Capital Thinking Update - October 10, 2011

    View Author 10 October 2011

    General Legislative

    On Tuesday, October 11, 2011, the House will meet at 12:00 p.m. for morning hour and 2:00 p.m. for legislative business.  The following bills will be considered on Suspension of the Rules: H.R. 2433, the “Veterans Opportunity to Work Act of 2011,” as amended, H.R. 2074, the “Veterans Sexual Assault Prevention Act,” as amended, H.R. 2302, a bill to amend title 38 of the United States Code to direct the Secretary of Veterans Affairs to notify Congress of conferences sponsored by the Department of Veterans Affairs, H.R. 2349, the “Veterans’ Benefits Training Improvement Act of 2011,” H.R. 1263, a bill to amend the Service members Civil Relief Act to provide surviving spouses with certain mortgage-related protections, and H.R. 1025, a bill to recognize the service in the reserve components of certain persons by honoring them with veteran status.  The Senate will convene at 2:00 p.m. for a period of morning business. Thereafter, the Senate will proceed to executive session to consider the nomination of Jane Triche-Milazzo to be United States District Judge for the Eastern District of Louisiana. A vote on the nomination is expected to occur at 5:30 p.m. 

    Budget, Appropriations


    • FY2012 Continuing Resolution. On October 4, the House passed a Continuing Resolution (CR) to fund the federal government through November 18 by a vote of 352 to 66; the President signed the measure on October 5 (H.R. 2608 / P.L. 112-36). As previously reported, the CR utilizes the discretionary spending cap of $1.043 trillion established in the Budget Control Act (BCA) (P.L. 112-25) which results in a 1.409 percent overall reduction from FY2011 discretionary spending.
    • Senate Plans to Take up Three FY2012 Spending Bills in October. Senate Majority Leader Harry Reid (D-NV) plans to bring three FY2012 appropriations bills to the Senate floor this month – Agriculture, Commerce-Justice-Science (S. 1572), and Transportation-Housing (S. 1596). To date, the Senate has passed only the Military Construction-Veterans Affairs FY2012 spending bill (H.R. 2055), but the remaining bills, with the exception of the Interior-Environment measure, have been approved by the full Appropriations Committee. Of the three bills proposed for action by Leader Reid, only the Agriculture bill has been passed by the House (H.R. 2112). The Commerce-Justice-Science bill (H.R. 2596) was approved by the House Appropriations Committee in July; the Transportation-Housing bill has not been marked up by the full committee in the House.

      Consideration of the spending bills on the Senate floor will not ensure enactment but merely bolster the Senate’s position during its negotiations with the House on an omnibus / minibus resolution to the FY2012 appropriations process. Negotiations over individual bill allocations are ongoing, but final consensus will be difficult to achieve for a number of reasons, including, but not limited to: (1) the difference in House and Senate department and programmatic spending levels and priorities; (2) the push of House conservative Republicans for deeper spending reductions beyond the $1.043 trillion cap established in the BCA; and (3) potential controversial policy riders that may be proposed by House Republican leadership to garner support from at least some of the conservative rank-and-file Members but will be strongly opposed by House and Senate Democrats.
    • Balanced Budget Amendment Update. The Budget Control Act (P.L. 112-25) mandated that the House and the Senate each vote on a balanced-budget amendment between September 30 and December 31, 2011. The House Judiciary Committee held a hearing on October 4 to discuss the balanced-budget amendment, which included testimony from former Congressional Budget Office Director Douglas Holtz-Eakin, among others. Two versions of a balanced-budget amendment have been proposed in the House: H.J. Res. 1, which in addition to balancing the budget would cap federal spending at 18 percent of the gross domestic product and require a super-majority vote in both chambers to increase the debt limit; this version currently has 133 co-sponsors, only one of which is a Democrat. A less restrictive version, H.J. Res. 2, which does not include the spending cap and debt limit provisions, has garnered 242 cosponsors and is the most likely of the two to gain the two-thirds majority required to pass a balanced-budget amendment. The House plans to vote on a measure in November.
    • Jobs Bill Will Face Cloture Vote in the Senate. Senate Majority Leader Harry Reid (D-NV) intends to bring up his version of the American Jobs Act of 2011 (S. 1660) for a procedural vote on October 11. Senate Democrats altered the offset provisions in the bill, including a surtax on millionaires, by raising the top tax rate from 35 percent to 39.6 percent to replace other tax provisions proposed by the President, including oil and gas industry tax increases and an increase in taxes for individual income over $200,000 and household income over $250,000. The President expressed his comfort with these changes, saying “if that's what it takes to get [his] bill through Congress.” The Senate vote is purely symbolic as the bill will not secure the 60 votes required to move forward. Senate Republicans intend to release an alternative jobs proposal this week.


    • Senate Budget Committee to Submit Recommendations to the Super Committee. Congressional committees have until October 14 to submit recommendations to the Joint Select Committee on Deficit Reduction (Super Committee). The Senate Budget Committee will meet next week to finalize its recommendations, which will likely include proposals to implement a biennial budget process and refine the procedure for passing a budget resolution. Moving to a biennial budget process is supported by many leaders and rank-and-file Members in both the House and Senate, but opposed by appropriators. Stand-alone legislation in the Senate (S 211) currently has thirty-three co-sponsors. 




    • Workforce Investment Act. On Tuesday, October 4, the House Education & Workforce Subcommittee on Higher Education and Workforce Training held a hearing to explore reform measures under the 1998 Workforce Investment Act. Proposed reforms included: (1) reviewing reporting requirements; (2) providing more flexibility to state and local workforce boards; and (3) obtaining more employer input at the “front-end” of curriculum development on what skills are needed. Subcommittee Chair Virginia Foxx (R-NC), stated, “An improved job training system must empower state leaders to pursue policies that best meet the needs of the local workforce.”
    • National Education Association (NEA) Supports Republican ESEA Proposal. On Thursday, October 6, the NEA, the nation’s largest teachers union, showed its overall support for the Senate Republican Elementary and Secondary Education Act (ESEA) proposal. The NEA supports key provisions of the proposal, including changing the school accountability system, retaining the current collection of data for subgroups of students (e.g., data from low-income families), mandating multiple measures of student achievement and establishing new teacher-quality standards and evaluations. The NEA, however, expressed a few concerns about the proposal, including minimal accountability for charter schools, a lack of focus on teacher recruitment and development, a proposal to block grant funding and the elimination of a collective-bargaining clause.

      In September, Senators Lamar Alexander (R-TN) and Johnny Isakson (R-GA) introduced the Republican proposal, which would: (1) set new “college- and career-readiness” standards; (2) create an initiative to prepare, train and recruit effective teachers and principals; (3) consolidate 59 education programs into two block grants that would allow states to pick and choose among programs to meet their needs; and (4) expand charter schools.
    • Democrats Plan to Introduce ESEA Proposal. This week, Tom Harkin (D-IA), Chairman of the Senate Health, Education, Labor, and Pensions Committee, is scheduled to introduce his ESEA proposal. The bill will likely include a revised accountability system based on student growth, college- and career-readiness standards, new teacher evaluations (based, in part, on student test scores) and increased flexibility in how states and local school districts use federal dollars. Harkin has scheduled a mark-up for October 18.


    • White House Report Released. On Tuesday, October 4, the White House released a report titled, “Teacher Jobs at Risk.” The 14-page report outlines the American Jobs Act’s impact on the education system. The Administration asserts that the Act will support nearly 400,000 education jobs, prevent layoffs of educators and increase the hiring of thousands of educators. The report also proposes to modernize at least 35,000 public school buildings and community college campuses.
    • White House Hosted Twitter Conference on ESEA Flexibility. On Wednesday, October 5, Carmel Martin, Department of Education assistant secretary for planning, evaluation, and policy development, hosted a Twitter chat to answer questions about the Department’s ESEA Flexibility plan. Currently, there are two windows in which a state may submit its request: (1) November 14, 2011 for December peer review; and (2) mid-February 2012 for a spring 2012 review. States should notify the Department of their intent to request ESEA Flexibility by October 12, 2011.
    • Upcoming Hearings. On Tuesday, October 11, the Senate Health, Education, Labor, and Pensions Committee will hold a full committee field hearing on “Leveraging Higher Education to Improve Employment Outcomes for People Who Are Deaf or Hard of Hearing.” The hearing will take place at Gallaudet University in Washington, DC.
      On Wednesday, October 12, the House Science, Space, and Technology Subcommittee on Research and Science education will host a hearing titled, “What Makes for Successful K-12 STEM Education: A Closer Look at Effective STEM Education Approaches.”




    • American Jobs Act. Senate Majority Leader Harry Reid (D-NV) reintroduced the “American Jobs Act” last week, keeping President Obama’s proposed job-creating measures while eliminating his plan to end $40 billion in oil and gas industry tax incentives and raise taxes on individuals/families making at least $200,000/$250,000 to partially pay for the $447 billion package. To pay for the legislation, Reid included a 5.6 percent “millionaire’s surtax,” beginning in 2013 on income exceeding $1 million.
    • Clean Tech Report. Twenty-two Senate Democrats (including both Independent Senators) have requested Energy Secretary Steven Chu provide a report on efforts to advance and deploy clean technologies.
    • Green Jobs. The Labor Department’s Inspector General issued a report last week – requested by Senate Finance Committee Ranking Member Chuck Grassley (R-IA) – critical of the Recovery Act’s “green jobs” program. It concluded that $327 million remained unexpended as of June and recommended that remaining funds be recouped to the extent possible. House Oversight and Government Reform Committee Chairman Darrell Issa (R-CA) immediately issued a statement calling on President Obama to “move quickly to redirect these funds to deficit reduction and focus on broad-based job creation and economic recovery, not just a niche program that has fallen far short of expectations.” 
    • Congressional Hearings. On Wednesday, the House Natural Resources Committee will hold an oversight hearing on the lingering economic impacts since the Administration lifted the offshore drilling moratorium last October. On Thursday, the Committee will hold a hearing on the recently released Joint Investigation Team report into the Deepwater Horizon disaster. (That hearing has twice been postponed.) The Senate Energy and Natural Resources Committee’s Subcommittee on Water and Power is also expected to schedule a follow-on shale gas hearing to further consider hydraulic fracturing activities in the eastern United States.


    • OCS Rules. The Interior Department will begin enforcing the Safety and Environmental Management System rule next month, after a year-long delay to ensure sufficient time for industry to come into compliance. The new Bureau of Safety and Environmental Enforcement will also issue an Advance Notice of Proposed Rulemaking – providing for stakeholder comment – in the coming weeks on proposed regulations to further strengthen safety and environmental protection of offshore operations. (Interior officials had been waiting for the Coast Guard/BOEMRE Joint Investigation Team’s report into the Deepwater Horizon disaster, which was released in mid-September, before proceeding with the rulemaking process.) In the meantime, Interior Secretary Ken Salazar’s Ocean Energy Safety Advisory Committee will hold a public meeting next month to discuss preliminary recommendations to increase offshore energy safety measures.
    • Shale Rules. The Interior Department/Bureau of Land Management is expected to propose new natural gas rules for drilling activities on federal lands next month. It will likely include requirements that companies disclose non-proprietary chemicals used for hydraulic fracturing activities and well design standards.




    • Gulf Coast Restoration. Gulf Coast House Members introduced H.R. 3096, "The Restore Act," which would create a new Gulf Coast Restoration Trust Fund funded with 80 percent of the civil penalties paid in connection with the Deepwater Horizon oil spill. The Clean Water Act penalties, estimated from approximately $5.4 billion to approximately $21 billion, would be allocated in the following manner:
      • 35 percent would be divided equally among the five Gulf States (LA, MS, AL, TX and FL) for economic and ecological recovery activities along the coast.
      • 30 percent would be dedicated to the development and implementation of a comprehensive restoration plan. A new Gulf Coast Restoration Council — made up of federal officials and representatives from the five states — would dictate the scope of the plan.
      • 30 percent would be distributed by the council to Gulf Coast States, with the allocation dictated in part by spill impact.
      • 5 percent would go to a new long-term science and fisheries endowment and to a Gulf Coast research, science and technology program.
        S. 1400, the Senate companion measure that also enjoys broad bipartisan support, was recently reported by the Environment and Public Works Committee.
    • Gulf Hearing. On Wednesday, October 12, the House Committee on Natural Resources will hold a full committee oversight hearing on the Gulf of Mexico and the former lifting of the moratorium to examine impacts on jobs, energy production, and local economies
    • Spill Report Hearing. On Thursday, October 13, the House Committee on Natural Resources will hold a full committee oversight hearing titled “BOEMRE/U.S. Coast Guard Joint Investigation Team Report.” The hearing will focus on the investigative report conducted by the Bureau of Ocean Energy Management, Regulation, and Enforcement and the United States Coast Guard into the Deepwater Horizon spill.
    • Endangered Species Act. On Thursday, October 13, the House Committee on Science, Space and Technology, Subcommittee on Investigations and Oversight will hold a committee hearing on the Endangered Species Act.


    • Preliminary Report of Gulf Coast Ecosystem Restoration Task Force. The Gulf Coast Ecosystem Restoration Task Force released its preliminary report, titled “Long Term Recovery Plan after the Deepwater Horizon Oil Spill (September 2010),” in response to the spill and the recommendations proposed by Secretary of the Navy Ray Mabus for America’s Gulf Coast. The report is a draft road map for restoring the Gulf of Mexico ecosystem. President Barack Obama established the Gulf Coast Ecosystem Restoration Task Force on October 5, 2010. The Task Force will make formal recommendations to Congress late this fall. The public review and feedback period for the preliminary report runs through October 26, 2011.
    • Trichloroethylene. The EPA has released the final health assessment for trichloroethylene (TCE). Trichloroethylene is a chlorinated hydrocarbon commonly used as an industrial solvent. TCE has also been used in the United States to clean kerosene-fueled rocket engines. The final assessment characterizes the chemical as carcinogenic to humans. TCE is one of the most common man-made chemicals found in the environment. Frequently found at Superfund sites across the country, TCE’s movement from contaminated ground water and soil into indoor air of overlying buildings is of serious concern to EPA.


    Financial Services


    • Senate Banking Committee Recommends Confirmation for CFPB Director, Other Nominees. On Thursday, October 6, the Senate Banking Committee voted along party lines (12-10) to endorse Richard Cordray as Director of the newly created Consumer Financial Protection Bureau. The Committee also approved, by voice vote, Alan Krueger to be a member of the Council of Economic Advisers and Cyrus Amir-Mokri to be an Assistant Secretary of the Treasury.
    • House Agriculture Committee to Discuss Dodd-Frank Act Legislative Proposals. On Wednesday, October 12, the House Agriculture Committee will hold a hearing to review legislative proposals amending Title VII of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The proposals include (i) a bill designed to address the treatment inter-affiliate swaps (H.R. 2779), the Business Risk Mitigation and Price Stabilization Act (H.R. 2682), a bill to improve consideration by the Commodity Futures Trading Commission (CFTC) of the costs and benefits of its regulations and orders (H.R. 1840) and the Swap Execution Facility Clarification Act (H.R. 2586).
    • House Subcommittee to Discuss U.S. Housing Finance System. On Thursday, October 13, the House Financial Services Subcommittee on International Monetary Policy and Trade will hold a hearing titled, “The U.S. Housing Finance System in the Global Context: Structure, Capital Sources, and Housing Dynamics.” The witnesses include Michael Farrell, Annaly Capital Management, Inc.; Richard Dorfman, Securities Industry and Financial Markets Association; Moe Veissi, National Association of Realtors; Susan Wachter, University of Pennsylvania.
    • House Financial Services Subcommittee to Discuss OTC Derivatives Regulation. On Friday, October 14, the House Financial Services Subcommittee on Capital Markets and GSEs will hold a hearing titled, “Legislative Proposals to Bring Certainty to the Over-the-Counter Derivatives Market”.


    • FDIC to Hold Open Meeting on Volcker Rule. On Tuesday, October 11, the Federal Deposit Insurance Corporation (FDIC) will hold an open rulemaking meeting. The FDIC is expected to approve for publication and comment a proposed rule on prohibitions on proprietary trading and certain interests in, and relationships with, hedge funds and private equity funds. The FDIC will be the first of several agencies to consider the proposed jointly-issued “Volcker Rule.”
    • FSOC to Issue Second Proposed Rulemaking on SIFI Designation. On Tuesday, October 11, the Financial Stability Oversight Council (FSOC) will meet to issue for public notice and comment a second notice of proposed rulemaking and guidance on the authority to require supervision and regulation of certain nonbank financial companies. As Treasury Secretary Geithner testified before the Senate Banking Committee on October 6, the FSOC’s guidance will “give the markets more guidance, more clarity about what types of institutions, what types of structures” will be considered systemically important.
    • SEC to Hold Dodd-Frank Rulemaking Meeting, Consider Volcker Rule. On Wednesday, October 14, the Securities and Exchange Commission will hold an open meeting to (i) consider the Volcker Rule (the proposal related to prohibiting any banking entity from engaging in proprietary trading or from acquiring or retaining an ownership interest in, sponsoring, or having certain relationships with a hedge fund or private equity fund subject to certain exemptions); and (ii) proposed rules related to the registration of security-based swap dealers and major security-based swap participants.


    International, Defense, Homeland Security

    • Trade Developments. On Monday, October 3, President Obama officially submitted for Congressional consideration the Free Trade Agreements (FTAs) with South Korea, Panama and Colombia. On Wednesday, the House Ways and Means Committee sent to the House floor the implementing bills for the three FTAs, reporting out all three by robust margins. The Senate Finance Committee is slated do to the same on Tuesday, October 11. The House and Senate Leadership envision floor votes on the FTAs, as well as a House vote to renew the Trade Adjustment Assistance (TAA) program and the Generalized System of Preferences (GSP) trade preference provisions, on October 12, prior to Korean President Lee Myung-bak’s State Visit the following day. Additional details on the Ways and Means markup follow below.
      • By a 31-5 margin, the Committee reported favorably the implementing legislation for the Korea-U.S. States Free Trade Agreement (KORUS), H.R. 3080, sponsored by House Majority Leader Eric Cantor (R-VA) and co-sponsored by Ways and Means Ranking Member Sander Levin (D-MI). All attending Republicans and all but five Committee Democrats voted in favor of KORUS. Committee Members, particularly on the Republican side, stressed both economic and strategic factors as their reasons for voting for the FTA. Pro-KORUS Committee Democrats and Trade Subcommittee Chairman Kevin Brady (R-TX) also cited the Obama Administration’s work to rectify previous auto and beef concerns, and the parallel renewal of TAA and GSP, as reasons the Committee is able to produce a strong “yes” vote on the agreement.

        The only “no” votes on KORUS came from Congresswoman Shelley Berkley (D-NV), Congressman Lloyd Doggett (D-TX), Congressman John Lewis (D-GA), Congressman Bill Pascrell (D-NJ) and Congressman Pete Stark (D-CA). Only Representative Pascrell offered a KORUS-specific rationale for his “no” vote. The Congressman highlighted his discomfort with the agreement’s Rules of Origin provisions, which he fears could lead to 65 percent third-party origin, particularly Chinese, products receiving duty-free exports to the United States.
      • H.R. 3078, the Colombia legislation sponsored by Leader Cantor and co-sponsored by Congressman Sam Farr (D-CA), cleared Ways and Means on a 24-12 vote. Congressman Joe Crowley (D-NY) and Congressman Ron Kind (D-WI) joined all twenty-two Committee Republicans in voting in favor. Democrats voting “no” lamented the Republican Leadership’s decision, and the Obama Administration’s reputed acquiescence, in failing to include the Colombia Action Plan on labor rights issues in the text of the implementing bill. USTR General Counsel Tim Reif’s assurances did not mollify anti-Colombia FTA Committee Members, who alleged the lack of inclusion of the Action Plan will deprive the United States of one avenue of redress if Colombia fails to comply on labor rights.
      • The Committee sent Panama legislation H.R. 3079, offered by Congressman Cantor and Trade Subcommittee Ranking Member Jim McDermott (D-WA), to the House floor on a 32-3 vote. Representative Berkley, Representative Lewis and Representative Stark voted “no.” Of the other “no” votes on KORUS, Representative Doggett did not vote on the Panama legislation, and Representative Pascrell voted “yes.”

        During the Committee’s deliberations, several Republican Congressmen prodded Reif to commit to an estimated date for entry-into-force for all three agreements. Reif would not offer a date, but he repeatedly promised that after the President signs the FTA implementing bills into law, the Administration will reach out to the Korean, Colombian and Panamanian governments to move as quickly as possible on implementation.
    • Currency Developments. On Thursday, October 6, the Senate voted 62-38 to limit debate on S. 1619, Senator Sherrod Brown’s (D-OH) legislation designed to threaten sanctions against allegedly “misaligned” currencies, such as China’s. Senator Maria Cantwell (D-WA), Senator Claire McCaskill (D-MO) and Senator Patty Murray (D-WA) joined 35 out of 47 Senate Republicans in voting against cloture. The Senate is expected to pass the measure on Friday, but it faces dim prospects in the House.


    Super Committee

    While its members have been in ongoing closed-door meetings, the Super Committee has not held a public hearing since September 13. Although the Committee is expected to resume public hearings, none have been announced for the upcoming week. By most accounts, progress towards bipartisan deficit reduction legislation remains very slow, in large part due to disagreements over whether to include tax increases as part of the legislation, and whether and how significant any cuts to entitlement programs (Medicare, Medicaid and Social Security) should be. It is likely that the Committee will first focus on non-health mandatory spending items that were discussed last spring by the Biden Group (such as agriculture subsidies and federal retirement benefits) while discussions continue on taxes and entitlements.

    Although progress remains slow, the Super Committee is under pressure to have some measure of agreement by around November 1 to give the Congressional Budget Office time to score their proposal, which the Super Committee itself must vote on by November 23 in order to maintain “fast track” procedures of any legislation they report.



    • Tax Reform in Super Committee Deliberations. While the Super Committee met several times this week during extended closed-door sessions, no details have emerged on any progress toward an agreement. Whether, and to what degree, tax provisions will be included in any final agreement remains an open question. Although the Super Committee continues to be briefed on tax reform options, it remains unlikely that it will be able to include fundamental reform in any agreement given the truncated timeframe of its proceedings. Other possible options include setting up a process whereby fundamental reform could be compelled next year, or including various piecemeal tax provisions in a final product and leaving reform to be dealt with at a later point in time. However, disagreements over policy outcomes and revenue targets continue to persist.
    • Repatriation Proposal Unveiled in the Senate. On October 6, Senators Kay Hagan (D-NC) and John McCain (R-AZ) unveiled a foreign earnings repatriation bill. The Foreign Earnings Reinvestment Act would reduce the 35 percent corporate tax rate to an 8.75 percent effective rate, dropping it further to 5.25 percent for companies that expand their “qualified payroll” by 10 percent during 2012. Companies that reduce their payroll will be penalized $75,000 per full-time position eliminated. The Senators have indicated that the plan will be offered as an amendment to the President’s American Jobs Act. While the Senate will vote on Monday on whether to invoke cloture on the motion to proceed to that legislation, it is doubtful 60 votes will exist in order to allow the legislation to advance for consideration by the Senate.

      The Hagan/McCain bill provides a similar, but not identical, repatriation framework to legislation introduced in the House of Representatives earlier this year by Representatives Kevin Brady (R-TX) and Jim Matheson (D-UT). The Brady/Matheson bill has been referred to the Ways & Means Committee but has not yet been marked up. Some Congressional Democrats, including Senator Chuck Schumer (D-NY), have indicated that a repatriation holiday would have a stronger chance of passing if tied to an “infrastructure bank” proposal that would finance infrastructure projects.
    • Tax Reform Hearings. Hearings on fundamental tax reform continue on both the House Ways & Means and Senate Finance Committees. On October 6, Patton Boggs’ Senator John Breaux, who co-chaired the 2005 President’s Advisory Panel on Tax Reform, testified before the Senate Finance Committee on the Panel’s proposed changes to tax incentives for homeownership.

      The following hearing is scheduled for next week:
      • October 12: Senate Finance Committee hearing on Tax Reform Options: Capital Investment and Manufacturing. The following witnesses are scheduled to testify: Dr. Jane Gravelle, Senior Specialist in Economic Policy, Congressional Research Service, Library of Congress; Douglas Holtz-Eakin, Ph.D., President, American Action Forum; Dr. Robert D. Atkinson, President, Information Technology and Innovation Foundation; Dr. J.D. Foster, Norman B. Ture Senior Fellow, Economics of Fiscal Policy, The Heritage Foundation; Dr. Michelle Hanlon, Associate Professor of Accounting, Massachusetts Institute of Technology, Sloan School of Management.




    • Spectrum. Representative Greg Walden (R-OR), Chairman of the House Communications and Technology Subcommittee, said this week that he intends "to advance a proposal by the end of this year" on spectrum reform. Chairman Walden released a statement amid negotiations with leading Democrats on the panel, and with momentum building to produce a measure that will use incentive auctions of broadcast spectrum to expand broadband access, repack broadcast stations to clear spectrum for auction and deploy a nationwide interoperable public safety network. Walden stated that "we will continue working in good faith to develop legislation that creates jobs, establishes a public safety network, and reduces the deficit."

      Walden’s subcommittee has not set a date to mark up a spectrum bill, although it may occur next week, in time to send the bill to the Joint Select Committee on Deficit Reduction for consideration. House and Senate Committees have until October 14 to transmit their recommendations to the Joint Select Committee and spectrum auctions provide an opportunity to contribute to an offset the deficit with auction proceeds.
    • Universal Service Fund (USF) Reform. The Senate Commerce Committee plans to hold a hearing to examine USF reform next Wednesday. Consumer concerns will likely be the focus. Expected to testify are Michael Powell of the National Cable Television Association and former Chairman of the Federal Communications Commission (FCC) NCTA, Kathleen Abernathy of Frontier, Mary Dillon of US Cellular and most likely a rural provider. FCC Chairman Julius Genachowski officially put reform on the Commission’s October 27 meeting agenda. In a speech on October 6 about his reform plan, Genachowski said he collected input from numerous stakeholders before writing his rules. The FCC’s reform effort would overhaul the USF, which consumers contribute to through their phone bills. Genachowski wants to transition the fund from supporting the provision of basic phone service to hard-to-reach areas to supporting broadband and wireless networks. At the same time, the Commission also would streamline the system of payments between phone companies known as intercarrier compensation in order to incentivize companies to upgrade their networks. The FCC’s efforts to rebalance intercarrier compensation charges also could affect companies that have been offering Internet calling, such as Google Voice, Skype and Vonage. If the FCC decides to apply a uniform access charge to all services, including voice-over-Internet Protocol providers, those companies say they could have to increase the rates for customers by as much as $180 a year.

      Phone companies came together for negotiations earlier this year and developed a consensus framework on which the FCC sought public comment. Consumer groups are concerned that consumer phone bills could rise under the new plan, while state regulators oppose preemption of the intercarrier compensation regime.
    • GOP Cybersecurity Recommendations. On October 5, the House Republican Cybersecurity Taskforce released its recommendations to point the way for cybersecurity legislation for the remainder of the 112th Congress. Led by Taskforce Chairman Mac Thornberry (R-TX), the Taskforce made recommendations in four key areas: authorities, information sharing and public-private partnerships, critical infrastructure and domestic legal frameworks. The Taskforce’s recommendations highlight the critical need for the improvement of existing information sharing structures and the development of an active defense capability to improve security and disseminate real-time information designed to help target and defeat malicious cyber activity. The recommendations include voluntary incentives to encourage private companies to improve cybersecurity, such as the development of voluntary standards through a public-private partnership, utilizing existing tax credits and grant funding to promote increased security, and studying the possible role the insurance industry may play in strengthening cybersecurity.

      The Taskforce also recommends reform of a number of cybersecurity laws, including Federal Information Security Management Act (FISMA) of 2002, Computer Fraud and Abuse Act (CFAA) of 1986, as well as other communications laws and criminal statutes. Noting that complexity for Congress, recommendations include updating legal authorities beginning with defining a proactive process for Defense Support of Civil Authorities (DSCA) and increased support from the Department of Defense to the broader federal government. The Taskforce also suggests formalizing the Department of Homeland Security’s current role in coordinating cybersecurity for federal civilian agencies’ computer and networks. The full report is available on Representative Thornberry’s website here. The recommendations drew support from Senate Homeland Security and Governmental Affairs Committee Chairman Joseph Lieberman, (I-CT), Ranking Member Susan Collins (R-ME) and Federal Financial Management Subcommittee Chairman Tom Carper (D-DE), who say the legislative principles laid out by the House Republican Cybersecurity Task Force “demonstrate that comprehensive cybersecurity legislation can and should pass Congress this year.”
    • Children’s Online Privacy. On October 5, the House Energy and Commerce Committee, Subcommittee on Commerce, Manufacturing, and Trade, held a hearing titled, “Protecting Children’s Privacy in an Electronic World.” The hearing follows proposals announced in September by Federal Trade Commission (FTC) Chairman Jon Leibowitz to revise FTC rules governing the Children’s Online Privacy Protection Act. The Commission has proposed adding new ways in which parents can consent to the collection of their children’s personal information. It also wants to add to confidentiality and security requirements for personal information handled by service providers or third parties. The FTC also wants to boost its oversight of self-regulatory “safe harbor programs” by requiring annual audits of those programs. At the hearing, Democrats called for action on privacy legislation but most Republicans remain cautious about legislating in this area and are wary of mandating new privacy laws on the technology sector. Although Subcommittee Chair Mary Bono Mack (R-CA) renewed her desire to see congressional action on data security, she stated that privacy legislation was “just not ready for prime time.” The Subcommittee has scheduled another hearing on October 13 to examine consumer attitudes toward Internet privacy.
    • Hearings. The Subcommittee on Commerce, Manufacturing, and Trade has scheduled a hearing titled, “Understanding Consumer Attitudes About Privacy,” on October 13 at 9:00 a.m. in 2123 Rayburn House Office Building. 


    • FCC Open Meeting. On October 27, the FCC will hold its monthly open meeting. At the meeting, the Commission will consider: 1) a Notice of Proposed Rulemaking (NPRM) to reform the Universal Service Fund to support Broadband services; 2) an NPRM to replace television broadcast stations’ public files with online public files to be hosted by the Commission; and 3) will received a status report by the Public Safety and Homeland Security Bureau on preparations for the national test of the Emergency Alert System to be held on November 9, 2011.




    • House Searches for Revenue for SAFETEA-LU Reauthorization. House Republican leaders are seeking up to $100 billion in additional revenue to fund a six-year surface transportation reauthorization bill at or close to current funding levels. There are indications that the House Republican leadership views the surface transportation reauthorization as a central element of a Republican jobs plan, and the announcement regarding the additional revenue was seen as giving significant momentum to the surface transportation reauthorization. Challenges remain, however, in identifying and finding consensus on the revenue source. Over this past week, Republican leaders have given signs that they are looking at additional revenue that would be generated from increased oil and gas production on public lands, thereby linking transportation revenue to increased domestic energy production. The additional revenue would bring the funding levels of Chairman John Mica’s (R-FL) proposal closer to the funding levels included in the two-year bipartisan measure developed by the Senate Environment and Public Works Committee. Up to this point, the two proposals’ differing funding levels have been the biggest divide.
    • Chairman Boxer Intends to Markup Reauthorization Bill in the Senate. Chairman of the Senate Environment and Public Works (EPW) Committee Barbara Boxer (D-CA) plans to hold a markup of a two-year reauthorization bill in the next several weeks. Chairman Boxer may move forward with her markup before Senate Finance Committee Chairman Max Baucus (D-MT) holds his own markup to reauthorize the fuel tax and devise an offset to close the $12 billion gap needed to maintain funding at current levels for two years. Chairman Boxer has said that significant progress has been made on identifying the additional $12 billion, but a bipartisan consensus in the Senate for the additional revenue has not yet been reached.
    • National Infrastructure Bank. The Subcommittee on Highways and Transit of the House Committee on Transportation and Infrastructure has scheduled a hearing titled, “National Infrastructure Bank: More Bureaucracy & More Red Tape,” for Wednesday, October 12. The hearing will focus on questions relating to the President’s proposed infrastructure bank proposal from the American Jobs Act and other alternative approaches to financing major infrastructure projects. Chairman of the House Transportation and Infrastructure Committee John Mica (R-FL) remains outspokenly opposed to creating another federally-backed agency and continues to express his preference for the expansion of state infrastructure banks.
    • Transportation Appropriations. Both the House and Senate Transportation-HUD Appropriations Subcommittees have released their versions of the FY2012 appropriations legislation; the Senate version has also passed the Full Appropriations Committee. As previously reported in Capital Thinking, the House bill sets a dramatically lower obligation limitation for Highway Trust Fund programs, whereas the Senate maintains the obligation limitation at current levels. In light of the six month SAFETEA-LU extension at current levels, it is likely that the obligation limitation will tract this authorized level. On the discretionary side, the House bill eliminates funding for the TIGER program, funds New Starts at $1.56 billion and makes significant cuts to Amtrak. The Senate version increases funding for TIGER and New Starts and maintains Amtrak funding, meeting its budget authority target instead through more extensive cuts and rescissions to HUD programs. Given the bipartisan support for the bill in the Senate Appropriations Committee, where the bill passed by a vote of 28-2, the Senate Democratic leadership may attempt to move the Transportation-HUD bill to the floor for a vote, with the idea that doing so would strengthen the Senate position in subsequent House-Senate negotiations. As reported elsewhere in this Capital Thinking, the anticipated endgame for appropriations remains for the individual bills to be informally conferenced between the House and Senate to reconcile their differences; and to then package the bills either into an “omnibus” or several “minibus” bills as the vehicles for ultimate passage.
    • American Jobs Act. The Senate this week introduced a version of the American Jobs Act, including the President’s proposed infrastructure funding. While the President’s specific proposal for $50 billion in immediate infrastructure investment and the National Infrastructure Bank continues to face challenges in Congress, the broader emphasis on infrastructure investment has been embraced on a bipartisan basis as a job-creation strategy.