Capital Thinking Update - November 7, 2011

    View Author 7 November 2011

    General Legislative

    On Monday, November 7, the House will begin a Constituent Work Week and will not be in session. The Senate will convene at 2:00 p.m. on Monday for a period of morning business. Thereafter, the Senate will resume consideration of H.R. 674, the 3 percent Withholding Repeal and Job Creation Act.

    Budget, Appropriations


    • First FY2012 Appropriations Minibus. On November 1, the Senate passed the first FY2012 minibus (H.R. 2112 / A. Amt. 738) by a vote of 69 to 30. House and Senate conference negotiators are now aiming to finalize the bill and draft a report by November 14 in order to pass the measure before the expiration of the current Continuing Resolution (CR) on November 18.

      The measure currently includes the Agriculture, Commerce-Justice-Science, and Transportation-Housing and Urban Development FY2012 spending bills. House appropriators indicated they would like to add one or two additional non-controversial bills to the measure in order to move the FY2012 budget process further along (two bills mentioned as possible add-ons include the Legislative Branch and Homeland Security bills); however, the strategy of transforming a three bill package into a four or five bill package is receiving significant pushback from Senators.

      The Senate and House conferees for the first minibus include: Senator Herb Kohl (D-WI); Senator Tom Harkin (D-IA); Senator Dianne Feinstein (D-CA); Senator Tim Johnson (D-SD); Senator Ben Nelson (D-NE); Senator Mark Pryor (D-AR); Senator Sherrod Brown (D-OH); Senator Daniel K. Inouye (D-HI); Senator Patty Murray (D-WA); Senator Barbara A. Mikulski (D-MD); Senator Roy Blunt (R-MO); Senator Thad Cochran (R-MS); Senator Mitch McConnell (R-KY); Senator Susan Collins (R-ME); Senator John Hoeven (R-ND); Senator Richard Shelby (R-AL); Senator Kay Bailey Hutchison (R-TX); Senator Jerry Moran (R-KS); Representative Norm Dicks (D-WA); Representative Rosa DeLauro (D-CT); Representative John Olver (D-MA); Representative Ed Pastor (D-AZ); Representative David Price (D-NC); Representative Sam Farr (D-CA); Representative Chaka Fattah (D-PA); Representative Adam Schiff (D-CA); Representative Jerry Lewis (R-CA); Representative Bill Young (R-FL); Representative Frank Wolf (R-VA); Representative Jack Kingston (R-GA); Representative Tom Latham (R-IA); Representative Robert Aderholt (R-AL); Representative Jo Ann Emerson (R-MO); Representative John Culberson (R-TX); Representative John Carter (R-TX); and Representative Steven LaTourette (R-OH).

      Conferees agreed to top-line funding parameters that align closely with those passed in the Senate, which are slightly higher than those of the House (in part because some of the House totals were established according to the House Budget Resolution (H.Con.Res. 34) and not the Budget Control Act (P.L. 112-25)) -- $19.6 billion for Agriculture; $52.7 billion for Commerce-Justice-Science; and $55.6 billion for Transportation-Housing and Urban Development.

      On November 2, House Appropriations Committee Ranking Member Norm Dicks (D-WA) outlined Democratic priorities for the conference report, primarily highlighting programs that were drastically reduced or zeroed out in the House versions of the bills, including, but not limited to Food Assistance for Women, Children and the Elderly; the Community Oriented Policing Services (COPS); emergency relief funding for transportation projects; TIGER grants; Housing Counseling Assistance; and the Choice Neighborhoods Initiative. Subsequently, on November 3, the House adopted a non-binding resolution requesting conferees to provide the highest level of funding for the Federal Highway Administration’s disaster response program and the COPS program.
    • Second FY2012 Appropriations Minibus. Senate Majority Leader Harry Reid (D-NV) intends to bring up the next FY2012 Appropriations minibus this week. The measure will likely include the Energy and Water (H.R. 2354), Financial Services (S. 1573) and State-Foreign Operations (S. 1601) bills. The White House urged the Senate to replace the State-Foreign Operations bill with a less controversial measure, but it is unlikely Senate leaders will do so. Debate over the State-Foreign Operations bill will focus on foreign aid spending, particularly funds that are directed to Pakistan.
    • Dueling Jobs Proposals Blocked in the Senate. As detailed in the Transportation section of this report, on November 3, the Senate defeated both Democratic and Republican jobs proposals. The Rebuild America Jobs Act (S. 1769), a $60 billion infrastructure investment package based off of the President’s larger jobs proposal, failed to advance by a vote of 51 to 49. The Republican proposal, which provided a two-year extension of funding for federal highways and transportation programs, failed by a vote of 47 to 53. 




    • Unofficial House Hearing on Student Athlete Protection and Compensation. On Tuesday, November 1, Congressman Bobby Rush (D-IL), a member of the House Energy and Commerce Committee, held an unofficial hearing on the NCAA rules as they relate to protecting and compensating student athletes. Witness testimony focused on preventing student athletes from losing scholarships because of athletic injuries, increasing student athletes’ rights regarding their NCAA Letters of Intent, ensuring that athletic scholarships cover the complete cost of attendance and reducing unethical recruitment practices. House Judiciary Committee Ranking Member John Conyers (D-MI) also attended the hearing.
    • House STEM Education Hearing. On Thursday, November 3, the House Science, Space and Technology Subcommittee on Research and Science Education held a hearing titled, “STEM [Science, Technology, Engineering and Math] in Action: Transferring Knowledge from the Workplace to the Classroom.” The hearing examined approaches and programs that would encourage STEM professionals from industry to consider strongly a second career in teaching. Witnesses provided testimony on the importance of transition programs and the challenges, ranging from monetary to certification and licensure requirements, current STEM industry professionals are likely to confront should they decide to teach in the classroom.
    • Upcoming Senate Hearing on ESEA Reauthorization. On Tuesday, November 8, the Senate Health, Education, Labor, and Pensions (HELP) Committee will hold a hearing titled, “Beyond NCLB: Views on the Elementary and Secondary Education Reauthorization Act.” Senators Tom Harkin (D-IA) and Michael Enzi (R-WI) agreed to convene this additional hearing as part of an agreement with Senator Rand Paul (R-KY). During the markup of the ESEA bill in October, Senator Paul invoked a Senate rule barring the Committee from conducting the markup in its entirety. Senator Paul had expressed concerns over the reauthorization process, including the timeline HELP Committee members were given to address issues with the bill.


    • Secretary Duncan Speaks at U.S-Indonesia Education Summit. On Monday, October 31, Secretary of Education Arne Duncan spoke at the U.S-Indonesia Higher Education Summit. His remarks focused on  new collaborative educational efforts between the U.S. and Indonesia, including a $165 million commitment over five years to support increased international higher education exchanges and the new $15 million Fulbright Indonesia Research, Science, and Technology Program (FIRST) to promote study abroad of high-demand science and technology fields by students and scholars. 




    • BLM and OSM Merger. Secretary of the Interior Ken Salazar has announced a decision to merge the Bureau of Land Management and the Office of Surface Mining Reclamation. The BLM manages more than 245 million acres in the West, including permitting exploration and mining projects for hardrock minerals, while the OSM oversees state surface coal-mining regulatory programs throughout the country. The Secretary’s order becomes effective December 2. The merger would consist of the following activities:
      • Integration of the OSM's administrative functions with the BLM's administrative functions, including the management of human resources, budget, communications, information, finance, ethics and acquisition and financial assistance.
      • Integration of the OSM's abandoned mine lands programs and functions, including its state grants-in-aid program and the Abandoned Mine Land Inventory System, and the BLM's mine and surface reclamation programs.
      • Integration of fee collections.
      • Integration of the OSM's coal mining regulation, inspection and enforcement programs and functions and the BLM's inspection and enforcement program functions relating to mining.
    • Congressional Hearings. On Tuesday, the Senate Energy and Natural Resources Committee will meet to consider market developments for domestic natural gas, including the approval process and potential for liquefied natural gas exports. The Committee has also scheduled a field hearing to examine Marcellus Shale gas development and production in West Virginia on November 14. On Thursday, November 17, the Committee will hold a full committee hearing to receive testimony on the Secretary of the Interior’s Order No. 3315 to Consolidate and Establish the Office of Surface Mining Reclamation and Enforcement within the Bureau of Land Management.


    • Hydraulic Fracturing and Drinking Water. At the request of Congress, the EPA is undertaking a study of potential impacts of hydraulic fracturing on drinking water resources. On November 3, it announced its final research plan, which will look at the full cycle of water in hydraulic fracturing from the acquisition of the water, through the mixing of chemicals, to conducting fracturing and the post-fracturing stage, including the management of flowback and produced water and its ultimate treatment and disposal. The initial research results and study findings will be released to the public in 2012. The agency expects to issue its final report in 2014.
    • NPR-Alaska Lease Sale. The Bureau of Land Management’s Alaska State Office will hold an oil and gas lease sale bid opening for select tracts in the National Petroleum Reserve-Alaska on December 7. Sealed bids must be received by 4:00 p.m. on December 5.
    • BSEE Offshore Regulatory Programs Chief. Bureau of Safety and Environmental Enforcement Director Michael Bromwich has appointed Doug Morris to serve as Chief of Offshore Regulatory Programs. Morris previously worked at the Energy Information Administration, American Petroleum Institute and the former Minerals Management Service. 




    • National Parks. On Saturday, November 5, the Senate Committee on Energy and Natural Resources, Subcommittee on National Parks will hold a field hearing in the Mesa Verde National Park, CO on issues affecting management of archaeological, cultural and historic resources at Mesa Verde and other units of the National Park System.
    • Bureau of Land Management. On Thursday, November 17, the Senate Committee on Energy and Natural Resources will hold a full committee hearing to receive testimony on the Secretary of the Interior’s Order No. 3315 to Consolidate and Establish the Office of Surface Mining Reclamation (OSM) and Enforcement within the Bureau of Land Management (BLM).


    • BLM and OSM Merger. Secretary of the Interior Ken Salazar has proposed merging the Bureau of Land Management and the Office of Surface Mining Reclamation. The BLM manages more than 245 million acres in the West, including permitting exploration and mining projects for hardrock minerals, while the OSM oversees state surface coal-mining regulatory programs throughout the country. The Secretary’s order becomes effective December 2. The merger will consist of the following activities:
      • Integration of the OSM's administrative functions with the BLM's administrative functions, including the management of human resources, budget, communications, information, finance, ethics and acquisition and financial assistance.
      • Integration of the OSM's abandoned mine lands programs and functions, including its state grants-in-aid program and the Abandoned Mine Land Inventory System, and the BLM's mine and surface reclamation programs.
      • Integration of fee collections.
      • Integration of the OSM's coal mining regulation, inspection and enforcement programs and functions and the BLM's inspection and enforcement program functions relating to mining.
    • Hydraulic Fracturing and Drinking Water. At the request of Congress, the EPA is undertaking a study of potential impacts of hydraulic fracturing on drinking water resources. On November 3, the EPA announced its final research plan, which will look at the full cycle of water in hydraulic fracturing from the acquisition of the water, through the mixing of chemicals and actual fracturing, to the post-fracturing stage, including the management of flowback and produced or used water and its ultimate treatment and disposal. The initial research results and study findings will be released to the public in 2012. The agency expects to issue its final report in 2014.
    • Lead and Copper in Drinking Water. The EPA has announced it will hold a public teleconference of the National Drinking Water Advisory Council (NDWAC) on November 18, 2011. The Agency is developing proposed revisions to the Lead and Copper Rule (LCR), which is the National Primary Drinking Water Regulation for controlling lead and copper in drinking water supplied by public water systems.
    • Oil and Gas Emissions Standards. The EPA has announced that it extended until November 30, 2011, the period for providing public comments on the proposed rule titled, Oil and Natural Gas Sector: New Source Performance Standards and National Emission Standards for Hazardous Air Pollutants Reviews.
    • Microbial Risk in Food and Water. Eastern Research Group, Inc. (ERG), a contractor to the EPA, will
      convene an independent panel of experts to review the draft document titled, Microbial Risk Assessment Guideline: Pathogenic Microorganisms with Focus on Food and Water. The draft was developed jointly by scientists from the EPA and the U.S. Department of Agriculture, Food Safety and Inspection Service, with scientists from other federal agencies. It addresses the full range of microbial risk assessment topics: definitions of the assessors’ roles and responsibilities; planning and scoping; the four components of a risk assessment; and contains sections discussing risk management and communication. The guideline highlights differences in the issues and processes between chemical and microbial risk assessment. The document will ultimately be used as an approach to conducting microbial risk assessments.
    • EPA’s Final Exposure Factors Handbook. EPA has announced the release of the report titled, Highlights of the Exposure Factors Handbook: 2011 Update. The report provides data and analyses on various physiological and behavioral factors commonly used in assessing exposure to environmental chemicals. It may be useful to scientists, economists and other interested parties as a source of data and/or U.S. EPA recommendations on numeric estimates for behavioral and physiological characteristics needed to estimate exposure to environmental agents.


    Financial Services


    • House Approves Financial Services Proposals. This week, the House passed (i) the Entrepreneur Access to Capital Act (H.R. 2930) which removes SEC restrictions that prevent “crowdfunding” from a large pool of small investors who may or may not be considered “accredited” by the SEC; (ii) the Access to Capital for Job Creators Act (H.R. 2940), which removes a regulatory ban that prevents small businesses from using advertisements to solicit investors; (iii) the Small Company Capital Formation Act of 2011 (H.R. 1070), which would increase the annual public-offering threshold for companies to be exempt from full SEC filing requirements from $5 million to $50 million; and (iv) a measure that would increase the threshold for total assets of an issuer required to register with the SEC from $1 million to $10 million, and increase the threshold for the number of shareholders that banks must have to trigger SEC registration requirements from 500 to 2,000 (H.R. 1965).
    • Transaction Tax Legislation Introduced. Senator Tom Harkin (D-IA) and Congressman Peter DeFazio (D-OR) each introduced, in their respective legislative bodies, a proposal to place a tax on certain trading activities undertaken by banking and financial firms. The proposal would impose a tax of three basis points on most non-consumer financial trading including stocks, bonds and other debts, except for their initial issuance.
    • Senators Crapo, Stabenow Discuss Derivatives Regulation. During Senate consideration of the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act (H.R. 2112), Senator Michael Crapo (R-ID) agreed to withdraw an amendment that would have blocked the CFTC from issuing final derivatives rules unless the agency also submitted reports demonstrating the rules would not impede U.S. economic growth. In exchange, Senator Debbie Stabenow (D-MI), Chairwoman of the Senate Agriculture Committee, promised additional Committee hearings on the issue of derivatives trading, particularly focused on maintaining exemptions for non-financial companies, known as end users, that use derivatives to hedge financial and other market-based risks, and whether regulations might place U.S. financial institutions at a competitive disadvantage to foreign companies.
    • House Subcommittee Considers GSE Reform Legislation. On Thursday, November 3, the House Financial Services Subcommittee on Capital Markets, Insurance, and Government-Sponsored Enterprises discussed draft legislation from Subcommittee Chairman Scott Garrett (R-NJ) called the Private Mortgage Market Investment Act. At the hearing, Edward DeMarco, Acting Director of the Federal Housing Finance Agency, called the proposal “a thoughtful approach to a framework that does not rely on a government guarantee.”


    • SEC to Hold Public Financial Reporting Roundtable. On Tuesday, November 8, the Securities and Exchange Commission will hold its inaugural public roundtable of the Financial Reporting Series. The event, “Measurement Uncertainty in Financial Reporting,” will feature three panels discussing the extent to which financial reporting should include measurement uncertainties, and the information that investors find important to understanding and assessing those uncertainties.


    • Treasury Announces Federal Advisory Committee on Insurance Members. The U.S. Department of the Treasury announced the appointment of 15 individuals to serve as members of the Federal Advisory Committee on Insurance, which will provide advice to Treasury’s Federal Insurance Office. The Federal Insurance Office, created by the Dodd-Frank Wall Street Reform and Consumer Protection Act, monitors all aspects of the insurance industry, including identifying issues that could contribute to systemic risk in the insurance industry or the U.S. financial system. It also assesses the availability and affordability of insurance to traditionally underserved populations; advises the Secretary of the Treasury on major domestic insurance policy issues; and develops and coordinates federal policy on international insurance regulatory matters. 


    Health Care


    • Super Committee Health Cuts. Details regarding potential health care cuts remain illusive, but pressure is mounting on the Super Committee panel with compelling presentations this week from Erskine Bowles reviewing recommendations from the White House Deficit Commission Panel. as well as a the bipartisan duo of former Congressional Budget Office Director Alice Rivlin and former Senator Pete Domenici. The Rivlin-Domenici proposal would restructure the Medicare program by creating a regional system of exchanges where beneficiaries would be able to pick a comprehensive health plan with a federal contribution, or traditional Medicare fee for service. The federal contribution would be based on the second lowest bid, and would be capped at GDP plus one percent in growth.
    • FDA Spending Bill. Following passage in the Senate, bicameral conferees began deliberation of the House and Senate versions of the first mini-bus of spending bills which includes spending for the Food and Drug Administration. Conferees will have to reconcile spending levels, with the Senate at $137 billion and the House at $125 billion, but have indicated they are hoping to finish their work before the House returns on November 14.
    • Senate VA Hearing. The Senate Committee on Veterans’ Affairs has scheduled a hearing on Thursday, November 10 at 10:00 a.m. titled, “VA Mental Health Care: Addressing Wait Times and Access to Care.”
    • Senate HELP Hearing. The Senate Committee on Health, Education, Labor and Pensions has scheduled a hearing on Thursday, November 10 at 2:30 p.m. on “Improving Quality, Lowering Costs: The Role of Health Care Delivery System Reform.”


    • Regulations. The Centers for Medicare and Medicaid Services (CMS) has just released several final rules regarding 2012 Medicare payments including (1) End-Stage Renal Disease Prospective Payment System and Quality Incentive Program; Ambulance Fee Schedule; Durable Medical Equipment; and Competitive Acquisition of Certain Durable Medical Equipment, Prosthetics, Orthotics and Supplies; (2) Hospital Outpatient Prospective Payment; Ambulatory Surgical Center Payment; Hospital Value-Based Purchasing Program; Physician Self-Referral; and Patient Notification Requirements in Provider Agreements; and (3) Payment Policies Under the Physician Fee Schedule, Five-Year Review of Work Relative Value Units, Clinical Laboratory Fee Schedule: Signature on Requisition, and Other Revisions to Part B for CY 2012. Of particular note, the final rule regarding the physician fee schedule reduced Medicare physician payments for 2012 by 27.4 percent, which is less than the anticipated 29.5 percent cut.

      The Health Resources and Services Administration also released lists of designated primary medical care, mental health, and dental health professional shortage areas as of September 1, 2011.


    • IOM Meetings. The Institutes of Medicine’s Roundtable on the Promotion of Health Equity and the Elimination of Health Disparities will hold a workshop on Monday, November 7, in Detroit, MI. The purpose of this workshop is to focus on the newly evolving equity model as a strategy for moving forward in improving health outcomes for people of color – and all people - in the U.S. What are the “lessons learned” about the equity model of addressing health disparities from those sectors that have embraced the equity model?
    • MACPAC Meeting. The Medicaid and CHIP Payment Advisory Commission has scheduled a public meeting on November 17 and 18.


    International, Defense, Homeland Security

    • Iraq Withdrawal Developments. To this point, Senate Armed Services Committee (SASC) Chairman Carl Levin (D-MI) has resisted the appeals of SASC Ranking Member John McCain (R-AZ), ten other SASC Republicans, and Senator Joe Lieberman (I-CT) to hold a hearing on the strategic and practical consequences of the U.S. military withdrawal from Iraq by the end of 2011. Recent polling suggests Senator Levin stands on relatively solid political ground with his decision. A Gallup poll released Wednesday shows 75 percent of U.S. respondents approving of President Obama’s recent decision to withdraw all combat troops from Iraq. The President’s withdrawal announcement directly stemmed from stalled U.S.-Iraqi discussions over a renewed Status of Forces Agreement (SOFA) for a residual U.S. troop presence. However, the nearly-unanimous support (96 percent-2 percent) for withdrawal among Democrats in the poll has made the SOFA impasse easier for the White House to swallow. In comparison, Republican respondents to the Gallup poll disapproved of the withdrawal decision by a 52 percent-43 percent margin.
    • Palestinian Developments. Last week’s decision by the United Nations Educational, Scientific and Cultural Organization (UNESCO) to admit “Palestine” as a member triggered an immediate shutoff of $200 million in U.S aid to the organization, as required by U.S. law. House Foreign Affairs Committee (HFAC) Chairwoman Ileana Ros-Lehtinen (R-FL) immediately commenced public relations efforts intended to ensure that the Obama Administration would not seek waivers or statutory changes to the law. For its part, the Administration has not indicated that it intends to attempt to change the policy. In a rather surprising related development on Thursday, Congresswoman Ros-Lehtinen lifted her hold on $150 million in security assistance to the Palestinian Authority, after the U.S. Department of State complied with her request to brief her on the planned uses for the funding.
    • Syria Developments. On November 9, the Senate Foreign Relations Committee’s (SFRC’s) Near East Subcommittee will examine the Obama Administration’s Syria policy. Subcommittee Chair Bob Casey (D-PA) and other SFRC attendees can be expected to question Assistant Secretary of State Jeffrey Feltman and Deputy Assistant Secretary of the Treasury Luke Bronin on the limited U.S. options for:  1) bilateral and multilateral sanctions policy, and 2) how best to respond to the Assad regime’s reported human rights abuses, especially in the absence of U.S. Ambassador Robert Ford who was recalled from his post on October 24, due to security concerns.
    • Homeland Security Developments. Reversing a previously self-imposed deadline to comply with a statutory mandate, the Transportation Security Administration (TSA) reportedly has stated that it does not plan to screen 100 percent of U.S.-bound air cargo by the end of 2011. Last Monday, three leading House Democrats on homeland security issues wrote TSA Administrator John Pistole on the issue, noting that if the agency instead were continue to pursue only selective, risk-based air cargo screening, that approach “would be contrary to the intent of Section 1602 [of the 9/11 Commission Act of 2007] and would pose significant security vulnerabilities for our country.”  House Homeland Security Committee (HHSC) Ranking Member Bennie Thompson (D-MS), HHSC Transportation Security Subcommittee Ranking Member Sheila Jackson-Lee (D-TX), and Congressman Ed Markey (D-MA) were relatively gentle in their criticism of the Obama Administration’s implementation of the air cargo mandate, posing open-ended questions in the letter that are seemingly designed to steer TSA toward issuing a new deadline for meeting the 100 percent screening requirement. The letter asks Administrator Pistole to respond by November 14. HHSC Republicans, who generally support risk-based screening, not surprisingly have remained quiet in response to the House Democrats’ letter.


    Super Committee
    Last week, behind closed doors, Super Committee members discussed dueling Democratic and Republican deficit reduction plans. Committee Democrats presented a proposal that would reduce the deficit by around $3 trillion over 10 years. The plan includes $1.3 trillion in tax increases and would reportedly cut Medicare and Medicaid spending by nearly $500 billion. The Democrats’ proposal does not have the support of all Super Committee Democrats – Representative Jim Clyburn (D-SC) opposed the plan’s cuts to healthcare spending, and a number of House Democrats have stated they would oppose such a plan. Super Committee Republicans and House Speaker John Boehner (R-OH) have also dismissed the Democrats’ plan, countering with their own proposal totaling around $2.2 trillion in deficit reduction over a 10-year period. Republican savings are accomplished primarily through targeting mandatory spending, including greater healthcare cuts than those proposed by Democrats. However, 25 percent of the total savings would come from increases in non-tax revenue, such as the sale of government wireless spectrum. Super Committee Democrats have rejected this proposal as well.

    On November 1, the Super Committee held a hearing to review two previous debt proposals: the Simpson-Bowles and Rivlin-Domenici proposals. Appearing before the committee were former Senator Alan Simpson (R-WY) and former White House Chief of Staff to President Clinton, Erskine Bowles (Simpson-Bowles), co-chairs of the bipartisan National Commission on Fiscal Responsibility and Reform, as well as former Office of Management and Budget Director Alice Rivlin and former Senator Pete Domenici (R-NM) (Rivlin-Domenici), co-chairs of the Bipartisan Policy Center’s Debt Reduction Task Force. The hearing focused on large scale tax reform and controlling entitlement program costs in order to achieve deficit reduction. Notably, Senator Simpson and Mr. Bowles offered the Committee a possible compromise three trillion dollar plan, based on the reported dueling Democratic and Republican deficit reduction proposals.

    The Super Committee is under continued pressure to have some measure of agreement quickly in order 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. Given the relative lack of progress thus far, it is expected that House and Senate Leaders will continue to become more actively involved in discussions in order to help spur a result by November 23.

    At this time, no additional public sessions are scheduled.



    • Tax Reform in Super Committee Deliberations. Significant disagreements between the parties over policy outcomes and revenue targets continue to persist, as evidenced by the differing proposals released by Super Committee Democrats and Republicans last week. Whether, and to what degree, tax provisions will be included in any final agreement remains an important and open question. The Super Committee has been briefed on tax reform options, though it remains highly unlikely that the Super Committee will be able to actually include fundamental reform in its forthcoming legislative proposal given the truncated timeframe of the Super Committee proceedings. Short of this, other possible options include setting up a process whereby fundamental reform could be compelled next year, and/or including various piecemeal tax provisions in their final legislative product while leaving fundamental reform to be dealt with at a later point in time.
    • JCT Analyzes Repeal of All Corporate Tax Expenditures. Earlier this week, House Ways & Means Committee Ranking Member Sandy Levin (D-MI) released a Joint Committee on Taxation (JCT) estimate indicating that a repeal of all corporate tax expenditures would only yield enough revenue to reduce the corporate tax rate to 28 percent. The JCT’s preliminary estimate follows on the heels of committee Chairman Dave Camp’s (R-MI) release of a proposal to reform the corporate tax regime, moving from a worldwide system of taxation toward a territorial system. The Camp proposal would lower the top corporate tax rate from 35 percent to 25 percent, using yet unspecified base-broadening measures to pay for the reduction. The JCT score, which was produced at Congressman Levin’s request, is quite preliminary in nature and by necessity makes a number of assumptions that tax writers could easily alter, thus changing the initial JCT estimate.
    • Senate Sets Procedural Vote on Repeal of Three Percent Withholding Law. While over the last few weeks the Senate has voted on party lines to defeat a series of Democratic and Republican jobs bills, it is possible both sides will come together to pass legislation next week. Senate Majority Leader Harry Reid (D-NV) has filed for cloture on the motion to proceed to H.R. 674 as passed by the House last week. The legislation repeals a three percent withholding tax on the proceeds private companies derive from government contracts, which absent legislation is set to take effect in 2013. While originally viewed as a tax compliance measure, three percent withholding is now viewed as a policy that would disrupt cash flow to private business and consequently threaten jobs while reducing economic growth. A vote on the procedural motion is expected on November 7.

      Last week, the Senate rejected an identical version of the three percent repeal bill, which was introduced by Minority Leader Mitch McConnell (R-KY), but which was paid for by certain discretionary spending cuts. The measure, which received bipartisan support, fell three votes (57-43) shy of the 60 required to bring the bill to the floor for debate. The House passed H.R. 674 on October 27 with strong bipartisan support (405-16). To pay for the cost of repeal – estimated at $11.2 billion over 10 years – the House passed separate legislation to replace the Modified Adjusted Gross Income (MAGI) calculation for determining eligibility for premium subsidies for the health insurance exchanges included in the Affordable Care Act and for determining Medicaid eligibility beginning in 2014, with the income formula used in all other federal programs. This offset has now been incorporated into the legislation the Senate will take up next week. It is likely the Senate will vote to proceed to the House-passed bill, and it is possible that once on the legislation Senate Democrats will offer one or more amendments, including legislation that would provide employers with tax credits of up to $4,800 for hiring unemployed veterans.
    • Infrastructure Bills Fail to Advance in Senate. On November 3, competing Democratic and Republican infrastructure bills failed on procedural votes in the Senate. The Democrats’ bill, the Rebuild America Jobs Act (S. 1769), would have levied a 0.7 percent surtax on Modified Adjusted Gross Income (MAGI) in excess of $1 million for individuals and married couples filing jointly to pay for $60 billion in infrastructure-related spending. The Republican alternative was offset via a rescission of unspent appropriated funds.
    • Democrats Introduce Financial Transaction Tax. On November 2, two Congressional Democrats introduced legislation to tax financial transactions. The measure, sponsored by Senator Tom Harkin (D-IA) and Congressman Peter DeFazio (D-OR), would impose a tax of three basis points on stocks, bonds, swaps, futures, options and certain derivatives. The following day, at a G-20 summit, President Obama told European leaders that he supports the idea of requiring the financial sector to pay an “appropriate contribution” fee, but not a financial transaction tax.
    • Tax Reform Hearings Next Week. Hearings on fundamental tax reform continue on both the House Ways & Means and Senate Finance Committees. The following hearings are scheduled for next week:

      November 10: Senate Finance Committee hearing on “Unemployment Insurance: The Path Back to Work.”

      The Senate Finance Committee postponed a hearing scheduled for Wednesday, October 12 on “Tax Reform Options: Capital Investment and Manufacturing.” It is possible that this hearing will be rescheduled for sometime in November. The previously announced witnesses for that hearing were: 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.


    • IRS Releases Proposed Regulations under Section 892. On November 2, the IRS released proposed regulations for determining whether the income of foreign government controlled entities qualifies for the exemption from federal income tax under section 892. Comments and public hearing requests are due by February 1, 2012.




    • Wireless/Online Taxes. H.R. 1002, Representative Zoe Lofgren’s (D-CA) Wireless Tax Fairness Act, passed the House by voice vote on November 1. The measure would prohibit local governments from imposing any new “discriminatory” taxes on mobile services, mobile service providers, or mobile devices during the next five years. Upon passage, Lofgren called the bill “a common sense approach to tackling the increasing and discriminatory nature of local and state wireless service taxation.” Opponents – like Representative Judy Chu (D-CA) – expressed concern that the bill would limit a state’s ability to respond to, and subsequently provide services during, economic downturns. The legislation, supported, of course, by the wireless industry, is being actively opposed by groups representing state and local governments. The Senate has not taken action on their companion bill, S. 543, which is sponsored by Senator Ron Wyden (D-OR).

      In other tax news, Senators Lamar Alexander (R-TN) and Mike Enzi (R-WY) plan to introduce an online sales tax bill in the near future that will mirror in large part the Marketplace Equity Act introduced last month by Representatives Jackie Speier (D-CA) and Steve Womack (R-AK). That bill gives states the authority to compel online retailers to collect sales taxes. As we have reported, there is already a bill pending in the Senate sponsored by Senator Dick Durbin (D-IL) which allows states to adopt a national streamlined sales-tax agreement to require out-of-state retailers to collect sales taxes for online purchases.
    • FCC Reform. On November 2, House Energy and Commerce Committee Chairman Greg Walden (R-OR) and Senate Commerce Committee member Dean Heller (R-NV) introduced FCC reform legislation (H.R. 3309/S. 1784) in the House and Senate respectively. The bill requires the FCC to identify consumer harms and conduct cost-benefit analyses before issuing new regulations, changes the commission’s standards for merger reviews, allows a bipartisan majority of commissioners to schedule items for commission action, and streamlines reporting by combining eight congressionally mandated reports into a single, comprehensive report. With the stated goal of making the FCC “more transparent and more responsive to business,” Senator Heller stated “[t]he technology sector has helped power economic growth in our country for the last twenty years and will continue to if big government does not over burden it. Stifling the technology sector with onerous regulations will only impede new job creation at a time when we need jobs most. Stopping oppressive regulations will be critical to getting our nation’s economy moving again and this legislation is a step in the right direction.”


    • Nominations. On October 31, President Obama nominated Jessica Rosenworcel and Ajit Pai to be FCC Commissioners. Ms. Rosenworcel is currently the senior communications counsel for Senate Commerce Committee Chairman Jay Rockefeller (D-WV) – a job she began under former Committee Chairman Daniel Inouye (D-HI) in 2007. Prior to her committee work, she served as Senior Legal Advisor to FCC Commissioner Michael Copps. Mr. Pai is a litigation Partner at Jenner & Block LLP. Immediately prior to joining Jenner & Block, Mr. Pai worked in various capacities including deputy general counsel, associate general counsel and special advisor to the general counsel at the FCC. Mr. Pai also served as chief counsel to the U.S. Senate Judiciary Committee’s Subcommittee on the Constitution, Civil Rights, and Property Rights and as senior counsel at the Office of Legal Policy at the U.S. Department of Justice. Mr. Pai also served as deputy chief Counsel to the U.S. Senate Judiciary Committee’s Subcommittee on Administrative Oversight and the Courts, and as associate General counsel at Verizon Communications Inc. The nominations received positive reaction from several corners including from CTIA-The Wireless Association- President Steve Largent who said the nominees “have a wealth of experience in Washington, knowledge of communications issues and thoughtfulness that will be great additions to the commission.” 

      While no hearing date has yet been set on the new nominees, they could be added to the Senate Commerce Committee’s November 15 nominations hearing slate, where the committee will be considering the Federal Trade Commission nominations of Chairman Jon Leibowitz to a second term as Chairman and Maureen Ohlhausen to be a new commissioner.


    • FCC Indecency Fine Vacated. Acting upon a remand from the U.S. Supreme Court, on November 2, in a 2 to 1 decision, the 3rd Circuit Court of Appeals reviewed the forfeiture penalty imposed by the Commission on CBS for the “fleeting indecency” involving the Janet Jackson “wardrobe stunt” during the 2004 Super Bowl. The appellate Court ruled: “In finding CBS liable for a forfeiture penalty, the FCC arbitrarily and capriciously departed from its prior policy excepting fleeting broadcast material from the scope of actionable indecency. Therefore, we will grant CBS‘s petition for review and will vacate the Commission‘s order in its entirety.” As of the date of this report the Commission had not commented on the ruling or given any indication as to whether it will appeal to the Supreme Court.    




    SAFETEA-LU Reauthorization

    House Action

    • On Thursday, November 3, Speaker Boehner announced today that House Republicans "will formally introduce an energy and infrastructure jobs bill, and hope to move the legislation through the House before the end of the year." The bill may be released within the next two weeks. As previously reported in Capital Thinking, the House Republican Leadership has been working on a plan to tie SAFETEA-LU reauthorization to new energy production legislation – with the link being that the revenues from new oil and gas leases (and other revenue tied to new domestic energy production) would be used to make up for the shortfall in the Highway Trust Fund and allow a multi-year reauthorization to be move forward. Boehner's announcement confirms the intention to try to move the bill this calendar year as a centerpiece of a Republican jobs agenda.
    • House Transportation and Infrastructure Chairman John Mica (R-FL) has said the House product would be a six-year bill. It is unclear how much revenue will actually be raised through the energy proposal, and there is some speculation it will not be enough to maintain current surface transportation spending levels over six-years. Also, new oil and gas revenues will not come on-line immediately, so there will have to be some kind of transfer or bonding against those future revenues. The Ways and Means Committee, working with the Republican leadership, will have to tackle those issues before a bill can be released – although this week's announcement may signal they are close to some resolution.

    Senate Action 

    • The Senate Environment and Public Works (EPW) Committee will be marking up the highway title of SAFETEA-LU reauthorization next Wednesday, November 9. The draft bill has still not been released as of this writing, but its release should be imminent.
    • The Senate is continuing to move forward with a two-year reauthorization that maintains current spending levels. The Senate Finance Committee, however, has not yet identified or agreed on a way to come up with the $12 billion in additional revenue that is needed. There is no timeframe currently for the Senate Banking Committee (which has jurisdiction over transit programs) to mark-up, and it remains unclear whether they will continue to wait for the Finance Committee to identify the additional revenue or will ultimately mark-up before that occurs.

    Rebuild America Jobs Act

    • On Thursday, November 3, the Senate also considered and failed to pass the Rebuild America Jobs Act, the transportation provisions of President Obama's American Jobs Act that included $50 billion in new transportation spending and $10 billion for a National Infrastructure Bank. The $60 billion provision would have been paid for by a 0.7 percent surtax on incomes over $1 million. As reported above, it failed to reach the required 60 vote threshold and was defeated.
    • In response to the Democratic measure, Senate Republicans introduced a dueling bill that would have extended SAFETEA-LU for two years at essentially current levels while also aggressively streamlining environmental and other project reviews and taking steps to curtail regulations across all agencies. The bill rescinded $40 billion in unobligated discretionary appropriations as the intended offset for the extension -- although it failed to actually deposit any new revenues into the Highway Trust Fund. As also reported above, the Republican offering also failed, falling 13 votes short of the 60 vote threshold. Ultimately, the Senate dispatched of two transportation bills that were not going to pass, clearing the way for continued work on the reauthorization by the committees of jurisdiction.

    Transportation Appropriations

    • On Wednesday November 2, the Senate passed the Transportation-HUD appropriations bill as part of the three-bill "minibus" package. The Senate defeated all significant transportation-related amendments, including multiple amendments to eliminate or significantly modify the current requirement that states spend 10 percent of their STP funds on transportation enhancements (TE). Senate Environment and Public Works Chairman Barbara Boxer (D-CA) led the effort against the TE amendments, noting that the EPW highway reauthorization includes a deal she worked out with Ranking Member James Inhofe (R-OK) to allow states to opt out of the TE requirement.
    • As previously reported in Capital Thinking, there are major differences between the House and Senate versions of the T/HUD appropriations bill that will have to be reconciled. 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 track 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 (providing $1.95 billion) and maintains Amtrak funding, meeting its budget authority target instead through more extensive cuts and rescissions to HUD programs. The Senate bill also provides that Bus Rapid Transit (BRT) projects are to be funded out of the discretionary Bus and Bus Facilities account, thus freeing additional funds for rail projects in the New Starts pipeline. In addition, the House bill includes a provision that would limit the maximum federal share for Full Funding Grant Agreements (FFGAs) to 50 percent, which would affect a number of projects in the pipeline, while the Senate maintains the maximum federal share at 60 percent.
    • Both the House and Senate have now announced their conferees to lead the House-Senate negotiations, and negotiations at the staff level are actively underway. It is generally expected that the Senate will be in the stronger position in these negotiations, having passed its bill with a more than a supermajority (69-30), while the House has only released a draft of its transportation appropriations bill.