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Capital Thinking Update - June 25, 2012
June 25, 2012
On Tuesday, the House will meet at 2:00 p.m. for legislative business. Votes will be postponed until 6:30 p.m. Legislation considered under suspension of the rules will include: H.R. 4850 - Enabling Energy Saving Innovations Act; H.R. 5625 - Collinsville Renewable Energy Promotion Act; H.R. 5889 - Nuclear Terrorism Conventions Implementation and Safety of Maritime Navigation Act of 2012, as amended; H.R. 4223 - Safe Doses Act; H.R. 4018 - Public Safety Officers' Benefits Improvements Act of 2012, as amended; Senate Amendment to H.R. 2297 - To promote the development of the Southwest waterfront in the District of Columbia, and for other purposes; H.R. 4251 - Securing Maritime Activities through Risk-based Targeting for Port Security Act; H.R. 4005 - GAPS Act; H.R. 1447 - Aviation Security Stakeholder Participation Act of 2011; H.R. 5843 - To amend the Homeland Security Act of 2002 to permit use of certain grant funds for training conducted in conjunction with a national laboratory or research facility; H.R. 3173 - To direct the Secretary of Homeland Security to reform the process for the enrollment, activation, issuance, and renewal of a Transportation Worker Identification Credential (TWIC) to require, in total, not more than one in-person visit to a designated enrollment center; and several bills to name facilities of the U.S. Postal Service. Thereafter, the House will begin consideration of H.R. 5972, the Transportation, Housing and Urban Development, and Related Agencies Appropriations Act of 2013.
The Senate will convene at 2:00 p.m. on Monday to resume consideration of the motion to proceed to S. 1940, the Flood Insurance Reform and Modernization Act.
- Passage of Senate Farm Bill. On Thursday, June 21, the Senate passed the Agriculture Reform, Food, and Jobs Act of 2012 (S. 3240) with a vote of 64 to 35. The bill, commonly referred to as the Farm Bill, eliminates direct payments and establishes a shallow loss program to provide aid to farmers when prices drops or crops fail. The bill also contains provisions to curb fraudulent activity under the Supplemental Nutrition Assistance Program (SNAP) and cuts SNAP funding by $4.5 billion. Overall, the bill would save $23.6 billion over 10 years.
The Senate addressed more than 70 amendments to the bill, including the following:
- Crop Insurance Subsidies Cap. The Senate voted to adopt (63-36) to place a cap on crop insurance subsidies for farmers with adjusted gross incomes of more than $750,000.
- Dietary Study. The Senate adopted by voice vote an amendment that requires the Secretaries in the National Nutrition Monitoring and Related Research Act of 1990 to include national nutritional and dietary information and guidelines for pregnant women and children starting in 2020.
- Sugar Reform. The Senate voted against (46 to 53) an amendment that would scale back the sugar program by creating flexible marketing allotments for sugar and adjusting the tariff rate quotas for sugar.
- Genetically Engineered Labeling. The Senate voted against (26 to 73) an amendment that would allow states to require labeling of any food or beverage product indicating that it contains a genetically engineered ingredient.
- SNAP Funding. The Senate voted against (33 to 66) an amendment that would reduce subsidies for insurance providers by $5 billion to increase funding for SNAP.
- Microloan Program for Gleaners. After a division vote, the Senate adopted an amendment that would implement a pilot microloan program for gleaners, who gather excess food to feed the hungry.
In terms of non-germane amendments, the Senate adopted an amendment that would require the Office of Management and Budget, Pentagon, and the President to submit three separate reports to Congress on the impact of sequestration on defense and non-defense discretionary spending (see Budget, Appropriations section). The Senate also adopted an amendment that would prohibit the use of public funds for political party conventions.
Following the Senate’s passage of the bill, Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Ranking Member Pat Roberts (R-KS) pressured the House Agriculture Committee and the full House to pass a bill. Chairwoman Stabenow stated, “I call on the leadership in the House to work with them as the Senate leadership worked with us.” Senator Roberts also mentioned that he plans to call House Speaker John Boehner (R-OH) and Majority Leader Eric Cantor (R-VA).
- House Farm Bill Timeline. The House Agriculture Committee has delayed its markup of the Farm Bill until after the July 4 recess.
- House Agriculture Appropriations Markup. On Tuesday, June 19, the House Appropriations Committee approved by voice vote the draft FY 2013 agriculture spending bill. The bill would provide $19.4 billion in discretionary funding for the Department of Agriculture, the Food and Drug Administration, and the Commodity Futures Trading Commission (CFTC). The bill provides $365 million less than FY 2012 spending levels and $1.7 million less than the funding request in the President’s FY 2013 Budget proposal.
- CFTC Funding. The bill provides $180 million for the CFTC, which is $25 million less than FY 2012 spending levels (a 12 percent cut) and $308 million less than the funding request in the President’s FY 2013 Budget proposal (a 41 percent cut). The Committee rejected Representative Sam Farr’s (D-CA) amendment to increase CFTC spending to $224 million by a vote of 19-27.
- Food Aid. The bill provides for $1.15 billion to support the Food for Peace Program, which is $316 million less than FY 2012 funding levels and $250 million less than the funding request in the President’s FY 2013 Budget proposal. The Committee rejected (20-26) Representative Rosa DeLauro’s (D-CT) amendment, which would increase the proposed FY 2013 funding level by $260 million.
- Taxes on Sugary Drinks. On Wednesday, June 20, the American Medical Association (AMA) voted at its Annual Meeting to adopt dozens of resolutions, including endorsing taxes on beverages with added sweeteners. The AMA has stated that several studies show that drinking sweetened beverages has been strongly linked to weight gain and health problems like type 2 diabetes. In addition, AMA believes that taxes on drinks with added sweeteners can help pay for educational campaigns aimed at reducing obesity.
- FY 2013 Appropriations Action. Last week, the House Appropriations Committee approved its Transportation-Housing, Agriculture, and Financial Services FY 2013 spending bills. The anticipated House Labor-HHS-Education Subcommittee markup did not occur; instead, the House Interior-Environment Subcommittee approved its bill on June 20. This week, the Transportation-Housing and Agriculture bills will be brought to the House floor and the full House Appropriations Committee will mark up the Interior-Environment bill.
As of the writing of this report, the Senate Appropriations Committee had not released its schedule for this week. None of the FY 2013 spending bills have seen action on the Senate floor; it is likely the Senate will start bringing spending bills to the floor after the July 4 recess.
- Sequestration. With the uncertainty of whether a sequestration process will actually occur in January 2013, Congressional Members are asking the Administration to answer the question of how sequestration would be implemented. The Office of Management and Budget (OMB) has been reluctant to provide specifics of how the automatic spending cuts would be applied, but Director Douglas Elmendorf stated recently the effects would begin when federal departments start rolling out their FY 2013 spending plans this fall. In response, the Senate adopted a bipartisan amendment to the Farm Bill (S. 3240) which would require the administration to provide three reports on the implementation and impact of sequestration, one each from OMB, the Pentagon, and the President. Additionally, both House and Senate appropriators included similar language in their FY 2013 Financial Services spending bills.
- Senate Cybersecurity Legislation. Senators Olympia Snowe (R-ME) and Mark Warner (D-VA), Members of the Senate Select Committee on Intelligence as well as the Committee on Commerce, Science, and Transportation, sent a letter to Senate leadership calling for an open and transparent debate on cybersecurity legislation this summer. The letter encouraged the Senate to reach an agreement on cybersecurity legislation that (1) Allows the Senate committees of jurisdiction to provide their perspective, (2) Sets a definite timeline for allowing the legislation to be debated during the July work period, and (3) Commits to an open and fair process that allows Senators to offer amendments to insert or remove provisions from the bill.
Soon thereafter, Senate Majority Leader Harry Reid (D-NV) stated that he plans to bring cybersecurity legislation to the floor in July. He indicated that the remaining issues, including regulation of critical infrastructure, which have not yet been worked out should be fully debated on the Senate floor. As of now, it is unclear whether Senator Reid plans to bring up the legislation immediately after the Senate returns from its Fourth of July recess or if it will be later in the month. Given the breadth of issues that still need to be considered and debated, it may take up to several weeks for the Senate to complete its work on cybersecurity legislation.
- United Nations Regulation of the Internet. On Wednesday, the House Energy and Commerce Committee unanimously passed a resolution to urge the Obama Administration to resist international efforts to regulate the Internet and preserve the multi-stakeholder model that currently governs the Internet. The resolution was in response to recent proposals that would give the United Nations’ International Telecommunications Union (ITU) more control over cybersecurity, data privacy, technical standards, and the Internet’s address system and allow foreign, government-owned Internet providers to charge extra for international traffic. These proposals are likely to be considered at a December UN conference in Dubai and are supported by China, Russia, Brazil, India and other UN members. The resolution, introduced by Representative Mary Bono Mack (R-CA), will likely be considered by the full House in the coming weeks.
EXECUTIVE BRANCH ACTIVITY
- U.S. Department of Energy Report. The Pacific Northwest National Laboratory (PNNL), a federal contractor of the U.S. Department of Energy, released a report titled “Technology Security Assessment for Capabilities and Applicability in Energy Sector Industrial Control Systems: McAfee Application Control, Change Control, Integrity Control.” In general, PNNL provides cybersecurity research activities that determine the applicability and effectiveness of cyber technologies. The report, written in conjunction with McAfee, detailed the current challenges facing critical infrastructure, including how to effectively secure the control systems and technical domains of critical infrastructure owners and operators while working in an active and advanced cyber threat environment.
- Morrill Act. The week of June 25 marks the 150th Anniversary of the Morrill Act, the 1862 legislation that allowed for the creation of land-grant colleges. A number of events celebrating the anniversary will take place in Washington, DC.
- Hearings and Events. The following hearings and events have been noticed:
- Tuesday, June 26 – The Senate Banking, Housing and Urban Affairs Committee will hold a hearing titled “Empowering and Protecting Servicemembers, Veterans and their Families in the Consumer Financial Marketplace: A Status Update.”
- Wednesday, June 27 – The House Education and the Workforce Committee will hold a business meeting to approve the committee’s report of its activities during the third quarter of the 112th Congress.
- Thursday, June 28 – The Senate Health, Education, Labor and Pensions (HELP) Committee will hold a hearing titled “Beyond Seclusion and Restraint: Creating Positive Learning Environments for All Students.”
- Leaders & Laggards Report. On Tuesday, June 19, the Institute for a Competitive Workforce released the third edition of its Leaders & Laggards series, “A State-by-State Report Card on Public Postsecondary Education.” The report examines how state public higher education systems are performing in areas such as return on investment and transparency. The report also analyzes state policies and incentives to promote reform and innovation, as well as provides recommendations for what states can do to improve in these areas.
- Common Standards for Career Technical Education. On Tuesday, June 19, the Career Technical Education (CTE) State Directors unveiled the Common Career Technical Core (CCTC), which is a shared set of CTE standards. Within a year, the National Association of State Directors of Career Technical Education Consortium will launch an initiative to coordinate a comprehensive gap analysis to compare each state’s current course-level standards against the CCTC program-level standards to determine alignment. States may voluntarily adopt the CCTC.
- Student loans. On Thursday, June 21, President Obama again increased pressure on Congress to find a solution to the student loan impasse and stop the doubling of interest rates on federally-subsidized loans (set to expire July 1). After a conference call with stakeholders and a press event at the White House, the Departments of Education and Treasury released a report examining the economic case for higher education. The report provides statistics highlighting the earnings gap and how increased grants and affordability of students (e.g., Pell Grants and Stafford Loans) both increase college-going.
Later that day, Senate Majority Leader Harry Reid (D-NV) said that meetings had occurred to discuss options for extending the current rate, and White House Press Secretary Jay Carney said the Administration is “engaged with Congress in trying to get this done.” However, Congressional Republican leaders Mitch McConnell (R-KY, Senate Minority Leader) and John Boehner (R-OH, Speaker of the House) refuted those claims, stating they have not been included in such conversations. Then, on Friday, June 22, Democrat and Republican Senate leaders confirmed they are negotiating a deal. An announcement is expected in the coming week.
- Immigration Reform and STEM Education. The Partnership for a New American Economy and Partnership for New York City released a report, “Not Coming to America: Why the U.S. is Falling Behind in the Global Race for Talent,” that compares ways that foreign countries are shaping immigration policies to boot their economies by attracting highly skilled workers in STEM fields. The report provides recommendations to boost the nation’s economy at attracting and retaining STEM graduates.
- Energy Efficiency. It remains to be seen if the Senate will consider non-controversial, bipartisan energy efficiency legislation (S. 1000) sponsored by Senators Jeanne Shaheen (D-NH) and Rob Portman (R-OH). Given the limited legislative days remaining before the August recess and the likelihood that any energy bill would attract controversial amendments on contentious issues, there may not be sufficient time on the Senate’s already-full calendar to consider any energy legislation. House companion legislation (H.R. 4017) has not yet been vetted through a Congressional hearing.
- Congressional Hearings. On Wednesday, the House Natural Resources Committee will hold a hearing on “Mandatory Conditioning Requirements on Hydropower: How Federal Resource Agencies are Driving Up Electricity Costs and Decreasing the Original Green Energy,” and a House Transportation and Infrastructure Subcommittee will hold a hearing to review vessels used to carry Strategic Petroleum Reserve draw-downs. On Thursday, the Senate Energy and Natural Resources Committee will review innovative non-federal programs for financing energy efficient building retrofits.
- Hydraulic Fracturing. The National Drinking Water Advisory Council will host a webinar/conference call on June 27 to discuss, among other topics, the draft Environmental Protection Agency (EPA) permit guidance for the use of diesel fuels in hydraulic fracturing activities.
- Chinese Trade Dispute. Comments regarding China’s trade dispute on U.S. countervailing duty measures on certain Chinese products are due at the Office of the U.S. Trade Representative by July 22. China has formally requested consultation with the United States under the WTO concerning numerous U.S. countervailing duty determinations and orders including certain oil country pipes, crystalline silicon photovoltaic cells, and utility-scale wind towers.
- MODUs. The Bureau of Safety and Environmental Enforcement has begun the regulatory process to renew a Notice to Lessees regarding global positioning systems for Mobile Offshore Drilling Units. Offshore lessees and operators are required to report GPS information to BSEE after a major weather event.
- Building Retrofits. On Thursday, June 28, the Senate Committee on Energy and Natural Resources will hold a hearing to review non-federal programs for financing energy efficient building retrofits.
- EPA. On Thursday, June 28, the House Committee on Science, Space and Technology will hold a hearing concerning the U.S. Environmental Protection Agency (EPA) titled “An Examination of Agency Practices and Foundations for Regulations Affecting the American Economy.” EPA Administrator, the Honorable Lisa Jackson, will testify.
- Recycling and Superfund. On Wednesday, June 27, the House Committee on Energy and Commerce, Subcommittee on Environment and the Economy will hold a hearing to consider a discussion draft of “The Increasing Manufacturing Competitiveness Through Improved Recycling Act of 2012,” and H.R. 2997, “The Superfund Common Sense Act.”
- Property Assessed Clean Energy (PACE). The Federal Housing Finance Agency (FHFA) has issued a Notice of Proposed Rulemaking (NPR) concerning underwriting standards for the Federal National Mortgage Association (Fannie Mae), and the Federal Home Loan Mortgage Corporation (Freddie Mac) relating to mortgage assets affected by Property Assessed Clean Energy (PACE) programs, and is inviting comments from the public as to whether it should allow PACE programs to move forward. FHFA received 33,000 comments on its Advanced Notice of Proposed Rulemaking. Comments are due on this NPR by July 30.
- Clean Cities. On Monday, June 25, the U.S. Department of Energy (DOE) will hold a live webcast on electric vehicles titled “Clean Cities’ Electric Vehicle Summer 2012 Quarterly Discussion Webinar.” The webcast will describe the latest results from Ecotality's EV Project, which is collecting data from more than 4,000 plug-in vehicles providing 105,000 miles of data daily, as well as data from more than 5,000 electric vehicle chargers. City planners, transportation analysts and others interested in electric vehicle deployment can find out what the Department has learned from this data and how the data may be applicable to their electric vehicle community readiness projects. For additional information click here.
- Urban Sustainability. The EPA has announced a new online tool that highlights key links between policies, funding and on-the-ground projects in an effort to drive investment in urban sustainability. The interactive web platform is designed to serve as an entry point for individuals from local officials to investors who are looking for best demonstrated strategies for investment in urban sustainability. The platform is intended to be a collection of policy instruments, financial mechanisms and project examples that aim to serve as models for sustainable development in cities around the world. The platform features expertise from a range of public and private sector leaders, including: federal, state, and local government officials, corporate, financial, academic, community leaders and innovators. Government leaders are working with C40 Cities, a forum for the world’s largest cities to collaborate on addressing climate change to expand this platform to include urban sustainability efforts happening in cities around the world.
- Lobbying Ban Inserted into House 2013 Financial Services Spending Legislation. On Wednesday, June 20, Representative Frank Wolf (R-VA) successfully inserted into the 2013 Financial Services spending bill an amendment that would ban former Members of Congress and the Administration from lobbying on behalf of certain foreign governments, including China, for the first 10 years after they leave office. The ban applies to ambassadors, the president, vice president, senior political appointees and senior intelligence officials, including CIA station chiefs. Representative Wolf’s amendment was approved by voice vote during the House Committee on Appropriations markup. The bill now awaits consideration on the House floor.
- Flood Insurance Reauthorization Moves Closer to Passage in the Senate. On Thursday, June 21, the Senate agreed to invoke cloture on a motion to proceed to the flood insurance reauthorization legislation, setting the set for floor debate next week and moving one step closer to passage before the bill expires at the end of July. The Senate legislation will have to be reconciled with the House-passed version, which does not include provisions on properties protected by levees, dams, and other flood control structures. The legislation, which has been temporarily extended 17 times since its last long-term reauthorization in 2008, remains controversial.
- House Financial Services Subcommittee to Hold Hearing on Appraisal Oversight. On Thursday, June 28, the House Financial Services Subcommittee on Insurance, Housing and Community Opportunity will hold a hearing titled “Appraisal Oversight: The Regulatory Impact on Consumers and Businesses.”
- House Financial Services Subcommittee to Examine Fractional Reserve Banking. On Thursday, June 28, the House Financial Services Subcommittee on Domestic Monetary Policy and Technology will hold a hearing at 2:00 p.m. titled “Fractional Reserve Banking and the Federal Reserve: The Economic Consequences of High-Powered Money.”
- CFTC Postpones Meeting on the Cross-Border Application of Title VII. On Wednesday, June 20, the CFTC postponed a meeting originally scheduled for June 21 to discuss the interpretive guidance for the cross-border application of Title VII of the Dodd-Frank Act. On June 20, the House Financial Services Subcommittee Chairmen Scott Garrett (R-NJ) and Randy Neugebauer (R-TX) sent a letter to the CFTC regarding concerns over the guidance process being contemplated. Their letter noted concerns about the use of informal guidance when addressing a significant matter of public policy and reiterated concerns about the CFTC’s cost-benefit analyses being performed with respect to the CFTC’s activities. The letter urged the Commission not to move forward with the non-binding guidance, but rather to proceed with a formal rulemaking process and conduct an appropriate cost-benefit analysis that the law requires.
OTHER FINANCIAL SERVICES NEWS
- Moody’s Downgrades Credit Ratings for 15 Major Banks. On Thursday, June 21, Moody’s Investors Service downgraded 15 major banks to reflect new industry risks experienced since the financial crisis. The banks have argued that the downgrade amplifies bank problems and does not reflect safeguards and changes that the banks have put in place in recent years.
- SCOTUS Watch. With Thursday’s potential release behind us, the Supreme Court is expected to release their decision on the challenge against the Affordable Care Act next week, as early as Monday June 25, but more likely Wednesday, June 27. The health practice group will have an in depth analysis of the ruling and impact on various sectors upon the decision’s release. If interested, please contact a member of the firm’s health practice group.
- FDA User Fee Legislation. Following House passage of the final FDA user fee package, the FDA Safety and Innovation Act, on Wednesday, the measure will come to a vote in the Senate early next week. On Thursday, Senate Majority Leader Harry Reid (D-NV) scheduled a cloture vote on a motion to concur in the House amendment to the Food and Drug Administration (FDA) user fee bill for Monday evening, which is expected to be approved.
- House Judiciary Hearing. The House Committee on the Judiciary Subcommittee on the Constitution has scheduled a hearing on Wednesday, January 27, 2012 on H.R. 3356, the “ACCESS (ADA Compliance for Customer Entry to Stores and Services) Act.”
- Senate VA Hearing. The Senate Committee on Veterans’ Affairs will hold a hearing on Wednesday June 27, 2012 on health and benefits legislation.
- Community Health Center Grants. The Department of Health and Human Services (HHS) announced the award of $128.6 million to 219 community health centers in 41 states across the country. The grants will help expand access to care for more than 1.25 million additional patients and create approximately 5,640 jobs by establishing new health center service delivery sites.
- Reg Watch. The U.S. Department of Health and Human Services (HHS) and the Center for Medicare and Medicaid Services (CMS) is expected to release a number of regulations in the coming weeks that will impact a wide variety of health care stakeholders. These include the End Stage Renal Disease (ESRD) Prospective Payment System (PPS) abd Quality Incentive Program (QIP) Proposed Rule, Modifications to the HIPAA Privacy, Security, Enforcement and Breach Notification Rules Final Rule, the Physician Fee Schedule Proposed Rule, the Home Health PPS Rate for CY 2013 Proposed Rule, the Hospital Outpatient PPS Final Rule, and regulations regarding Essential Health Benefits.
OTHER HEALTH NEWS
- IOM Meeting. The IOM Committee on Review of California Institute for Regenerative Medicine will hold its fourth committee meeting on Thursday, June 28 through Friday, June 29, 2012. The meeting will be held at Keck Center of the National Academies Building, 500 5th Avenue, NW, Washington DC. There will be a public session scheduled from 12:00 p.m. to 1:00 p.m., on June 28. The committee will host a conference call to speak with Jon Thomas and Jeff Sheehy to discuss CIRM’s governance and financing model.
The first meeting of the Committee to Review the Health Effects in Vietnam Veterans of Exposure to Herbicides (Ninth Biennial Update) will be held on June 28-29, 2012. This committee will undertake an updated review and evaluation of the available scientific evidence regarding the statistical association between exposure to dioxin and other chemicals in the herbicides used in Vietnam and various adverse health outcomes. This updated review would build upon the information developed in previous IOM studies in the Veterans and Agent Orange Updates. An open session will take place on Thursday, June 28, from 1:00 pm to 3:00 p.m. in the National Academy of Sciences Boardroom. This open session is being held to discuss the health effects in veterans associated with the herbicides sprayed during the Vietnam War. All Vietnam veterans are invited, and anyone who wishes to share a personal experience with the committee is encouraged to attend.
International, Defense, Homeland Security
- Trade Developments. Tuesday’s announcement that the Trans-Pacific Partnership (TPP) had decided to add Canada and Mexico to the now eleven-nation TPP trade discussions was more or less expected, but most trade analysts consider the decision a win for U.S. exporters and the Obama Administration nonetheless. Moreover, compared to the cacophony of twenty years ago surrounding Mexico’s prospective inclusion into the North American Free Trade Agreement (NAFTA), the announcement has generated only low-profile opposition so far, although that could change over time. Furthermore, including Japan in the TPP talks certainly would increase consternation among some parties on both sides of the Pacific, notably including U.S. automakers and their Congressional allies, but neither Washington nor Tokyo nor the other TPP countries appear ready to take the plunge on that decision yet.
Meanwhile, Permanent Normal Trade Relations (PNTR) status for Russia remains the subject of intense discussions among the Senate, House, and Administration. The Obama Administration and House Ways and Means Committee Chairman Dave Camp (R-MI), among others in Congress and the U.S. business community, would prefer a “clean” granting of PNTR to Russia in conjunction with Moscow’s expected accession to the World Trade Organization in July, but at least the White House appears willing to assent to some form of the Sergei Magnitsky human rights legislation in order to move forward on PNTR. In turn, Senator Ben Cardin (D-MD), the lead sponsor of the Senate Magnitsky bill, S. 1039, and some other Senate Democrats are amenable to considering the Administration’s potential changes to S. 1039. However, Senator John McCain (R-AZ) and some other Senate Republicans view those changes as an untenable “gutting” of the Magnitsky bill and a potential deal-breaker on their agreement with Chairman Max Baucus (D-MT) to move Russia PNTR through the Senate Finance Committee in short order.
- Syria Developments. The Administration and foreign policy leaders in both parties in Congress are straddling a fine line on further U.S. engagement in Syria. Secretary of Defense Panetta noted this week that U.S. military assistance to the Syrian opposition could provoke further carnage, but media reports suggest that the Central Intelligence Agency is nonetheless helping to steer third-party weaponry toward the non-radical Syrian rebel factions that Washington views most favorably. On Capitol Hill, the majority of Congressional Republicans appear comfortable with House Armed Services Committee Chairman Buck McKeon’s (R-CA) wariness of further U.S. involvement in Syria, but they nevertheless have to take account of the significantly more hawkish positions of some of their most prominent voices on national security, namely Senator McCain (R-AZ), Senator Lindsey Graham (R-SC), and Senator Marco Rubio (R-FL). Notable Congressional Democrats on foreign policy, such as Senate Foreign Relations Committee Chairman John Kerry (D-MA), appear to be struggling between the desire to act on human rights grounds and the skepticism that such action, including via a partnership with the diverse and diffuse Syrian opposition, could produce beneficial results.
- Senate Finance Holds Hearing on Reform in Current Fiscal Environment. On June 19, the Senate Finance Committee held a hearing on tax reform in the context of the “looming fiscal crisis.” Testifying before the Committee were former New Mexico Senator Pete Domenici and former White House Budget Director Alice Rivlin, co-chairs of the Bipartisan Policy Center’s Debt Reduction Task Force and co-authors of the Domenici-Rivlin Deficit Reduction Plan. The hearing focused on tax and Medicare reforms, with members of both parties generally expressing support for elements of the Domenici-Rivlin plan.
- Final Senate Action on Measure Touted to Promote Small Business Expected in July. Next week, the Senate may begin consideration of the Senate Democrats’ Small Business Jobs and Tax Relief Act (S. 2237). The measure, touted as a small business bill, would extend the 100 percent bonus depreciation tax break for 2012 and provide a new tax credit equal to 10 percent of the cost of new job creation or wage increases in 2012 (capped at $500,000). Even if the Senate begins consideration next week, a final vote on the bill may not come until July, according to a spokesperson for Senate Majority Leader Harry Reid (D-NV).
- House Still Set to Consider Bush Tax Cuts in July. House Speaker John Boehner (R-OH) has announced that the House will vote in July on a straight one-year extension of the 2001 and 2003 tax provisions – the so-called “Bush tax cuts.” The Obama Administration has held fast in its position against extending the cuts for couples making more than $250,000 a year or for individuals making more than $200,000 a year. At odds with the Administration’s stance, House Minority Leader Nancy Pelosi (D-CA) previously sent a letter to House Majority Leadership proposing extension of the cuts only for those making less than $1 million annually. Boehner has rejected Pelosi’s proposal, reiterating that the House will vote to extend all of the tax cuts.
- Supreme Court Decision on Health Care Bill May Impact Tax Provisions. The Supreme Court is expected to issue its decision on the Affordable Care Act (Obama Health Care Law) this coming week. Depending on the Court’s decision, several tax provisions in the Obama Health Care Law could be impacted, including provisions related to new Medicare taxes on earned and investment income for upper-income taxpayers, the small business health care tax credit, health flexible spending arrangements, the medical device excise tax, and the health insurance premium tax credit.
- Tax Hearings Next Week. The following tax hearings are scheduled next week in the House Ways and Means and Senate Finance Committees:
- June 27: House Ways and Means Subcommittee on Human Resources hearing on How Welfare and Tax Benefits Can Discourage Work
- June 28: Joint House Ways and Means Committee and Senate Finance Committee hearing on Tax Reform and the Tax Treatment of Capital Gains. Scheduled to testify before the Joint Committee are: Mr. David H. Brockway, Partner, Bingham McCutchen LLP; Dr. Lawrence B. Lindsey, President & CEO, The Lindsey Group; Dr. Leonard E. Burman, Daniel Patrick Moynihan Professor of Public Affairs at the Maxwell School, Syracuse University; Mr. David L. Verrill, Founder and Managing Director, Hub Angels Investment Group LLC.
- Treasury Issues Joint Statements with Foreign Countries on FATCA Reporting. On June 21, Treasury issued joint statements with Switzerland and Japan providing an alternative framework for cooperation on the implementation of the Foreign Account Tax Compliance Act (FATCA). The alternative framework would establish a structure of direct reporting by foreign financial institutions (FFIs) to the IRS, supplemented by information exchanged upon request by the foreign government and the U.S. Earlier this year, in February, Treasury issued a joint statement with France, Germany, Italy, Spain, and the United Kingdom, which would set up a domestic reporting regime with automatic exchange of information at the government-to-government level.
- The Future of Video. On June 27, the House Communications Technology Subcommittee will hold a hearing on “the Future of Video.” Testifying will be: David Barrett, President and CEO of Hearst Television Inc.; Jim Funk, Vice President, Product Management of Roku; Robert W. Johnson, CEO of Sky Angel U.S. LLC; Charlie Ergen, Chairman of DISH Network; David Hyman, General Counsel of Netflix; Michael P. O'Leary Senior Executive Vice President, Global Policy and External Affairs of the Motion Picture Association of America; Gigi Sohn, President & CEO of Public Knowledge; and Michael Powell, President and CEO of the National Cable & Telecommunications Association.
- Universal Music-EMI Merger. On June 22, the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights held a hearing to explore Universal Music Group’s $1.9 billion bid to acquire EMI. Senator Herb Kohl (D-WI) chaired the hearing, which included testimony from the CEOs of Universal and EMI. Chairman Irving Azoff of Live Entertainment also testified in support of the merger. The Director of Warner Music Group, Chairman of the Beggars Group, and the CEO of Public Knowledge testified in opposition to the merger. Chairman Kohl expressed concern that the merger would lessen competition in the music industry, citing the basic economic principle that consolidation in markets increases the risk of higher prices. The opposition also compared the merger to the AT&T-T-Mobile deal that was opposed by the Department of Justice last year and fell through, arguing that the merger could stifle innovation. However, the chairmen of Universal Music Group, EMI, and Live Entertainment argued that the Internet had leveled the playing field in a way that record labels were no longer necessary for artists. They also lamented the loss of revenue due to piracy and online sources of music. Musicians Mary J. Blige and Peter Frampton wrote letters in support of Universal Music Group. It does not appear that the House Judiciary Committee has plans right now to conduct its own inquiry. Industry stakeholders are waiting to see whether Chairman Kohl will write the FTC on the deal, and if so, which issues they might suggest warrant further attention.
- Privacy and New Technologies. On June 19, the Judiciary Subcommittee on Intellectual Property, Competition and the Internet held a hearing on “New Technologies and Innovations in the Mobile and Online Space, and the Implications for Public Policy.” The hearing focused on how the technology industry has incorporated privacy protections into mobile applications, social media, online advertising and services. In opening the hearing, Subcommittee Chairman Bob Goodlatte (R-VA) noted the dramatic growth of mobile and online services and that as Congress considers privacy, it must weigh protecting consumers against stifling innovation. Committee Chairman Lamar Smith (R-TX) spoke about the need to provide privacy policies that are understandable and reasonable for the consumer to understand. Witnesses represented eBay Inc.; the Association for Competitive Technology; TRUSTe; and New York Law School. Chairman Smith asked witnesses whether consumers should be able to opt out of data that is collected. eBay’s Scott Shipman said that while certain information is essential to e-commerce, such as consumer addresses, information used for marketing may be subject to opt out. Representative Jason Chaffetz (R-UT) questioned the witnesses about what constituted a reasonable amount of privacy. Morgan Reed with the Association for Competitive Technology and Scott Shipman with eBay both said it depended on the intended use of the information. Subcommittee Ranking Member Mel Watt (D-NC) discussed the need for a federal baseline privacy bill that would be modeled after the Administration’s privacy initiative. Meanwhile, Committee Ranking Member John Conyers (D-MI) supporting giving the Federal Trade Commission direct enforcement action authority, noting that enforcement is “critical to consumer protection.” Representative Zoe Lofgren (D-CA) focused on business best practices and cautioned against having “Congress weigh in with a heavy regulatory hand, because Congress moves too slowly to make any corrections.”
- RUS Broadband. Earlier this week, the Senate approved a broadband-related amendment and rejected two others as part of its consideration of the Farm Bill. The approved amendment from Senator Mark Warner (D-VA), requires the Department of Agriculture to ensure at least 25 percent of households in an area up for a Rural Utilities Service broadband grant or loan qualify as unserved or underserved. In the past, critics have argued that too much of this government money went to areas that already have sufficient connectivity. The amendment also calls for government accountability by boosting reporting requirements, and it requires that more robust information be included in broadband mapping. Critics of the Warner amendment, however, say its conditions could encourage overbuilding and that eligibility and reporting requirements will discourage applications, thereby leading to delays in rolling out broadband to under and unserved areas. Two other broadband amendments, sponsored by Senator Jim DeMint, were rejected. Both amendments essentially aimed to reign in or lower broadband-related spending by the Agriculture Department.
- Public Safety Spectrum. On June 21, the Federal Communications Commission (FCC) formally transmitted technical standards to govern interoperability on the 700 MHz nationwide public safety broadband network to the First Responder Network Authority (FirstNet), the authority charged with building the network. Under the Middle Class Tax Relief and Job Creation Act that Congress passed earlier this year, the Commission was asked to assemble a board of experts, the Technical Advisory Board for First Responder Interoperability, to develop minimum technical requirements to ensure a nationwide level of interoperability. As required by the law, FirstNet must incorporate all of the recommendations that are aimed at ensuring interoperability into their requests for proposals (RFPs). Commissioner Jessica Rosenworcel praised the Interoperability Board for doing “a stellar job” and noted that the Interoperability Board’s recommendations have received widespread recognition for their technical rigor and for providing FirstNet with the flexibility necessary to get the network up and running. Those guidelines had been prepared and given to the FCC in May by the Interoperability Board that was comprised of state and local officials, public safety representatives, company executives and others. Now, FirstNet must take the requirements and, without material change, incorporate them into the RFPs on construction, operation and management of the network.
- Supreme Court. The Supreme Court on June 21 issued its decision in FCC v. Fox Television Stations, Inc. Justice Kennedy, writing for a unanimous Court (though Ginsberg wrote separately concurring in the judgment), found that the FCC's enforcement of its indecency policy "as applied" to Fox and ABC were unconstitutional under a notice theory: “The Commission failed to give Fox or ABC fair notice prior to the broadcasts in question that fleeting expletives and momentary nudity could be found actionably indecent." Justice Kennedy wrote. The opinion appears to be very narrow, and does not address the underlying constitutionality of the policy itself. The Court was cautious to avoid revisiting its 1978 Pacifica decision - which addressed George Carlin’s “7 dirty words” that formed the basis for indecency rules enforced against broadcasters by creating safe harbor rules. In a concurring opinion, Justice Ruth Bader Ginsburg wrote that the decision “was wrong when it issued” and needs to be reconsidered.
- SAFETEA-LU Reauthorization. This week marked an unexpected breakthrough in conference negotiations on SAFETEA-LU reauthorization that have created new and significant momentum towards a potential conference agreement. Early this week, Majority Leader Reid, Speaker Boehner, Chairman Mica and Chairman Boxer met behind close doors for a pivotal meeting that resulted in statements of commitment by both the House and Senate leadership towards trying to get a bill done and instructions to the transportation conferees to “redouble their efforts” on resolving the transportation policy disagreements. Throughout Wednesday and into Thursday, Chairman Mica and Chairman Boxer (and in particular their senior staffs) worked through the night to negotiate an agreement on the most significant and controversial issues in the highway title including NEPA streamlining and transportation enhancements. The details of those deals have not been disclosed, but the Committee Leaders have reached an agreement in principle on those issues. Making that breakthrough thus gave the indication that it would be possible to get an overall deal on the transportation policy issues. The negotiators are now turning to resolve outstanding issues in the other titles (transit, rail, etc.) with the hope of reaching an agreement in principle on all of the major transportation policy issues by early next week. At that point, the agreement will be taken back to the respective caucuses to see if the support is there to file and bring a Conference Report to the floor. Perhaps the most significant question remains the high-profile riders including the Keystone XL provision and coal ash language - and whether the disposition of the Keystone XL issue one way or another is acceptable to the House Republican and Senate Democratic caucuses. Most observers feel that an agreement in principle will have to be reached next week for the bill to move forward or else a six-month extension is the most likely outcome. If an agreement in principle is reached next week, the challenge of drafting and finalizing the Conference Report and Explanatory Statement and moving the legislation through both chambers before June 30th suggests that a short-term extension of perhaps two weeks may be needed to translate that agreement into final legislation and enact it into law.
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Weekes, Dana T.
Davenport, Amy F.
Welsh, Pamela K.
Smith, Amy Budner
DeRivi, Tanya M.
Vilms, Sarah G.
Kulkin, Matthew B.
Giorgio, Mara C.
McGrain, Erin L.
Keljo, Lindsey Weber