Washington Report

8/5/11

Congress on Summer Recess

Immediately following its August 2 approval of the Budget Control Act, the hard-fought compromise package to raise the debt ceiling while cutting spending, the House went on recess until September 6.  The Senate remains in pro form session until August 8, but most members have left Washington, not to return until September 7.  The only action possible this week is a unanimous consent item in the Senate – which technically only takes the presence of one Senator – to adopt a short-term extension of the Federal Aviation Administration (FAA) reauthorization package, which if adopted would put an estimated 78,000 federal employees around the world back to work. 

Congress Enacts Debt Ceiling Deal; Obama Signs

In less than 72 hours this week the House and Senate passed the Budget Control Act, a compromise debt ceiling increase and spending reduction package, with President Obama signing the bill within minutes of it reaching his desk. The bill calls for as much as $2.4 trillion in deficit reduction and a maximum of $2.4 trillion in debt ceiling increases in two steps.  Key components of the new law are as follow:

• An immediate 10-year spending cap estimated to cut $935 billion off the deficit, balanced between military and non-military spending over the next decade. It achieves this by generally capping discretionary spending at annual targets, and is matched by a $900-billion increase in the debt ceiling above its current $1.43 trillion level. The details of program cuts are still generally unknown;

• The current $1.4-trillion federal debt ceiling increases between $2.1-2.4 trillion, which authors say makes unnecessary another vote in 2012. The first increase would be an immediate $900 billion over 10 years, with the second increase authorized at $1.2-1.5 trillion over the same period at the President’s request. Congress could block up to $500 billion of the first increase through a resolution of disapproval, but both chambers would need a two-thirds vote to override an assumed presidential veto of the resolution;

• A new bipartisan Joint Select Committee on Deficit Reduction is established. Each party leader in both chambers will name three members to the 12-person panel within 14 days of enactment. The House Speaker and Senate Majority Leader will designate co-chairs of the new committee.

• The new committee must find $1.5 trillion in additional spending cuts and send a bill to both chambers by November 23, 2011. There are no restrictions on which federal programs are cut, including defense and entitlements. This bill would be “fast-tracked” – both chambers must act by December 23, 2011 – on a straight up or down vote with no amendments or procedural blocks allowed. If enacted, the President is then authorized to seek an identical amount in debt ceiling increase, subject to a resolution of disapproval.  The President could also seek a $1.5-trillion debt ceiling increase if Congress enacts and sends to the states a balanced budget amendment;

• If the committee fails to produce a bill or Congress fails to act on a bill that cuts at least $1.2 trillion in spending, a “trigger” kicks in that pares at least $1.2 trillion from the federal budget across the board by 2013. The cuts are split equally between domestic and military accounts, including defense and Medicare.  However, several programs, including food stamps and conservation programs, would be “sequestered” or protected from the first round of cuts, and

• Congress is required to vote on a balanced budget amendment to the Constitution between September 30 and December 31, 2011.

The bill does not include any tax increases or other revenue-raising measures, but it’s assumed the committee will consider the elimination of personal and business tax breaks or find additional revenue through a comprehensive tax reform package.  All House and Senate committees have until October 14 to make spending/revenue recommendations.

Ag, FDA Dodge Deeper Cuts in Debt Package, but Reductions Coming

Congressional agriculture leaders breathed a collective sigh of relief this week as the enacted Budget Control Act did not single out agriculture programs for up to $30 billion in cuts, including slashing direct farm payments.  House Agriculture Committee Chair Frank Lucas (R, OK) said this temporary reprieve may make his job writing a 2012 Farm Bill a bit easier.  Both the American Farm Bureau Federation (AFBF) and the National Farmers Union (NFU), the opposite ends of the aggie political spectrum, praised the compromise package, but AFBF warned “even harder work lies ahead,” and NFU said, “The struggle for agriculture funding is not over.”  An analysis of FDA spending levels showed much the same relative relief as the cuts envisioned for the agency will be relatively less than those envisioned in the GOP-supported bill.  Lucas said his committee will come up with funding recommendations for the Select Joint Committee on Deficit Reduction, priority areas for Farm Bill spending. Lucas went so far as to say that if the new committee fails to come up with a plan to slash at least $1.2 trillion over 10 years, the across-the-board cuts triggered under the new law would likely take less than the $30 billion included in earlier versions of the bill. “However you define it, I’m better off and the committee is better off and ag is better off now than any time before,” Lucas said.  He then offered an interesting insight:  The new joint committee could compel through its mandated spending cut recommendations that the new Farm Bill be written before the end of this year rather than waiting until 2012.  Either way, Lucas said there will be less money in the next Farm Bill; the question is, how much less.

Joint Select Deficit Reduction Committee Already Under Attack

No one knows yet who will sit on the newly minted Joint Select Deficit Reduction Committee, the 12-person congressional panel charged with finding $1.2-1.5 trillion in spending cuts by November 23, but already budget hawk Senators are demanding public access to committee information and deliberations.  Eight Senators, including seven who voted against the debt reduction package, sent an August 3 letter to Majority Leader Harry Reid (D, NV) and Minority Leader Mitch McConnell (R, KY) challenging the new committee for not being required to hold joint hearings with other panels or hold open committee hearings. “If our colleagues wish to raise taxes or propose spending cuts, the American people have a right to see that process unfold.”  Reid’s office said the committee would determine its own operating rules absent specific instructions in the Budget Control Act.  Sen. David Vitter (R, LA), who signed the letter, introduced a bill that would require any member named to the deficit reduction panel to disclose campaign donations of $1000 or more within 48 hours of receiving them. In related action, 25 political groups sent an open letter to Congress that paralleled Vitter’s concerns, demanding “that from the time they are selected to the time their plan is vote on, committee members cease all political fundraising for themselves their party or other candidates.”  The groups also demanded “full transparency” on meeting with lobbyists or corporate CEOs or donors.

Senate Ethanol Compromise Fails to Make it into Debt Package

Senate ethanol subsidy reform champions failed to get their deal included in the Budget Control Act just enacted by Congress. And in action directly related to ethanol tax breaks, Sen. Tom Coburn (R, OK), who sought a clean kill of the program outright, joined with Sen. Jim Webb (D, VA), leading a group of 12 colleagues in sending a letter to Senate leadership last week urging them to call for a revote of a previously approved amendment by Sen. Dianne Feinstein (D, CA) to kill the ethanol program as part of the debt ceiling package, a move they said would have resulted in $2 billion in immediate savings. Prior to the House and Senate votes on the debt ceiling package, Feinstein Sen. Amy Klobuchar (D, MN) and Sen. John Thune (R, SD), architects of a compromise to end federal support for ethanol, hoped to see their deal included.  Klobuchar said failure to include the deal – and no other vehicle is found to carry the language – means the public loses deficit savings of about $1.13 billion – that portion of the savings her bill would dedicate to deficit reduction. Ethanol interests said they’d focus on the new joint deficit reduction committee, in hopes of getting the agreement included and to argue to preserve federal spending on ethanol infrastructure.

Baucus: Tax Reform Possible this Year

The chair of the Senate Finance Committee this week said he’s still considering whether his panel should try and put together a comprehensive federal tax reform package to be presented to the new joint deficit reduction committee as part of its considerations and eventual inclusion in the panel’s recommendation for at least $1.2 trillion in spending cuts. However, the goal is to avoid the rancorous political battle over tax rates and who must pay more, said Finance Committee staff, and attention would likely be paid to savings based on closing loopholes rather than manipulating individual and corporate tax rates.  Sen. Max Baucus (D, MT), chair of the tax-writing panel, added his voice to those of President Obama and Senate Majority Harry Reid, who have called for the new bipartisan committee to target individual and business tax code loopholes, including those for private planes, yachts, and federal subsidies to the oil and gas industry and other tax breaks which favor the top 1% of American earners. The October 14 deadline for House and Senate committee recommendations to the new joint committee could be tough to meet with a comprehensive tax bill, insiders say, but Baucus could pick the “low-hanging fruit,” beginning with an $800-billion package of “revenue enhancers” agreed to by House Speaker John Boehner (R, OH) before House-White House negotiations broke down a few weeks ago.  Just a couple of weeks ago, Baucus said it would take until the end of 2012 to come up with a truly comprehensive, top-to-bottom tax rewrite package. 

White House, Hill Announce FTA ‘Path Forward’

In the wake of intense lobbying pressure from agriculture, food and business groups, it now appears the White House and the Senate have agreed to a “path forward” on ratification of three pending free trade agreements. However, House Minority Leader Nancy Pelosi (D, CA) said she’s still not convinced U.S. workers will benefit from the trade pacts, and said congressional action is still up in the air. Resolved at least in the Senate is debate over renewal and expansion of Trade Adjustment Assistance (TAA), programs which provide benefits to U.S. workers whose hours or jobs are negatively impacted by export agreements.  This is a major demand of the White House before it formally sends the Colombia, Korea and Panama free trade agreements to the Hill.  Senate GOP and Democrat leadership said this week they’ve agreed on a process to move TAA separately.  However, it appears this “path” on the trade treaties will be a complex series of congressional votes and may pull into the debate other trade pacts which have expired that could delay ratification until late October. First would come a bill to renew the Generalized System of Preferences (GSP), an expired developing nation assistance program.  The House would act first, and then the Senate, attaching an amendment to renew TAA.  Then both chambers wait for the White House to send up the three trade agreements, originally negotiated during the Bush Administration.  Tied into the three pacts would be separate House votes on GSP and the TAA extension; extension of trade preferences for countries in the Andes of South America, and then the three individual votes on the three trade agreements. Then the Senate would act.  Well over 100 state and national agriculture organizations – including the American Feed Industry Assn. (AFIA) – along with several companies – last week sent an open letter to President Obama and Congress demanding they take immediate action to ratify trade agreements with Colombia, Panama and South Korea.  Urging the politicos to “stand up for American exports and the jobs that depend on them,” the letter explained to the lawmakers in no uncertain terms that to delay ratification was to multiply the economic damage already done.

House Dems Unsuccessful in Removing Policy Language from EPA Spending Bill

A 7% cut in EPA funding from FY2011 levels and a bucket of policy riders designed to limit the agency’s authority in various areas survived a Democrat floor assault this week, with the House approving the FY2012 Interior/EPA spending package after four days of debate.  The bill appropriates $27.5 billion, 12% below President Obama’s recommended 2012 spending level. 

New Chemical Reporting Rule Published by EPA

A new final rule to increase the type and amount of information collected by EPA on commercial chemicals from their manufacturers was published this week by the agency.  The new rule is designed to allow EPA to better identify and manage “potential risks to Americans’ health and the environment.”  Known as the chemical data reporting rule (CDR), the new regulation requires companies to submit the information electronically to EPA and limits confidentiality claims by companies.  CDR falls under the Toxic Substances Control Act (TSCA) inventory update rules and requires more frequent reporting of information on chemicals, and requires the filing of new information on potential chemical exposures, current production volumes, manufacturing site data and processing and use data for a larger number of chemicals for which the information is required. The Environmental Working Group (EWG) slammed the new rule for not requiring more information on more chemicals to be filed more frequently. Details on the new CDR rule can be found at www.epa.gov/iur.

STB Publishes New Complain Fee Schedule

The Surface Transportation Board (STB) this week announced its updated feed schedule reflecting the board’s recent decision to reduce fees charged for filing formal complaints, including rail complaints, and unreasonable practice complaints.  The new fee is $350, and the STB added it will maintain its $150 fee to file an expedited small rate case.  STB says all of its user fees have been decreased “slightly” or are unchanged. To check the new user fee schedule, go to www.stb.dot.gov.

Food Inflation Continues to Climb: USDA’s ERS

The consumer price index (CPI) for all food will likely increase 3-4% this year, following modest increases over the last two years, USDA’s Economic Research Service (ERS) reported this week. Food-at-home prices will jump 3.5-4.5%, while food purchased at restaurants will rise 3-4%, ERS said.  Red meat prices are increasing faster than other food categories, sitting 8.2% last year in June.  Steak prices were 4% higher and ground beef prices jumped 11%, the department said.  Pork prices are 8.5% higher than a year ago, and poultry prices are 3% over last year. Egg prices are 11% higher than 2010; fish and seafood prices are up 8.2% and dairy price are 7.2% above June, 2010.  ERS said most of the spike in meat prices is due to higher prices for feed and other inputs.  Downsizing of herds and flocks also contributed to the increase.