2nd Session of the 112th Congress: A Preview of the Issues

With the nation’s eyes on who wins the prize in the Iowa republican Presidential caucus, very few realize that today the second session of the 112th Congress began, albeit in pro forma session.

In actuality, the legislative business of the second session of the 112th Congress will begin in the U.S. House of Representatives on January 17 and in the U.S. Senate on January 23. President Obama will deliver his annual State of the Union address before a joint session of Congress on January 24.

Here are some of the issues Cansler Consulting will be tracking for clients in the second session of the 112th Congress:

Agriculture: The last Farm Bill adopted by Congress in 2008 is set to expire on September 30 this year.  Leaders of the House and Senate Agriculture Committees will resume congressional hearings on the 2012 Farm Bill and have indicated that the starting point for the next farm bill will be the plan crafted for the failed negotiations of the Joint Select Committee on Deficit Reduction.  That plan included $23 billion in budget reductions for agriculture.

Budget and Appropriations: President Obama will unveil his budget request to Congress for FY 2013 on February 6.  The request will be bound by the provisions of the Budget Control Act that the President signed into law in August limiting discretionary spending to $1.047 trillion, a level that is 0.4 percent over spending for FY 2012. This sets off congressional budget hearings throughout February and March with the goal to pass a budget resolution in both the House and Senate by mid-April.  The U.S. House adopted a budget resolution by April 16 last year.  The U.S. Senate has failed to adopt a budget resolution in the past two consecutive years.  Soon after a budget resolution is adopted in the U.S. House the annual appropriations cycle will begin with the budget allocations going to 13 Appropriations Subcommittees with respective jurisdictions over multiple federal agencies.  On August 17, 2011, OMB Director Jacob Lew distributed a two-page memorandum for the heads of departments and agencies calling for FY 2013 budget submissions to be 5 percent and 10 percent below the FY 2011 enacted discretionary appropriation.

Regulatory Relief: Because federal regulations impose some costs every president from Gerald Ford to Barack Obama has established a formal system to review new government regulations before they are issued.  For at least the past 15 years varying legislation has been introduced in the Congress to legislate a generic regulatory reform effort.  This Congress is no exception to recent history.  During the first session of the 112th Congress the U.S. House adopted several legislative proposals to provide regulatory relief.  Some of those included,  Environmental Protection Agency (EPA) Regulatory Relief to provide additional time for the Administrator of EPA to issue achievable standards for industrial, commercial, and institutional boilers, process heaters, and incinerators; Cement Sector Regulatory Relief that provides additional time for the Administrator of EPA to issue achievable standards for cement manufacturing facilities; Farm Dust Regulation Prevention that prohibits the EPA from issuing new regulations for farm dust for one year and limits the EPA’s ability to regulate farm dust where state and local rules already exist; and Reducing Regulatory Burdens Act providing that EPA or a State shall not require a permit under the Clean Water Act for a point source discharge of a pesticide registered under FIFRA or the residue resulting from the pesticide application. These legislative proposals will unlikely be taken up in the U.S. Senate.   But with mounting federal budget pressures, rising national debt  and under the auspices of cost-savings and revenue generation, look for more regulatory relief proposals from Congress, especially in the U.S. House, in the second session.

Tax Extenders: At the end of 2011 tax breaks including the research and development credit, the deduction for state and local sales taxes, empowerment zone tax incentives, tax breaks for ethanol refiners and credits for manufacturers of energy-efficient appliances expired.   Congress must now decide on whether or not to renew these tax breaks and how they will pay for them. Congress could add these extensions as part of the negotiations over extending the payroll tax cut for the remainder of 2012 and may enact the tax breaks retroactively.  In addition, the tax incentives enacted during the term of President (George W) Bush are set to expire at the end of this year. Those tax incentives include a reduction in all tax rates and the capital gains tax, an increase in the child tax credit and elimination of the “marriage penalty.”  Congress must also decide on whether or not these tax breaks will be extended.

U.S. Representative Dave Camp (R-MI) Chairman, U.S. House Ways and Means Committee

Payroll Tax Extension: Before Congress adjourned for the Christmas holiday House republicans relinquished their wishes for year-long extension of the 4.2 percent payroll tax and agreed to a two-month extension leaving details for negotiators to hammer out in a conference committee on H.R. 3630 before the end of February.  Along with the payroll tax extension lawmakers must decide on extending emergency unemployment benefits and how to pay for both.  Senate Democrats have proposed to pay for the extensions with a surtax on incomes over $1 million. House Republicans have proposed freezing federal salaries to finance the extension.  If the payroll tax cut is not extended, about 160 million U.S. workers will see a 2 percent increase in their taxes. About three million people who receive long-term unemployment benefits will also see their benefits end. The House and Senate have reached an agreement on the provision of the legislation that will avoid a 27 percent cut in Medicare payments to doctors for up to two years.  The agreement was reached even with some lawmakers preferring a complete overhaul of the Medicare reimbursement formula and ridding them of the responsibility of continually adjusting payments.

Debt Limit: The August 2, 2011 debt deal that created the failed super Committee also created a process by which The President submits a certification to Congress that government borrowing is within $100 billion (this occurred December 31) of its current limit and the debt ceiling needs to be increased.  Congress has 15 days after the president’s submission to pass a joint resolution disapproving any increase in the U.S. debt ceiling.  Since the adoption of the law in August the U.S. debt limit has been raised twice by a total of $900 billion. Current estimates suggest the U.S. debt limit must be raised again by $1.2 trillion raising the total federal debt limit to $16.4 trillion.  It is estimated no further debt ceiling increase will be needed before the elections in November.  On December 30, President Obama agreed to delay submitting the required certification to Congress allowing Congress to return and cast votes on a resolution of disapproval.   If both legislative chambers voted against the proposed debt ceiling increase, President Obama would veto the legislation and the votes are not in place to override the veto.

Surface Transportation: Re-authorization of legislation for highway, transit and road safety programs must occur before the end of March.  House and Senate Transportation Committees have been working on respective legislation but there remain differences over policy and funding objectives, as well as the length of the reauthorization.  The Senate Environment and Public Works Committee approved a two- year reauthorization bill (S. 1813) dealing primarily with the highway programs.  However, additional funding is needed through offsets totaling $12 billion to fund the gap between current Highway Trust Fund tax revenues and the bills authorized spending level.  The U.S. House Transportation and Infrastructure Committee is working on a six-year transportation bill. Similar to the Senate Committee, members of the House Transportation and Infrastructure Committee are facing funding challenges for their proposed six-year bill. House Leaders are indicating that a possible funding mechanism would be expanding oil and gas drilling and using those additional royalties to fund the Highway bill.

Aviation: House and Senate leaders are attempting to complete a multi-year reauthorization of the Federal Aviation Administration (FAA).  For over two years Congress has been grappling with FAA reauthorization and has adopted 22 short-term fixes. The latest reauthorization expires at the end of January and with Congress reconvening toward the end of January, a 23rd extension is likely. One issue that remains contentious are subsidies for flights to small town airports   Roughly 150 of the U.S.’ 3,500 small-town airports receive the subsidies. Of this, the subsidies to 109 airports in the continental United States amount to $163 million. The subsidy per seat can range between $50 and over $3,000 depending on the number of flights and the number of passengers per plane.

Immigration: Congress recently responded to the immigration investment challenge through the re-introduction of the Startup Visa Act of 2011, S. 565.  The legislation was introduced in the U.S. Senate on March 14, 2011. The Startup Visa Act has been referred to the Judiciary Committee in both legislative chambers. The Startup Visa Act is intended to establish a way for the smartest and most entrepreneurial individuals in the world to come to the United States, secure their visas, create jobs and improve U.S. global competitiveness.  The legislation will allow an immigrant entrepreneur to receive a two year visa if he or she can show that a qualified U.S. investor is willing to invest in the immigrant’s startup venture.  The pool of eligible immigrants would now include holders of H-1B visas and entrepreneurs living outside the United States with a market presence in the country.

Online Piracy: The U.S. House Judiciary Committee is set to complete its work on legislation, H.R. 3261 intended to help curb online piracy. The legislation would allow the Justice Department to request that courts order Internet-service providers, search engines, payment services and advertising networks to block or cease business with non-U.S. websites trafficking in stolen content or counterfeit goods. In addition,  the measure would give private copyright holders the ability to seek court orders forcing payment and advertising companies to cease business ties with such websites.  The U.S. Senate has scheduled a vote on January 24 to limit debate on a motion to proceed to companion legislation, S. 968, already approved by the Senate Judiciary Committee.

U.S. Postal Service: The U.S. Postal Service is facing bankruptcy and is reducing its budget by $3 billion.  Even with such budget reductions, the Postal Service is expected to lose $14 billion this year.  House and Senate committees have approved separate plans to overhaul the U.S. Postal Service to avoid bankruptcy (H.R. 2309 and S. 1789).  Remaining issues that must be resolved include moving to five-day (Monday-Friday) mail delivery, dealing with a surplus in one Postal Service retirement account and adjusting the prepayment schedule for current retiree health benefits.

If you or your organization will be impacted by these or other issues being addressed by the U.S. Congress then you need an active voice to represent your side of the issue.  Cansler Consulting is an experienced lobbying firm in budgeting, agriculture, rural healthcare, and energy policies and through our Congressional relationships we can help you influence the policy makers on Capitol Hill. You can contact us at [email protected] or at (202) 220-3150.

Tim Cansler