On September 7, 28 members of the House led by Representative Mike Doyle (D-PA) sent a letter to FCC Chairman Julius Genachowski urging the FCC to ensure there is space reserved in urban areas for new low-power FM station licenses “based on the needs of the local community,” as required by the Local Community Radio Act. The letter also urges the FCC to “ensure that licenses are awarded to truly local churches, non-profit organizations, local governments and schools.” In a separate statement, Representative Doyle said “[t]he benefits of low power FM radio have been demonstrated time and time again. These stations have been instrumental in local news reporting, emergency response, and cultural enrichment.”


    • FCC Open Meeting. The FCC has released a tentative agenda for its next open meeting scheduled for September 22, where Commissioners will: 1) consider a Notice of Proposed Rulemakings to accelerate the development and deployment of Next Generation 911 (NG911) technology; and 2) hear a report from the Public Safety and Homeland Security Bureau on the use of deployable aerial communications architecture to facilitate the ability of first responders to communicate with each other and consumers to reach first responders in the wake of natural and manmade disasters, even when there is severe damage to terrestrial communications infrastructure. The report will make recommendations regarding next steps the FCC should consider to promote the development and use of deployable aerial communications.




    • American Jobs Act. As expected, infrastructure investment was a major focus of the President’s address and the American Jobs Act. The President’s proposal calls for $50 billion in immediate infrastructure investment -- repeating a call he made at approximately this time last year -- as well as $10 billion for a National Infrastructure Bank. Separately, the President announced that we would work Administratively to speed infrastructure investment by identifying high-impact, job-creating infrastructure projects across federal agencies that can be expedited through the review and permitting processes.
    • New Infrastructure Spending. The President’s $50 billion proposal includes:
      • $27 billion for highways
      • $9 billion for mass transit
      • $4 billion for high-speed rail corridors
      • $2 billion for other intercity passenger rail
      • $5 billion for TIGER and TIFIA grant/loan assistance
      • $2 billion for airport improvement grants
      • $1 billion for FAA NextGen air traffic control

        The prospects for the President’s infrastructure proposal, as formulated, remain unclear but face significant challenges. While there remains broad support for infrastructure investment as a job-creation measure, the President’s call for $50 billion stands in contrast to the sharp cuts in transportation spending coming out of the House (cuts in keeping with the unsustainable balance in the Highway Trust Fund) as well as the continuing delay in the Senate Finance Committee in identifying an additional $12 billion needed to fund a two-year reauthorization at current levels. In the context of the jobs discussion, the House Leadership has also signaled a different approach on transportation infrastructure. In a recent letter to the President, Speaker Boehner and Majority Leader Cantor identified eliminating the requirement that states spend 10 percent of their highway funding on “transportation enhancements” as a more paradigmatic reform for House Republicans and one that would allow states to invest those funds more flexibly and efficiently to create jobs. However, the President’s strong focus on increased infrastructure investment -- as well as the bipartisan support for infrastructure investment -- may also have the effect of increasing the pressure on the Super Committee to provide revenue to stabilize the Highway Trust Fund and allow for a robust reauthorization bill, as proposed by the Gang of Six.
    • National Infrastructure Bank. The President called for a National Infrastructure Bank based on the Kerry-Hutchison bill (The BUILD Act). This represents a significant transition for the President, as – unlike the Administration’s own proposals – the BUILD Act would create a bank outside USDOT that would make loans and loan guarantees for a variety of transportation infrastructure, water infrastructure and energy infrastructure projects. The President called for a $10 billion appropriation that would cover the subsidy and administrative cost of providing loans and loan guarantees, allowing for an estimated $100 billion to $150 billion in direct credit assistance. Signaling the challenges that a National Infrastructure Bank also faces, House Transportation and Infrastructure Committee Chairman John Mica (R-FL) issued a press release repeating his view that capitalizing existing state infrastructure banks would be a more efficient approach- one involving less “Washington bureaucracy” and less subject to Washington political influence.
    • Transportation Appropriations. The House Transportation, Housing and Urban Development Appropriations Subcommittee (T/HUD) marked-up and favorably reported the FY2012 appropriations bill this week.
    • Highway Trust Fund Programs. As required, the House T/HUD bill follows the Ryan Budget (as does the Mica bill) in limiting obligations from the Highway Trust Fund to the “maximum levels which, according to the Congressional Budget Office, are sustainable over a ten-year window from tax revenues collected at current tax rates.” For highways, this means a spending level of $27.0 billion in FY2012 compared to $41.1 billion in FY2011. For transit, this means a spending level of $5.2 billion in FY2012 compared to $8.3 billion in FY2011.These deep reductions in Trust-Funded programs are the 34-36 percent cuts that have been repeatedly highlighted, and they reflect what is at stake over the next two years in the reauthorization debate. Notably, the Committee’s press release states that: “The highway program still requires reauthorization to operate beyond September 2011, and the Committee is prepared to support a higher Highway Trust Fund spending level, should a new, multi-year authorization bill be enacted.”
    • Discretionary Programs. For discretionary programs, including New Starts, the House T/HUD bill reflects the discretionary spending caps established in the debt ceiling deal (i.e. the Budget Control Act), which effectively froze discretionary spending for FY2012 at FY2011 levels. However, the final FY2011 CR achieved its budget authority total for T/HUD in significant part through rescissions: in effect, the CR was able to provide a higher level of funding, and offset that with rescissions, to meet the target of $55 billion in discretionary budget authority for T/HUD. Because the House T/HUD bill does not contain significant offsetting rescissions, in order to meet the $55 billion target again this year, it has to make real program cuts versus FY2011 levels. This includes the elimination of the TIGER program, a cut of $360 million from Amtrak, and significant cuts across HUD programs. The House bill does provide $1.554 billion for New Starts, which were funded at a similar $1.600 billion in FY2011. As expected, the House bill continues to zero out high speed rail. It remains unclear how the Senate T/HUD Appropriations Committee will handle this issue but indications are they are working to avoid or minimize these cuts to discretionary programs as part of a year-end appropriations package.
    • SAFETEA-LU Reauthorization. The current extension of SAFETEA-LU is set to expire on September 30, prompting a Rose Garden address by the President calling for Congress to enact a clean extension. On Thursday, September 8, the Senate EPW Committee marked up and reported out a clean four month extension. Chairman Mica has indicated that he is open to one more short-term extension of SAFETEA-LU, but has not explicitly stated whether the House extension proposal would be “clean” or what its duration will be. In particular, there are indications that House and Senate Republicans will seek language eliminating the requirement that 10 percent of highway funds be set aside for “transportation enhancements.” Because of these complications, the extension debate may require multiple days of floor time in the Senate and is likely to again push back (or provide grounds to push back) the release and mark-up of EPW’s two-year reauthorization bill, which Chairman Boxer had hoped to do in the first half of this month. The release and mark-up of the EPW bill will most likely continue to await consensus on finding $12 billion in additional revenue to fund the bill at current levels, although a revenue agreement is not strictly necessary to release and mark up the bill. Ultimately, no firm timetable exists for the release and mark-up of either the House or Senate reauthorization bill at this point.
    • FAA Reauthorization. Chairman Mica announced that he will release another extension of FAA programs on Friday, September 9, 2011 that will last until December 31, 2011. The current extension expires on September 16. The extension will include retroactive back pay for FAA employees furloughed in July-August.