Capital Thinking ~ December 17, 2012

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  • 1. December 17, 2012
  • 2. General LegislativeOn Monday, December 17, the House will meet at noon for morning hour and at 2:00 for legislativebusiness. Votes will be postponed until 6:30 pm. Legislation considered under Suspension of theRules will include: H.R. 4606 – To authorize the issuance of right-of-way permits for natural gaspipelines in Glacier National Park, and for other purposes; and S. 3193 – Barona Band of MissionIndians Land Transfer Clarification Act of 2012. On Tuesday, December 18, the House will meet at10:00 am for morning hour and noon for legislative business. Legislation considered underSuspension of the Rules will include: H.R. 6612 – To redesignate the Dryden Flight ResearchCenter as the Neil A. Armstrong Flight Research Center and the Western Aeronautical Test Rangeas the Hugh L. Dryden Aeronautical; H.R. 6016 – Government Employee Accountability Act; S.3564 – Public Interest Declassification Board Reauthorization Act of 2012; S. 2170 – Hatch ActModernization Act of 2012; H.R. 6621 – To correct and improve certain provisions of the Leahy-Smith America Invents Act and title 35, United States Code, as amended; H.R. 2471 – To amendsection 2710 of title 18, United States Code, to clarify that a video taping service provider mayobtain a consumer’s informed, written consent on an ongoing basis and that consent may beobtained through the Internet, as amended; H.R. 6014 – Katie Sepich Enhanced DNA CollectionAct of 2012, as amended; and S. 3642 – Theft of Trade Secrets Clarification Act of 2012. OnWednesday, December 19, and Thursday, December 20, the House will meet at 10:00 am formorning hour and noon for legislative business. On Friday, December 21, the House will meet at9:00 am for legislative business. Legislation under considering will include H.R. 6504 – SmallBusiness Investment Company Modernization Act; H.R. 1509 – Medicare Identity Theft PreventionAct of 2011, as amended; H.R. 1845 – Medicare IVIG Access Act, as amended; Concur in theSenate Amendment to H.R. 3783 – Countering Iran in the Western Hemisphere Act of 2012; S. 3331– Intercountry Adoption Universal Accreditation Act of 2012; and the Conference Report on H.R.4310 – National Defense Authorization Act for Fiscal Year 2013.The Senate will convene on Monday, December 17, at 2:00 pm and resume consideration of H.R. 1,the legislative vehicle for the Emergency Supplemental Appropriations Bill.Fiscal CliffPresident Obama and Speaker Boehner continue to remain divided on any fiscal cliff deal despiteongoing conversations. On Monday night, the Administration issued its long-awaited first counteroffer,which included $1.4 trillion in revenue increases, down from the President’s original $1.6 trillion offer. Onspending reductions, the Administration’s proposal was essentially unchanged. The offer also includedstimulus spending and an increase in the U.S.’s borrowing limit, both of which were part of thePatton Boggs Capital Thinking Weekly Update | December 17, 2012 1 of 12
  • 3. Administration’s original proposal. In short, the only difference between the original proposal and theAdministration’s updated counteroffer is the $200 billion reduction in additional revenues requested.Under the President’s original proposal, per Administration officials, $1.6 trillion of net tax increases wouldoccur in two steps: (1) the first trillion up front by virtue of allowing upper-income Bush tax cuts to expireon earned and investment income, along with changes to the estate tax, with (2) the remainder to beraised in a tax reform process to be completed by August 1, 2013. The President’s counteroffer adjuststhe second part of this two-step equation, where only approximately $400 billion would be generatedthrough tax reform, rather than the original proposal of $600 billion.In response to the President’s counteroffer, the Speaker countered immediately with essentially theRepublicans original proposal. Under that proposal, the Republicans offered $2.2 trillion in new revenuesand spending cuts – roughly $500 billion more in spending reductions than the amount proposed by thePresident. House Republicans reach the $2.2 trillion figure through: (i) $800 billion in new revenues in thecourse of 2013 tax reform; (ii) $300 billion in discretionary savings; (iii) $600 billion in savings fromhealthcare programs; (iv) $300 billion from other mandatory spending; and (v) $200 billion throughrevisions to the Consumer Price Index (CPI) inflation calculation method, providing for a chained-CPI.Over the weekend, Speaker Boehner proposed allowing tax rates to expire for those with annual incomesof $1 million or more, but continued to insist on the entitlement cuts contained in the Republicans’ offer.As meetings continue, additional options have begun to emerge. One option, commonly referred to as“Plan B,” would include a Republican agreement to allow the top rates to expire on the top 2 percent bypassing a bill that would look similar to the Senate passed Middle Class Tax Cut bill, S. 3412, thatextended rates for the middle class and included a one year AMT patch. S. 3412, which passed by a 51-48 vote, would also extend through 2013 dividend and capital gains rates for joint filers earning less than$250,000, but increases the capital gains rate to 20 percent for those earning above that amount. S.3412 would further extend through 2013 (1) the American Opportunity tax credit; (2) the increase in therefundable portion of the child tax credit; (3) the increased earned income tax credit percentage for threeor more qualifying children; and (4) disregards tax credits and refunds in determining eligibility for federaland federally assisted programs (for example, means tested programs). It extends to taxable year 2013 a$250,000 expensing allowance for depreciable business assets and increases to $800,000 the thresholdfor a phase-out of the amount of such expensing allowance.The Plan B approach would produce, according to reports, approximately $440 billion in additional taxrevenue. Items that could be added to this bill to make it more palatable are business tax extenders,estate tax extension, a delay to the automatic defense cuts, an extension for unemployment insurancebenefits, and inclusion of the so called “Doc fix,” which includes means adjusting the sustainable growthrate (SGR) formula for Medicare to keep provider payments stable so that doctors do not flee Medicare.If House Republicans were to pass such legislation, the President and Senate Democrats would be leftPatton Boggs Capital Thinking Weekly Update | December 17, 2012 2 of 12
  • 4. with a choice to either accept this version, without a debt ceiling increase, or allow all rates to increase onJanuary 1.The President has been adamant that any deal also include an increase in the debt ceiling, butRepublicans have refused to include this in the discussion. By leaving the increase in the debt ceiling toanother day, it provides the Republicans with more leverage on entitlement reform.House staff has been alerted that a weekend session is possible next week, hinting that a vote on a fiscalcliff deal could be near. Although staff have been advised of a potential weekend vote, it may be difficultfor one to occur next week as there is just too little time to piece together the minutiae of a deal in time fornext weekend – in which case, a vote on any deal could be delayed until the week between Christmasand New Year’s Day.Agriculture & FoodLEGISLATIVE ACTIVITY Farm Bill. Last week, negotiations between the Senate and House Agriculture leadership to include a five-year Farm Bill in a deficit-reduction package remained at a stalemate. Significant differences still remain, as discussions continued to focus on the commodity title, particularly on setting target prices and placing limits on subsidies. On Thursday, December 13, a bipartisan group of 33 Senators (24 Democrats and 9 Republicans) sent a letter to Senate Majority Leader Harry Reid (D-NV) and Minority Leader Mitch McConnell (R- KY) urging them to include the Farm Bill in a fiscal cliff agreement, if such an agreement passed by the end of the year. Notably absent from the group were Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Ranking Member Pat Roberts (R-KS), as well as Senators from southern states.Budget, AppropriationsLEGISLATIVE ACTIVITY Supplemental Appropriations for Disaster Aid. Today the Senate will begin consideration of a $60.4 billion emergency disaster appropriations bill (as revenue bills must originate in the House, Senate Majority Leader Harry Reid (D-NV) will substitute a House-passed appropriations measure (H.R. 1) with the recovery package). With 60 votes needed to advance the legislation, SenatePatton Boggs Capital Thinking Weekly Update | December 17, 2012 3 of 12
  • 5. Democratic leaders are working to solicit Republican support. Although the demand for spending offsets is waning, Republicans would prefer to scale back the size and scope of the bill, particularly with regard to the funding proposed for mitigation-related efforts and funding which would be spent beyond the FY 2013 budget year.CybersecurityLEGISLATIVE ACTIVITY Cybersecurity Legislation. Incoming House Homeland Security Committee Chairman Michael McCaul (R-TX) and Senate Homeland Security and Governmental Affairs Committee Chairman Tom Carper (D-DE) met last week to discuss cybersecurity legislation in the next Congress. Rep. McCaul also met with Department of Homeland Security Secretary Janet Napolitano to discuss a long list of issues but he noted that cybersecurity was one of the priorities of the meeting. It is expected that both Rep. McCaul and Senator Carper will introduce cybersecurity legislation in the first few months of 2013. Congressional Cybersecurity Caucus Chairman Jim Langevin (D-RI) has also expressed his intent to introduce cybersecurity legislation next year that would give the Executive Branch more power to regulate information technology security standards for critical infrastructure providers.EXECUTIVE BRANCH ACTIVITY Executive Order: We expect that the White House will issue an Executive Order (EO) related to cybersecurity issues in the near future given the lack of movement on cybersecurity legislation in the Congress during the lame duck. House Cybersecurity Task Force leader Rep. Mac Thornberry (R- TX) stated last week that an EO cannot adequately address all of the cyber risks that currently exist and cooperation between the Executive Branch and Congress on cybersecurity legislation next year will be necessary.OTHER NEWS A new McAfee Labs report released last week warns that cyber hackers may stage a massive attack on 30 or more U.S. national, investment, and regional banks in the coming year. A Russia-based hacker group is likely behind the cyber threat and has already stolen $5 million in the past few months. It is expected that these attacks will continue as the hackers have increasingly targeted U.S. banks. The report encourages the financial industry to be wary of software that creates fraudulent online banking transactions.Patton Boggs Capital Thinking Weekly Update | December 17, 2012 4 of 12
  • 6. EducationREGULATORY ACTIVITY Pay as You Earn. Last week, the Department of Education announced an earlier implementation date for the Direct Loan program regulation establishing a new income-based student loan repayment program, titled “Pay as You Earn.” The program is aimed at assisting borrowers who have a high student debt-to-income ratio. The current program caps monthly loan payments of qualified student loan borrowers at 15 percent of their discretionary income and forgives the remaining balance after 25 years. Under the new program, the monthly cap is set at 10 percent and the remaining balance is forgiven after 20 years. Originally, the program was scheduled to take effect in 2014.EnergyLEGISLATIVE ACTIVITY Energy Taxes. In a letter addressed to congressional leaders, the American Wind Energy Association has proposed extending and phasing-out the wind production tax credit beyond 2012, in an effort both to bolster chances for a short-term extension by year-end and in comprehensive tax reform discussions next year. (Taxpayers can now claim a 2.2 cent/kilowatt-hour income tax credit for wind energy produced from a qualifying facility placed in service by December 31, 2012.) The AWEA proposal would extend the tax credit for projects that commence construction in 2013 (the Senate Finance Committee noted that this modification would cost $12.184 billion); the tax would then begin to be phased down to 90 percent for projects placed in service in 2014; 80 percent in 2015; 70 percent in 2016; and 60 percent in 2017 and 2018 – ending in 2019. Energy Committees. Two newly-elected Democrats are slated to join the Senate Energy and Natural th Resources Committee in the 113 Congress: Senators-elect Martin Heinrich (NM) and Mazie Hirono (HI). In the House, three Democrats are slated to return to the Energy and Commerce Committee, plus two new members will join: Congressmen Jerry McNerney (CA), Bruce Braley (IA), and Peter Welch (VT) will return; second-term Congressmen Ben Ray Luján (NM) and Paul Tonko (NY) will join.REGULATORY ACTIVITY FERC Conference. The Federal Energy Regulatory Commission will hold a February 13 technical conference to identify areas in which additional guidance or regulatory changes could be considered regarding information sharing and communications issues between natural gas and electric power industry entities. There will be a free webcast of the conference.Patton Boggs Capital Thinking Weekly Update | December 17, 2012 5 of 12
  • 7.  Hydraulic Fracturing. The Bureau of Land Management is expected to delay finalizing proposed rules to regulate the practice on federal lands into next year in order to review the 170,000 comments received. Offshore Wind. Submission of nominations for commercial wind lease projects offshore North Carolina must be postmarked to the Bureau of Ocean Energy Management by January 28. In consultation with other federal agencies and the North Carolina Intergovernmental Renewable Energy Task Force, BOEM has identified three areas totaling 1,441 square nautical miles under consideration for potential future wind energy leasing. One area is located offshore Kitty Hawk, the other two areas are located offshore southern Wilmington. Power Plants. The Environmental Protection Agency has extended the comment period by one week, to January 7, for the proposed rule, “Reconsideration of Certain New Source and Startup/Shutdown Issues: National Emission Standards for Hazardous Air Pollutants from Coal- and Oil-fired Electric Utility Steam Generating Units and Standards of Performance for Fossil-Fuel-Fired Electric Utility, Industrial-Commercial-Institutional, and Small Industrial-Commercial-Institutional Steam Generating Units.” Keystone XL Pipeline. The Nebraska Department of Environmental Quality is expected to submit its recommendation to Governor Dave Heineman within the next few weeks. State law provides the governor with the power to accept or reject a proposed alternative route for the pipeline through Nebraska that avoids the sensitive Sand Hills. The U.S. State Department delayed making a recommendation to President Obama earlier this year after the State raised environmental concerns. His decision is expected early next year.EnvironmentREGULATORY ACTIVITY EPA Releases New Recreational Water Quality Criteria. Pursuant to an order from a U.S. District Court and required by the Beaches Environmental Assessment and Coastal Health Act of 2000, the U.S. Environmental Protection Agency (EPA) has recommended new recreational water quality criteria for states. EPA last issued ambient water quality criteria recommendations for recreational waters in 1986. The new criteria use a broader definition of illness. In addition, EPA narrowed from 90 days to 30 days the time period over which the results of monitoring samples may be averaged. The 2012 Recreational Water Quality Criteria (RWQC) puts forth two sets of numeric concentration thresholds and consists of three components: magnitude, duration and frequency. The recommendations also include:Patton Boggs Capital Thinking Weekly Update | December 17, 2012 6 of 12
  • 8. • A short-term and long-term measure of bacteria levels that must be used together to ensure that water quality is properly evaluated. • Stronger recommendations for coastal water quality, similar to those for fresh water. • A rapid testing method to determine if water quality is safe within hours of water samples being taken. • An early-alert approach for states to use to issue swimming advisories for the public. More information about the new criteria can be accessed here: http://water.epa.gov/scitech/swguidance/standards/criteria/health/recreation/index.cfm U.S. Off-Shore Wind Advancing. The U.S. Department of Energy (DOE) has announced seven offshore wind projects in Maine, New Jersey, Ohio, Oregon, Texas, and Virginia for installation in state and federal waters intended for commercial operation by 2017. Each project will receive up to $4 million to complete the engineering, design, and permitting phase. The DOE will select up to three of these projects for follow-on phases that focus on siting, construction. These projects will receive up to $47 million each over four years, subject to Congressional appropriations. A map displaying the announced wind projects can be accessed here: http://energy.gov/maps/accelerating-offshore-wind- development. In addition to the above projects, the U.S. Department of Interior, Bureau of Ocean Energy Management (BOEM), has issued a notice of intent to prepare an Environmental Assessment (EA) for commercial wind leasing and site assessment activities on the Atlantic Outer Continental Shelf (OCS) for offshore North Carolina.Financial ServicesLEGISLATIVE ACTIVITY New Republicans to Join House Financial Services Committee. Congressman Jeb Hensarling (R-TX), who will become Chairman of the House Financial Services Committee, announced eight Republicans will join the Committee next Congress. The Members include Rep.-elect Andy Barr (KY), Rep.-elect Tom Cotton (AR), Randy Hultgren (IL), Mick Mulvaney (SC), Rep.-elect Robert Pittenger (NC), Dennis Ross (FL), Marlin Stutzman (IN) and Rep.-elect Ann Wagner (MO). Next Week’s Senate Banking Committee Hearings. On Tuesday, December 18, the Senate Banking Subcommittee on Securities, Insurance, and Investment will hold a hearing titled “Computerized Trading Venues: What Should the Rules of the Road Be?” Witnesses will include Lawrence Leibowitz, NYSE Euronext; Dan Mathisson, Credit Suisse; Eric Noll, NASDAQ OMX; andPatton Boggs Capital Thinking Weekly Update | December 17, 2012 7 of 12
  • 9. Robert Gasser, ITG. On Wednesday, December 19, the Senate Banking Subcommittee on Financial Institutions and Consumer Protection will hold a hearing titled “Making Sense of Consumer Credit Reports.” Witnesses will include Consumer Financial Protection Assistant Director for the Office of Deposits, Cash, Collections, and Reporting Markets Corey Stone, Stuart Pratt of the Consumer Data Industry Association, and Chi Chi Wu of the National Consumer Law Center.REGULATORY ACTIVITY Federal Reserve Proposes Rules for Large Foreign Banks. On Friday, December 14, the Federal Reserve published for comment proposed rules that would impose enhanced prudential standards required by the Dodd-Frank Act for foreign banking organizations and foreign nonbank financial companies supervised by the Federal Reserve. The enhanced prudential standards include risk- based capital and leverage requirements, liquidity standards, risk management and risk committee requirements, single-counterparty credit limits, stress test requirements, and a debt-to equity limit for companies that the Financial Stability Oversight Council has determined pose a grave threat to financial stability. Comments should be received on or before March 31, 2013. Treasury Announces Sale of Remaining AIG Common Stock. On Friday, December 14 the Treasury Department announced it received payment from its final sale of AIG common stock. On Tuesday, December 11, the Treasury Department agreed to sell its remaining 234 million shares of AIG common stock at $32.50 per share. In total, the Treasury and the Federal Reserve fully recovered the combined $182.3 billion committed to AIG during the financial crisis, resulting in a $22.7 billion positive return. Treasury still holds warrants to purchase approximately 2.7 million shares of AIG common stock. CFTC Wins DC Federal Court Challenge to CPO Rules. On December 12, the U.S. District Court for the District of Columbia ruled in favor of the Commodity Futures Trading Commission (CFTC) and against the Investment Company Institute (ICI) and the U.S. Chamber of Commerce, holding that the CFTC’s new rules rescinding certain commodity pool operator (CPO) registration and reporting exclusions neither were done in an arbitrary and capricious manner nor did the CFTC fail to comply with the Commodity Exchange Act’s (CEA) cost-benefit analysis requirements. This decision marks the CFTC’s successful defense of one of its final rules criticized for a deficient cost-benefit analysis and Administrative Procedure Act (APA) violations.Patton Boggs Capital Thinking Weekly Update | December 17, 2012 8 of 12
  • 10. Health CareLEGISLATIVE ACTIVITY Doc Fix Plan B. In the event President Obama and Congress fail to make a deal to address the fiscal cliff, House Energy and Commerce Committee Chairman Fred Upton (R-MI) has a "plan b" to avert a scheduled 27 percent cut to physician payments under Medicare. Committee staff have prepared a standalone package to extend current physician payments for one year; the package also includes a number of other "Medicare extenders" and will cost $30 billion. Finance Confirmation Hearing. The Senate Finance Committee will hold a December 20 confirmation hearing for William B. Schultz to be general counsel of the Department of Health and Human Services (HHS).REGULATORY ACTIVITY Regs Under Review. The Medicaid Eligibility Changes under ACA Proposed Rule is under review at the Office of Management and Budget (OMB).OTHER HEALTH NEWS MedPAC Meeting. The Medicare Payment Advisory Commission (MedPAC) has scheduled a public meeting on January 10-11, 2012. An agenda will be released in advance of the meeting. GAO EHR Report. The Government Accountability Office (GAO) released a report this week on electronic health records and the number and characteristics of providers awarded Medicaid Incentive Payments for 2011. Participation rates, as well as total payments, were higher for hospitals in the Medicaid EHR program when compared to the Medicare EHR program, though the median payment amount in the Medicaid EHR program was less than half as large. About 50 percent of hospitals accounted for about 80 percent of the total amount of Medicaid incentive payments awarded to hospitals. Proportionally more than three times as many eligible professionals participated in the Medicaid EHR program in 2011 than in the Medicare EHR program, though the total payment amounts in the two programs were nearly equivalent. IOM Meeting. The Institute of Medicines (IOM) Committee on the Governance and Financing of Graduate Medical Education (GME) will hold a public meeting on December 19-20, 2012.The Committee is charged with an independent review of the governance and financing of GME, and will develop a report with recommendations for policies to improve graduate medical education, with an emphasis on the training of physicians.Patton Boggs Capital Thinking Weekly Update | December 17, 2012 9 of 12
  • 11. International, Defense, Homeland SecurityLEGISLATIVE ACTIVITY Senate Foreign Relations Committee (SFRC) Developments. As President Obama reportedly moves closer to nominating SFRC Chairman John Kerry (D-MA) as Secretary of State, Senator Bob Menendez (D-NJ) stands ready to assume the Committee Chairmanship if Senator Kerry departs. Senator Menendez is a vocal champion of President Obama’s policy priorities on most issues. However, the Senator’s differences with the Administration on certain first-tier foreign policy concerns, notably his more unilateralist tendencies on Iran and Cuba sanctions issues, have served as a key, if underreported, reason behind the President’s alleged initial preference for nominating UN Ambassador Susan Rice over Senator Kerry. Senator Menendez also possesses a more combative political style than Senator Kerry, which could lead to some fireworks not only with the White House and Foggy Bottom, but certainly also with relatively mild-mannered incoming SFRC Ranking Member Bob Corker (R-TN). Meanwhile, Senator Corker will face his share of intra-Committee challenges on the Republican side, as the intervention-wary Tennessean will differ publicly on some issues with other SFRC Members with more neo-conservative foreign policy tendencies, including Senator Marco Rubio (R-FL) and a likely Committee newcomer, Senator John McCain (R-AZ). Among Democratic SFRC newcomers, Senator-elect Tim Kaine (D-VA) likely will devote significant attention to Latin American issues, building on his earlier work as a missionary in Honduras. Senator-elect Chris Murphy (D-CT) brings foreign policy experience to the Committee from his previous service on the House Foreign Affairs Committee. Meanwhile, before any of those SFRC roster changes occur, Secretary of State Clinton is tentatively scheduled to testify in front of the Committee on the Benghazi attack on Thursday. House Foreign Affairs Committee (HFAC) Developments. Secretary Clinton also is tentatively slated to appear before HFAC on Benghazi on Thursday. The State Department may yet aim to push back both hearings, though. In other news, incoming HFAC Chairman Ed Royce (R-CA) has taken pains recently to show there is no daylight between him and outgoing Chair Ileana Ros-Lehtinen (R- FL) on key issues, criticizing Administration efforts to modify Iran sanctions provisions in the pending defense authorization bill, lambasting North Korea for its ballistic missile launch this week, and questioning what he deems “President Morsi’s power grab” in Egypt. Senate Intelligence Committee Developments. Following the closed-door 9-6 vote by the members of the Senate Select Committee on Intelligence to approve the classified Majority staff report on the Central Intelligence Agency’s (CIA’s) interrogation techniques during the Bush Administration, the Obama Administration, including the CIA itself, now will have the chance to comment in response. Senators also will engage in ongoing debate whether to declassify the report. Committee Chair Dianne Feinstein (D-CA), fellow Committee Democrats, and non-Committee Member John McCainPatton Boggs Capital Thinking Weekly Update | December 17, 2012 10 of 12
  • 12. (R-AZ) favor declassification. Most Committee Republicans, including Vice Chair Saxby Chambliss (R-GA), are staunchly opposed, in part because of complaints about the report’s interviewing and fact-checking methodology. Meanwhile, Senator-elect Angus King (I-ME) and Senator-elect Martin Heinrich (D-NM) will join the Committee in the next Congress. Senate and House Armed Services Committee (SASC and HASC) Developments. Look for senior SASC and HASC Members to conclude their Conference Committee on the Fiscal Year 2013 National Defense Authorization Act next week, despite several lingering differences between the Senate- and House-passed versions of the annual defense authorization bill. Also of note, Hampton Roads, VA’s naval facilities and Wright-Patterson Air Force Base in Dayton, OH emerged as big winners when the HASC’s Subcommittee Chairs were announced on Thursday. Congressman Mike Turner (R-OH), a former mayor of Dayton, will chair the Tactical Air and Land Forces Subcommittee. Congressman Turner has been a highly active HASC Member, particularly on missile defense issues as the outgoing Chair of the Strategic Forces Subcommittee. Eastern Virginia Republicans Randy Forbes and Rob Wittman will serve as the Chairs of the Seapower and Projection Forces and Readiness Subcommittees, respectively. Senator-elect Kaine’s position on the SASC, replacing outgoing Senator Jim Webb (D-VA), also will prove vital for the Tidewater region’s ship-building industry and military facilities. Senator-elect King, Senator-elect Joe Donnelly (D-IN), and Senator Bill Nelson (D-FL) also will join the Committee next year.REGULATORY ACTIVITY Personnel Decisions. In addition to President Obama’s upcoming announcements on his nominees to be Secretary of State and Secretary of Defense, where informed speculation is coalescing around Senator Kerry and former Senator Chuck Hagel (R-NE), respectively, the President also will decide on his second-term CIA Director in the coming weeks. All of the supposedly leading candidates for the CIA Director position come with complications. The Senate Intelligence Committee’s Majority staff report on Bush-era CIA interrogation techniques, mentioned above, may well lead President Obama to steer clear of naming Acting Director Michael Morrell or White House Counterterrorism Advisor John Brennan, despite the President’s close working relationship with both men. Moreover, Brennan does not appear to want the job. Under Secretary of Defense for Intelligence Michael Vickers is a well-regarded, longtime intelligence figure. However, the Pentagon’s recently-announced desire to expand its clandestine service could complicate Under Secretary Vickers’s chances. The Department of Defense proposal, with which Vickers was intimately involved, is unpopular at Langley and among key Senate and House Members involved in Intelligence Community issues. Finally, former Congresswoman Jane Harman (D-CA), a former House Intelligence Committee Member and current Director of the Woodrow Wilson Center, is an intelligence expert and a centrist with support on both sides of the aisle. However, Representative Harman and House Minority Leader Nancy Pelosi (D-CA) are not close. Plus, the President may wish to refrain from adding another formerPatton Boggs Capital Thinking Weekly Update | December 17, 2012 11 of 12
  • 13. Member of Congress to an Administration national security team that may soon include Senator Kerry and Senator Hagel, in addition to Vice President Biden and himself.TaxLEGISLATIVE ACTIVITY Obama and Boehner Hold Series of Talks. President Obama and Speaker Boehner met in a series of talks this week. The President extended a counteroffer early in the week, followed by later meetings that resulted in some progress being made (i.e., the President Requested less revenues through tax reform and the Speaker offered a rate increase on those earnings over $1 million). Please see the Fiscal Cliff section above, for more detailed coverage of this topic. Tax Hearings Next Week. There are no relevant tax hearings scheduled for next week.TransportationLEGISLATIVE ACTIVITY Hurricane Sandy Supplemental Appropriations Legislation. The Senate is expected to consider emergency supplemental appropriations legislation for Hurricane Sandy next week, potentially as early as Monday. Last week, Senate Appropriations Chairman Daniel Inouye (D-HI) released a $60.4 billion appropriations measure largely tracking President Obama’s supplemental appropriations request. The bill includes $921 million for FHWA emergency relief; $336 million for grants to Amtrak; and $10.7 billion for FTA’s newly authorized Public Transportation Emergency Relief program, of which $5.4 billion may be transferred for eligible highway or transit projects to mitigate the impacts of future disasters in areas impacted by Hurricane Sandy. Republican support for the measure as drafted remains unclear as there is opposition to using emergency spending for long-term prevention and mitigation projects. Infrastructure Funding and the Grand Bargain. This week, negotiations over the “fiscal cliff” will continue. As previously noted, the Administration’s initial proposal included the $50 billion in upfront infrastructure investment that President Obama has been pushing since 2010. Republicans have continued to reject the idea of a deal that would include additional spending. Outgoing House Transportation and Infrastructure Chairman John Mica (R-FL) and others have also firmly indicated that they do not see the fiscal cliff negotiations addressing the gas tax or transportation revenue.Patton Boggs Capital Thinking Weekly Update | December 17, 2012 12 of 12