Capital Thinking Updates ~ September 18, 2012


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Capital Thinking Updates ~ September 18, 2012

  1. 1. General LegislativeOn Tuesday, September 18, the House will meet at 12:00 in pro forma session. On Wednesday,September 19, the House will meet at 2:00 p.m. for legislative business. Legislation consideredunder suspension of the rules will include, among other bills: H.R. 6324 - Cutting FederalUnnecessary and Expensive Leasing Act of 2012; H.R. 6375 - To authorize certain Department ofVeterans Affairs major medical facility projects and leases, to amend title 38, United States Code,to extend certain authorities of the Secretary of Veterans Affairs, and for other purposes, asamended; H.R. 5948 - Veterans Fiduciary Reform Act of 2012, as amended; H.R. 3099 - Buffett RuleAct of 2011, as amended; H.R. 5044 - Andrew P. Carpenter Tax Act, as amended; H.R. 2827 - Toamend the Securities Exchange Act of 1934 to clarify provisions relating to the regulation ofmunicipal advisors, and for other purposes; H.R. 6361 - Vulnerable Veterans Housing Reform Actof 2012, as amended; H.R. __ - To provide flexibility with respect to U.S. support for assistanceprovided by international financial institutions for Burma, and for other purposes; H.R. 2903 -FEMA Reauthorization Act of 2011, as amended; H.R. 6368 - Border Security InformationImprovement Act of 2012; H.R. 6296 - Disaster Loan Fairness Act of 2012, as amended; H.R. 5910 -Global Investment in American Jobs Act of 2012, as amended; H.R. 4124 - Veteran EmergencyMedical Technician Support Act, as amended; H.R. 6163 - National Pediatric Research NetworkAct, as amended; H.R. 6118 - Taking Essential Steps for Testing Act; H.R. 733 - RecalcitrantCancer Research Act of 2012, as amended; and H.R. 3783 - Countering Iran in the WesternHemisphere Act of 2012, as amended.On Thursday, September 20 and Friday September 21, the House will meet for legislativebusiness. Legislation under consideration will include H.R. __ - STEM Jobs of 2012; H.J.Res 118 –Providing for congressional disapproval under chapter 8 of title 5, United States Code, of the rulesubmitted by the Office of Family Assistance of the Administration for Children and Families ofthe Department of Health and Human Services relating to waiver and expenditure authority undersection 1115 of the Social Security Act with respect to the Temporary Assistance for NeedyFamilies program; and H.R. 3409 – Stop the War on Coal Act of 2012, Rules Committee Print.The Senate will convene at 2:00 p.m. on Monday, September 17 for a pro forma session.Agriculture & FoodLEGISLATIVE ACTIVITY Discharge Petition Filed on House Farm Bill. On Thursday, September 13, Representative Bruce Braley (D-IA) filed a discharge petition aimed at forcing a floor vote on the House’s version of the Farm Bill (H.R. 6083). The petition included 39 Member signatures. To force a vote, the discharge petition would need at least 218 Members’ signatures. It is unlikely that Representative Braley will receive the requisite signatures, as disagreements on both sides of the aisle remain over funding for the Supplemental Nutrition Assistance Program.Patton Boggs Capital Thinking Weekly Update | September 17, 2012 1 of 14
  2. 2. Farm Bill Timeline. On Wednesday, September 12, Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) joined a rally of a few hundred farmers pressing for the House to pass a five-year Farm Bill before the September 30 deadline. We do not expect Congress to pass a five-year Farm Bill this year or take up an extension until after the election, given that Members of Congress will likely head home after this week to campaign and House leadership has not indicated any plans to bring up an extension for a vote this week. Thus, the Farm Bill is expected to expire on Sunday, September 30. As mentioned in last week’s edition of Capital Thinking, a failure to extend the Farm Bill will not impact farm programs, as most of these programs are authorized through the end of the 2012 crop year next spring. The only exception is the dairy program, which will expire on December 31, 2012. As such, Congressional leaders continue to operate as though they have until the end of this year to address authorization of the Farm Bill.REGULATORY ACTIVITY Renewable Fuel Standard. Per the request of the corn growers, the Environmental Protection Agency (EPA) has extended the deadline to submit comments on the Renewable Fuel Standard waiver petitions submitted by Governors Mike Beebe (D-AR) and Beverly Perdue (D-NC) to October 11, 2012.Budget, AppropriationsLEGISLATIVE ACTIVITY FY 2013 Continuing Resolution. On Thursday, September 13, the House approved a six-month FY 2013 Continuing Resolution (CR) by a vote of 329-91. The measure will fund the federal government through March 27, 2013 at a discretionary spending level of $1.047 trillion, an increase of 0.6 percent for most federal agencies over FY 2012 levels. The Senate will take up the bill this week and the President is expected to sign the measure before the end of the current fiscal year on September 30.CybersecurityLEGISLATIVE ACTIVITY Cybersecurity Legislation. The lack of agreement between key Members, the shortness of the September work period and the anticipated early recess of Congress has led to little progress being made on cybersecurity legislation to date. The lead sponsor of the Senate’s comprehensive cybersecurity bill, Senator Joe Lieberman (I-CT), acknowledged last week that it is very unlikely that the Senate will take up his bill until after the November election. It is unclear whether Congress will have interest in spending time on this issue during the lame duck session, with sequestration and taxPatton Boggs Capital Thinking Weekly Update | September 17, 2012 2 of 14
  3. 3. issues to address. But the drumbeat to move a cybersecurity bill continues and moving legislation during lame duck may still be the answer. Chairman of the House Intelligence Committee Mike Rogers (R-MI) continues to advocate for the Senate to abandon the more controversial sections of Senator Lieberman’s bill in order to pass a bill that focuses on bipartisan areas of agreement, such as information sharing. Yet, Senator Lieberman has said that this approach is inadequate because it would not address critical infrastructure. While Senate Minority Leader Mitch McConnell (R-KY) said that Republicans will continue to pursue bipartisan legislation, Senate Majority Leader Harry Reid (D-NV) expressed his openness to a White House executive order since there is diminishing hope of passing cybersecurity legislation this year. Last week, Senator Ron Wyden (D-OR) also called on the White House to issue an executive order that focuses on critical infrastructure while several Republican Senators that co-sponsored competing cybersecurity legislation, the SECURE IT Act, wrote an op-ed in the Wall Street Journal that highlighted the downsides to an executive order and called on the President to work with Congress to pass cybersecurity legislation.EXECUTIVE BRANCH ACTIVITY Executive Order: The Obama Administration is drafting an executive order (EO) in light of the Congress’ inability to pass a cybersecurity bill. The draft order is currently under review and subject to change, although some details of the draft order in its current form have leaked. A White House spokesperson said that the executive order is only one of many options that the Administration is considering as they look at how to address cyber threats. Media reports late Thursday night say they have a leaked copy of the EO which establishes an interagency cybersecurity critical infrastructure council led by the U.S. Department of Homeland Security. Reports also state that the EO would give the Executive Branch agencies an outline for possible new cybersecurity regulations and/or strengthen existing cybersecurity regulations. The U.S. Chamber of Commerce has spoken out against any type of executive order, saying that it would not adequately address the issue of cybersecurity and could place unnecessary burdens on U.S. businesses. The Administration is also looking to rewrite the 2003 presidential directive critical infrastructure and cyber issues.EducationLEGISLATIVE ACTIVITY Veterans Education. On Tuesday, September 11, the House passed by voice vote the Improving Transparency of Education Opportunities for Veterans Act of 2012 (H.R. 4057), which would require the Department of Veterans Affairs to develop a comprehensive educational outreach policy toPatton Boggs Capital Thinking Weekly Update | September 17, 2012 3 of 14
  4. 4. ensure that veterans and military servicemembers have the tools necessary to make informed decisions about their postsecondary education. Despite criticism by some Republicans, the Senate Veterans’ Affairs Committee approved a similar measure, the G.I. Bill Consumer Awareness Act (S. 2241), the following day (September 12) as part of a markup on a larger package of veterans legislation. The American Council of Education coordinated a letter from other higher education associations to the Committee noting their general support for efforts to help veterans make informed decisions and protect veterans from fraudulent and aggressive recruiting practices. The letter also expressed specific concerns in the bill related to burdensome reporting requirements, transfer of credit policies, and generally duplicative, uncoordinated efforts regarding veteran consumer initiatives. The coalition also circulated a letter to House Members regarding H.R. 4057, noting it prefers that measure over the Senate bill but also addressed concerns related to data collection and reporting, establishing a centralized tracking system and licensure requirements among other issues. The Senate is expected to pass veterans’ job-training legislation (S. 3457) on Wednesday, September 19. It is possible that the education-related legislation could be offered as an amendment during consideration of the jobs bill. Hearings and Events. The following hearings have been scheduled: o Wednesday, September 10 – The Senate Committee on Commerce, Science, and Transportation will hold a hearing titled “Five Years of the America COMPETES Act: Progress, Challenges, and Next Steps.” o Thursday, September 20 – The House Education and the Workforce Subcommittee on Higher Education and Workforce Training will hold a hearing titled “Assessing College Data: Helping to Provide Valuable Information to Students, Institutions and Taxpayers.” o Thursday, September 20 – The Senate Health, Education, Labor, and Pensions Committee will hold a roundtable discussion on “Pension Modernization for a 21st Century Workforce.” Additionally, the Information Technology & Innovation Foundation (ITIF) is holding an event on Thursday, September 20 to release a report outlining the effects that pending sequestration cuts will have on research and the innovation ecosystem.REGULATORY ACTIVITY Gainful Employment. On Monday, September 10, the Department of Education filed a motion requesting the court to overturn its ruling that the Department’s gainful employment regulations were an overreach in authority and for-profit and vocational programs were held to arbitrary standards, which was discussed in the July 9 edition of Capital Thinking. As part of his ruling, Judge Rudolph Contreras did uphold the Department’s legal right to issue gainful employment regulations and found that the Department did not overstep its bounds regulating in this particular area. He also left in place disclosure standards that require institutions to provide students with data on their performance.Patton Boggs Capital Thinking Weekly Update | September 17, 2012 4 of 14
  5. 5. No Child Left Behind Waivers. On Monday, September 10, the Department of Education announced that it received nine No Child Left Behind waiver requests from Alabama, Alaska, Hawaii, Maine, New Hampshire, North Dakota, Puerto Rico, West Virginia and the Bureau of Indian Education. Since September 2011, the Department has received a total of 44 waiver requests. The 33 states (plus the District of Columbia) that have been approved for NCLB waivers are: Arizona, Arkansas, Colorado, Connecticut, Delaware, Florida, Georgia, Indiana, Kansas, Kentucky, Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Jersey, New Mexico, New York, North Carolina, Ohio, Oklahoma, Oregon, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Virginia, Washington and Wisconsin. The 11 states (plus the Bureau of Indian Education and Puerto Rico) with outstanding requests for waivers include Alabama, Alaska, California, Hawaii, Idaho, Illinois, Iowa, Maine, New Hampshire, North Dakota and West Virginia. Strategies to Increase Postsecondary Success. On Wednesday, September 12, the Department of Education published in the Federal Register a request for information about promising and practical strategies, practices, programs and activities that have improved rates of postsecondary success, transfer and graduation. Responses to be considered in the second round of reviews should be submitted by November 30. In January, the Department invited submissions and posted select information received during the first round of reviews in August. Cohort Default Rates. On Monday, September 17, the Department of Education will release the 2- year (FY 2010) cohort default rate. The Department of Education will release the 3-year (FY 2009) cohort default rate on September 24.EnergyLEGISLATIVE ACTIVITY Congressional Hearings. On Wednesday, a Senate Energy and Natural Resources subcommittee will hold a legislative hearing on four water-related bills, including the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act (H.R. 2842) and a bill (S. 3265) offered by Ranking Member Lisa Murkowski (R-AK) to prohibit FERC from charging land-use fees for hydropower projects no longer located on federal lands. On Thursday, a House Energy and Commerce subcommittee will hold a hearing to discuss legislation (H.R. 6172) that would prohibit the Environmental Protection Agency (EPA) from finalizing proposed New Source Performance Standards for power plants.Patton Boggs Capital Thinking Weekly Update | September 17, 2012 5 of 14
  6. 6. REGULATORY ACTIVITY SunShot Competition. The pre-submission and submission period for the Department of Energy’s “Race to the Rooftops” competition begins December 31. Part of the “SunShot Initiative,” the competition aims to make subsidy-free solar energy cost-competitive with conventional energy sources by the end of the decade. The first entrant to successfully achieve the targeted non‐hardware cost will receive a cash prize of $7 million. BLM Cost Recovery Fees. The Bureau of Land Management intends to implement the final rule updating fee schedules it charges to recover costs incurred in processing documents associated with oil, gas, coal and solid mineral activities on October 1, the beginning of the new fiscal year. CFATS/TWIC. Department of Homeland Security Under Secretary Rand Beers informed a House Energy and Commerce subcommittee that a new personal surety plan that integrates the Transportation Worker Identification Credential program for facilities covered by the Chemical Facility Anti-Terrorism Standards (e.g., refineries, chemical plants) will be resubmitted to the White House for regulatory review. A Request for Information is anticipated within 30 days regarding personal surety risk-based performance standards. There will be a 60 day comment period. Oil Field Drivers. The Federal Motor Carrier Safety Administration will hold a final public listening session on September 27 in Dallas, Texas to receive comments on the June 5 notice concerning regulatory guidance on the applicability of the oilfield operations exceptions in the hours-of-service regulations. Public comments are due October 5.EnvironmentLEGISLATIVE ACTIVITY Water. On Wednesday, September 19, the Senate Committee on Energy and Natural Resources, Subcommittee on Water and Power, will hold a hearing to discuss several water bills, two of which would have a national impact. S. 3265 would amend the Federal Power Act to remove the authority of the Federal Energy Regulatory Commission to collect land use fees for land that has been sold or otherwise transferred from federal ownership but that is subject to a power site reservation. The second bill, H.R. 2842, is the Bureau of Reclamation Small Conduit Hydropower Development and Rural Jobs Act of 2012.REGULATORY ACTIVITY Termination and Replacement of Gulf Coast Ecosystem Task Force. President Obama has issued Executive Order No. 13626, which terminates and replaces the Gulf Coast Ecosystem Task Force with the Gulf Restoration Council. The Council was created by the passage of the RESTORE the Gulf Coast States Act of 2012. The Council is charged with developing a comprehensive plan for ecosystem restoration in the Gulf Coast region. Among its duties, the Council is tasked with identifying projects and programs that would restore the natural resources and ecosystems of thePatton Boggs Capital Thinking Weekly Update | September 17, 2012 6 of 14
  7. 7. Gulf Coast region with a portion of the penalties that will be paid by BP under the Clean Water Act as a responsible party for the Deepwater Horizon incident. Mississippi River Monitoring Collaborative. The Mississippi River/Gulf of Mexico Watershed Nutrient Hypoxia Task Force has announced that it is launching two new efforts to monitor reductions in nutrients – nitrogen and phosphorus – throughout the watershed. The joint federal, state and tribal task force, chaired by the EPA and the State of Iowa, has established the Mississippi River Monitoring Collaborative to evaluate progress toward reducing the amount of nutrients entering local waterways and ultimately to the Gulf of Mexico. The U.S. Department of Agriculture, a member of the Task Force is also preparing to update its technical standard for water quality monitoring to better measure the amount of nutrients coming from farm fields. Nutrient runoff from agricultural, urban and industrial sources has polluted waterways and contributed to the hypoxic zone in the Gulf of Mexico – an area of low oxygen that is largely uninhabitable by fish and other marine life. The new Mississippi River Monitoring Collaborative, made up of federal and state agencies, has collected more than 670,000 nutrient data records from 12 states in the Mississippi River Basin, which it will use to evaluate where conservation practices and policies are working and where new or enhanced nutrient reduction strategies need to be developed. State Capitals’ Green Design. EPA has announced that the capital cities of Kentucky, Iowa, Louisiana, Montana and Indiana will be awarded design assistance under EPA’s Greening America’s Capitals (GAC) program, which is an effort to help capital cities stimulate economic development, provide more housing and transportation choices and reduce infrastructure and energy costs. Through this project, EPA will provide design assistance from private-sector experts to help these cities demonstrate sustainable designs intended to create vibrant neighborhoods while strengthening the local economies and protecting people’s health. The following five capital cities were selected through a national competition for assistance: o Frankfort, Kentucky will receive assistance to enhance walkability and add bike lanes between the historic downtown and the State Capitol. The project will also connect the downtown with the proposed Kentucky River trail. o Des Moines, Iowa will receive assistance to incorporate green infrastructure elements into a proposed streetscape plan for a one-mile segment of 6th Avenue. The project will revitalize the commercial street that serves as the northern gateway to the city’s downtown. o Baton Rouge, Louisiana will receive assistance to incorporate green infrastructure elements into a proposed walking and biking trail that connects Louisiana State University with the city’s downtown. o Helena, Montana will receive assistance to improve the walkability and add bike lanes along Last Chance Gulch, a street that connects the northern part of the Helena business district with the historic downtown. The project will also explore design alternatives for a five-way intersection to enhance walkability.Patton Boggs Capital Thinking Weekly Update | September 17, 2012 7 of 14
  8. 8. o Indianapolis, Indiana will receive assistance to make streets more pedestrian-friendly and revitalize public plazas within and adjacent to the Market Square redevelopment area. The project will tie in with the city’s larger plan to develop businesses in a new green cultural district.Financial ServicesLEGISLATIVE ACTIVITY House Committee to Discuss Consumer Protection Bureau. On Thursday, September 20, the House Financial Services Committee will meet to review and discuss the semi-annual report from the Consumer Financial Protection Bureau (CFPB) with Director Richard Cordray. Senators to Discuss High-Frequency Trading. On Thursday, September 20, the Senate Banking Subcommittee on Securities, Insurance and Investment will hold a hearing titled Computerized Trading: What Should the Rules of the Road Be?” Witnesses are expected to include representatives from Better Markets, T. Rowe Price, Virtu Financial, and TABB Group.REGULATORY ACTIVITY GAO. Dodd-Frank Entities Need to Improve Accountability and Transparency. On Tuesday, September 11, the U.S. Government Accountability Office (GAO) released a report regarding financial stability. The report states that the Financial Stability Oversight Council (FSOC) and the Office of Financial Research (OFR) have taken steps to improve accountability and transparency, but concludes that these agencies continue to face challenges in these areas. It then discusses 10 recommendations that would increase accountability and transparency at FSOC and OFR.Health CareLEGISLATIVE ACTIVITY HELP Executive Session. The Senate Committee on Health, Education, Labor and Pensions will meet in Executive Session on Wednesday, September 19 to consider the following measures: S. 3391, the Taking Essential Steps for Testing Act (TEST), S. ___, the Recalcitrant Cancer Research Act of 2012, S. 1440, the PREEMIE Reauthorization Act, En Bloc, PN 1790, six hundred nominations in the Public Health Service received on June 26, 2012 and En Bloc, PN 1829, one thousand, six hundred and twenty-eight nominations in the Public Health Service received on July 25, 2012. Senate Aging Hearing. The Senate Special Committee on Aging has scheduled a hearing on Wednesday September 19, on “Fraud in Medicare Power Mobility Devices.” The hearing will focus onPatton Boggs Capital Thinking Weekly Update | September 17, 2012 8 of 14
  9. 9. efforts to eliminate Medicare waste, fraud and abuse, and an examination of prior authorization requirements for power mobility devices. House Oversight Hearing. The House Committee on Oversight and Government will hold a hearing on Thursday September 20, on “Examining the Administration’s Failure to Prevent and End Medicaid Overpayments.” House VA Hearing. The House Committee on Veterans’ Affairs Disability Assistance and Memorial Affairs Subcommittee has scheduled a hearing on Friday September 21, on “Breaking Through the Backlog: Evaluating the Effectiveness of the New State Strike Force Team.” The hearing will examine a Texas authorized program to create a special team of counselors to help the Department of Veteran Affairs reduce the number of pending claims.REGULATORY ACTIVITY OIG Reports. The Office of Inspector General (OIG) released two reports last week: 1.) “Recommendation Follow-up Memorandum Report: CMS Reporting to the Healthcare Integrity and Protection Data Bank". In a 2010 report entitled CMS Reporting to the Healthcare Integrity and Protection Data Bank (OEI 07 09 00290), OIG found that CMS took adverse actions against providers but did not report all of these actions to the Healthcare Integrity and Protection Data Bank (HIPDB) as required. OIG found that CMS improved its reporting of adverse actions for DME suppliers, but not for other types of providers. CMS has not fully addressed OIGs 2010 report recommendation to report required adverse actions to the HIPDB or to report such actions within required timeframes. 2.) "Medicare Overpaid Inpatient Rehabilitation Facilities Millions of Dollars for Claims with Late Patient Assessment Instruments for Calendar Years 2009 and 2010.” OIG estimated that Medicare Administrative Contractors (MAC) made a total of $8.4 million in overpayments to IRFs because IRFs often did not receive reduced case-mix-group payments for claims with PAIs that were transmitted to the Database after the 27-day deadline. The overpayments occurred because IRF and Medicare payment controls were inadequate. PCORI Workshops. The Patient-Centered Outcomes Research Institute (PCORI) announced workshops designed to bring patients and stakeholders together in an effort to start building a patient- centered research community. The workshops are scheduled for October 27-28, December 4, and December 5. For the first workshop, PCORI has established a deadline of September 24 for expressing interest in attending the workshop. Please note that there are a limited number of seats available for each workshop, and that a certain percentage of spots are reserved for patients. PCORI will extend invitations for the first workshop in late September.Patton Boggs Capital Thinking Weekly Update | September 17, 2012 9 of 14
  10. 10. OTHER HEALTH NEWS Sequester Report. The Administration released a report Friday explaining their plan to implement the sequestration budget cuts. The release of the White House report followed the Capital Thinking Report deadline; a detailed analysis of the report will be provided separately. Discretionary health spending is scheduled to be reduced by $94 billion, with another $16 billion in Medicare provider payment cuts. Meanwhile, the American Hospital Association, American Medical Association and American Nurses Association released a report warning Congress that if it lets the two-percent Medicare sequestration cut go through, more than 766,000 jobs could be lost by 2021, with nearly half a million lost at the outset. MACPAC Meeting. The Medicaid and CHIP Payment and Access Commission (MACPAC) has scheduled a public meeting on Thursday, September 20 and Friday, September 21. An agenda will be released in advance of the meeting. MedPAC Meeting. The Medicare Payment Advisory Commission will hold a public meeting on October 4 and 5, 2012. IOM Meeting. The Institute of Medicine will hold a public workshop, “Physical Activity and Physical Education in Schools: Perspectives on Successes, Barriers, and Opportunities” on Thursday, September 20. Its purpose is to provide the IOM Committee on Physical Activity and Physical Education in the School Environment with viewpoints from individuals in academia as well as practitioners of physical activity and physical education programs in the school environment. The workshop will feature approximately 12 speakers who will discuss the following programmatic approaches: 1) Physical Education; 2) Physical Activity in the Classroom; 3) Physical Activity during Recess/Breaks; 4) Intramural and Extramural Sports; and 5) Active Transport. The Institute of Medicine’s Roundtable on Health Literacy will host its next workshop on September 24, 2012 at The Conference Center at The New York Academy of Medicine. “International Approaches to Health Literacy” is the title of the workshop. Experts will present material on the subject to the Roundtable.International, Defense, Homeland SecurityLEGISLATIVE ACTIVITY House Foreign Affairs Committee and Armed Services Committee Hearings, Statements, and Markups. After focusing on China last week, the House Foreign Affairs Committee (HFAC) will turn its attention to the Middle East this week, following the attacks on U.S. diplomatic facilities in the region. Last week, HFAC Chairwoman Ileana Ros-Lehtinen (R-FL) and HFAC Subcommittee Chairmen Dana Rohrabacher (R-CA) and Chris Smith (R-NJ), all longtime hardliners on U.S.-China relations, spearheaded hearings on China’s role in the disputed claims in the South China Sea andPatton Boggs Capital Thinking Weekly Update | September 17, 2012 10 of 14
  11. 11. on allegations of coordination of organ harvesting by Chinese Communist Party officials. The Committee also reported out legislation, Congressman Eni Faleomavega’s (D-AS) H.R. 6313, as amended by Chairwoman Ros-Lehtinen, which calls on China to refrain from using or threatening military force in the South China Sea. On Thursday, the full Committee will examine U.S.-Egypt relations, while Chairman Steve Chabot’s (R-OH) Middle East Subcommittee will focus on “Safeguarding Israel’s Security in a Volatile Region”. The Egypt hearing will offer Chairwoman Ros- Lehtinen the opportunity to reiterate her initial response last week to the attacks on the U.S. diplomatic missions in Cairo and Benghazi, in which she lamented the loss of life and said the Egyptians laying siege to U.S. Embassy Cairo included “those who continue to seek the support of and assistance from the United States.” The Congresswoman added, “We have nothing for which we should apologize.” House Armed Services Committee (HASC) Chairman Buck McKeon (R-CA) more directly echoed Governor Mitt Romney’s rapid and strident criticism of the Administration, noting, “If history has taught us anything, it is that weakness is provocative. Again and again under President Obama we have met threats and thugs with apologies and concessions.” HASC Subcommittees also held several hearings on Department of Defense operations last week. Meanwhile, Congressman Chabot’s Subcommittee hearing on Israel surely will include significant Republican (and some Democratic) criticism of President Obama’s reported decision not to meet with Israeli Prime Minister Benjamin Netanyahu at the U.N. General Assembly, as well as the ongoing, semi-public U.S.-Israeli debate regarding whether (and, if so, when and what kind of) “red lines” are appropriate prior to a prospective military strike against Iran’s nuclear program. Senate Foreign Relations and Armed Services Committee Hearings and Markups. The Senate Foreign Relations Committee (SFRC) received a closed intelligence briefing on Iran and Syria on Wednesday, September 12. The Senate Armed Services Committee met in closed session on Syria on Friday, September 14. On Thursday, September 20, the SFRC will enter into closed session to discuss U.S. Embassy and Consular security in light of this week’s attacks. The hearing likely will strike a somber, businesslike tone, following on the heels of SFRC Ranking Member Richard Lugar’s (R-IN) pointed refusal Wednesday to criticize the Obama Administration’s preparations for or response to the attack in Libya that killed the Senator’s former staff member, Ambassador Chris Stevens. Later on Thursday, Senator James Webb’s (D-VA) SFRC East Asia Subcommittee will hold an open hearing on the South China Sea and other maritime disputes in the region. Assistant Secretary of State for East Asian Affairs Kurt Campbell will testify and is expected to express continued U.S. support for multilateral negotiations. On Wednesday, the SFRC is scheduled to mark up a series of bills and resolutions, several of which are designed to improve the management of U.S. diplomacy and foreign assistance. House and Senate Homeland Security Developments. On Wednesday, the House passed, by a 355-62 margin, Homeland Security Committee Member Bob Turner’s (R-NY) mass transit security legislation, H.R. 3857. The legislation allows the Department of Homeland Security’s (DHS) Transit Security Grant Program funds to be used to support specialized patrol teams, without relying on a waiver from the DHS Secretary. On Thursday, HHSC Chairman Peter King (R-NY) will hold a wide- ranging hearing on the future of DHS operations, on the heels of related HHSC Subcommittee hearings held on Tuesday, September 11 and Wednesday, September 12. Especially with only two former Bush Administration officials and a former DHS Inspector General scheduled to testify,Patton Boggs Capital Thinking Weekly Update | September 17, 2012 11 of 14
  12. 12. Committee Republicans are likely to strike a somewhat critical tone of the Obama Administration’s homeland security efforts. However, Ranking Member Bennie Thompson (D-MS) and other Democrats can be expected to push back forcefully. The Senate Homeland Security and Governmental Affairs Committee will hold a similar hearing on Wednesday, but DHS Secretary Janet Napolitano, FBI Director Robert Mueller, and National Counterterrorism Center Director Matthew Olsen will testify to present the Administration’s views in that case. In addition, the HHSC’s Oversight Subcommittee, chaired by Congressman Michael McCaul (R-TX), will tackle DHS acquisition challenges on Friday.SequestrationTo offset the required increase in the debt ceiling, the Budget Control Act of 2011 (BCA / P.L. 112-25)mandated that a sequestration process would commence on January 2, 2013 if the Joint SelectCommittee on Deficit Reduction and Congress failed to craft a $1.2 trillion deficit reduction plan. Thesequestration process will include automatic, across-the-board reductions in defense and non-defensediscretionary spending. White House Sequestration Report. On Friday, September 14, the White House Office of Management and Budget (OMB) released the sequestration report required by the Sequestration Transparency Act of 2012 (P.L. 112-155). The report outlines how federal agencies would implement the initial $109 billion in automatic sequestration cuts scheduled to go into effect on January 2, 2013, down to the “program, project, and activity” level. The report is almost 400 pages long and details cuts on a program basis. The release of the White House report followed the Capital Thinking Report deadline; a detailed analysis of the report will be provided separately. The synopsis is as follows for all agencies and programs not exempt from sequestration: o Discretionary domestic (non-defense) programs will receive an 8.2 percent cut in funding o Mandatory/direct domestic (non-defense programs will receive a 7.6 percent cut in funding o Discretionary defense programs will receive a 9.4 percent cut in funding o Mandatory/direct defense programs will receive a 10 percent cut in funding. House Passes Sequestration Replacement Legislation. On Thursday, September 13, the House passed the National Security and Job Protection Act (H.R. 6365). The Act would require the President to submit a plan to replace the $109 billion in automatic January 2, 2013 sequestration cuts. The Republican proposal was approved by a vote of 223 to 196. The bill specifies that the plan, due to Congress on October 15, must replace the sequestration with spending cuts only, not revenue. The bill also reduces the overall discretionary cap for FY 2013 by $19 billion, bringing it down to the level proposed in the House FY 2013 Budget Resolution (H. Con. Res. 112), and it eliminates the firewall between defense and non-defense spending established in the Budget Control Act (P.L. 112-25). The House passed a similar bill in May (H.R. 5652). The House vote is merely symbolic; the Senate will not take up the legislation and the White House issued a veto threat for the bill.Patton Boggs Capital Thinking Weekly Update | September 17, 2012 12 of 14
  13. 13. House Armed Services Committee Hearing. On Thursday, September 20, the House Armed Services Committee will hold a hearing titled “Department of Defense Plans for Sequestration: The Sequestration Transparency Act of 2012 Report and the Way Forward.” Witnesses will include Robert F. Hale, Undersecretary of Defense (Comptroller); Gen. Lloyd J. Austin III, Vice Chief of Staff, U.S. Army; Adm. Mark Ferguson, Vice Chief of Naval Operations; Gen. Larry O. Spencer, Vice Chief of Staff, U.S. Air Force; and Gen. Joseph F. Dunford, Assistance Commandant, U.S. Marine Corps. Stakeholder Efforts. Also on Thursday, September 20, the U.S. Conference of Mayors will lead a press conference in conjunction with the release of a letter highlighting the impact sequestration will have on local communities and metro economies. Other organizations, including the NDD Coalition, will also participate in the press conference.Tax Senate Tax Extenders Legislation May Wait Until After Election. Senate Majority Leader Harry Reid (D-NV) stated this past week that he does not expect the $205 billion tax extenders legislation to pass the Senate before the election. In August, the Senate Finance Committee reported legislation which focused on the tax “extender” provisions that expired at the end of 2011 and those that are due to expire at the end of 2012. The Committee acted to extend most, but not all, of the business and individual extenders through 2013 (retroactive to the beginning of 2012 for those provisions that have already expired). Key provisions in the bill include: extension and modification of the research and development (R&D) tax credit, extension of the active financing exception, and an extension allowing taxpayers to deduct state and local sales taxes in lieu of State and local income taxes. The legislation also included a two-year (through 2013) AMT patch for individuals. Although it was not expected that the legislation would move before the election, the Majority Leader’s comments confirm that further action on tax extenders will have to wait until the lame-duck session. Hearing on the Implementation of the Affordable Care Act. The House Ways and Means Oversight Subcommittee held a hearing last Tuesday which focused on the IRS’s implementation of the Patient Protection and Affordable Care Act (ACA). Republicans at the hearing expressed concern that the ACA is a complex and unwieldy law that is creating an administrative burden on the IRS and taxpayers. One witness added that the current ACA penalty for not purchasing insurance is too weak and would not incentivize people to buy it until they are indeed ill. Representative Erik Paulsen (R- MN), expressed concerned with the medical device tax, characterizing it as inappropriate because typically excise taxes are associated with the public policy goal of deterring certain behaviors, such as limiting smoking, alcohol or “gas-guzzling” vehicles, and are not normally placed on medical devices. Democrats, on the other hand, defended the ACA and argued that the IRS is performing well in administering the law. In June, the Republican-controlled House passed legislation to repeal the medical device tax from taking effect next year, but the Senate has not yet acted on it. House Ways and Means and Senate Finance to Hold Joint Hearing on Capital Gains Taxation. Originally scheduled for late June, the House Ways and Means and Senate Finance Committees willPatton Boggs Capital Thinking Weekly Update | September 17, 2012 13 of 14
  14. 14. hold a joint hearing on Thursday, September 20, on tax reform and the tax treatment of capital gains. Currently, the maximum tax rate on long-term capital gains is 15 percent, whereas the maximum individual ordinary income rate is 35 percent. Without Congressional action, on January 1, 2013, the maximum rate on long-term capital gains will increase to 20, while the maximum rate on individual ordinary income will rise to 39.6 percent. The capital gains tax will be further increased due to a Medicare surtax passed in the Affordable Care Act which will impose an additional 3.8 percent tax on the net investment income earned by upper-income taxpayers. In advance of the hearing, both Committee Chairmen, Representative Dave Camp (R-MI) and Senator Max Baucus (D-MT) have expressed hope that an agreement can be made on comprehensive tax reform. Tax Hearings Next Week. The following tax hearings are scheduled in the House Ways and Means and Senate Finance Committees next week: o Thursday, September 20: Joint House Ways and Means and Senate Finance hearing on Tax Reform and the Tax Treatment of Capital GainsTransportationLEGISLATIVE ACTIVITY Transportation Funding. Transportation stakeholders have been focused this week on the impact the Continuing Resolution (CR) will have on funding levels established in the two-year surface reauthorization, MAP-21. For a variety of technical reasons, the six-month CR sets a lower obligation limitation (or effective spending level) for the first six-months of FY2013 than the figure set in MAP-21, essentially freezing the obligation limit at FY2012 levels instead of providing the 1.4 percent increase established in MAP-21. In addition, while the CR provides an across the board 0.612 percent annualized increase from FY2012 levels, for technical reasons it does not appear that this CR inflation adjustment will apply to the federal-aid highway program either (although it will apply to other Highway Trust Fund programs, including mass transit). The Chairmen of the Transportation Committees in the House and the Senate have both made public their disappointment that the CR does not honor the MAP-21 funding levels. Many stakeholders have noted, however, that the funding difference of 1-2 percent is minimal in the context of the overall program and that it can be restored when the full-year appropriations bill is enacted.Patton Boggs Capital Thinking Weekly Update | September 17, 2012 14 of 14