September 24, 2010
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Next Week in Congress
Senators and Members of Congress are expected to have a short session leading up to the November 2, 2010 mid-term
elections and are looking to leave Washington to begin campaigning as early as next weekend. With the new fiscal year
set to begin on October 1, the one “must pass” item Congress faces next week is enacting a continuing resolution (CR)
which will continue funding the federal government.
After work on a CR, the race will be on by members of both Houses and both parties to wrap-up before breaking for the
elections. While debate on what are considered to be politically charged topics will likely dominate the headlines, Council members can expect that a number of non-controversial items will see action, albeit “under the radar.”
Budget/Appropriations
Next week, both the House and Senate will take up a continuing resolution (CR) that will provide short-term funding for
government programs. The duration of the temporary measure is unclear, but is likely to provide government funding
until Congress can return to legislative session after the November elections. Once Congress returns, lawmakers will
need to determine if they will pursue the individual fiscal year 2011 funding bills, or rather, an Omnibus appropriations
measure. Currently, none of the individual appropriations bills have been signed into law.
Healthcare
The House Energy and Commerce Subcommittee on Health heard from Congressmen Peter Roskam (R-IL) and Ron
Klein (D-FL) on Wednesday concerning abuse and fraud prevention within Medicare and Medicaid through higher penalties and predictive modeling. Congressman Klein introduced a bill (H.R. 5044) in May which would double the penalties
for kickbacks and false statements as specified in the Social Security Act. Senator Kirsten Gillibrand (D-NY) has introduced a companion bill (S. 3632). Congressman Roskam’s bill (H.R. 5546) would establish a tracking system which
would flag unusual claims in order to catch fraudulent activity “before it escalates and the cost grows,” he said. Another
bill (H.R. 6130) from Congressmen Pete Stark (D-CA) and Wally Herger (R-CA) would prevent any company tied to entities – both businesses and individuals – sanctioned for fraud from participating in Medicare or other federal health programs. The AARP came out in support of both Congressman Roskam’s bill and the Stark-Herger bill, the latter of which
was approved by the House under suspension of the rules on Wednesday.
A number of provisions of the healthcare overhaul laws went into effect on Thursday, and the possible effects of others
are already being anticipated. Medicare currently helps pay for prescription drug costs up to $2,830 and beyond $3,610,
but beneficiaries are responsible for all their drug costs if their total falls in between. Medicare recipients who fall into the
plan’s prescription drug “doughnut hole” where coverage drops out will be eligible for a 50 percent discount off a particular drugs’ brand-name price beginning next year. Pharmaceutical companies will bear the cost of the discount, and there
is concern that underlying prices of medications may rise as a result. The Centers for Medicare and Medicaid Services
(CMS) estimated last month that Medicare’s average monthly premium will increase by $1 in 2011, to $30. In a letter to
the CMS, the Center for Medicare Advocacy and the Medicare Rights Center expressed “legitimate concern that some
manufacturers will steeply increase the price of drugs in order to offset the cost of the discount.” Spokespersons for the
Pharmaceutical Research and Manufacturers of America (PhRMA) said that drug market competition will be sufficient to
restrain drug prices, and the average increase in monthly premiums indicates that there hasn’t been a price hike.
Work continues on defining the Medical Loss Ratio (MLR) as provided for in the healthcare reform laws. President
Obama and Secretary of Health and Human Services (HHS) Kathleen Sebelius met with officials from the National Association of Insurance Commissioners (NAIC) on Wednesday to work toward codifying the rules governing what portion
of revenue from premiums insurance providers must spend on medical care. The new law stipulates that by 2012, insurers must have an MLR of at least 80 percent if they operate in the individual pool, with an MLR of at least 85 percent for
those in the larger group pools. NAIC president-elect Susan Voss said they discussed with Administration officials the
possibility of phasing in the MLR requirement over several years beginning in 2011 in the hopes that customers won’t
lose coverage if insurance companies were to be forced out of the market by an all-at-once implementation. Another
NAIC official pointed out that the health care law allows states to apply to HHS for the ability to phase in the MLR requirement, and argued that it would be simpler for HHS to allow a phase-in across the board rather than deal with individual applications from states. The states of Iowa and Maine have both requested a waiver to delay the requirement
until 2014. In regards to cost, Susan Voss, who is also the Iowa insurance commissioner, commented that the state’s
insurance companies “aren’t telling us they’re raising rates” due to provisions of the law scheduled to take effect in 2011
and 2012.
Financial Services/Fiscal Policy
On Tuesday, it was announced that Director of the White House National Economic Council, Lawrence Summers, would
step down at the end of the year. A replacement has not been named.
Lawmakers are not expected to extend any portion of the “Bush tax cuts” (as they are commonly known) before the November 2nd elections and will instead look to address tax matters in a lame duck session. The tax cuts, which cover
such tax items as income, estate, capital gains, and dividend taxes, will expire on December 31, 2010 if no Congressional intervention occurs. Members of both parties state that they want to pass a version of tax cuts, with Republicans
generally favoring fully extending the tax cuts, and Democrats generally looking to extend specific tax benefits, such as
for families with less than $250,000 in yearly income, and for individuals with less than $200,000 in yearly income. However, Members of Congress could not agree on how to approach the sensitive matter of how best to provide tax relief in
the time remaining in this legislative session.
On Thursday, the House of Representatives passed the Small Business Jobs and Credit Act (H.R. 5297), by a vote of
237-187, clearing the way for the President to sign the legislation into law. On September 16, the Senate passed H.R.
5297 by a vote of 61-38. A key component of the bill creates a $30 billion loan fund geared towards small businesses
and available only through banks with less than $10 billion in assets. In addition, the bill contains approximately $12 billion in assorted small business tax breaks, including a provision to help investors who hold onto a small business stock
for more than 5 years before selling. Those individuals would not have to pay tax on their gains. Further, the bill extends the bonus depreciation allowance through 2010. The bonus depreciation allowance provision will allow businesses to more quickly recover the costs of capital expenditures, thus promoting investment and job creation. The New
England
Council
actively
advocated
for
the
extension
of
the
bonus
depreciation
provision
(http://newenglandcouncil.com/pdf/_all/ltr_2010.06.23_BonusDeprec.pdf). During debate on the Senate floor, a bipartisan group of Senators was unsuccessful in their effort to strip out a provision requiring corporations to report to the
Internal Revenue Service (IRS) any payment to a contractor of more than $600 (the so-called “1099 provision”). Revenues from this new reporting requirement are slated to be used to offset costs associated with the health care law enacted earlier this year. Due to Senate procedural considerations, a 60-vote “super majority” was necessary to remove
the provision.
On Tuesday, the Senate passed a bi-partisan measure (S. 3717) introduced by Senate Judiciary Chairman Patrick
Leahy (D-VT) with a specific technical correction to the new Wall Street Reform and Consumer Protection Act (Pub.L.
111-203). Under the new reform law, the Securities and Exchange Commission (SEC) was given broad power to exempt documents under their control from consideration under the Freedom of Information Act (FOIA). On Thursday evening, the House passed S. 3717, sending the bill on to President Obama for his signature.
On Tuesday, the Senate unanimously passed S. 3814, legislation reauthorizing the National Flood Insurance Program
(NFIP) through September 2011. On Thursday, the House of Representatives also passed and the measure now heads
to President Obama for his signature. On Wednesday, the Senate Banking Committee under Chairman Christopher
Dodd (D-CT) held a hearing on the long-term reauthorization of the NFIP. Initiated in 1968, the NFIP provides property
owners in “at risk” areas the ability to buy insurance to protect against flood damage/loss. Communities that participate
must establish floodplain management requirements to mitigate future flood loss. In 2008, the Senate passed a bill to
reform and reauthorize the NFIP, however that legislation was never enacted. According to Senator Dodd, the NFIP
faces a nearly $19 billion debt that is owed to the Treasury, due in part to claims arising from Hurricane Katrina and
other storms. The program also requires a readjustment in its premium rates as well as broader participation in the program by those who hold property in at-risk areas. In July, the House of Representatives passed the Flood Insurance
Reform Priorities Act (H.R. 5114) which would reauthorize the NFIP for 5 years and make actuarial adjustments, raise
coverage limits, and impose new flood maps among its changes. The one year extension means lawmakers will tackle
reauthorization again in 2011. According to the latest data by the Federal Emergency Management Agency (FEMA),
there are approximately 118,800 NFIP policies in force in New England. There are approximately 5.5 million participants
nationwide.
Technology/Immigration
Apart from a few suggestions for changes, public safety and first responder officials voiced their support for Senator Jay
Rockefeller’s (D-WV) bill (S. 3756) designating the D-block of the broadband spectrum as a public safety network. As
part of its national broadband plan, the Federal Communications Commission (FCC) intended to carve an additional 10
megahertz of spectrum to add to what public safety officials already control, and auctioned off D-block spectrum to commercial bidders in order to fund the building of a national interoperable public safety wireless network. Several public
safety officials responded that this was not enough spectrum for their needs, and pushed for the use of the D-block.
Senator Rockefeller characterized his bill as a middle way between the two plans, allowing the FCC to auction any portion of the D-block which public safety officials decide is not needed. At a hearing of the Senate Commerce, Science and
Transportation Committee, of which Senator Rockefeller is chair, Senator Mark Warner (D-VA) suggested that a commercial network would be far less expensive to set up than a stand-alone public safety network, and the involvement of
the private sector will help keep pace with changing technology. James Barnett from the FCC’s Public Safety Bureau
added that wireless providers could include a public safety transmitter any time a cell phone tower is erected or adjusted, but officials from first responder organizations were concerned that the public safety network would not be guaranteed priority access over commercial users in an emergency situation. Committee Ranking Member Kay Bailey
Hutchison (R-TX) threw her support behind a direct allocation of spectrum, rather than a commercial auction, to create a
public safety network. Senator Rockefeller conceded that a Senate vote on his bill before the end of the year was
unlikely.
On Thursday, the FCC commissioners voted unanimously to grant wireless broadband applications access to unlicensed “white spaces” between sections of broadband spectrum currently in use. Supporters of this move include Senate Commerce Communications Subcommittee member Olympia Snowe (R-ME) and Chair John Kerry (D-MA), who
said that “it is a critical step towards a robust wireless future that will benefit all Americans.” Some broadcasters, however, were concerned that the FCC did not include a requirement that wireless devices check in with a geo-location database multiple times a day to ensure they don’t interfere with other, licensed spectrum users. The National Association
of Broadcasters plans to proceed with its lawsuit to block the decision, according to a statement from spokesperson
Dennis Wharton. The lawsuit was filed in 2009 but has been on hold while the FCC came to a decision.
House Energy and Commerce Chair Henry Waxman (D-CA) is pushing for the completion of net neutrality legislation
before Congress adjourns for campaign season, although Congressman Rick Boucher (D-VA), head of the subcommittee on the Internet, added that “these conversations will keep going” even if the House does not manage to pass the bill
before recessing. The bill would give the FCC two years of authority to implement four Internet Openness Principles,
entitling consumers to: “access the lawful Internet content of their choice,” “run applications and use services of their
choice,” “connect their choice of legal devices that do not harm the network,” and to “competition among network providers, application and service providers, and content providers.” A fifth issue of nondiscrimination, which would prevent
internet service providers from prioritizing access to content from paying sources, is not addressed in the legislation.
Energy/Environment
On Tuesday, Senate Energy Committee Chairman, Jeff Bingaman (D-NM) along with Senator Susan Collins (R-ME) and
New England Council
Weekly Washington Report—September 24, 2010
(continued)
others introduced bipartisan legislation that would implement a renewable energy standard (RES) beginning in 2012. At
that point, those who sell electricity in the United States would need to derive three percent of that electricity from a renewable source, with a sliding escalation to 15 percent beginning in 2021. Usable renewable energy sources would
include: wind, solar, geothermal, biomass, incremental hydropower and new hydropower from existing dams, and wasteto-energy. Nuclear is not included in the bill. Sponsors of the legislation have expressed their wish to bring the bill to
the floor of the Senate before the 111th Congress completes its work in December.
On Thursday, Senator Mary Landrieu (D-LA) said she would block Senate consideration of Jacob Lew, President
Obama’s nominee to head the Office of Management and Budget (OMB), until the moratorium on deepwater drilling in
the Gulf of Mexico is withdrawn or significantly re-evaluated. Sen. Landrieu placed her “hold” on the nomination of Mr.
Lew after it had cleared final committee consideration. She expressed her opposition in a letter to Majority Leader Reid
(D-NV) expressing her reservations over Mr. Lew’s level of concern for the economic well-being of Louisiana and the
Gulf Coast states. [A Senate “hold” is often used as a bargaining chip for a Senator to obtain favorable action or prevent
unfavorable action on a particular item of concern to him or her, by delaying further action on legislation or a nomination
that is of high-value to someone else, usually, Senate or House leadership or the White House.]
The House Select Committee on Energy Independence and Global Warming under Chairman Ed Markey (D-MA) held a
hearing on Wednesday to discuss the financial considerations brought about by investing in clean energy technologies,
particularly as it relates to America’s standing in the renewable energy market. Witnesses indicated that the requirements for renewable energy sources under an RES would help spur investment in renewable energy technology here in
the US.
Senate Republicans who sought to remove Senator Lisa Murkowski (R-AK) as Ranking Member of the Energy and
Natural Resources Committee earlier this week decided instead to let her remain in the post. Sen. Murkowski lost her
primary challenge and has indicated she will mount a write-in campaign to retain her seat in the November elections, a
move which had upset some in the party. Others felt removing Ms. Murkowski would be seen as overly-punitive. Senator Richard Burr (R-NC) would succeed Ms. Murkowski on the Energy panel, provided he wins his re-election bid.
Transportation
The House and Senate both passed short-term authorizations of Federal Aviation Administration programs this week.
The House passed legislation (H.R. 6190) which will now proceed to the Senate. The bill approved by the Senate this
week (H.R. 4853) had previously been approved by the House and may be “repurposed” as a broad tax bill or a longerterm FAA bill in the future. This three-month authorization would extend the agency’s tax-collecting, grant-making, and
other authorities through the end of the current year, giving Congress more time to resolve the differences between each
house’s full FAA reauthorization bills (H.R. 915, S. 1451). Conference committee members on the long-term reauthorization have yet to be determined. Disagreement over allowing additional long-distance flights through Ronald Reagan National Airport as well as allowing FedEx ground employees to unionize on a local basis has led to repeated delays.
House Transportation and Infrastructure Chair James Oberstar (D-MN) is adamant that the long-term legislation allow
FedEx workers to organize locally, but he is at an impasse with GOP Senators from Tennessee Bob Corker and Lamar
Alexander, who have conversely promised to block any bill including the organizing language.
The Federal Aviation Administration announced a new program for pilots and air-traffic controllers to voluntarily share
safety data and information. United Airlines is the first company to agree to share data with the FAA and the agency expects other airlines to follow suit. In the past, safety information reported by the Aviation Safety Action Program and the
Air Traffic Safety Action Program had been separated; under the new agreement, safety concerns from pilots and air
traffic controllers will be analyzed together to inform aviation safety policies and improvements. Mechanics’ unions at
both American Airlines and Delta Airline’s commuter airline Comair have expressed concerns that reporting safety concerns could lead to backlash against their members, although the United pilots’ union supports the agreement for creating “yet another layer of safety measures.”
The Senate held a procedural vote Thursday rejecting a resolution (SJ Res 30) expressing disapproval of the National
Mediation Board’s May ruling which changed how rail and airline union election ballots are counted. Under the Railway
Labor Act, any member not casting a vote was counted as a “no” vote, but the revised rule would allow the majority of
votes cast to determine the election’s outcome. The Air Transport Association had argued that the mediation board did
not have the authority to make the change.
Amtrak Chair Thomas Carper and general counsel Eleanor Acheson have been subject to scrutiny from lawmakers over
the handling of an investigation into the company’s hiring of outside law firms last year. After releasing an internal report
on the matter earlier this month, Senator Chuck Grassley (R-IA) and Congressman Darrell Issa (R-CA) wrote a letter to
Transportation Secretary Ray LaHood this week, calling for the department’s inspector general to look into the matter
and the possible removal of Amtrak leadership. They say that former Amtrak inspector general, Fred Weiderhold, was
forced to resign in order to halt the investigation, and they request Carper’s and Acheson’s “removal pending an independent investigation by the Inspector General for the U.S. Department of Transportation.”
On Tuesday, the Senate Banking Committee held a hearing on the establishment of a National Infrastructure Bank designed to provide funds for road, bridge, water and other infrastructure projects based on a cost-benefit analysis. Among
the witnesses was Mr. Donald Schubert, President of the Connecticut Construction Industries Association, who discussed the economic benefits of infrastructure investment.
The hearing followed President Obama’s Labor Day
(9/1/10) proposal for a $50 billion investment in America’s infrastructure. Congresswoman Rosa DeLauro (D-CT-3) introduced legislation in May of 2009 addressing the need for infrastructure development for transportation, energy, environment, and telecom purposes. Her bill would authorize $25 billion over 5 years. That bill, H.R. 2521, is before the
House Financial Services Committee. No action has been taken on the measure.
Higher Education
The House Budget Committee held a hearing Wednesday on extending funding for the Perkins loan program. Committee Chair John Spratt (D-SC) introduced the Perkins Loan Extension Act (H.R. 5448) in May to give colleges a year-long
extension, until October 1, 2013, to begin repayment of federal funding for Perkins loans. No new funding for the program has been allocated since 2004, but the money repaid by students is made into new low-interest loans – 495,000 in
2009. Bob Perrin, President of the Coalition of Higher Education Assistance Organization, testified that Perkins loans
are “an essential part of the financial aid system” and a continuation of program funding at current levels should not constitute irresponsible spending. He added that the debt cancellation benefits for those going into public service career
tracks and the rolling investment system whereby students’ repayments are funneled back into the program to make
additional loans are benefits particular to the Perkins loan program and should be preserved and supported. Sarah
Bauder, assistant vice president of financial aid at the University of Maryland, noted that if funding for the Perkins program was cut off, other forms of student aid would be sought, but the unique flexibility to aid low-income students provided by the Perkins program is highly beneficial. Ranking Member Paul Ryan (R-WI) agreed with Congressman Spratt
on the importance of education in relation to the country’s global economic competitiveness, but called for funding
sources for financial aid programs which would have a smaller negative impact on the national debt. Congressman
Spratt conceded that the chances of his bill passing before the end of the year are slim to none, but he hopes to continue work on the issue next year.
The Department of Education released a new timeline for the announcement of its “gainful employment” regulations regarding students at for-profit institutions of higher education. The rules would suspend federal financial aid to programs
where students’ debt-to-income levels after graduation exceeded a certain standard. Due to the overwhelming number
of public comments received on the issue, the Department is postponing the release of the final guidelines until after
November 1 and the rules will not go into effect until 2012. November 1 was originally the deadline for beginning to enact the rule changes, but due to the delay, this will likely be pushed back. The Department had not planned on fully enforcing the gainful employment rules until July 2012, but the timeline shift will give for-profit colleges less time to respond
and adjust to the new requirements. Part of the continued scrutiny of for-profit institutions, another in a series of hearings
on for-profit colleges has been scheduled for next Thursday, September 30. The Senate Health, Education, Labor and
Pensions Committee will hear from witnesses on for-profit institutions’ revenue sources as well as student debt loads
and academic achievement. Committee Chair Tom Harkin (D-IA) requested relevant information from 30 for-profit colleges in August, divided evenly between publicly traded and privately held institutions.
The President’s Council of Advisors on Science and Technology (PCAST) released a report calling for federal action to
encourage K-12 students to enter and succeed in the STEM (science, technology, engineering and mathematics) fields.
Among their policy recommendations are establishing 1,000 schools focused on STEM education and the expansion of
STEM after-school programs. Eric Lander, co-chair of PCAST, faulted the federal government for failing to effectively
support STEM education, saying that it “lacked a coherent strategy and sufficient leadership capacity for STEM education.” The National Science Board also announced recommendations for promoting STEM education this week, emphasizing the importance of making sure low-income and at-risk students have the opportunity to develop an interest in the
STEM areas from early education. “Far too many of our… students with the most potential for future achievement in
STEM are overlooked and underdeveloped beginning at the early stages of their academic careers,” said Science Board
member Camilla Benbow.
Trade
On Friday, the House Ways and Means Committee is taking up legislation, the Currency Reform for Fair Trade Act (H.R.
2378), that will give federal officials the ability to levy new import duties on China and other nations that undervalue their
currency. The latest version of the bill has been drafted to ensure it is WTO-compliant. Capitol Hill lawmakers have expressed frustration over what they believe to be the Chinese government’s intervention in currency policy instead of allowing market forces to dictate its value. There is a belief by some that China’s economic growth can be attributed to
Beijing’s tinkering with China’s currency to keep it artificially low. It is estimated that the renminbi (or “Yuan”) is undervalued by as much as 40 percent. Experts cited by Committee Chairman Sander Levin (D-MI) say that a true currency
valuation of the Yuan would make US manufacturing more competitive and potentially create 500,000 American jobs.
Some in the American business community have cautioned against a currency “push back,” worried that it may prompt
China to use retaliatory tactics of its own that could have an adverse impact on America’s economy. America exported
approximately $70 billion worth of goods to China in 2009, while importing approximately $296 billion.
President Obama has repeatedly stressed the importance of the relationship between China and the US and has looked
towards diplomatic means to persuade the Chinese government to increase the Yuan’s value. While Treasury Secretary
Timothy Geithner did say that China’s currency was “significantly undervalued” at a House Financial Services hearing on
Wednesday, there is pressure on the President to address the currency situation in a substantive manner. This could
include bringing the issue to the forefront when the G20 Summit occurs in Seoul, Korea in mid-November as Geithner
has signaled may occur. It should be noted the President also has other key considerations having to do with China,
most notably North Korean stability, Iran’s nuclear ambitions, and global environmental protections.
The Majority leadership in the House has stated its intention to bring the Currency Reform for Fair Trade Act to the
House floor as early as next week.
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