Read on for the latest Washington Rundown
May 10, 2013
Congress returned from its Easter Recess this month to address several hot button issues. Though President Obama released his budget for Fiscal Year 2014 (FY 2014), most of lawmakers’ time this month was spent addressing controversial domestic issues. Senate Democrats made a strong, but ultimately unsuccessful, push to strengthen gun control laws while a bipartisan group of senators continued to negotiate a proposal on comprehensive immigration reform. During April, Congress also ran into its first sequestration related crisis and looked for new ways to move forward on tax reform and the need to raise the nation’s debt limit.
On April 10, the White House released President Obama’s budget for FY 2014. While the Administration’s budget blueprint echoes Senate Democrats’ calls for new tax revenues, it attempts to create room for negotiation with Republicans by including cuts in spending for entitlements and other federal programs. Notably, the White House did not seek to balance the budget within the next ten years. Included below are some highlights from the Obama budget proposal:
- $1.8 trillion in new deficit reduction over 10 years, bringing total deficit reduction achieved to $4.3 trillion. The deficit reduction under the proposal would be achieved through:
- $563 billion in new tax revenue by limiting high-income tax benefits
- $230 billion in savings from using a chained measure of inflation for cost-of-living adjustments throughout the budget
- $400 billion in health savings
- $200 billion in savings from other mandatory programs
- $50 billion for upfront infrastructure investments
- Increase in the minimum wage from $7.25 to $9.00
The President Obama’s full budget can be read here.
Both the Senate and the House passed their budget resolutions in late March, marking the first time in four years that the Senate passed a full year budget. The House budget resolution would balance the budget over ten years, largely by cutting $2.7 trillion in funding to several social programs. The House proposal projects $4.63 trillion in overall savings over the decade, creating a $7 billion surplus by FY 2023. The Senate budget resolution would not balance the budget, but would achieve $1.95 trillion in deficit reduction, calling for $975 billion in spending cuts and $975 billion in new tax revenue.
Under regular order, the significant differences between the two chambers’ budgets would be reconciled in a conference committee comprised of members from both the House and Senate. However, the process has stalled, and neither the House nor the Senate has selected conferees for the budget conference committee. Senate Democrats recently attempted to name the Senate conferees, but were rebuffed by Republicans. In the House, Republican leaders have indicated that they will not name conferees until they can agree on the general framework for budget negotiations. Both chambers’ budget chairs, Rep. Paul Ryan (R-WI) and Senator Patty Murray (D-WA), continue to negotiate a way forward in the budget process.
Given the significant and seemingly insurmountable differences between the competing budget proposals, it is unlikely that the two budgets will be reconciled. However, some see the budget process as the starting point for a larger grand bargain on tax and entitlement reform.
On March 1, the across-the-board federal spending cuts known as sequestration went into effect following failed Congressional attempts to negotiate a proposal to suspend and replace the cuts. The White House and Congressional Democrats waged a public campaign to gain popular support for a sequestration replacement plan to include new tax revenue to partially offset the cuts, warning of the breakdown in services if the indiscriminate cuts went forward. Following the implementation of sequestration, their warnings fell flat with most Americans feeling no immediate impact. April saw the first tangible effects of sequestration as thousands of air traffic controllers were furloughed, causing widespread flight delays across the country. Public outrage prompted Congress to act quickly, and on April 26 Congress approved a bill to allow the Federal Aviation Administration (FAA) to move funds from other accounts to end the furloughs. The furloughs were officially suspended after President Obama signed the bill on May 1.
Some analysts view the FAA episode as a model for dealing with sequestration going forward. Rather than passing a wide sweeping replacement, Congress may choose to deal with the cuts piecemeal. Already, advocates from other agencies are lining up for their own sequestration exemption or funding increase. Public safety, airport security, public health and other interests are reaching out to lawmakers to introduce legislation to help blunt the effects of sequestration on their operations. It remains to be seen if the FAA experience will become the new norm in resolving the effects of sequestration or if Congress will refrain from picking favorites by exempting agencies and programs from cuts that were specifically designed to affect everyone equally.
Progress on tax reform continued to slowly move forward this month. In the House, the Ways and Means Committee’s Working Groups wrapped up their responsibilities of reviewing current tax law and gathering feedback from stakeholders on how to move forward. The Joint Committee on Taxation summarized the results in a 568-page report on May 6. The report summarizes the feedback received from lawmakers, businesses and the public. In addition, the recommendations from a variety of panels and commissions over the past few years were included. While this body of work represents some progress, none of the proposals were analyzed by the JCT and no budget scores were attached to them, so much work remains to be done.
Chairman Dave Camp said the report is “very important to bring everyone along.” He plans to review the report with Committee members next and is still expected to release a tax reform draft and pass it out of Committee before the August recess.
House Republicans have also been making an attempt to cast a wider net of support by holding listening sessions where members who are not on the Ways and Means Committee can learn more about the tax reform process, ask questions and express any concerns.
On the Senate side, the Finance Committee released three new options papers on tax reform: Business Investment and Innovation; Family, Education and Opportunities; and Infrastructure, Energy and Natural Resources. An additional six papers will be released over the coming weeks when the Senate is in session.
Gaining traction on tax reform continues to be tied to the coming debate over the debt limit increase. One idea floated by House Republicans is to tie each step forward on tax reform to a small increase. For example, once the House passed a bill, a three month bump in the debt limit would be triggered. Senate passage would trigger an additional increase and a long-term increase would kick in once the President signed tax reform into law. However, the President has continued to insist that he is not open to negotiation on lifting the debt ceiling and wants a clean increase.
On January 31, Congress passed a bill allowing the Department of the Treasury to raise the U.S. debt ceiling. The measure suspended the legal mandate to limit the government’s ability to borrow until May 18. The bill allowed the Treasury to automatically raise the debt ceiling after that date, but only for the liabilities accrued before May 19. This provides Congress with extra time to again raise the debt ceiling before the default date, which most economists predict will occur somewhere between August and early October.
There was little action on the debt ceiling in April. However, House Republicans began floating the solution mentioned in the Tax Reform section that would tie increasing the debt ceiling to continued progress on tax reform.
The Affordable Care Act (ACA) received new attention in April as Congress and outside commentators continued to analyze the ongoing implementation efforts. By January 1, 2014, most of the ACA’s provisions will be fully in effect. Two of the most notable provisions include the creation of insurance market exchanges and the expansion of Medicaid for individual with incomes up to 133% of the federal poverty line. The past several months have been marked by state governments making decisions on these two issues. In terms of the insurance exchanges, 16 states and the District of Columbia (DC) have decided to facilitate their own exchange, seven states have decided to form a partnership with the federal government to operate an exchange, 26 states have decided to defer to a federally-administered exchange, and one state (Utah) is seeking approval for a hybrid system. On the expansion of Medicaid eligibility, 27 states and DC have agreed to an expansion, 20 states have declined, and three states remain undecided.
During April, several elected officials aired their frustration with state and HHS implementation efforts. Many congressional Democrats have begun to publicly complain that the Administration has not sufficiently prepared for full implementation of the ACA. The most notable example came from Senate Finance Chairman Max Baucus (D-MT), who chastised HHS Secretary Kathleen Sebelius for what he perceived to be a lack of Administration outreach to explain the ACA to individuals and the business community. Senator Chuck Schumer (D-NY) also made a rare criticism of the ACA this month by claiming that the law is likely contributing to the increases in individual premiums, contradicting President Obama’s pledge that the healthcare law would not increase insurance prices. Republicans are also continuing their efforts to dismantle the law. In a memo to fellow Republicans, House Majority Floor Leader Eric Cantor (R-VA) has stated that the House will vote on a full ACA repeal in the “near future.”
Amidst the continuing ACA analysis among lawmakers, the public has yet to embrace the new law. The Kaiser Family Foundation released several opinion polls this month showcasing a high level of confusion and mistrust toward the ACA. The Foundation’s April tracking poll found that 40% of Americans still harbor unfavorable views toward the law compared to 35% who view it favorably and 24% who do not have an opinion. Additionally, 49% of respondents say they do not have enough information to know how the ACA will affect their family, giving backing to some critics’ claims that the Administration’s outreach efforts have not been sufficient. Finally, while 53% of Americans support continued efforts to block or stop implementation, 58% disapprove of cutting funding for the ACA.
Medical Device Tax
Many lawmakers are continuing their push for the elimination of the ACA’s excise tax on medical devices. During the debate on the budget, several Senators introduced amendments to repeal the tax. The Senate approved one of the amendments on a bipartisan vote of 79-20. Although the budget amendment is non-binding, it provides some momentum for the issue to be addressed in independent legislation.
Despite the strong bipartisan support for repeal, the tax still has its defenders. At an April 16 Senate Budget Committee hearing, Treasury Secretary Jacob Lew called the tax a critical component of the ACA that can’t easily be replaced. Lew reminded the Committee that the tax raises nearly $30 billion over ten years and that the costs to the federal government of paying for medical devices have risen significantly. When pressed by Senator Kelly Ayotte (R-NH) about the negative effects on medical device start-ups, however, Lew left open the possibility of supporting changes to the funding mechanism.
Prescription Drug Supply Chain Legislation
During the debate over the FDA User Fee legislation in 2012, a proposal that was ultimately not included in the final law aimed to secure the U.S. prescription drug supply chain to protect against counterfeit drugs.
California enacted a law that would require electronic tracking and tracing at the unit-level, a requirement that many stakeholders say is costly and infeasible. Other states have taken similar steps. In response, stakeholders have asked for a federal standard for a track and trace system. Rep. Bob Latta (R-OH) and Rep. Jim Matheson (D-UT) proposed a draft bill this month on the issue. The Energy and Commerce Subcommittee on Health held a hearing on the proposal on April 25. Chairman Fred Upton stated he planned to pass the bill out of Committee in May. A similar proposal was introduced on the Senate side by Senator Richard Burr (R-NC) and Senator Michael Bennet (D-CO). Differences between the two bills on implementation timing and state involvement will eventually need to be resolved.
Vaccine Excise Tax Legislation
The Vaccine Injury Compensation Program is funded through an excise tax on vaccines. Due to the recent FDA approvals of two quadrivalent (4 strain) influenza vaccines, the statutory language must be updated to assess the excise tax on the new version. The tax on all flu vaccines is 75 cents per shot. Legislation (S. 391 and H.R. 475) was introduced to make the necessary technical changes.
With the current climate in Congress, House Leadership has refused to bring any tax bills to the floor due to a concern that the Senate could manipulate the bill. However, on April 23, the Senate passed a unanimous consent agreement “that if the Senate receives from the House H.R. 475, and the bill is identical to the text which is at the desk, then the bill be passed.” This agreement will hopefully resolve the concern and allow the House to bring the bill to the floor in May so that vaccine manufacturers have certainty as they move forward with the production of the 2013-2014 seasonal flu vaccines.
ISSUE—GUN CONTROL AND IMMIGRATION REFORM
Congress spent much of April debating two controversial subjects: gun control and immigration. In response to the December 2012 mass shooting at Sandy Hook Elementary in Newton, Connecticut, several Democratic Senators introduced legislation calling for stricter federal gun control policies. Initially, these bills failed to attract Republican support, but gun control’s chances improved significantly following the removal of the controversial assault weapons ban and the introduction of a bipartisan amendment by Senators Joe Manchin (D-WV) and Pat Toomey (R-PA). Among other things, the amendment would expand the existing background check system to cover firearms purchased at gun shows and over the Internet. A full summary of the amendment can be found here.
The measure was seen as a compromise and garnered the support of several Republican Senators, but it was ultimately defeated on a 54-46 vote, falling six votes below the necessary 60 vote threshold. Though the White House and Congressional Democrats vowed to continue their push for stricter gun laws, the defeat of the Manchin-Toomey amendment has stalled their efforts and made it significantly more difficult to gain enough support to push gun control legislation through Congress and into law.
Also in April, Congress continued the debate over immigration reform. The so-called “Gang of Eight”—Senators Rubio (R-FL), Schumer (D-NY), McCain (R-AZ), Durbin (D-IL), Graham (R-SC), Bennett (D-CO), Flake (R-AZ), and Menendez (D-NJ)—released its comprehensive immigration package on April 17. The Border Security, Economic Opportunity and Immigration Modernization Act of 2013 focuses reform efforts on two fronts: securing the border and addressing the substantial undocumented immigrant population already in the United States. Among its provisions, the bill calls for:
- Tighter border security with additional border fencing
- Mandatory employment verification (E-Verify)
- Visa exit system at all international airports & seaports
- Expansion of the HB-1 visa program for highly skilled workers and a fast-tracked green card process for college graduates
- A guest worker program for low skilled workers, including a separate guest worker program for agricultural laborers
- A pathway to legality through the creation of a Registered Provisional Immigrant (RPI) status
- A pathway to citizenship following the attainment of RPI status
A full summary of the bill can be found here.
In the past, Congressional Republicans have been hesitant to support comprehensive immigration reform efforts that would provide a path to legality and citizenship before securing the border. As a compromise, the Gang of Eight’s proposal requires the security provisions to be met before any undocumented immigrant may apply for RPI status. Additionally, the bill would require immigrants with RPI status to pay fines and back taxes and would initially prevent them from drawing many public benefits.
The Senate Judiciary Committee held three hearings on the bill in late April. On May 9, the Committee will hold a markup on the bill, voting on a host of amendment from Committee members. Committee Chairman Patrick Leahy (D-VT) has scheduled three subsequent markup sessions to handle what is expected to be a heavy load of amendments. If the Committee votes to report the bill favorably to the full Senate within that timeframe, Senate Majority Leader Harry Reid (D-NV) has indicated that would like to schedule a floor vote in June.
Due to Republican attempts to reach out to Latino voters, immigration reform is believed to have a greater chance than gun control of passing Congress. However, obstacles for final passage remain, including strong opposition from conservatives and ambiguity in some of the bill’s provisions. Consequently, the Gang of Eight and Senate Democratic leaders are reaching out to Republican Senators to negotiate a compromise in order to garner significant bipartisan support. Reform advocates hope that a strong showing in the Senate will motivate reluctant House Republicans to deal with the issue.
Congress is once again turning its attention to addressing a longer-term reauthorization of the Farm Bill. Despite the Senate passing legislation to fund agricultural and energy programs last year, the House failed to pass its version before the end of the Congress. A short-term extension was included in the fiscal cliff bill to keep the Farm Bill programs operating through September 30, 2013. Senate Agriculture Committee Chairman Debbie Stabenow (D-MI) has scheduled a May 14 meeting of the Committee to begin drafting a new Farm Bill for the 113th Congress. House Agriculture Committee Chairman Frank Lucas (R-OK) has indicated they he would like to the start the same process in the House on May 15.
Job Approval: President Obama
|Gallup||May 5||Approve 50, Disapprove 45|
|Rasmussen Reports||May 5||Approve 50,Disapprove 48|
|Quinnipiac||April 29||Approve 48, Disapprove 45|
Job Approval: Congress
|CBS News||April 28||Approve 17,Disapprove 75|
|Fox News||April 22||Approve 17,Disapprove 74|
|National Journal||April 9||Approve 17,Disapprove 76|
Direction of the Country
|CBS News||April 28||Right Track 34,Wrong Track 59|
|Rasmussen Reports||April 24||Right Track 30,Wrong Track 62|
|Associated Press/GfK||April 7||Right Track 36,Wrong Track 56|
|Cabinet Members||Incumbent||Status||Nominated Replacement||Confirmed|
|State||John Kerry||New to post||–||–|
|Treasury||Jacob Lew||New to post||–||–|
|Defense||Chuck Hagel||New to post||–||–|
|Interior||Sally Jewell||New to post||–||–|
|Commerce||Rebecca Blank||Acting||Penny Pritzker||Pending|
|Labor||Seth Harris||Acting||Thomas Perez||Pending|
|Health and Human Services||Kathleen Sebelius||Remaining||–||–|
|Housing and Urban Development||Shaun Donovan||Remaining||–||–|
|Transportation||Ray LaHood||Retiring||Anthony Foxx||Pending|
|Energy||Steven Chu||Retiring||Ernest Moniz||Pending|
|Veterans Affairs||Eric Shinseki||Remaining||–||–|
|Homeland Security||Janet Napolitano||Remaining||–||–|
|Vice President||Joe Biden||–||–||–|
|White House Chief of Staff||Denis McDonough||New to post||–||–|
|Director of Office of Management and Budget||Sylvia Matthews Burwell||New to post||–
|EPA||Bob Perciasepe||Acting||Gina McCarthy||Pending|
|Trade Representative||Ron Kirk||Retiring||Michael Froman||Pending|
|U.N. Ambassador||Susan Rice||Remaining||–||–|
|Chair of Council of Economic Advisers||Alan Krueger||Remaining||–||–|
|Small Business Administrator||Karen Mills||Retiring||To be determined||–|
The Washington Rundown is provided by BIO, The Biotech Industry Organization and Republic Consulting, LLC.